The sharing economy? More like the ‘subletting economy’

Ignore the schmaltz surrounding “the sharing economy.” The benefits of websites like Uber and Airbnb come in the form of greater efficiency rather than new friendships.

My initiation into the so called ‘sharing economy’ came about 18 months ago. I was planning a trip down the East Coast of the US for my sister and me and was grappling with how to do it on a budget. The problem was that budget accommodation in the US seemed to consist of motels that were about twice the price of European hostels. However, a way to avoid spending a $150 a night on accommodation turned up when a friend who doing essentially the same journey in reverse suggested using Airbnb – a site that allows people to rent out spare rooms and empty apartments.

Airbnb is part of the so-called “sharing economy.” It consists of a constellation of companies using technology to facilitate peer-to-peer transactions. As Noam Scheiber reports in New Republic there are big claims made for this new corner of the economy:

“The insistence that the sharing economy has tapped into a deep yearning for social interaction is both the most idealistic and least questioned assumption among its boosters. “People are both hungrier for human contact and more tolerant of easy-come-easy-go fluid relationships,” David Brooks wrote in a recent mash note to Airbnb. In a Wired story this spring, John Zimmer, the co-founder of the Uber competitor Lyft, invoked a stint on the Oglala Sioux reservation to summarize his feelings. “Their sense of community, of connection to each other and to their land, made me feel more happy and alive than I’ve ever felt,” he said. “We now have the opportunity to use technology to help us get there.”

It would be safe to say that Scheiber doesn’t think much of such claims. With specific reference to Airbnb he says:

The company’s origin story, which Chief Technology Officer Nate Blecharczyk cheerily recounted at the Share conference, involves two of its co-founders renting out a bedroom in their San Francisco apartment during a 2007 conference. “Real friendships were formed,” Blecharczyk said. “Something special was created.”

Airbnb doesn’t release data that would indicate how much its users value the social aspect of the service. But, while there is probably a core group who are genuinely out to bond with their hosts, the company’s own moves suggest its users care much more about the authenticity of their surroundings than befriending hosts. Airbnb recently hired a prominent boutique hotel operator named Chip Conley to improve (and generally standardize) its guests’ experiences. When we spoke in July, Conley told me the key insight from his boutique-hotel days is that people want to feel like they’re really getting to know a city or a neighborhood, not staying in some generic or touristy location. (No surprise that Airbnb’s motto until very recently was “live like a local,” something it delivers on exceptionally well.) He told me that a growing number of users are people mulling a move to a new city and want to try it out first.

There are hospitality companies focused on maximizing guests’ social interactions—the Sydell Group’s upscale hostels, for example. Airbnb just doesn’t appear to be one of them. “The Airbnb model is … isolating in a way. You’re staying in an apartment,” says Sydell CEO Andrew Zobler. “Substantively, you’re much more immersed if you’re staying with us. You’re meeting people.”

This tallies with my own experience of using Airbnb. The woman who hosted Cat and me in Richmond, Virginia – the remarkably hipsterish former capital of the Confederacy – had travelled quite a bit herself and seemed to letting out her spare room in part so she could meet other people who liked travelling. But she was something of an outlier. We didn’t meet two of our hosts and didn’t socialise with the remainder. We met far more people in the four days we spent in a hostel than the two weeks staying in places we found on Airbnb.

Which is not to say it isn’t a great service: it makes travelling on a budget a lot easier especially in the States. But the relationship it creates are those between buyer and seller. They are commercial not social.

What the sharing economy fosters most effectively is not community but competition. They allow a vast number of new providers to enter a marketplace and challenge established players. Airbnb makes it practical for someone with a single room or flat to connect with travellers, where previously you generally needed economies of scale such that you needed a whole hotel or hostel to compete effectively. Likewise, Uber allows drivers to sell lifts to customers without participating in the local government backed cartels that generally control the market for taxis. That obviously threatens a lot of people – hence the backlash against both Uber and Airbnb. But part of the point of a market economy is to stop anyone getting too comfortable.

Given that these enterprises are really about selling spare capacity rather than sharing it, Scheiber suggests we should be talking about the “subletting economy.” That’s a piece of branding that’s not going to make anyone feel warm and fuzzy about the advantages of these new companies are delivering. But that doesn’t mean these advantages aren’t real.

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