Ever since I discovered AirBnB, I have been fascinated by collaborative consumption and the potential it has to radically transform our economy and the very fabric of our society. I love the way Rachel Botsman characterizes it:
Reputation over credit.
Community over advertising.
Shared access over individual ownership.
What is even more interesting now, with the advent of collaborative consumption successes like AirBnB, Getaround, TaskRabbit and others, is that we are starting to see trends in terms of the generic problems they all face.
1- Trust and safety
It’s funny to notice how all those services have each implemented their own trust and safety mechanisms. In every case, it is based on the same basic principles:
- A rich user profile with real-world identifying information (rich identification)
- A strong integration of social networks like Facebook, Twitter, LinkedIn and others (peer-to-peer validation)
- A bilateral rating-and-review mechanism (reciprocal reputation)
Indeed, all collaborative consumption services are built to facilitate real-world interactions thanks to web and mobile technologies. In other words, they all have in common to ease transactions that start online and end offline. For this kind of transactions, the legendary anonymity of the web is not adapted at all: when everything happens online, you don’t care if people hide behind avatars and nicknames. But it’s not the same here. So we need a way to bridge the gap between the online and offline identities of our users.
Then, of course, once you have this information, you need a way to cross-check it, to validate it. And if traditional centralized approaches like certification authorities work for things like ecommerce, they are simply not scalable when it comes to validating millions of individual identities. Hence the integration of social networks but it’s certainly not spoof-proof.
Last but not least, reputation is clearly becoming a key asset in these services. The problem is that before you can get a reputation, you need to use the service at least once, so you need other users to trust you beforehand. And even once you have used the service, the other user you interacted with needs to be incentivized to leave a comment about you. This makes it even more absurd to have such a fragmented reputation landscape in which the same person can have multiple reputation profiles in different services.
Obviously there is a big opportunity here: collaborative consumption needs a generic transversal identification, validation and reputation mechanism, something like an electronic passport that can easily be integrated into third-party services, that is peer-to-peer to remain scalable, and creates one reputation for each user. At first, I thought it could be a startup and a business could be created out of this. But then I realized that it might be even better to make it a joint venture between collaborative consumption companies. An open standard that would be free to use and integrate, that would be developed and funded by major actors in this field. For me, it’s the number one condition for collaborative consumption to become mainstream.
2- Payment and taxes
eCommerce and traditional online businesses are still based on an old centralized model in which providers centralize goods and skills and sell them to businesses or consumers: those models are well-known B2B and B2C. And beyond the fact that those transactions happen online, they are still very similar to the way traditional commerce works. As such, they are also perfectly fine with the way payments and taxes are designed, that is in a very centralized fashion.
But with collaborative consumption, services merely act as brokers or facilitators in what are really consumer-to-consumer (C2C) transactions. In such a decentralized peer-to-peer model, we are all forced to struggle with a huge impedance mismatch between the way payments and taxes are designed and how our services work.
Take payments for example. Most collaborative consumption services are based on a transactional commission-based business model. Only a small part of the money that comes in stays with us, and the rest goes out. So every payment processing fee can have a very big impact on our business models. But most of the time, those fees are justified by the fact that payment processing is a very complex business. It involves a lot of actors, including very risk-averse ones who have to fight against fraud everyday. So how do we make this system lighter? How can we simplify it?
And of course it is the same for taxes. I am a company, I provide a service to a consumer who buys the right to use a room, a car or a desk to me. Then I have to pay taxes on my benefits, which is the difference between how much I sell and how much it cost me. But what it cost me, I pay it back to another consumer, not to a business. So what do I pay taxes on? There’s got to be a better way.
For me, it’s all a currency problem. I’m convinced that the currencies we are using today (dollar, euro, etc.) are defective by design for society in general, and even more in the context of collaborative consumption. And I’m convinced that collaborative consumption is the ideal loam for a brand new currency, designed from the ground up for it, and that will allow us to bypass centralized banking systems as well as archaic taxation mechanisms.
3 – Regulation and liability
Most laws are designed around the idea that the best way to control a collective effort, to prevent it from going nuts, is to create a central authority to apply laws and sanction those who don’t respect them. Take food as an example. At TechCrunchDisrupt, one of the Battlefield contestants was Grow The Planet, which I found very interesting as a concept. But they seemed to be struggling with their business model because it’s illegal for people to sell the vegetables they produce, unless they have a legal allowance of some sort, meaning that they are controlled by an official authority every once in a while. In a centralized economy where government is the only gatekeeper, this makes a lot of sense. But what about it in a decentralized peer-to-peer economy when your online reputation becomes much more reliable than any corruptible government organization?
And then of course, this issue is very related to the way most insurance contracts work. They are all based on a centralized liability mechanism: in which the provider pays to alleviate the risk of something going wrong in the transaction. And then of course, the cost of this insurance is propagated to customers. But does this mechanism still make sense when the service provider is merely a broker and the real provider is a consumer? It is simply not possible to ask end-users to pay for their own insurance, at least not in a one-shot premium like it is done today.
I think the regulation problem can also be solved by an alternate currency: most laws prevent you to sell (provide a service or give a good in exchange for money). But is it selling if I’m giving it away in exchange for Monopoly bills (at least in the eyes of the law)? Until legislation adapts itself to this new form of exchange (which will take a long time of course), I think that will do. As for liability, it’s simple: we need a new breed of insurance companies, we need a new form of insurance contracts capable of covering peer-to-peer transactions.
I really love collaborative consumption. I’m convinced it will drive us out of this financial and economical disaster we are still in and create a brand new economy based on real exchanges between human beings. Finally, it’s not social OR profitable anymore. Finally we can make a business based on sharing.
But we are still at the very beginning of this revolution and while some people think the best way to move it forward is to protest and occupy Wall Street, I personally think we should instead start creating a new system that will naturally take over when the current one eventually collapses. And we should definitely stop thinking it is out of our hands, that nothing can be done about it, or even worse, expect our politicians to create this new system for us.
Collaborative consumption will become mainstream when we implement the framework it needs to strive:
- a decentralized, peer-to-peer and unique identification, validation and reputation system
- a decentralized, negative interest rate and international currency
- a new kind of liability and insurance contract
What makes these times particularly exciting for our generation is that we are back in charge. The internet is providing us with all the tools we need to create our own system for generations to come. Let’s use them wisely and efficiently.