Home / Startups / Features / Über Alles: On startups and the sharing economy

Über Alles: On startups and the sharing economy

To borrow lyrics from Swedish supergroup ABBA, it is a Friday night, the lights are low and I am looking out for a place to go. In about 10 minutes Brett will let me, a complete stranger into his car and drive me to my desired destination.

“But Lauren,” you might say with a lifeless, unenthused gaze, “that is a taxi, and taxi’s are not exactly groundbreaking”. This is no taxi. Wearing a bright blue Superman shirt and driving his personal Toyota Camry, Brett is an Uber driver, which has allowed him to turn his car into an ad hoc taxi. 

Ever since its birth in San Francisco in the Autumn of 2009, and its consequential diaspora across the globe, the media has clenched its jaws around the feud that has unfolded between the taxi industry and the controversial company that is Uber.

But don’t despair dear reader, this isn’t just another article about the battle royale we see unfolding, with Uber in one corner and the taxi industry in another, and Joe Hockey thrown into the ring for good measure. This issue contextualises so much more than a playground fight between two alpha males, sitting atop their ivory towers of monopoly money; it represents one of the most important contemporary examples of the sharing economy.

Telstra Building, Brisbane CBD.

Today Uber is operating in 58 countries, has been valued at the gargantuan sum of $40 billion, and is considered one of the forerunners in the so-called sharing economy. Here lies the topic of our discussion, and while it is not my intention to give you a vocabulary lesson, a few key terms require clarification. First, just what is the sharing economy?

“The notion of sharing is a way of better coordinating existing resources,” Dr Bruce Littleboy, Senior Lecturer in Economics at the University of Queensland, said. “,a kind of technological change that doesn’t reinvent a new product; just a way of better organising what we have already.”

Quite simply the concept relates to the idea that a business will provide a marketplace for consenting individuals to rent out their stuff or time or labour – check out ShareStuff for a recent, local example of a startup in this space.

Littleboy goes on to explain that “it’s a way of bringing people together to do more win-win deals.  And up until now the cost of transactions and finding these people have been high, so these potential win-win deals haven’t been done. So this is a technology that lowers the cost of bringing potential buyers and sellers together.”

We have witnessed the maturation of the sharing economy over the past few years, from a fringe movement involving a few startup companies, to now a fully fledged economic tidal wave, crashing onto the modern world. We have now entered an age in which we are willing participants in behaviours once reserved for an evening of drunken debauchery, that left us with a foul taste of bitterness and regret in our mouths the morning after.

Hopping into a stranger’s car, welcoming them into our home and letting them feast in our dining room was once a recipe for disaster, or at the very least a trip to the GP for an STI check. So what has changed? Why are we suddenly trusting complete strangers? And what are the economic repercussions of this social change?

It is important to clarify that the idea of sharing isn’t new, and the very nature of the economy lends itself to being cyclical.  The urgency of becoming a part of the collaborative economy today, has almost obscured that crucial truth, that collaboration and sharing have been around since the beginning of civilisation. We can see the evolution of trust, from friend to friend transactions and barter in the local village to the development of currency in 1200BC.

Buyers and sellers began to trade with strangers through trusted intermediaries which gave rise to person-to-company and then person-to-world transactions, in which people could buy goods from multinational businesses, secured and regulated by watchdog groups, global rules and banks.

The 21st Century has taken us back to this concept of stranger to stranger transactions, as intimate new technology provides a centralised marketplace, allowing for in-person transactions brokered through the inter-web. In a similar fashion to my continual discussions with my boss about being paid in red wine, and thus taking out the middleman of my local liquor store, we can get around high transaction costs by bringing two strangers together who want the same thing.

While sharing economies can foster highly-efficient businesses models, one may argue that we need corporations and businesses because they are what stop us from being scammed and keep us safe. This is exactly the issue that has made the Uber and taxi industry debate such a newsworthy phenomenon. But more on that later.

Yellow Cab marketing strategy fighting against ride-sharing apps.

Our media use has mirrored this economic evolution. After video killed the radio star, every household with a stable internet connection witnessed the growth and death of MSN and Tom’s Myspace, and are now living in Zuckerberg’s timeline.

The birth of social media has enabled peer to peer (P2P) sharing of content, and consequently technologies of the collaborative economy have enabled the P2P sharing of goods, services and transportation (Uber, Lyft) and space (AirBnB). While the concept of sharing in reality is based on centuries of human nature, this social, economic and technological context of sharing has been forced to change drastically.

