Love it or hate it, you will have to agree that the sharing economy is here to stay. Any market has, as its sole duty and purpose, the task of finding ever better and more creative ways to satisfy the needs of its customers with the available resources.
Where such resources do not exist, the market seeks to create them. However, it is often the case that the resources are there but aren’t being used effectively enough.
The sharing economy is really about using whatever resources we already have in the most effective way possible, as opposed to creating and acquiring new resources. It achieves this by making use of idle assets that lots of people have just lying around.
Take Uber, for example. Uber’s greatest edge is its ability to convince people to make their private vehicles available for public use. Airbnb, on the other hand, convinces people to make their private homes free for public accommodation.
The idea is so simple as to almost seem trivial, and yet this simple idea of sharing what we do not use has gone on to revolutionize the business landscape in many ways that even the experts had not foreseen. We’re going to look at 3 of the greatest changes that the sharing economy has brought to the world of entrepreneurship.
1. Decentralized Production
In the past, businesses would handle all of their production. One central plant would be used to bring the product to life and then it would be distributed to the market after that. This certainly gave the business plenty of control. However, it also reduced efficiency.
Production processes have only grown more complicated over time, and businesses that aim to do everything themselves are bound to face crushing costs in terms of time, money, labor, and skill.
The sharing economy seeks to change this by fragmenting production into a modular state. The production process consists of a series of specialized tasks, which are then outsourced to people better suited to carrying them out. This effective method helps reduce costs for the original business owners.
Uber doesn’t own any cars. It bases its business model entirely on the cars of other people. Airbnb doesn’t own any homes but happens to be thriving in the accommodation industry. Rentfeather, an NYC furniture rental company, says this model is helping it make great leaps and bounds in the NYC furniture rental market.
2. Costs Are Maintenance Related
Previously, the greatest costs for those who owned the factors of production were ownership costs. Now, the costs are more maintenance related. The owner of the idle resource has to actively invest in the maintenance of that resource lest its earning power is drastically reduced.
In an ideal sharing economy, having your asset sit idly is equivalent to losing money. Every second you aren’t renting your asset to someone is a second you aren’t earning money. If that asset is something like a car, then you’re losing that money in the form of maintenance costs which you could be recouping by renting it out.
3. Anyone Can Be an Entrepreneur
The sharing economy has significantly reduced the barriers to entry for doing certain kinds of business. You no longer need a license and close to a $1 million dollar deposit to operate a taxi in a large city. All you need to do is become an Uber driver. Starting an accommodation business is as easy as renting out the extra space in your home.
Getting funding has always been one of the greatest challenges faced by entrepreneurs the world over. However, with the promise the sharing economy holds, anyone can get started doing business. Just find an idle resource that you own and that people need and you’re good to go!
It’s Going to Be an Interesting Future
The sharing economy is making the world more accessible and local. It is certainly not without its detractors. Many experts argue that it’s mainly a consumptive economy, rather than a productive one. Others say that the use cases are fairly limited. All we can do is wait and see where it goes. One thing is for sure. However, it’s going to be an interesting future.