The Real Core of the Sharing Economy Is Efficiency, Not Sharing

[Market Economy Op-Ed] Misconceptions About the Sharing Economy... The Illusion of a “Good Economy”

Attaching the word “sharing” to a business model can cause considerable side effects

It is, in fact, a concept that actively harnesses the pursuit of profit

Airbnb, Uber, Lyft, WeWork... these are some of the most representative icons of the sharing economy. But if you look closely at the business models of these leading companies, they all have something in common: the aggressive utilization of assets.

The core of Airbnb’s business model is to enable homeowners with empty rooms sitting idle to make additional income by actively putting those assets to use. Of course, from the consumer’s perspective, it also allows people to enjoy local living at a lower price than a hotel.

Car-sharing, too, initially began with the idea of allowing people with cars sitting unused in parking lots to make extra income by putting those idle vehicles to use. The same goes for shared offices and shared kitchens. What all of these have in common is the efficient use of assets: raising current asset utilization, which falls short of 100%, as close to 100% as possible.

If asset utilization used to be low in the past, how has it become higher now? The reason is IT innovation. Unlike before, mobile apps now make it possible to instantly check the availability of another person’s asset, GPS makes it easy to confirm each party’s location, and billing and payment have become much simpler. This is what makes it possible for idle assets to be used by people nearby in exchange for money. That is the core of the so-called “sharing economy.”

In this sense, attaching the label “sharing” to this kind of business model is not merely somewhat off the mark; it is a name that is the exact opposite of its true nature. Of course, these business models may appear to involve sharing assets with others. But those assets are by no means being lent out for free. This mistaken label has caused very serious social side effects.

The most representative of these side effects is that people have come to believe that the sharing economy is far removed from profit maximization and therefore constitutes a different kind of “good economy” from the conventional economy driven by private gain. But contrary to common social perceptions, the sharing economy is absolutely not a concept that suppresses profit-seeking and emphasizes altruism. On the contrary, the sharing economy is, paradoxically, a concept that actively leverages the pursuit of profit.

Think again of Uber, Tada, and Airbnb. Do these businesses really appear to give up ownership and private property rights and “share” their assets in order to contribute to society? Do they give up the pursuit of profit in the process? Absolutely not. To emphasize once more, the essence of these business models is the maximization of efficiency in idle assets, so they should instead be understood through the logic of the super-maximization of profit.

Professor Giana Eckhardt of the University of London already sounded the alarm on this misunderstanding in a 2015 Harvard Business Review article. In a bluntly titled piece, “The Sharing Economy Isn’t About Sharing at All,” she pointed out that the term “sharing economy” itself invites misunderstanding. She emphasized instead that this new economy is an access economy, in which people can pay for access to other people’s assets. Whatever we choose to call this new economy, the important point is this: in the new economy, the pursuit of corporate efficiency has become far more important than before.

Woonghee Lee, Professor, College of Business and Economics, Hanyang University

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Original title: 공유경제의 진짜 핵심은 공유가 아닌 효율성 추구

Author: Ung-hee Lee

Date: 2020-01-10

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=23&idx=22275