These drivers have turned the idea of sharing from a private and localised behaviour into a transformational, transnational movement. The desire for an independent lifestyle, a public concern about sustainability, and a dissatisfaction stemming from a culture of consumerism and ‘Keeping Up With The Joneses’, (or perhaps Kardashians is more germane), have all driven greater consumer interest in sharing rather than owning.

Furthermore, rising costs of production, the desire to maximise resource utilisation, and an interest in developing new sources of income through freelance work has created economical pressures.

These social and economic driving forces have been facilitated by the rapid development of technologies such as mobile devices, social networks,  the internet of things and payment systems that rely on the real-time identification of idle assets and these P2P transactions.

Uber’s success, and more importantly the speed of its success, seems to lie in the fact that the sharing economy is simply building on and amplifying existing, uniquely human behaviours. The rapid expansion of this new form of sharing is now threatening to transform virtually every sector of the economy.

Brisbane CBD.

Obviously, businesses need to understand the sharing/collaborative economy if they want to embrace the relevant opportunities. But there is remarkably little data on how many people are participating in sharing, particularly in Australia, let alone on who they are or why they are doing it.

This gap becomes especially relevant when you note that success in the collaborative economy is entirely dependent on customer relationships; I could even become real cheesy and say we are heading towards a new currency of trust.

Even with the disappointing lack of demographic data, the aforementioned startups within this sharing economy all seem like blanket success stories. The main problem for future companies, naturally, is regulation, which is catching up.

On this note, Littleboy addressed the economic principle that when “changes result in gainers and losers (which is close to the universal case), we can measure whether the gainers gain more than the losers lose. It then becomes a judgement call about whether to compensate losers or just let the gains and losses lie where they fall.”

When we have Uber swoop in with its billions and start taking rides off taxis, clearly people are going to be angry. General Manager of Yellow Cab Company Bill Parker has witnessed what happens behind the scenes regarding drivers and fares. He addressed public perceptions towards taxis and when questioned, and was openly negative towards Uber and the idea of deregulation.

“First of all, Yellow Cabs doesn’t have any problem with competition in the marketplace,” Parker said. “Competition is good but it needs to be a level playing field.”

“This act,” he said, referring to a copy of taxi legislation, “these standards and regulations are applicable to the cab industry. I would ask anybody who thinks that the cab industry has a form of protection from the government to read through those regulations and standards.

“Because it doesn’t protect the cab industry at all. What it does say is how you will operate a cab to the benefit of the consumer.”

As the economy transforms, legislation needs to transform with it, and the concept of Uber negates the incomprehensible sum of $519,000 it currently costs to purchase a taxi license in Queensland.

But as Parker said, “if it’s good enough for a cab operator to pay appropriate insurance for the privilege of putting a cab on the road and then comply with all these standards and regulations, which we support by the way.”

“We believe in rules, we believe in discipline, we believe in codes of conduct, we believe in uniforms and a total professional approach to delivering a service.”

Brisbane’s George St taxi rank.

Behind these customer-to-customer transactions is a new generation of startups, startups that are heavily and increasingly funded by venture capitalists. Use of the online services offered by startups is quickly spreading thanks to key technologies mentioned before like mobile apps, the internet of things and social networking.

The sharers who use these services have already begun to function like hotels, taxis, restaurants, manufacturers and other traditional businesses. The crowd is becoming a company unto itself.

Stepping away from the pedestal that is Silicon Valley, one business accelerator in Brisbane is ilab, which is run through UniQuest. Below, I talk to ilab director Bernie Woodcroft and founder of Hirehive Dee Deng about what the sharing economy means to them, the challenges of choosing a sharing model in our capitalistic society, and speculations into what the future holds.

No longer will I be haunted by nightmares of Skynet and Big Brother taking over the world. We are seeing an interesting paradigm emerge, of the albeit awe inspiring yet impersonal nature of technology, allowing people to still build meaningful connections, and while I could easily let my cynicism run rampant here I will rein it in to end on some heartwarming sentiment.

Connection is at the heart of humanity, and it is a humanness that we had lost somewhere along the way. The collaborative economy is reigniting this flame and by placing value in personal relationships rather than empty transactions, kindergarten teachers across the world can continue to sing out in glorified unison, sharing is caring.

The question then becomes, how will you stake your claim on the iron throne within the new sharing economy?

Lauren Baxter is a Science and Journalism student at the University of Queensland. This article was published on her personal blog, and has been edited and republished here with her permission.

About Lauren Baxter