By Akhil Raj Gupta
Edited by Associate Editor, The Indian Economist
If you think about it, most of us have grown up in a society with the roles and behaviors of ‘consumer’ and ‘producer’ quite clearly defined, almost like objects in a programming language. The producer makes stuff like cars and houses that consumers buy and money exchanges hands in these transactions. Simple, convenient, and a fairly lasting model of social organization. Right?
Not any more. Having interned this summer with an angel investment fund, I was exposed to a plethora of startups with fancy technology that if implemented, could redefine the way our world works. What struck me as extraordinary was how entrepreneurs were betting big on peer-to-peer sharing and collaborative consumption as a way of life in the future. What do these terms essentially mean? Why have they arisen out of the blue and how will they impact our daily lives? Which companies are leveraging the power of P2P and is it really beneficial for us as Indians? These are some of the questions that I want to answer in this piece.
By definition (or by ‘Wikipedia’ because the two are fairly synonymous anyway) the sharing economy is a socio-economic system whereby two people can share physical and human assets. Fair enough. What are these ‘physical and human assets’ anyway? Well, they’re literally everything! Nowadays innovative companies have developed socio-technological (yes that is a term, I just came up with it) platforms that connect people who can then rent houses from each other for a short vacation (think Airbnb) or borrow cars (RelayRides, Lyft, and even Uber to some extent). I read somewhere that in France you could pay somebody to use their washing machine too.
The genesis of this movement is largely in the rise of social media and information technology. In my opinion, the exponential rise of mobile technology combined with dropping smartphone prices has equipped people with an extremely powerful communication medium. Let’s face it; we live in a social world and we can’t help but love it. The other and often more noticeable aspect of online sharing is the knowledge economy wherein user-generated content (UGC for short) is carving a space for itself. Think of companies like Zomato or Yelp that thrive for the simple reason that you and I can’t resist telling everybody about the sumptuous dessert we just tucked away or how the service at Dominoes has just gone from ‘bad to worse’ (It’s true, it has.) These platforms have become hotbeds for online advertising because millions of people are flocking to them everyday, talking about their lives and registering innumerable ‘unique views’ (MBA speak for ‘ this is a frickin’ goldmine’).
From an economics perspective, online sharing marketplaces are a wonderfully efficient way of utilizing capitalized assets optimally and discouraging wasteful expenditure on resources that we really don’t use for a majority of the day. With income inequalities rising every day, such ‘market-making’ platforms will grant access to people outside the topmost echelons of society and that’s always a good thing. Moreover, companies that facilitate such interactions are raking in dollars faster than you would expect. Airbnb and Couchsurfing are today worth more than established hotel chains with a fraction of the time and money that it took the others. They’re also growing seriously fast.
And now, coming to a billion dollar question that I don’t really know the answer to, “ will this work in India?” The Economist gives a fantastic analogy on how the sharing economy is akin to online shopping in America fifteen years back. Initially everybody was worried about security and it was the early adopters (read the diffusion of innovation process if you don’t understand what this term means) who drove all the sales. But over time people got used to it and we should expect online sharing to follow a similar pattern.
After all online shopping has taken off almost unprecedentedly in India and many critics are left shaking their heads trying to figure out the how’s and why’s. I think the central piece of the jigsaw lies in the regulatory framework that P2P(and allied companies) operate under. Should people who rent their houses and cars be subjected to the same taxation as hotels or taxi services? In case something goes wrong, is the central company (or marketplace) liable in any way whatsoever?
Given the broken judicial system and the decades of time it takes to clear a case in India, this will be a serious obstacle to any progress in an exciting and underserved space. However our own entrepreneurs aren’t going to lie down so easily and I write this while reading about a company called SeekSherpa that just got funded. They connect travellers with locals (or Sherpas as they like to call ‘em) to create curated travel experiences and to promote tourism in a fun and innovative way. Exciting times lie ahead and I can’t wait for the day when I can rent someone’s car and drive to a different city, meet up with a local to show me around town, and check in for a goodnight’s sleep at somebody’s spare room!
Akhil is currently in his third year at college, pursuing a Bachelor of Arts degree in Economics (Hons) at Sri Ram College of Commerce, University of Delhi. He has been passionate about writing since an early age and is currently involved with the official College magazine and Economics Department magazine at SRCC. His areas of interest include behavioural economics / finance, econometric analysis, macroeconomic policy, and political theory. He spends his free time reading extensively, watching interesting videos on YouTube, and trying to convince everybody around him that he really does know a thing or two about economics in the midst of all the pontification!