The Sharing Economy: The End of Employment and the Rise of Crowd-based Capitalism

by Arun Sundararajan

The wide-ranging implications of the shift to a sharing economy, a new model of organizing economic activity that may supplant traditional corporations. Sharing isn't new. Giving someone a ride, having a guest in your spare room, running errands for someone, participating in a supper club—these are not revolutionary concepts. What is new, in the "sharing economy," is that you are not helping a friend for free; you are providing these services to a stranger for money. In this book, Arun Sundararajan, an expert on the sharing economy, explains the transition to what he describes as "crowd-based capitalism"—a new way of organizing economic activity that may supplant the traditional corporate-centered model. As peer-to-peer commercial exchange blurs the lines between the personal and the professional, how will the economy, government regulation, what it means to have a job, and our social fabric be affected? Drawing on extensive research and numerous real-world examples—including Airbnb, Lyft, Uber, Etsy, TaskRabbit, France's BlaBlaCar, China's Didi Kuaidi, and India's Ola, Sundararajan explains the basics of crowd-based capitalism. He describes the intriguing mix of "gift" and "market" in its transactions, demystifies emerging blockchain technologies, and clarifies the dizzying array of emerging on-demand platforms. He considers how this new paradigm changes economic growth and the future of work. Will we live in a world of empowered entrepreneurs who enjoy professional flexibility and independence? Or will we become disenfranchised digital laborers scurrying between platforms in search of the next wedge of piecework? Sundararajan highlights the important policy choices and suggests possible new directions for self-regulatory organizations, labor law, and funding our social safety net.

Genres: Business, Economics, Nonfiction, Technology, Entrepreneurship, Sociology, Audiobook

240 pages, Hardcover

Published January 1, 2016

Reviews

[Jeff Wilsbacher · Rating 3 out of 5]

It's an acceptable introduction to Sharing Economy. Mr Sundararajan gives a snapshot of what's been happening over the last few years, but doesn't provide much foresight into what will happen (just that it's going to grow). He's done a good job surveying the existing data...but I was hoping for more forward looking data.

Sundararajan's economic views include Akerlof's information asymmetry models and classic (Schumpeter-ian) models but don't include Stiglitz's models regarding learning economies. In short Mr. Sundararajan seems to have an over-simplified foundational knowledge in many areas and this has the feel of a very long (but well written and edited) academic research paper.

Sundararajan regularly calls Uber drivers, Airbnb hosts, and other "sharers" entrepreneurs or micro-entrepreneurs ...they might be small business people, but entrepreneur is defined in "...capacity and willingness to develop, organize, and manage a business venture along with any of its risks in order to make a profit." Most of these "sharers" are taking risks, but the development, organization and managing of the business ventures along with the mass of aggregate profit going to the networker... Uber makes hundreds of millions while any driver is likely making less than 30k a year.

[Jan Poruba · Rating 4 out of 5]

We are entering a new era of crowd-based capitalism and this book could be considered as a brief guide to this new phenomenon with arguments backed by scientific research. The book covers all important topics such as economical impact, regulatory challenges and future of work. Although Sundararajan is rather optimistic, he discusses both opportunities and threats of sharing economy which makes the text really balanced. Highly recommended.

[Drew · Rating 2 out of 5]

Good book if you're very unfamiliar with the sharing economy businesses... or if you're obsessed with the Sharing Economy.
It kind of ends up being the worlds longest list of sharing economy companies, and there are few original insights.

[RAJESH PARAMESWARAN · Rating 4 out of 5]

This is a must read for anyone who wants to analyze how platforms claim to change the world. I don't agree with the work or share the optimism expressed by Prof Arun Sundara rajan, nevertheless this book deserves attention.

[Ivo Fernandes · Rating 4 out of 5]

From the begin until the chapter 7 is a 5 stars, gives many examples of successful sharing economy platforms, compare them to each order and group from many ways, if the users can review each other anonymously, if the client can choose the service provider, if the provider can choose his price, etc...

The idea that the uber and airbnb are the first really big sharing economy platforms because cars and houses both have high prices and low utilization rate is great.

But from the 8 chapter to the end the book is immersed in regulation, politics and things that are clearly out of the comfort zone to the author, he have no idea how and why should we regulate.

