Radical Sharing for the New Industrial Revolution

Presidio Graduate School’s Macroeconomics course for Spring 2012, is authoring a series of articles. The articles on this “micro-blog” reflect reactions and thoughts on news items, economic theory, and other issues as they pertain to the concept of sustainability.  Follow along here.

By Morgan Matthews
Until recently, I have been astonished by the incredibly poor allocation of one of our most widely available, but drastically underused resources: open seats in cars.  According to a national survey conducted by the US Department of Transportation, the average vehicle commuting to and from work today carries just 1.1 people which means about 80% of car capacity goes unused. In the Bay Area alone an average of 270,000 cars commute across the Bay Bridge daily and each vehicle is only 20% full; talk about massive waste of resources!

Why so wasteful? Obtaining efficient transportation is a pain for city dwellers and commuters alike. Public transportation is affordable, but can be unreliable. Taking taxis and driving are convenient, but expensive. Is there a simpler solution to our transportation woes? Yes, yes there is. All thanks to a movement known as collaborative consumption and a few innovative companies.

The sharing economy, or access economy, also known as collaborative consumption, is characterized by the sharing of goods, space, services and expertise, in innovative ways; typically through an online platform. Ridesharing and car sharing platforms such as Zimride, Get Around, and Avego are contributing to the evolution of transportation and taking the market by storm. Each platform provides users with a unique way of filling up empty seats in cars. On Zimride you can sell empty seats in advance and on Get Around you can rent your car to a stranger for a fee. One of the most creative ways to solve the efficient-transportation conundrum is a platform called Avego.  Avego is a real time ridesharing application that uses map overlays to instantly match riders; it offers the convenience of a car and rates slightly higher than public transportation. Avego recently launched a bay area pilot program, called We Go, earlier this year and is already gaining traction. 

This idea of sharing instead of owning represents a disruptive shift in the consumer conscious, one that could transform the economy as we know it. The brimming potential for the massive reorganization of markets is a signal that a new type of industrialism is emerging. The sharing economy might be the first of many trends towards the next industrial revolution, as originally discussed by Hawken, Lovins, and Lovins, in Natural Capitalism.

Natural Capitalism provides a foundational framework for building the post-industrial economy; as we continue to deplete the planet’s resource base, its application will become imperative. Collaborative consumption, such as ridesharing or car sharing, employs two of the four strategies from the framework: radical resource productivity and service and flow economics.  The first strategy, radical resource productivity, insists that we will extract 10 to 20 times more productivity from our resources. Sharing marketplaces have already tapped into this vein as they are designed to extract additional value out of the products we already have. For instance, selling unoccupied seats in a car and extracting value out of an otherwise wasted resource.

The second strategy, transitioning to a service and flow economy, suggests that many of the products consumers think they need to own, they don’t; they merely need the service or function it provides. Companies like Get Around and Zipcar have capitalized on this concept; people want the convenience of a vehicle, and not the hassle of owning one. The current sharing market embodies both of these strategic shifts, and is gaining momentum.

According to Lynn Franz, Director of the Consumer Research firm Campbell Mithun, the sharing economy has gone mainstream and "this trend is no longer emerging, it's here.” The sharing economy has already taken many forms: car, skill, house, clothing, equipment and ride sharing, just to name a few. Each of these markets has a slew of online platforms to go along with it, and new platforms are popping up each day. Rachel Botsman, coauthor of What's Mine Is Yours: The Rise of Collaborative Consumption, believes that the sharing economy is a $110 billion-plus market. As resource scarcity becomes the norm and the sharing economy grows, markets will begin to transform; a positive indication that the next industrial revolution might not be as far off as one would think.