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The Sharing Economy: The Information Age Brings Back the "We"


Written By: Jake Coffin

Some may still be reeling from all the technology brought on by the Information Age. But it isn't all bad. The ability to garner information at the touch of a button has sparked a return to a broader spectrum of sharing; perhaps even replacing the 'I' with a 'We' in some cases, at least when it comes to business and the economy.

One of the benefits of the Information Age is that it opens up new opportunities for business that deviate from the standard model. We use these products and services in our daily lives, but it wasn't long ago that our technological infrastructure could not even support these (now) everyday functions. We use websites like Craigslist and EBay to buy and sell goods without using a physical marketplace. We keep track of our exercise schedules and eating habits using an app on our phones. We have driving, walking, and public transportation directions to anywhere in the world at the tips of our fingers. Need we forget...we have Angry Birds? Twenty years ago, these products and services were just ideas. As our technology develops, so does our commerce. Our rapid transition to the current technological state has fostered a new kind of commerce, called the 'Sharing Economy' by some and 'We' Commerce' by others.

Sharing the Ride

So, what is the Sharing Economy? Well, basically, it is an economic system based on the sale, trade, or rental of different goods and services at a peer-to-peer level. Technology, more specifically the internet, has made this kind of transaction incredibly easy. Many companies encourage the idea of a sharing economy, and indeed, show us that it is viable.

RelayRide
RelayRide example page

RelayRides is one such company. Its business model is fairly straightforward. It acts as a go-between for individuals and companies who would like to rent a vehicle or offer their vehicle up for rent. If you are an experienced traveler, you know that rental car rates can vary depending on where you are renting the car from, where you are dropping it off, and even what events are occurring during your rental period. It's easy to pay over a hundred dollars per day for a base model vehicle.

  • Renting a Ride the RelayRides Way

When you rent a car with RelayRides, you are renting someone’s personal vehicle. You can often find late model cars, equivalent to these hundred dollars per day rentals, for a fraction of the cost of a major rental company. On the other hand, if you want to spend a little more, you can rent a much nicer vehicle on RelayRides for significantly less than what you would pay at the airport.

    • How about a Mercedes CLS for sixty dollars per day? That doesn’t sound bad.
    • Maybe a Porsche 911 is more your style. That’s two-hundred-fifty dollars per day.
    • Or, why not get that 2005 Mustang with Lambo doors for seventy-five dollars per day.

The level of choice and flexibility is a wonderful addition that our wallets sometimes just cannot handle when we are working with a traditional rental company.

  • How to Rent Your Ride Through RelayRides

The benefit is not all on the consumer’s side. Renting out your unused vehicle can be a great way to earn some supplementary income, especially for someone who owns a personal vehicle but also retains a company vehicle for work. Getting set up with RelayRides seems pretty straightforward. Users create an account on the website, and verify identity and driving record with a series of photos of the user and their current driver’s license. RelayRides even insures the vehicle, and the owners have the ability to set their own rate, as well as mileage limitations for the rental period. RelayRides takes a percentage of the rental fee. Both renters and owners are reviewed on the site, which can provide a decent look at the reliability of both parties based on other users’ testimonials.

  • What's the Downside?

So there must be a downside, right? There sure is. The main drawback of the service is the lack of clarity with the insurance coverage. According to a March 2014 press release on the New York Governor’s website, RelayRides was issued a cease and desist order last year within the state of New York due to their non-compliance with state insurance laws, and was ordered to pay $200,000 in fines. New York does not allow insured vehicle owners to exclude renters from their insurance policy. This means that the owner of the vehicle could be held liable for any damages caused by the renter while driving their vehicle. When you take into account that many insurance companies, including the industry giant Geico, specifically exclude coverage for ride sharing, this would have left the owner of a vehicle that had been in an accident in a bad position.

RelayRide’s insurance does not currently appear to cover vehicles in New York, and their website specifically excludes it in their insurance FAQ. What is curious about this is that they still list New York vehicles on their site and have recent reviews on these cars. The New York Taxi and Limousine Commission (TLC) has offered other ride-sharing companies some legitimacy, however RelayRides has not made the cut. Lyft, for example, another rideshare, is registered as a Black Car Base. Uber, yet another rideshare, is part of a pilot ridesharing program. Other states such as Oregon and California have put in place legislation that specifically covers ridesharing insurance. With any new innovation in business, it may take some time for laws and regulation to catch up with the current state of commerce.