[Đạt Tiêu · Rating 3 out of 5]

The sharing economy notes

I. Cause
1. Sharing economy, market economy and gift economy
* Sharing economy
- General traits:
+ Largely market-based: new services, higher levels of economic activity.
+ High impact capital: assets, skills, time and money used at levels closer to the full capacity.
+ Crowd-based: the supply of capital and labor comes from decentralized networks of individuals.
+ Personal vs. Professional: more services commercialize and scale as P2P activities.
+ Full employment vs independent worker: more non-traditional jobs
- Must-haves(collaborative consumption view):
+ Critical mass.
+ Idling capacity.
+ Belief in the commons.
+ Trust in strangers.
- Networks must have:
+ Sharability within a community (local or global).
+ Rely on advanced digital networks.
+ Immediacy (whenever and wherever).
+ Promotions driven by social media platforms.
+ Global in scale and potential.
- Platforms must have:
+ Value created by some kinds of exchange.
+ Underutilized assets.
+ Online accessibility.
+ Community (trust, social interaction, shared value).
+ Reduced needs of ownership.
- P2P characteristics:
+ Distributed networks: individuals have a certain degree of agency.
+ Anti-credentialism: anyone can join.
+ Holoptism: information symetry (knowledge for everyone)
* Gift economy
- Characteristics:
+ 3 obligations: to give, to accept and to reciprocate.
+ True purpose is of increasing social cohesion/connection (no commercial profit).
+ No expectation of bilateral reciprocity.
+ Flow of gift facilitates the flow of social value.
+ Have a socialism vibe.
-> Sharing economy is hybrid: market-gift economy.

2. Digital and socioeconomic foundations
* 3 fundamental forces
- Information goes digital.
- Growth of hardware power, bandwidth, storage and miniaturization of digital devices.
- Modular programmability: easier to modify, codify, extend and integrate.
* 4 consequences of these forces
- Consumerization of the digital: digital devices go popular among consumers and in everyday life.
- Digitalization of the physical: -> IoT and additive manufacturing.
- Decentralized P-2-P emergence: block chain, P2P sharing, ...
- Digitalization of trust:
+ Trust is the willingness to commit to a collaborative effort before know how the other will behave.
+ 3 dimensions for trust: authencity, intentions and capabilities.
+ Learn trust from: prior interactions, other experience, brand certification,
digitized social capital (personal networks)
and validation from external institutions.

3. Platforms: under the hood
* Hierarchies vs markets
- Markets determine the prices that balance supply and demand.
- In hierarchies, suppliers and customers interact under cooperation from government/central entities.
* Digital technologies reshape economic activities
- Production cost + External coordination cost (cost of other different activities from the markets):
-> If coordination cost is low relative to production cost, people should favor markets.
- Complexity of product description + Asset specificity
-> The more complex to describe/manage/use/transact... a product or the more customized it is
-> more external coordination costs
-> the more people should favor hierarchies (economies of scale) (also suffer from bureaucraticy - internal cost)
- Technologies decrease external coordination costs and internal cooperation costs:
+ Economic activities should shift more to markets (market efficiency).
+ Firms: horizontal growth increases (geographically) + vertical growth decreases (employee size -> outsourcing)
- Open innovation: use external ideas (ideas from communities)
-> sharing economy is a hybrid between markets and hierarchies.
* P2P rental platforms
- Conditions for a P2P rental platform to emerge:
+ Costly/High-value products.
+ Low frequency of use.
+ Low asset specificity (low-tailored, customized products; low-ownership, memorial value)
-> Increase the depreciation process of assets -> increase maintenance cost -> decrease asset life cycle
- Industries P2P platforms -> Collaborative Economy HoneyComb

II. Effects
1. Economic impacts
- Increased impact of (existing and new) capital.
- Increased variety of products/services -> increased consumption.
- Network effect and economies of scale.
+ Supply side economies of scale: specialization -> transaction cost between phases decreases
-> doing small chunk of work is easier to improve
-> more efficient, lower cost
+ Network effect -> demand side economies of scale: an increase in value of a product when its usage grows.
also lower customer acquisition cost when the network grows
+ P2P(micro-business in sharing economy) vs traditional macro-business:
@ lose supply economies of scale.
@ need less capital.
@ local nature of economic activities (depend on local infrastructure and population density).
- Democratization of economic opportunity: opportunities for everyone -> micro-business
* GDP is unable to recognize new value created from the sharing economy.
- GDP shortcomings:
+ Only aggregate number, no distribution.
+ Do not care about the "behind the scene" elements (negative impacts: pollution, resource exploitation,...).
+ Do not take into account activities from non-markets or underground markets.
+ Unable to reflect the standard or quality of life.
+ Do not consider consumer surplus (difference of the maximum amount consumers agree to pay and the actual payment)
-> Advanced technologies lead to lots of consumer surplus (transaction cost reduction, customer experience enhancement,...)

