What You Need to Know About the Sharing Economy
The basics: A peer-based economic system typically powered by the internet that encourages the sharing of resources and products.
- For example: UberX and Lyft allow those who own cars to act as cabbies and offer paid rides to strangers.
Also known as: Collaborative consumption.
How’s it transforming real estate:
- AirBnB: Allows homeowners and renters to loan their places to others online, changing the way people travel and find short-term lodging while undermining—and exasperating—the hotel industry.
- EBay & Etsy: With the ability to sell used and homemade goods and crafts online, traditional brick and mortar retailers lose a piece of the market—and the ability to pay their rent
- Crowdfunding: Fundrise, RealtyMogul, and other platforms empower accredited investors to invest in real estate projects online and bypass traditional lenders like banks, and equity investors like PE firms.
- LiquidSpace enables office tenants and hotels to rent space by the day or hour to users on demand.
- 1841: Brook Farm becomes the first secular "utopian community" of the Transcendentalist movement. Members collectively till the land and reap its rewards while pursuing intellectual fulfillment.
- 1960s: The counterculture movement revives the popularity of communes, with hippies often "dropping out" of mainstream society and going back to the land--or Haight-Ashbury.
- 1986: Larry Harvey and a few friends burn a 9-foot tall wooden man on a San Francisco beach, inspiring what would become Burning Man, the annual festival rooted in music, art, a gifting economy and radical self-reliance.
- 1995: Craigslist debuts, popularizing the user-generated digital marketplace for goods running the gamut from furniture to concert tickets to flesh.
- 1995: EBay founded. It introduces an auction model to e-commerce while inspiring some to resell their belongings for a living.
- 1999: Napster appears, immediately undermining and unsettling the music industry as it allows users--there were 80 million of them at the site's peak--to freely upload and download songs.
- 2006: Stockholm police raid popular torrent site The Pirate Bay, shutting it down...for three days.
- 2009: KickStarter is founded, becomes an internet phenomenon with millions of consumers providing capital to entrepreneurs, artists and filmmakers in exchange for no financial return. Instead, they may receive a credit in a film or get a sneak peek of an album.
- 2011: Time magazine declares collaborative consumption one of the 10 ideas that could change the world.
- 2012: Congress passes the JOBS Act, which loosens restraints on crowdfunding. Fundrise, the real estate crowdfunding platform, launches in the wake of the legislation.
- In 2014, cabbies across Europe blocked city streets in protest of Uber, contending that it unfairly threatens their regulated business model.
- It’s not only the hotel lobby that opposes Airbnb. Just this week, New York Attorney General Eric Schneiderman said that 72% of New York’s roughly 35,000 Airbnb spaces were run by commercial operators and illegally flew in the face of zoning laws.
How Big Is This Thing?:
- The World Economic Forum estimated in 2013 that the sharing economy would generate $350 billion in revenue around the globe that year.
- More than half of Airbnb hosts are dependent on income from the site to pay their rent or mortgages.
- Before Congress signed the JOBS Act of 2012 into law, there were two real estate crowdfunding platforms: Fundrise and Prodigy. By some accounts over 100 platforms have sprung up in the past 12 months.
- Growing eco-consciousness is another phenomenon propelling the growth of the sharing economy. Lyft estimates that one of its cars in service takes up to 20 vehicles off the road.
- Rather than view upstart peer-to-peer platforms as rivals, some big conventional companies are getting in on the action. For example, Avis acquired ZipCar for $431 million in 2012, which also gave the rental car giant a stake in the car-sharing platform Wheelz.
Bottom line: Technology, spurred by a transitional economy, can now easily connect those seeking a broad range of products and services to people providing them. Ideally, this fosters a strong sense of community while cutting costs for consumers and providing alternative income streams for providers.