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Dhaka Tribune

The new ‘trust-based’ economy

Update : 03 Aug 2013, 10:51 AM

A recent Thomas Friedman op-ed in the New York Times was dedicated to the topic of the ‘sharing economy’, a fast-growing phenomenon that has swept the world, especially North America and Western Europe, in the last few years. An innovation that was spurred by the financial crisis, it’s an interesting new economic model that is opening up new horizons in the consumer-producer relationship in the capitalist marketplace.

So, what is this ‘sharing economy’, exactly? At the core the concept is a simple one – it’s a mechanism to monetise the unused or ‘extra’ resources most people have available to them. A great example of this, which Friedman explores in great length, is AirBnB. AirBnB is an online property-listing platform where homeowners can rent out extra rooms in their apartment, guest-houses or vacation rentals (i.e., your home while you are on vacation elsewhere) to travellers. It allows every homeowner to transform their homes into a bed and breakfast (‘BnB’) at their convenience and turn their idle resources into a source of income.

Since its launch, AirBnB has seen explosive growth with over 34,000 listings in 192 countries around the world. According to Friedman’s interview with the founders, this summer up to 200,000 people will sleep in rooms they have rented out through the service every night. The variety of properties listed forces one to pause in awe – castles, yurts, caves, private islands, glass houses, light houses, igloos and even tree-houses are available to be rented out from private owners.

It’s easy to see the appeal of this type of a system. As a traveller, you have the opportunity to take a break from expensive hotel rooms or dingy hostels and have a unique experience. If you’re lucky, you even get to avail yourself of insider knowledge and tips on the city you are visiting from the host.

As a host, you not only get to make money out of your spare property, but you also get to meet interesting people from all around the world, a fact that’s explicitly mentioned as a draw of the service on many of the hosts’ profile pages. As someone who has used AirBnB both as a host and a guest, I can attest to both of the above.

Aside from the interesting financial model, as Friedman points out, the real innovation of AirBnB is in building a ‘trust’-based network. Guests and hosts are able to rate each other online, which is a big incentive to deliver a good experience since a series of bad reviews can significantly lower your chance of getting new business or finding future accommodation.

While a similar review model has been used before by sites like ebay, the ‘trust’ component is much more crucial in a service like AirBnB. It is a big psychological hurdle to overcome to agree to open your home up to strangers or to decide to be guests at the home of someone you never met. What the success of AirBnB demonstrates is that once this hurdle is overcome the rewards can be immense.

Services based on the ethos of “sharing” are gaining popularity in other areas as well. Ride-sharing businesses such as Lyft, on-demand, short-term car rentals such as “Zip car” and even bike-sharing facilities in big cities like New York, Paris and Montreal are encouraging people to rethink their ideas of how personal property can be used communally or how much “personal” property we need in the first place.

While the “sharing economy” is based on the idea of maximising the use of a limited amount of resources, I would argue that this also has the wonderful benefit of moving us towards a more “enlightened” version of capitalism. It allows us to improve our quality of life by not only by generating new sources of income and giving us cheaper access to a bigger range of services, it also does this with a low impact on the environment and allows us to engage more meaningfully with fellow human beings. It transforms us from atomised, individual consumers to members of a community that is vested in each other’s interest, at least to some degree.

For emerging economies, the “sharing” model should be particularly interesting. As low-income countries move up the economic ladder, we have seen an explosion of consumerism in many places around the world. However, history shows us that such steep increase in consumption on a mass scale is not sustainable from either an environmental or economic point of view.

However, we are not necessarily doomed to repeat the mistakes of the past. The “sharing economy” shows us a good way to avoid consumerist excess. Since most of these services are based on new technological innovations, they are also fundamentally “of our time.”

There is no question about the fact that now is an interesting time for capitalism. The global financial crisis has raised some very difficult questions, one of which is our role as consumers in the system. The new economic model based on sharing and trust is proof that we can shape the system of capitalism into something that is more egalitarian, and ultimately, more human.

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