2. Regulation and consumer protection
* Problems in P2P sharing economy
- Information asymetry:
+ Uncertainty of the quality of the products/services.
+ Moral hazard: one party may act riskier than others.
- Externalities: one's action can cause negative affect on others.
- Blurring line between the professional and the personal:
+ Hard to control over lisensing, taxation, quality.
-> Market inefficiency/failure
* New regulation for sharing economy
- Peer regulation: feedback, review and rating system of platforms.
- Self-regulatory ogarniztions: associations which have accountability, enforcement and governmental intervention.
- Data-driven delegation: trust platforms to enforce the regulation.

3. The future of work
- Increased offshoring of service industries.
- New marketplaces based on platforms: -> reduce information asymetry
+ Ease of access.
+ Rise in wages (better sense of price, valuation).
+ More market liquidity.
- New generalists (vs. Specialists)
+ Lower specialization requirements.
+ Move away from centralized workplace.
- Immediacy of supply:
+ Exploit leisure/free time to turn into work -> increase labor efficiency.
+ Too many micro-tasks -> decrease work life balance.
- Task economies -> split a task into many small chunks and outsource them.
+ No need to hire a full-time employee.
+ On demand contractors whenever and wherever.
- Invisible work:
+ More traditional employees -> independent contractors, micro-entrepreneur
+ The challenge -> re-define: employment and unemployment, also underemployment.
-> new metrics to capture value created by these kinds of jobs.

4. The future of work: what needs to be done
* Employees vs Indepenedent contractors based on:
- How independent contractors are
- How much control the employer exert on the contractor.
-> Guidelines to distinguish:
- Behavioral: company controls/has the right to control what job to do and how to do it.
- Financial: how business aspects are control -> how expenses, payment are paid, who provides tools/supplies.
- Type of relationship: are there written contracts? employee-like benefits
-> In sharing economy, this is blurring -> in need for new category beside employees and contractors?
* New social safety net
- A new basic income for all types of labor.
-> what does this basic income package look like? minimum income based on salary/wages?
-> where the money for this comes from? society or put aside by labor?
-> who's in charge of doing this? governments or platforms or unions?
* Sharing ownership in sharing economy
- Platform cooperatives: platform ownership is distributed among labor
-> increase equality and efficiency?
* Data Darwinism
- Everything is driven by data now:
+ Data in forms of rating, reviews, comments, feedback can have big impact on platforms and workers.
-> amplify bias towards prior-success platforms -> create polarization.
-> workers can build huge trust.
+ Challenge: take this data when workers switch from platform to platform.

[José Luis · Rating 5 out of 5]

Seguramente, merece 5 estrelas. Um livro curto, muito técnico, tudo baseado em resultados de pesquisas e investigação sobre dados reais, em universidades de renome. O que é economia colaborativa? Quais seus impactos e como afeta os negócios tradicionais? Qual seu potencial de crescimento? Quais as implicações econômicas e sociais? Qual impacto na educação formal? Como poder ter certeza de que estamos contratando um serviço confiável, como medir isso? Quais são as novas relações de trabalho, podem ser entendidas com as regras da economia tradicional? O autor tem resposta para todas essas questões, tudo discutido seriamente e longamente. Se você quer descer um pouco mais além da superfície do assunto, entender melhor, essa é a leitura obrigatória para dar os primeiros passos. Já li muita coisa sobre o assunto, tudo muito superficial, dá para ter uma ideia, nada comparado com este livro. Recomendo muito. E o livro é muito bem escrito, muito acessível.
================================
Surely it deserves 5 stars. A short, very technical book, fully based on research results and research on real data, at renowned universities. What is collaborative economics? What are its impacts and how does it affect traditional businesses? What is its growth potential? What are the economic and social implications? What are the impacts on formal education? How can we be sure that we are hiring a reliable service, how can we measure this? What are the new labor relations, could it be understood by the rules of the traditional economy? The author has answers to all these questions, all discussed seriously and at length. If you want to go down a little further than the surface of the subject, understand better, this is the obligatory reading to take the first steps. I've read a lot on the subject, everything very superficial, nothing compared to this book. Highly recommend. And the book is very well written, very accessible.

