Over the last few years I’ve often heard how recent technology is causing society to break down. Although social media is allowing people to be in touch with more people on a more frequent basis than ever before there is less and less direct physical interaction. There are legions of virtual “friends” but nobody actually talks to anyone. We are becoming isolated in a virtual cocoon and losing the glue that holds society together.
There was an interesting article in a recent issue of Wired magazine that talks about how technology, through the sharing economy, is actually causing people to start meeting each other face to face and asks whether this is going to be a major societal change.
Let’s put aside the question of whether we have really become a society of isolated introverts. I think that Wired posits and interesting idea.
The sharing community is a fancy term for what you and I used to call “borrowing”. If you need a rake and don’t have one and your neighbor has a rake, but isn’t using it, then you would borrow it to use while he is not using it. It works out well because you get an economic benefit from not having to buy a rake, the rake is more fully utilized (in economic terms, the full utilization of an asset is nirvana), and, in theory, your neighbor benefits from the fact that you will allow him to borrow some under utilized asset of yours in the future. This non-monetary system of borrowing is similar to a barter system of trade where you trade goods and services for other goods and services. The key here is that to make this system, work you have to know who your are borrowing from and who the borrower is. You don’t want to loan your rake to someone who will steal or break it because that will destroy the virtuous economic cycle.
To this philosophy, let’s add money and technology. Putting money into the mix means that I don’t have to worry about reciprocity. Instead of my expectation to loan you something in the future if I borrow your rake, I can now pay you the economic value of my partial utilization of your rake. Once I’ve used it and paid you there is not a future social contract.
Technology allows me to know everyone in the world who has a rake that I can use. It also allows me to know whether you have stolen someone’s rake in the past and whether I want to let you borrow my rake.
Businesses like Homeaway and Airbnb which utilizes houses and apartments, and Uber and Getaround, which does the same for cars, are some of the companies that have harnessed technology and money to create a sharing community that allows people who want to get economic value for their under utilized assets (lending) from people who only want to pay for the limited utilization of the asset (borrowing).
Big deal, you say. Economic utilization has been around for years with car rental companies and hotel chains. The difference in this model is that it is a peer to peer interaction. Individuals are dealing with other individuals and, because of the personal nature of what you are renting/borrowing (someone’s house or car), the owner is in direct contact with the borrower. You have to pick up the key to the house or car from the owner and, because of the technology, it throws strangers together in a person to person transaction that is economically more intimate that the typical retail transaction.
Technology is creating the “village” that allows the sharing of value amongst ourselves. We are no longer isolated from face to face encounters but are required to create relationships, however temporary, in the name of economics.
I’m not saying that this is the beginning of a new age of man. But I do think that this is an interesting business model that has more social ramifications than most.
Does anyone have a rake I can borrow?