Book Summary- The Sharing Economy

Summary

In the book The Sharing Economy written by Arun Sundararajan, it explains what the sharing economy is and its cause, effects, and its future implications. Sundararajan defines the sharing economy, also known as crowd-based capitalism, as “an economic system with the following 5 characteristics:

  1. Largely market-based
  2. High-impact capital, how capital is better utilized
  3. Crowd-based “networks” rather than centralized institutions or “hierarchies”
  4. Blurring lines between the personal and the professional
  5. Blurring lines between fully employed and casual labor, between independent and dependent employment, between work and leisure

“Peer-to-peer rental markets introduce new levels of adaptability and flexibility that enable people to take new economic risks” — Sundararajan (127)

In the first half of the book, Sundararajan describes the history of the sharing economy and how the concept of sharing our property or services has been around since pre-Industrial Revolution. However, today’s sharing economy differs than the past because of the advanced technology that enables people to scale and network with people in the digital marketplace. The book also how companies like Uber, Lyft, Airbnb and other sharing economy companies are operated with peer-to-peer exchanges on the social network. Trust is the whole reason why the sharing economy can exist. In the second half of the book, Sundararajan focuses on the effects and impact of crowd-based capitalism. Since these many of these companies have been successful, there has been a lot of positive economic impacts. However, this also leads to the question about how to regulate these businesses. In the end, Sundarajan offers his viewpoints on how he believes what the future of the sharing economy will look like and what steps need to be taken in order to allow them to continue to flourish.

Regulations

What really peaked my interest was Sundararajan’s point about regulation for crowd-based capitalism. Because the capital or assets that are used are “shared” and used for personal and professional reasons, it makes the sharing economy difficult to classify and regulate. For instance, the suppliers in the sharing economy (like the Uber driver, Airbnb hosts, etc) get to choose when they will put their services out to the market because they are using their personal assets. As a result, most do not spend the full 40 hours working on the platform or only lend their services as a side job to make additional money. These people can be considered “fractional employees” and raise the question if they can be considered as full-time employees or unemployed. This makes it tough for the government to capture the data on the workforce and distribute the proper benefits or taxes to its people. Not only that but I wonder, what do they believe their services and product categorizes as. As in, would they consider the suppliers who use the platform as fully-employed or not? And also how do these companies deal with regulations that the government attempts to impose on them? How would they react? These are the kinds of questions that I would like to ask these companies during our Tech Trek trip.


Examples of companies in the sharing economy

The other question in mind is if these suppliers or “microentrepreneurs” should be considered on the same standards as a corporation. Because many sharing economy platforms have quite varied services or products provided by the suppliers, it is hard to determine if these are professional services or personal undertakings. Currently, many of the services provided by the sharing economy are considered personal undertakings because they have “none of the additional oversight, licensing, screening, taxation, or training expected of providers who conduct these activities as a full-time occupation” (141). Without these additional regulations, it can harm the consumers if not monitored properly because most regulations in place are used to protect the consumers. For example, Airbnb does not encounter the same regulations and level of monitoring as hotels do, yet both provide lodging. One consequence of this is that Airbnb faces discrimination of ethnicity because hosts can choose to accept or decline potential guests whereas hotels have laws to prevent discriminating who they will accept as guests. I was shocked to see that Airbnb would turn away customers that hotels would accept. Originally, I thought Airbnb would be able to accept or accommodate more diverse people than turn away certain people.


Although many sharing economy platforms do not face as much government regulation as normal companies, crowd-based capitalism does have its own set of means of regulations through its peers. As stated before, trust is the key to making the sharing economy work. This is represented through the social network of peers in the platform. Take reading a bad review on Google reviews as an example. No one would want to eat at a restaurant with a one star rating left by someone else. Reputation, ratings, and brands are all examples of ways to build trust. The sharing economy companies are heavily dependent on what people think and say about them because it’s their peers that create the standard of what is good and bad. Thus according to the author, “peer regulation can represent an equitable way to regulate from within, one that is cost-efficient for society and leverages learning-by doing in a way that is well suited to the scale of peer-to-peer”(151). Therefore, it’s so crucial that crowd-based capitalist companies do not upset their customers since bad reviews can make-it-or-break or them

Recommendation

Overall, I thought this book was a good-read in the sense that it is very informative and not too difficult to read. Although sometimes the book can be a little repetitive in explanation, Sundararajan does a good job of explaining all the aspects of the sharing economy, from defining terms to leaving the readers with future implications about what the sharing economy will look like. In addition, I found the history and emergence of crowd-based capitalism very interesting and gave me a better understanding of why and how sharing economy platforms like Airbnb came to be. Lastly, I really liked how the author not only incorporated his own thoughts on the subject, but also other scholars’ perspectives and theories as well to enrich the reader’s understanding of the sharing economy. I would recommend this book to anyone who is interested in diving deep and learning more about the sharing economy. It’s a good stepping stone book to get immersed today’s tech scene and a great way to get into the right mindset for Tech Trek West!

4 thoughts on “Book Summary- The Sharing Economy

  1. Hey Julie,

    I think I read an article recently about discrimination that has happened regarding Airbnb in the past. You’re right, it is shocking. I’ve always found sharing economy companies very fascinating so I might give this book a read.

    I think the question of what is the company’s responsibility for the actions of its users is one that permeates all social based companies. I think with some of the stuff facebook has endured, it is something that companies will continuously need to take more accountability for. Since sharing economy companies’ core function is as brokers for person to person transactions, it is sort of odd that they now have to be more responsible for the clients behavior.

    In my opinion, the companies have the issue of needing to regulate their client bases because they market themselves somewhat as if they provide the product themselves. It certainly is more optimal for business and inherently makes them less sketchy, but it lends itself to more regulation. I think if you look at a service like craigslist or old school ebay which are considered more sketchy and are quite transparent about just providing the brokerage type service, they aren’t likely to be required to handle more regulations. I think it’s noticeable that there’s a tradeoff between the business model chosen and the scrutiny the company will be under for regulations.

    Like

  2. Julie, I really enjoyed this summary because it led me to consider things I hadn’t previously thought about. I became fascinated by sharing economies last semester when a portion of Machine, Platform, Crowd delved into the topic. However, I never considered the idea that these sharing economies like Uber and Lyft are employing people, but not necessarily full time. That definitely could make it more difficult to establish a truthful unemployment rate, so thank you for pointing that out. You make some great points. See you Wednesday!

    Like

  3. Julie,
    Great summary! I really enjoyed reading it. One thing I found particularly interesting was the mention of potential discrimination by companies like Airbnb and Uber. I remember when this particular critique was first making headlines and was also shocked that something like this could still occur in our society. I thought that Airbnb and Uber took measures to fix this problem, like taking off profile pictures for the ‘demand’ side (aka consumers) to reduce discrimination. Although I never really felt that this was enough of a step, because if someone is discriminatory, they often can discriminate based on the user’s first-name alone, regardless of a profile picture. It would be something interesting to read and learn more about, because it is definitely an issue that needs to be addressed! See you in class tomorrow.
    Best,
    George

    Like

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s