[Thomas A. · Rating 4 out of 5]

I am a technologist, not an economist, but I never felt like this book left me behind. I did feel that the book was more scholarly or academic than most lay people would care for. But the concepts are well presented and the topic interesting. I would consider this a thorough introduction to the concept of sharing economies and the issues and impacts that surround them. I would recommend this book to entrepreneurs, politicians and technologists.

[Izalette · Rating 4 out of 5]

Sharing economy works wholly depends on trust.
Blurring of boundaries btw personal and professional
The evolution of regulation - trust, Institution and brand

Build trust needs
1. Reputation
2. Create communities of shared interest

Dystopian view: work will be defined by low wages, elimination of benefits, high level of job insecurity, work longer hours for less money, income will be fragmented, safety net will be a distant memory, and work environment will have less ideal and less carefully monitored conditions.

Or work has increased flexibility, fluidity, innovation, and creativity. Individuals will be empowered entrepreneurs who take control of their own destinies. Innovative new products and services, work fewer hours on a more flexible schedule from wherever they want and make more money doing work that they choose.

1. Only some jobs have the ability to be offshored.
2. Highly offshore-able jobs only account for a small fraction of the US job market.
These jobs aren't dependent on skill or educational credentials but rather on whether the service can be delivered electronically over long distances w/o compromising quality.

[Dan Gabree · Rating 3 out of 5]

This is a good intro into this realm and the author adds his opinions about what the causes and future will be for this type of business, but it is often unnecessarily verbose and at times the details or speculations are more opinion than fact. It starts well and does provide a very details picture of several key companies that have driven this business model, but it is at time repetitive and toward the end dwells at length on speculative or legal issues that do not add a lot to the tale.

[Tony Canas · Rating 4 out of 5]

Excellent exploration of the sharing economy and how it's changing our world. It's a bit academic but it does give you a great framework to analyze the sharing economy.

[Paul · Rating 2 out of 5]

So, the sharing economy; an interesting trend that is creating change in how we own things, consume services, and seek employment.

The interesting bits of this book are
- Chapter 1&2: gives a fairly useful introduction to the area
- Chapter 8: the future of work.

So as you may have guessed, I think that the book content could have been compressed into a nice couple of blog posts rather than underpinning an entire book. The chapters in the middle mainly are over-conceptualisations of the trends that are being seen e.g. using economic theory, but that society has largely seen before. But that is the U.S. tech mindset: ignore history and see everything as brand new and amazing.

The writing style is a bit annoying as the author endlessly lists the names of sharing economy companies and endlessly name-drops people he worked with or knows of. Amazing that you can write a book in 2017 mainly comprising lists of people and companies.

Overall: it's not that bad, but don't spend too long reading it since it doesn't contain any novel insights.

[Jonathan · Rating 3 out of 5]

Sandarajan's term "crowd-based capitalism" is a helpful term for conceptualizing what's commonly referred to as the "sharing economy." The "sharing economy" is often not about sharing, but still is different (and not just technologically) from the economic patterns of the traditional industrial or postindustrial economy. Although I think Sundarajan is more favorable toward these new economic forms than I am (and less gung-ho about state regulation of them), I found the book to be very useful for understanding the landscape of the "sharing economy," what makes it different, and what trends will influence it (for the better or for the worse) in the years to come.

[Gonçalo Gato · Rating 4 out of 5]

Um livro acessível para entendermos como é que plataformas como a Uber e a Airbnb se tornaram tão disruptivas a nível social e económico. Uma pequena demonstração da panóplia de fatores que poderão alterar o nosso quotidiano com a cada vez maior adesão a este tipo de plataformas. Como será o futuro do corpo laboral a nível flexibilidade, benefícios e independência? O que acarreta ser um contratado, que benefícios traz e que desafios impõem? Serão as micro-transações o futuro? Como podemos evitar o enviesamento criado pelos sistemas de classificação online que serão inerentes a qualquer aspeto da nossa vida?

