Strategist, Speaker, Designer, Instigator

Sharing, shmaring [part 2/2]

In my last post, I went on about how the ’sharing economy’ is a misnomer that distracts from what’s really going on. This time, I’m going to talk about the impact that distraction can have.

Businesses that enable peer-to-peer commerce can have a huge positive impact, as I wrote last time. They enable people to ingeniously fill gaps in the marketplace, and profit when their ideas hit the mark. But they can also have a powerful negative impact on local markets when they’re used irresponsibly.

I’ve already written about Uber and local transport ecosystems, so I won’t dig into that again here. I do question whether Uber really is peer to peer commerce though. One of the hallmarks of peer to peer commerce is that it’s about people offering their own skills, spaces, creations, etc. to other people in their own ways. Uber isn’t like that. When was the last time you ordered an Uber and got picked up by a middle-aged woman in a yellow VW beetle? That’s right: never. Uber pretends to be part of the ‘sharing economy’ but to me it seems more like it’s taking advantage of a new name and construct to keep its own overhead down. Though Uber runs a largely homogenised service, they get out of the costly process of having to buy vehicles and hire drivers and pay them benefits by claiming they are simply connecting drivers with passengers. The California courts seem to be suspicious too, and there’s now a class-action suit in the works in the USA, so we’ll see what happens with that.

The main takeaway there is that while this moniker is in place as a blanket, it is possible for a less than well-intentioned business to take the piss. To keep that from happening, we need to look a little more closely at what’s happening under the banner of ‘sharing’.

More broadly, peer to peer commerce needs to consider human nature to be sustainable.

People love to game a system. We are natural-born hacker monkeys. Give us pretty much anything and we’ll collectively figure out a dozen uses for it that were never intended – for better and for worse. Peer to peer commerce is no exception. The problem is that gaming the system can create systemic problems to local economies that often outweigh the platforms’ core benefits.

AirBnB’s core proposition is to let residents rent out their homes when they’re out of town, or spare rooms when they’re around. But lots of people use it to run what amount to illegal hotels, buying or renting flats that they never occupy themselves and raking in the cash over AirBnB. There are a few problems with this.

Hotels are regulated entities, and it’s not possible for just anyone to open one. This makes sense – hotels are required to maintain certain standards of cleanliness, plumbing, electrics and so forth, and the number of hotels in a given area is restricted, to ensure there’s enough residential real estate.

Much of the criticism of the peer to peer economy has been on this level, specifically that because AirBnB hosts don’t have regulatory overhead, they’re able to undercut their hotel competitors on price and thereby are damaging the tourism ecosystem. I’m inclined to think that staying in someone’s flat is a different experience to staying in a hotel, and both can have a place in the overall ecosystem – as long as the ecosystem is balanced and the experience is good. A lot of that balance depends on residences actually being lived in.

This, in my opinion, is the bigger problem: housing shortages. I live half-time in Berlin and half in London, and both cities currently have more demand than supply when it comes to housing. In London, housing prices are ludicrously high, and many properties sit vacant for much of the year because they are owned by foreigners who don’t spend much time in them; in Berlin it’s hard to even find a place for rent. Vacation rentals like AirBnB are a major contributing factor.

Last year, the Frankfürter Allgemeiner published a piece on the impact of AirBnB in the Kreuzberg area of Berlin. The map below (taken from the article) shows an area of just over 1 square kilometer: of 103 vacant flats, only 1 is available to rent; the rest are on AirBnB. Some of these may be lived in at least part of the time, but most are not.

Vacant flats in Wrangelkiez, from the Frankfurter Allgemeiner

It’s become common to have 15 or more people at every Berlin flat viewing, all anxiously shoving their paperwork at the agent. Those with the highest incomes win. Getting a flat has gone from a relatively short process (it took me less than a week in 2009) to a lengthy, frustrating and painful one (it took my mum more than 6 months in 2013). It’s also inflated the market – rents have more than doubled and in some areas tripled in the past 6 years, and though they are still below the median for western European capitals, they are now out of sync with local income.

This is a serious problem, and one that’s often overlooked when we talk about the mechanics of these businesses. Does this have something to do with the ‘sharing economy’ moniker? Maybe. Sharing is always good, right? Sharing is a community-orientated activity. Sharing could never damage the local economic ecosystem. But these businesses can, if they’re used irresponsibly or poorly managed.

I doubt AirBnB’s founders foresaw their service would being used in this way. But it seems clear that to continue without addressing the service’s local impact is unsustainable, if not outright irresponsible. Berlin has recently passed legislation banning AirBnB-style lettings, and you can’t turn a profit where your business is prevented from operating. How this new legislation will be enforced is another story, but it’s certainly needed if the city is going to grow sustainably.

If I were on the AirBnB board, I’d be asking what the Strategy teams are doing to make the business more sustainable within local markets. There are a number of possible methods for this, and the business is definitely well enough funded to do some research. Maybe the answer is to get neighbours involved, maybe it’s about connecting with local government. Maybe it’s different for different cities, or regions, or countries. Whatever the case may be, this is a necessary step on the road to ensuring the future of the business, not to mention making it a positive force rather than a destructive one.

There are obviously many intricacies in the peer to peer economy, and I don’t think we’ve gone far deeper than the tip of the iceberg yet – there will be more unforeseen outcomes and more adjustments required. Failing to address these challenges is short-sighted and irresponsible, and sometimes it seems to me that the ‘sharing economy’ is used as a screen to hide behind when things get complicated.

Peer to peer business can be a powerful force for good in the world, but as with most things, it’s going to take some careful consideration to get the balance right. Short-term growth targets should not always win out over long-term sustainability factors, and names should not be something to hide behind.