Shaking up the economy

What is underway is the rise of the “sharing economy” that will shake up our financial system to an almost unprecedented extent.

While sharing obviously is part of an old tradition, this will be radically different.

Every evening hundreds of people across Canada are renting accommodation from a service that offers rooms, but not in regular hotels. The rooms were selected and paid for online, but the lodgings were provided by individuals rather than a hotel chain. This is an illustration of the huge, new “sharing economy,” in which people rent cars, boats and all kinds of other assets from each other; and they can be coordinated by the Internet.

Formerly, it was not that unusual for a tremendous change as people rent every manner of assets directly from each other. This resembles, of course, time-sharing for holiday housing that has been going on for some time. Technology has made it easier and less expensive than ever to share. Participating in a car pool illustrates this, but it has evolved into something altogether new. The availability of technology reduces transaction costs, making the sharing of assets less costly and easier.

Before the Internet, renting a small piece of equipment generally was more trouble than it was worth.

To cite just some instances, one can come to a retailer to rent a small space for a holiday sale event, one can rent a piece of jewelry for an evening or fishing equipment.

The process works for items expensive to buy and are widely owned by people who do not use them all the time. Sharing can obviate the need for ownership in many cases.

Collaborative consumption is a contemporary wave, permitting owners to make money from assets not always in use, such as people who rent their homes for a very short period while they are on away on a holiday. Car owners can rent their cars when they are not wanted. One can rent facilities when youngsters are at university, even exercise equipment. Web users can check on the background and reliability of potential renters. New social contacts may evolve.

In cities throughout the world people have been able to borrow a bicycle for a few hours and return it, even to a different location. This was first tried in Amsterdam and has been very successful. Losses from missing or stolen bikes have been minimal.

Nowadays too, people are renting out part of their office or administrative-secretarial help, thus defraying the cost for a tenant.

The emerging model is big enough so that there should be new regulations and rules; governments and companies should wake up to it, a sign of its immense potential.

It is time to start caring and sharing. “Long live the sharing economy!”

Bruce Whitestone