[Todd Benschneider · Rating 5 out of 5]

Great book, gives historical context to the rise of alternative and independent contract type labor such as Uber, Task Rabbit, Instacart and Guru blended with the arrival of improved computing power that is replacing previous white collar jobs in data processing, legal services, banking and insurance have ignited a new machine age of economic shift that could either increase or decrease GDP depending on how the social and regulatory infrastructure adapts. Very deep read but very well written and easy to understand. A must read for students of business

[Lloyd Fassett · Rating 5 out of 5]

I read this for work as a Marketplace Entrepreneur. It's solid and I highlighted the hell out of it.

He never mentions Ronald Coase's work on Transaction Costs though, which is really odd. He must have jumped through hoops to not talk about the original workaround when hierarchical structures dominate vs market-based. That doesn't really matter though because market-based systems are winning and gaining steam, still.

[Federico · Rating 2 out of 5]

Fairly disappointed by this book.
It's self-indulgent review of the greatness of modern platform companies and sharing economy, with very limited objectivity on the subject. But if you can bear the rainbows and glitters of two thirds of the book, you will enjoy the last two chapters where you finally find some substance.

[Sahithi Maley · Rating 2 out of 5]

This book was very educational and informative. It really opened doors to a lot of new concepts and warned me about the changes caused by the new Uberisation. The book covered a lot of information and lacked continuity at certain parts. I took a lot of time to finish the book due to vast amount of information it covered.

[Sandra Lascarro · Rating 5 out of 5]

It is such an actual book! Even when it was writing three years ago, talking about technology it could be old today, but this revolution is just starting and the economy is not only changing many businesses are becoming irrelevant because of the use of technology and the power of the community looking for better service.

[Ernestas Poskus · Rating 4 out of 5]

At the heart of the book is the idea that a technological fragmentation of the previously more hierarchical economy will facilitate expanded opportunities for individuals to enhance their earning capacity by "sharing" their underused but in-demand assets for additional income, not necessarily fiat money.

[Thomas Sedkowski · Rating 4 out of 5]

It gave me a fair few "aha" experiences, but mostly it won me over by simply providing structure to how to gauge this exciting field. How it happened, what it means, what the consequences are. Not necessarily a radical take on the matter that deeply changed my perception on the sharing economy, but it gave me a better understanding of the pros and cons (especially the pros).

[Duane · Rating 1 out of 5]

"In this chapter I explain..." is how chapter two starts out. That's as far as I got because the book was a horrible read. The subject has so much potential and Arun turned it into a dry, lifeless, trudge of a book. It's more of a masters thesis gone awry.

[Gog Joo · Rating 4 out of 5]

A thoughtful and interesting read about the emerging trends of sharing economy. Arun offers readers without prior knowledge a comprehensive coverage of the key aspects of sharing economy. The last 2 chapters on policy implications are simple to understand.

[kerf · Rating 3 out of 5]

Recommended for those seeking to learn more about the basics of sharing economy, especially the economic, sociology and history aspect of it. However, there was not much of insights and the book was mostly filled with theories and examples.

[Casey Tanner · Rating 3 out of 5]

A good trip through crowd business and opportunities for social change brought on by the crowd economy. Not a clear and easy read, seems to wander a little at times, more wordy than needed and a lot of name dropping.

[Loke · Rating 4 out of 5]

Den tog upp väldigt intressanta aspekter som jag inte hade tänkt på, men stundvis var den ganska seg. Det hade nog gått lika bra att exkludera vissa saker, förutsatt att den är skriven för privatpersoner.

[Phyllis · Rating 3 out of 5]

This book provides a comprehensive review of the past, present and future of the sharing economy. I particularly enjoyed the chapters discussing the future and challenges of the sharing economy.

[Craig Carignan · Rating 4 out of 5]

Interesting but too much of an egghead academic read to be enjoyable, but it was interesting .

[Avram · Rating 4 out of 5]

A bit dry, but a very thorough introduction. Develops frameworks to understand the sharing economy, and points to several complexities that may ensue because of this new style of capitalism.

[Monica · Rating 4 out of 5]

Great book. Filled with facts that are kinda self explanatory, but the perspective is novel.

It was an enjoyable read, and a good resource for my work.