What propels the 'sharing economy'

The booming business of digital transactions between strangers in providing services and goods relies on new ways of determining trust. Consumers say the 'sharing economy' is building strong communities.

AP Photo
Tourist leave a privately owned home with rooms for rent in Havana, Cuba April 1. The popular online home-sharing service Airbnb will allow American travelers to book lodging in Cuba in a significant US business expansion on the island since the declaration of detente between the two countries.

Ebay and Craigslist, the early pioneers in the creation of a “sharing economy” on the Internet, have now been around for 20 years. They showed how honesty and openness are critical to creating digital communities of trust. They have since been eclipsed by Uber, Airbnb, and others in using cyberspace for peer-to-peer transactions. Most rely on users leaving reviews of buying a product or service. This reputational system has helped allay the fear of doing business with strangers from afar. 

Less then half of Americans have yet to use or even learn about the sharing economy, according to a new survey by PricewaterhouseCoopers. Yet of those who have jumped in, 78 percent say it builds a stronger community. Nearly two-thirds say peer regulation works better than government regulation. 

This is a window into how the Digital Age is altering the sharing ethos. The virtual economy between people is forcing new ways to determine the quality of character in each user. If the sharing economy is to expand and maintain a reputation of integrity, it will need to keep discovering ways to build trust in each transaction. 

The survey report explains it this way: “As nearly one-fifth of American consumers partake in some sharing economy activity, be it renting a driveway on JustPark, buying a dress from Poshmark or hitching a ride through Lyft, what is the attraction? Yes, convenience and cost-savings are beacons, but what ultimately keeps this economy spinning – and growing – is trust.”

The key to building that trust, says the report, is to authenticate the identity and reliability of both users and providers, such as Uber drivers or TaskRabbit errand runners. Brian Chesky, the chief executive officer of Airbnb, says his company’s ability to help people book the homes of others relies on a “very streamlined mechanism for trust.” If a person’s identity can be trusted, then the playing field with traditional businesses like hotels is leveled. People can act as a business, or a “micro-entrepreneur.”

In another new report, Stanford University sociologists Paolo Parigi and Karen Cook find that online transactions between strangers can build a surprising amount of trust early on, more so than in the “offline world.” They looked at users of Couchsurfing, a website that brings people together for international travel. They discovered that the rating system helps reduce the uncertainty of human interaction, although caution emerges later in maintaining relationships. In digital space, trust is more easily “engineered” than envisioned in the past, they write.

The PricewaterhouseCoopers survey estimates that global revenue from sharing-economy companies will jump from $15 billion today to around $335 billion by 2025. A key factor for this growth will be trust. If these companies and the users can rely “on the kindness of strangers,” as Blanche DuBois says in “A Streetcar Named Desire,” then these virtual communities will thrive.

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