The End of Ownership: America’s New Sharing Economy

“Drilling for gold.” If you own something, someone somewhere is dreaming up a way for you to rent it to your neighbors. (David Arky)

Almost everybody I spoke to for this story said that, like Derek Fraser, they first became a part of the sharing movement for economic reasons. In the process, they had to get over what I’ve come to think of as the Ick Factor: an aversion to sharing that’s rooted in the fear of strangers, germs, and awkward social encounters. Think of all those lessons our parents taught us: Don’t talk to strangers. Never get in a car with someone you don’t know. If you want to take part in the sharing economy, you somehow have to push aside your mother’s voice in your head and develop a sense of trust.

That was certainly the case for Fraser and his wife. Who were these drivers? What would happen if someone crashed his car or, worse, just took off with it? Was there insurance? Clark worked on this problem for months before officially launching the business. “Insurance companies are by definition risk averse,” he says. “If you’re a pioneer, it’s very difficult.” In the end, though, after some haggling, he got what he needed. All cars in RelayRides’ network are covered for up to $1 million in damages, and all renters’ driving records are screened before they can check out a car. (Insurance companies, meanwhile, are eyeing these peer-to-peer exchanges warily, and some have changed their policies so as not to cover car-sharing accidents.)

For Airbnb, the push to earn users’ trust involves verifying the credit card, phone number, and address of all prospective renters before allowing them to post listings on the site. “We’ve really cleaned it up and brought it above board compared with the Wild West of Craigslist,” says Molly Turner, the company’s public policy director. The site also often pulls in information from Facebook, so that when you look for a room in, say, Paris, it will identify its users who also exist in your extended network, which can provide an extra layer of assurance. When I logged on to the site recently, I found rooms offered by people who went to my high school, and rooms in the homes of friends of friends.

Most peer-to-peer sites now also allow users to rate their experience. In the past, reviews were a one-way street. Only customers wrote them—about, say, hotels or restaurants. But in the sharing economy, the process works both ways. You can rate an owner on Airbnb, just as you would a hotel, but now they can also rate you—as a five-star house guest, maybe, or as a slob who left Cheetos crumbs all over the couch. Increasingly, these reviews will attach themselves to your online persona. Experts predict they’ll become a kind of currency, which you can then use in future transactions. Already, a company called Virtrue is trying to carve out a piece of this people-ranking market, by syncing up ratings from peer-to-peer sharing sites with personal information pulled from LinkedIn and Facebook. It’s like Yelp, but for humans.

As these businesses evolve, plenty of people are now entering the sharing economy to make money rather than connections. Scrolling through Airbnb’s Boston listings recently, I found one user offering a half-dozen properties. Some people on RelayRides have bought second and third cars just to earn more from the site, which runs counter to the company’s “fewer cars on the road” sensibility. (It likes to say that one car shared through its site takes 14 others off the road.)

But as these micro entrepreneurs get increasingly savvy, they, along with the sites they’re using, have come under scrutiny from municipal officials. One person who thinks about such challenges is Nigel Jacob, Mayor Menino’s adviser on emerging technologies and the cochair of the city’s office of New Urban Mechanics. He’s met with several sharing startups to learn how they operate, and has been in touch with leaders in other cities to see how they ensure public safety.

He’s had a lot to absorb. Right now in New York City, many Airbnb hosts are finding that they’re violating laws governing short-term rentals in large buildings. The New York Times recently ran a story about one unlucky host who, after charging a Russian tourist $300 to stay in his apartment while he was away, was threatened with $40,000 in fines by the city for running an illegal hotel. In 2011, the most recent year for which records are available, New York investigated 1,897 such violations. Last year in San Francisco, meanwhile, two peer-to-peer shuttle services, SideCar and Lyft, were each issued a cease-and-desist order by the city and fined $20,000 for operating outside of the formal taxi-and-limousine permitting process. (San Francisco lifted the order in January, saying it needed to revisit the regulations.) And just as crowds started flooding into Austin, Texas, this past March for the annual South by Southwest conference, the city council there passed a law that made charging for ride-sharing a crime.

It’s understandable that cities want to regulate these new businesses, but their early attempts have been less than effective. “A lot of times you end up with regulators stopping things because they run afoul of existing regulations, or allegedly do, and not necessarily because they’re bad for the public interest,” says Nick Grossman, a visiting scholar with the MIT Center for Civic Media.

“There’s no obvious place to put the sharing economy within the existing legal framework,” says Janelle Orsi, an Oakland, California–based attorney who directs the Sustainable Economies Law Center. Orsi says that when she first began working on what she calls “sharing law,” she expected that she would be helping nonprofits or cooperatives, not overseeing peer-to-peer transactions. Sharing as commerce, she says, “brings up so many other legal issues.”

The good news for Boston, Nigel Jacob says, is that City Hall hasn’t yet felt the need to muck things up with regulation. “There’s a lot of fascinating activity around sharing as a new mode of collaboration and economic expression,” he told me. “The issue for us is, which side do we put ourselves on? Do we regulate or do we not? We try to use the regulatory aspect of government sparingly, as it often can backfire.” The city is looking to foster innovation, he says, and cracking down on these startups would run counter to that.

Plus, he has a personal interest in seeing these kinds of companies succeed. He’s just listed his own place on Airbnb.

Jacob is a step ahead of me. Although I’m excited about the ways in which the sharing economy could improve my own life (think of the cash!), I have to admit I haven’t completely overcome the Ick Factor. After my great experience in Santa Fe, I filled out a listing for my home on Airbnb—but have yet to take the plunge and turn it on. I’ve added my car to the RelayRides network, but the first query I received was from a guy who wanted to rent my car for a week, which made me panic and turn him down.

To better understand, and perhaps overcome, my aversions, I went to see Juliet Schor, an economist who teaches sociology at Boston College. Schor is the author of True Wealth (2010), a book that offers suggestions for rethinking what’s valuable in our lives. “In order for our economy to survive, and for humans to survive and thrive in the current very perilous ecological context that we find ourselves in,” she told me, “we need more structures that encourage cooperation and sharing.” Like others I spoke to for this story, she noted that sharing itself isn’t new, particularly among low-income communities. But, she added, it certainly is a new concept for those with high cultural capital, people who don’t need to share, that is, but increasingly want to.

Schor assured me that I’m not the only one feeling slightly unnerved by the prospect of sharing my possessions with strangers, or of paying people to use their stuff in the hopes of creating a “connection.”

Schor was wearing a shawl as we spoke, and at that point in the conversation she pulled her hands out from under it: One hand represented a friend, she said, and the other a business. She then used both hands to draw a box in the air between them. “So these sharing sites and practices are, I think, creating a third kind of intermediate zone, in which it’s all being worked out and invented. And as people are moving there, they struggle with things: Well, how much market should there be? How high should my standards be? Should I expect professional quality?”

That zone is where most of us now reside.