Share the Room

Another sharing economy business is Airbnb. It follows a similar blueprint to Relay Ride's.  Airbnb matches up travelers who need a place to stay with people who want to rent out their spare bedroom, second floor, or entire home. Like RelayRides, Airbnb offers a fully fleshed-out website that allows users to preview pictures of potential rentals and read other renter’s reviews.

Airbnb
Airbnb page example
  • Sharing the Airbnb Way

Airbnb offers their customers the option to forego a hotel room for something more expansive, or likewise look for something smaller and more economical if your needs are easily met. I can’t count the number of times I have been traveling and wished my hotel room had a full kitchen, so that I could cook myself a decent meal instead of eating at yet another chain restaurant. Often, the host will provide meals, or there will be additional amenities such as big screen TVs, game systems, or swimming pools. The website clearly lays out all of these features in an easy to read format. Prices vary quite a bit across different rentals. Often you will be paying equivalent prices to hotel rooms, so you will need to take into account the different amenities that each may offer and decide if it is the right choice for you. There are definitely opportunities for cost savings here, but they are not as pronounced as RelayRides.

  • From a Legal Standpoint

Much like the situation with RelayRides, the laws and regulations surrounding the use of this service can be murky. In many cases, it is flat out illegal for you to rent your home, or a portion of it to a houseguest. While the IRS does not require you to report income if you rent for 14 days or less in a year, your local government may have different laws in place. New York Attorney General Eric Schneiderman recently issued a report on Airbnb stating that “up to 72%” of Airbnb listings in New York are illegal.

  • What's the Downside?

Airbnb does not only face issues with the legality of their user base’s rentals. Renting a car from someone and meeting in a public place to exchange the keys is one thing, inviting a stranger into your home is another matter entirely. While the review system in place on the company’s website can help you weed out the bad apples, there have still been a number of incidents that should make any prospective renter wary. Check out Huffington Post’s article "Most Airbnb Rentals Go Perfectly. Then There Are These Horror Stories." The article highlights some of the worst experiences renters or tenants have faced. Robbery and destruction of property are the least of your concerns. Coming home to find that your place has been used as a brothel and/or that a prostitute was stabbed in your home is something we’d all like to avoid.

Most of these stories took place years ago, and Airbnb has since taken measures to heighten security. However, this is still something to keep in mind when you want to make a reservation. A large quantity of good reviews is a must.

While both of the businesses we have looked at have some issues that need to be worked out, sharing economy businesses, in general, have a lot going for them. The benefits for using sharing economy businesses are lower costs for goods and services, direct income production, and a reduction of our impact on the environment.

As Brian Chesky, the CEO of Airbnb points out in Welcome to the 'Sharing Economy,' "There are 80 million power drills in America that are used an average of 13 minutes," says Chesky. “Does everyone really need their own drill?”

This idea is not entirely baseless. It is likely that we won’t need to make as many drills, and all of the resources associated with creating the product and bringing it to market will be reduced. This speaks to the point Chesky is making, that the sharing economy is good for the environment, but what does it mean for our workforce? Another question might be...If everyone is sharing drills, what happens to the workforce producing, marketing, and transporting those drills?

Chesky's article states that over 50% of Airbnb hosts depend on their income from guests to pay their rent or mortgage. In an economy that is struggling to produce more jobs, this can have a variety of effects. People are able to use the sharing services to not only save themselves money when they travel, but also make money on their property as well. The money has to come from somewhere though. Companies like RelayRides and Airbnb are taking market share from within the established industry that they are emulating, which in some cases means less taxes collected, and less margin for established companies with a large workforce. This creates the possibility of job displacement within these industries, as well as their supporting industries.

sharing

It also creates a workforce that is currently untracked, unmonitored, and is without many of the benefits that have become standard with full time employment: paid mileage or gas expense for company business, healthcare, 401k plans, etc. While people are making money through these companies, they are not 'employees,' but rather each person is treated as an independent contractor. It is important that as our lawmakers shape the new policies that fit these new business models, that they, as well as the owners of these companies, maintain the balance of profitability and service for all involved parties.

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Other Articles of Interest:

Contaminated Spices: More than You Bargained For

Is It Really Made in America

Dope to Manage Dopamine: Can Cannabis Help ADHD?

Not-For-Profit in America: Sports Leagues and Taxes

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