The Sharing Economy | Arun Sundararajan

Summary of: The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (MIT Press)
By: Arun Sundararajan


Dive into the fascinating world of the sharing economy, an economic system revolutionizing the way we view transactions and employment. In ‘The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism,’ author Arun Sundararajan sheds light on the key features that set sharing economy companies apart from traditional firms. Explore disruptive companies like Airbnb, Uber, and Lyft and the way they have made use of underutilized assets and decentralized networks. Discover the intricate balance between market-based and gift-based exchanges in the sharing economy, and the potential for this new system to democratize access to higher living standards.

The Emergence of Crowd-based Capitalism

The sharing economy is a relatively new concept that harnesses the power of digital technology to enable individuals to sell their unused time, skills, and assets. This economy is characterized by the dominance of market-based peer-to-peer transactions, a focus on underutilized labor and assets, decentralized networks, the combination of personal and professional abilities, and the use of contractual labor. Prior to the Industrial Revolution, self-employed workers comprised almost half the US labor force, and the sharing economy has revived this trend. With the sharing economy, we see the emergence of a new form of capitalism: crowd-based capitalism.

Inside the Airbnb Phenomenon

Airbnb, the leading online platform for short-term apartment rentals, was co-founded by CEO Brian Chesky and his roommate during an international design event. The company offers travelers the opportunity to rent unoccupied sleeping quarters from locals and has become one of the most successful and disruptive companies in the “sharing economy”. Airbnb, along with other peer-to-peer platforms, relies on reviews and ratings to establish reputational profiles for both hosts and guests, and as a result, the sharing economy has the potential to address some of the economic disparities in today’s society.

The Sharing Economy

The sharing economy has sparked a new “on-demand work force” that connects drivers with passengers through ride-sharing services like Lyft and Uber. While these services originated as intercity ride sharing, they have since pivoted to a on-demand model. BlaBlaCar, based in Paris, currently dominates the intercity ride-sharing market. The sharing economy lies on a continuum between gift and market economies, with some believing that profit drives the industry while others believe it is more of a “gift economy.” Nevertheless, most transactions mix market and gift-based exchanges. Finally, while platforms like eBay can be used from anywhere, Uber’s success relies on the local “demand-side economies of scale” which allow it to operate.

The Sharing Economy’s Gift Economy

Yochai Benkler argues that social relationships drive the sharing economy, and gift economies, like Couchsurfing, are not bartering systems. The platform operates more as a social network than an accommodation market, allowing verified members to host and sleep on each other’s couches without payment or tracking. This represents a new economic model that combines older models marginalized under capitalism, signaling a shift from market-based to socially-based transactions.

The Evolution of Social Funding

Kickstarter, Kiva, and AngelList as social funding platforms that shift the economy towards gift and market-based models.

Discover three platforms influencing the economy: Kickstarter, Kiva, and AngelList. From 2009 to 2015, Kickstarter raised almost $2 billion from almost nine million backers, allowing them to fund new projects. Kiva works similarly to Kickstarter but drives lenders towards entrepreneurs needing microloans. Lenders don’t only focus on the financial details of these ventures, but their life stories as well. AngelList follows a market-based approach where it helps investors to purchase stock from new businesses requiring capital. These funding platforms’ gift and market-based approaches prove to be driving forces in shifting the economy.

Understanding Bitcoin and Smart Contracts

Bitcoin is a digital currency purchased with traditional currency and is tracked on a decentralized, public ledger called the blockchain. Each account has a private and public key to facilitate secure transactions. The blockchain ensures the authenticity of transactions, and smart contracts provide added security by only executing payment when suppliers meet their obligations. Bitcoin’s rise has brought up regulatory challenges for sharing economy platforms around the world.

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