The sharing economy is growing the pie!

A big misperception about the sharing economy is that it’s totally substituting the incumbent way of doing things. In other words it’s a ‘zero sum game’. Turns out that in most it’s cases it’s actually growing the pie considerably.

Take hotels for example. Despite the unquestionable success of Airbnb, the hotels business in big metropolitan cities like London and NYC is booming. They can’t build hotels fast enough. Try booking a hotel in either and you’ll see -you’ll be lucky to get a room. Mean time Airbnb has captured a mere 5% of the inventory in NYC and less so in London.

An analogy outside the sharing economy is low cost Airlines. If you’ve ever flown on EasyJet or Ryanair in Europe you will know that there’s a distinct difference in the passengers to traditional airlines. When was the last time you saw men dressed as peacocks getting drunk and rowdy in the corridors of a BA or Virgin flight? Do they just flip and change pending on what airline they’re on? No. Many of those people would previously not travel or travel much less. With a drop in air fares now they do (unfortunately!). Low cost airlines undoubtedly increased the total pie of travellers.

It’s the same with Airbnb. People who would seldom book a hotel before – possibly for a myriad reasons, cost being one of them but also the comfort factor(many people don’t feel ‘homely’ in a hotel to the point where it would put them off travelling) – now have an alternative.

We see the same in the Gig economy in which we operate in. Numerous stats now show that 1 in 3 people in the working population are freelancers. In smaller companies less than 20 people in size 50% of the headcount are temporary / contract staff, and even in larger companies now HR managers foresee that as much as 20% of their head counts in the future will be freelance staff (a figure which I believe is grossly understated). Does that mean that Employment as we know it is over? Is it the death of PAYE? Many of our peers keep pushing that message to get more PR and buzz but I question whether they truly believe i. It would be the equivalent of Airbnb saying Hotels will die, completely and forever.

Employment will not be ridden extinct for the same reasons I mention above. Freelance hiring is a great alternative for roles where an organisation does not want – and perhaps shouldn’t – hire permanent staff for. Again, cost is one reason but not the only one. Often it’s to retain people’s creativity for example. By being independent and working for a multitude of clients, freelancers get more ideas, get to see best practice and transfer it around. Other times it’s just simple culture fit. Take social media management (ours is done by a PPHer called Kelly), often the people who excel at that don’t fit into an old-school bureaucratic organisation. Lets face it, to excel at that you need to LIVE in social media, get a kick out getting likes and master the art of hashtags. In most corporate environments using social media at work isn’t even allowed!

Uber is another example. I find that I probably am more on the move now than I was before because Uber makes it easy and fast (plus just more enjoyable. I actually get a lot of work done when I’m in an Uber- which is just as well give how much of my day that includes – whilst previously getting from A to B was all lost downtime). In this case there has been a substitution effect – at least in my life – whereby i use public transport less and even have been put off by buying a car which in the absence of Uber I think I would have bought. But still, there is definitely more of an ‘addition’ effect to a ‘substitution’ effect. Before aviation people travelled the world less – that doesn’t mean that planes rendered ships obsolete! In fact more global mobility of people leads to more international trade, which increases the pot for anything that facilitates that.

In the freelance economy the parallel to that is the need for and drive to hyperspecialisation. Companies increasingly are able to access highly specialised skills by tapping into this vast virtual workforce that now surrounds us and is now a click away. That gets them realising what they don’t know. It’s happened to us many a time. Bring in a handful of experts per month to advise on different topics – from social media marketing, the latest on fraud detection, data science or cyber-security, or the latest in tech and Dev. Ops – and you’ll quickly see that you’ll go on a hiring spree, budget permitting. Much like in the examples above, the freelance economy increases the demand for talent. The additive effect outweighs the substitution effect.

In the good-old-fashioned world all the above tells us is that customer just value more choice. Choice is good and it increases the total spending of consumers in the long term. In the myopic world of the buzzword-ridden tech world unfortunately we have a tendency to confuse choice with disruption. Anything new is ‘disruptive’ and will simply kill whatever came before it. It’s as if the world of Zeros and Ones that technology runs on translates to everything that technology touches! Including people! This is nonsense. Most of what’s invented and will be invented will coexist with innovations that came before and will come after – so long as it delivers value and offers customers credible and desired choice. It’s only in cases where the new innovation reminders the incumbent 100% obsolete across all its use-cases that them opposite holds true. For example in a digital world there is no place for film. Kodak dies. In this instance it’s not a credible alternative to the newer innovation. Why would you spend something (versus nothing – it all goes in your memory stick) a plus the time and hassle to get the images printed when you can do it at a click?

Often the measure of success of a tech company is confused with the extent to which it ‘disrupts’. It’s almost like someone else must die for this new innovation to be cool. Growing the pie isn’t cool – no matter how big that is! – creating death is! I think this is a derivative of the savage gene in our DNA. In the jungle winning means someone dies. Period. So we are hard-wired to think that way and praise those that demolish and conquer, as opposed to those who discover over new pastures.

This self-destruction syndrome may well be our very undoing as a species.

  1. Anthony Tornambe says:

    Thanks for sharing a great story!

Leave a Reply
Your email address will not be published.