Click any word in a definition or example to find the entry for that word
an economic system based on the idea that different people or organizations share the creation and use of resources
'When David McGaw … needs a cab, he taps in his location on a smartphone app and waits for another citizen, albeit one owning a car, to collect him. A frightening prospect, you say? But the sharing economy is taking off, spawning companies for those willing to lend and borrow everything from mattresses to power tools.'The Guardian 24th January 2014
The idea of sharing resources with our friends and family, whether it's a car, DIY skills, or a box of chocolates, is common practice for any sensible and morally grounded person. However, in an economic system now described as the sharing economy, the concept of sharing has moved from a social activity to a profitable business model.
the winning idea of the sharing economy is that it allows consumers to access goods and services when they need them and gives others the opportunity to offer goods and services whenever convenient or desirable for them
The expression sharing economy describes a type of business activity based on the idea that assets, whether human or physical, can be successfully pooled and utilized by a number of parties. In the sharing economy, different people or organizations cooperate with one another to share the creation, distribution and consumption of goods and services.
A prominent example of the sharing economy in action is the San-Francisco-based firm AirBnB, an online service which provides a platform for people looking for overnight accommodation in a particular location to link up with individuals wanting to rent out rooms in their homes. As an alternative to a conventional hotel or bed and breakfast business, this has proved incredibly popular, successfully matching up thousands of people on a daily basis with rooms offered in as many as 30,000 locations across the world.
This is just one example but there are many others, from cars to dog-walking, parking spaces to musical instruments, storage units to garden tools. The winning idea of the sharing economy is that it allows consumers to access goods and services when they need them and gives others the opportunity to offer goods and services whenever convenient or desirable for them. This is all made possible via the freedoms afforded by online technology, which reduce transaction costs and make it cheaper than ever to advertise and share assets.
This fundamental ethos of cooperation and accessibility has spawned the alternative terms access economy or collaborative economy to describe the same phenomenon. The expression the mesh (from the verbal sense of mesh as 'work well together') is also sometimes used.
Since such transactions typically occur between individuals rather than larger organizations, they are often described as peer-to-peer (sometimes abbreviated to P2P) transactions, with corresponding expressions peer-to-peer business/network/rental, etc.
The expression sharing economy first emerged around 2005, when new business structures began to appear as the potential to harness social networking and related technologies was recognized. The concept is also considered by some to be ethically motivated, connected with a growing awareness of the need to balance the world's finite resources against global population growth. An inspiration is said to be the Tragedy of the Commons, an economic principle which states that when individuals act purely in their own interest, if demand outweighs supply then available resources become so severely depleted that there's a detrimental effect on everyone.
Like many such innovations, however, it seems that the sharing economy is inevitably beginning to lose its 'innocence'. Just as online selling platforms like eBay™ are often dominated by professional sellers, enterprising purveyors of the sharing economy are working out how to maximize their returns, such as by buying items solely to rent them out to others. Such individuals are now sometimes described as micro-entrepreneurs.
Read last week's BuzzWord article. Anecdata.
This article was first published on 11th March 2014.