Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism
304 pages, PublicAffairs, 2015
Sharing economy, collaborative economy—we didn’t consider these terms in mainstream discussions about “the economy” 10 years ago, but today, we do. The web and social media are increasingly connecting individuals and companies in new and deeply collaborative ways. How have sharing platforms like Zipcar, Airbnb, Waze, and OK Cupid contributed to this change, and what do they have in common? The book Peers Inc, from Zipcar founder Robin Chase, explores how the sharing economy has evolved to change behavior and business, as well as the much larger economic transition that is fully underway. In this excerpt, Chase details the three theses she learned with Zipcar that are at the heart of Peers Inc: Excess capacity (sharing an asset) makes economic sense; platforms for participation make sharing simple; and, peers are powerful collaborators. As synergies between companies and people evolve through the use of new technology, Chase shows how age-old concepts of capitalism, consumerism, and even ownership are taking on new meaning in today’s marketplace.
The more I’ve thought about it, I’ve come to understand that sharing is actually figuring out how to tap into existing excess capacity. Zipcar thrived by leveraging the opening provided by the wasteful economics of current car consumption models—the fact that personally owned cars sit idle 95 percent of the time. But we weren’t the only ones leveraging idle capacity: The U.S. government similarly shared its R&D and satellites with everyone for global positioning systems (GPS), and the city of Bogotá, Colombia, took advantage of the fact that its thoroughfares were relatively car-free on Sunday mornings by turning the streets over to pedestrians, runners, bicyclists, and skaters and featuring performances throughout the city. Examples of exploiting the hidden value in idle assets abound once you start to look for them. Recognizing the role of excess capacity was the first of my epiphanies. Unpacking my Zipcar experience, seeing the commonalities with other emerging companies, and appreciating the scale of the firestorm that Zipcar helped catalyze, took many years.
When Zipcar formally launched in 2000, less than 40 percent of Boston’s households had Internet access. Nobody had smartphones. Wikipedia would not be launched until 2001, followed by Facebook in 2004 and YouTube in 2005. It was important that we include the “.com” on the end of zipcar.com so anyone who saw it would know to look for us on the World Wide Web. But by 2014, investment into companies whose core assumptions mirrored the ones we pioneered in 2000 had exploded. Sharing houses and apartments, Airbnb raised $450 million in that year. Sharing travel and costs on long car trips, BlaBlaCar raised $100 million. Disrupting the status quo in urban transportation and collaborating with people driving their own cars as taxis, Uber raised $3 billion and Lyft raised $250 million. In total, companies building platforms to tap into excess capacity raised more than $5.5 billion that year, which was close to four times what had been raised by similar companies in 2013, which was again more than double what had been raised in 2012.
What is happening? The Internet has eliminated a key corporate competitive advantage. In 1937, in the influential essay “The Nature of the Firm,” British economist Ronald Coase wrote that the corporation was invented to do things that individuals and small companies couldn’t do. In particular, small companies would choose to become larger companies whenever it was cheaper to hire than to outsource. What would make hiring cheaper than outsourcing? Transaction costs (a term Coase invented). Finding, monitoring the quality of, and managing many discrete individuals was expensive. It was cheaper to hire them. But now the Internet has transformed that equation. Today, we see that the smartest companies and governments are using the Internet’s ability to facilitate collaboration by leveraging expertise, assets, and resources outside their sphere of control.
The result is a very efficient, and often more humane, way of doing things. On one side of the collaboration, we have industrial strengths: companies, governments, and institutions (the “Inc”) that apply significant resources, talent, and money to simplify the complex, apply standards and consistency, deliver economies of scale, and create global brands. On the other side we have individual strengths: individuals and small companies (the “peers”) that engage in local, small-scale, customized, and specialized efforts to create just-right unique goods and services, often tapping into their own social networks.
The thirty companies included in the 2014 funding numbers I listed earlier are just the tip of the iceberg. Significant sectors of the economy are transitioning to this new approach—building platforms to unlock excess capacity and welcoming outside collaboration. My three Zipcar theses are the kernels of the Peers Inc building blocks. The first is that excess capacity (sharing an asset) makes economic sense, the second is that platforms for participation make sharing simple, and the third is that peers are powerful collaborators. This book is about the platforms and the peers, the collaboration and the synergies I first uncovered at Zipcar. Enabled by new technology, a revolution is taking place inside capitalism as we reimagine the role of consumers, producers, and even ownership. I call this new paradigm Peers Inc: a transformation of the relationship between companies and people.
Peers Inc finds abundance where there once was scarcity. It leverages the ability of individuals and small actors to experiment, adapt, iterate, and evolve. When done well, Peers Inc can create change at a pace, scale, and quality we previously thought impossible. Peers Inc is leading the transition from industrial capitalism to the collaborative economy.
The fact of abundance contrasts sharply with the shadow of perceived scarcity as I sit reading the news in my own house filled with the toys, papers, projects, and detritus of twenty years of family life, surrounded by hundreds of thousands of people living in their own equally stuff-filled abodes in an area that is riddled with highways congested with mostly empty cars and near an airport where planes take off and land constantly throughout the day. When I consider all this, I feel overcome. Americans are 5 percent of the global population yet consume almost 30 percent of the world’s goods. In the last three years, China has produced more cement than the United States did in the last one hundred years. Dan Sperling, in his book Two Billion Cars, writes that today there are 1 billion cars and we are trending toward 2 billion in the next twenty years.
There is more than enough physical stuff already; we just need to think about and organize it differently. We can share the assets we have already (cars, beds, phones). We can leverage the networks that we didn’t even know existed (social media). We can share virtual goods that had been hidden (open data, open source software, open APIs). We can share talents, expertise, creativity, and insights that were previously unvalued.
In itself, excess capacity is just latent value. Actual value comes from making use of it. When I picked up my own children from school, I would also sometimes pick up a neighbor’s child as well. I was getting more value out of my trip, doing what neighbors should do, and providing my own children with more compelling companionship than me alone. Making use of excess capacity in small local ways is fulfilling and useful, but it’s not what this book is about. I’m interested in scaling this idea by making more efficient use of what we have around us and by uncovering totally new value there as well. Therein lies the path to abundance. Etsy, an online marketplace for makers, is not like a really big craft fair. eBay is different from both classifieds and yard sales. Airbnb is much more than a listing of 1 million bed-and-breakfasts. What distinguishes and transforms these activities is that platforms connect, organize, aggregate, and empower the participating peers. Without the platform—without Airbnb, Etsy, Lyft, TopCoder, or OpenStreetMaps, to name a few—the peer co-creators would not engage, the leveraged excess capacity would be limited, and the consumers of these products and services would not return again and again.
Excess capacity turns out to be a key input into a Peers Inc product or service. The cost of experimentation is lowered as new value is extracted out of something that already exists and is already substantially (or entirely) paid for. This is why excess capacity is so appealing, especially for entrepreneurs, whose biggest problem is almost always a lack of capital. This is why businesspeople and government officials who want to get higher returns on their investments should constantly be on the lookout for ways to repurpose those investments by opening them up. In all cases, leveraging excess capacity comes at a far lower cost than buying raw material. And execution can happen in a fraction of the time, since we don’t have to find, source, build, or finance inputs.
Copyright (c) 2015 by Robin Chase