There is a recent report out on a new model for the economy: World Economic Forum YGL Sharing Economy Working Group Position Paper. According to the report, the Sharing Economy (aka Collaborative Consumption) is part of the movement from an “asset heavy” to an “asset light” lifestyle where temporary use (rental, like-exchange, gifting) replaces ownership. As the report notes:
When combined with the power of new technologies, particularly mobile platforms in today’s global village, collaborative models of consumption, production and marketplace creation – such as Airbnb, Etsy, TaskRabbit, RelayRides and many others – stand to reinvent and redefine these timeless behaviors on a scale and in ways never possible before.
From my perspective, the Sharing Economy is part and parcel of the I-Cubed (Information-Innovation-Intangible) Economy. It is a business model growing out of shift from emphasis on products to solving customer needs and the resulting fusion of products and services (see some previous postings). I would note that the “asset light” part of the description refers only to tangible assets. The Sharing Economy is actually intangible asset heavy. For example, it requires high levels of key intangibles such as trust and reputation. And it has a much deeper social and community aspect to it as well. It also needs careful review of government policies to succeed.
The report outlines factors that make sharing a success:
Generally speaking, collaborative consumption businesses work best when they meet certain criteria:
• It is important for the asset to become “liquid,” i.e. easy to share and/ or distribute; this is typically the case for spaces and skills.
• It is also particularly good when the asset has high idling capacity, i.e. low frequency of use, such as cars or spare spaces (commercial and residential).
• Assets that are correlated with a high percentage of income outlay or are expensive to own outright, such as solar panels and luxury goods, due to potential cost savings and/or income limitations.
• Assets that quickly become obsolete, such as baby goods and maternity related clothing and products.
• Assets that have no demand or supply limitations, or whose value increases because of the fact it is shared (such as travel experiences), are other hallmarks of this space.
It is important to note that consignment shops and flea markets have been dealing in the re-use of goods for years. What had changed is not the resale of goods but the deliberate temporary use of those goods. As a result, there is a shift in the business model as noted above. The report gives an example of this:
Traditional car manufacturers have partnered with car sharing companies (GM and RelayRides) and developed their own car sharing initiatives (BMW, Daimler), while ride sharing services can work with taxi cab companies to maximize utilization of unused cabs (Uber). They have begun to look at a future in which customers are more interested in having access to “mobility services” than owning a car, and developing offerings accordingly.
The report notes the legal, regulatory and policy issues involved:
Many existing public policies and laws can help or hinder the sharing economy. Equally important, many policies drafted in the ownership era are silent about sharing – creating a “gray area” in which activities are neither legal nor illegal. Today the most contentious issues focus on taxation, insurance, zoning and licensing, and consumer protection (including personal data) issues.
One specific set of recommendations for government I found especially interesting – and problematic. That is the use of government assets in the sharing economy. I have long advocated better use of government intangible assets (see previous posting on government investments in intangible assets). But the examples given here are about use of tangible assets, specifically space and vehicles.
Space is less problematic as there is a history of public/private partnerships (PPP’s) in real estate development. Although there is also a history of criticism of such arrangements, there are ways of ensuring public benefit and avoiding private capture. Government rental of other assets, such as vehicles, raises the question of pricing and unfair competition by government entities. Governments can often price well below what a private sector could. For example, since the government already has its fleet of cars it could price a car sharing service at marginal costs which are lower than a private company could charge.
Of course, the long term answer to that might be for the government to get rid of its fleet and participate as a customer in a car sharing service. That gets into a whole other area of the outsourcing of government activities.
Such issues of pricing and outsourcing are not new (I was involved in legislation on pricing, access and competition with government entities back in the 1980s). But they do need to be added to the list of government policies to be reviewed.
The report astutely recognizes that there may not be a one-size-fits-all answer to these issue. Thus, they recommend local government set up Sharing Economy Working Groups to address these issues. I would take that a step further and recommend that the federal government also set up such a working group with two separate but interrelated tasks: 1) review federal policies concerning the development of the Sharing Economy market and 2) review internal government management policies and procedures concerning the ability of the federal government to participate in the Sharing Economy.
This latter part also has a dual role. The federal government may be able to reduce costs and improve efficiency through sharing. The participation of the federal government may also help jump start the development of the Sharing Economy in certain locations. Government procurement has always been an important factor in promoting or inhibiting innovation. Making sure it gets used to promote innovation in this case would be of benefit to us all.