How Sharing and Renting is Creating a New Economy in the West
Image: Eric Millette for Forbes
n paper, Frederic Larson is just one data point in five years of US government statistics showing underemployment in dozens of industries and stagnant income growth across the board. The 63-year-old photographer with two children in college was downsized by the San Francisco Chronicle in 2009. He now spends his time teaching at Academy of Art University with occasional lecturing gigs in Hawaii. A far cry from the salary, benefits and company car he used to have. But Larson is also a data point in an economic revolution that is quietly turning millions of people into part-time entrepreneurs, and disrupting old notions about consumption and ownership. Twelve days per month Larson rents his Marin County home on website Airbnb for $100 a night, of which he nets $97. Four nights a week, he transforms his Prius into a de facto taxi via the ride-sharing service Lyft, pocketing another $100 a night in the process.
It isn’t glamorous—on nights that he rents out his house, he removes himself to one room that he’s cordoned off, and he showers at the gym—but in leveraging his hard assets into seamless income streams, he’s generating $3,000 a month. “I’ve got a product, which is what I share: My Prius and my house,” says Larson. “Those are my two sources of income.” He’s now looking at websites that can let him rent out some of his camera equipment.
The ‘gig economy’, the plethora of microjobs fuelled by online marketplaces offering and filling an array of paid errands and office chores, has been well-documented, and sites like TaskRabbit, Exec and Amazon’s Mechanical Turk continue to grow apace. What Larson finds himself in, however, is something lesser-noticed and potentially far more disruptive—a share economy, where asset owners use digital clearing houses to capitalise the unused capacity of things they already have, and consumers rent from their peers rather than rent or buy from a company.
While Airbnb is the best-known example of this phenomenon, over the past four years at least 100 companies have sprouted up to offer owners a tiny income stream out of dozens of types of physical assets, without needing to buy anything themselves. “The sharing economy is a real trend. I don’t think this is some small blip,” says Joe Kraus, a general partner at Google Ventures who has backed two car-sharing sites, RelayRides and Sidecar. “People really are looking at this for economic, environmental and lifestyle reasons. By making this access as convenient as ownership, companies are seeing a major shift.”
The sharing concept has created markets out of things that wouldn’t have been considered monetisable assets before. A few dozen square feet in a driveway can now produce income via Parking Panda. A pooch-friendly room in your house is suddenly a pet penthouse via DogVacay. On Rentoid, an outdoorsy type with a newborn who suddenly notices her camping tent never gets used can rent it out at $10 a day to a city slicker who’d otherwise have to buy one. On SnapGoods, a drill lying fallow in a garage can become a $10-a-day income source from a homeowner who just needs to put up some quick drywall. On Liquid, an unused bicycle becomes a way for a traveller to cheaply get around while visiting town for $20 a day.
Getting into the share economy was the reason Avis Budget Group last month chose to pay a whopping $500 million for Zipcar, despite the fact that the pioneering rent-by-the-hour startup generated a paltry profit of $4.7 million over the past year. But Zipcar in some ways misses the larger point of what’s going on: Its fleet, as with Avis’, has been centrally owned. A more profitable model may lie in peer-to-peer car-sharing services such as RelayRides and Getaround, which mimic Hertz or Avis except that the service itself owns nothing. Their fleets, about 50,000 combined at last count, draw from the tens of millions of autos idling in America’s driveways. SideCar and Lyft slice that market finer, monetising an empty seat by letting owners tote along fee-paying passengers on routes they may already be taking.
Just as YouTube did with TV and the blogosphere did to mainstream media, the share economy blows up the industrial model of companies owning and people consuming, and allows everyone to be both consumer and producer, along with the potential for cash that the latter provides.