by Sunil Paul
The peer economy, driven by the smartphone, is on a path to reinvent our economy, our culture and the way we live and work.
The peer economy is the growing business segment of transactions between individuals – one person to another – without a middleman to manage and package it. Think eBay for everything. The peer economy is not new. In fact, it made up the entire economy before industrialization when corporations came to rule economic activity.
The Internet changed everything. The architecture of the Internet encourages peer relationships from its basic data protocols to the way dominant websites operate. Skype, eBay, PayPal, Wikipedia, YouTube, Facebook and Craigslist all lean heavily on the Internet’s capability to connect peers. These innovators used the desktop-based Internet to disrupt powerful century-old institutions as diverse as telephone companies, retail commerce, money transfers, television, and newspapers.
Internet-connected smartphones are changing things again. They have pushed the peer economy out from the desktop and are creating opportunities for a new generation of companies powered by peers. This phase of the Internet will be even more disruptive to the old guard because now the Internet is out in the world rather than tied to a desk.
The list of vulnerable institutions includes taxis, hotels, banking, money, airlines and the automobile. The innovators in the peer economy include Airbnb, Bitcoin, Etsy and Sidecar. Each creates a marketplace where peers can meet and conduct transactions on their own terms and with their own reputations.
A Cultural Shift
The shift away from hierarchical command and control towards collaboration and cooperation is part of a broad scale change in our culture. Have you noticed no one wears a business suit anymore? Just a few decades ago it was de rigueur. Is the change just fashion? Or is it more fundamental? The “business casual” trend started in Silicon Valley among engineering-centric organizations that valued collaborative relationships among peers. This trend spread worldwide at the same time as the spread of the Internet. Coincidence? No. In an increasingly peer-to-peer world driven by internet innovations, one looks pompous and out of touch wearing a suit and tie.
The cultural impact of the spread of the peer economy will be more profound than office fashion. It will change our perception of careers and what it means to have a job. A cab driver is traditionally a lower status job than a banker. But what happens when a banker is the one giving you a ride to the office on his way to the airport? When you might make a valuable contact or friend on your way to the airport (or give away an important insider tidbit), you no longer treat the driver as a chauffeur; he or she is a peer.
Making items by hand was once a limiting career. Now peer economy companies like Etsy give handmade items global reach. Now, maybe making jewelry or stuffed animals by hand isn’t a limiting opportunity.
The nature of a job is changing too, because individuals now have the power to weave together their own incomes from a variety of sources as micro-entrepreneurs. Large-scale entrepreneurs like Mark Zuckerberg are celebrated in the media, but they are not the face of the modern entrepreneur. Modern entrepreneurs are people like Chris*, who gives rides on Sidecar to save up for trips to other countries, rents out her home on Airbnb while she is gone, and makes money while she is there as a tutor through Craigslist. And there is Frank, who works at a tech company and earns a good salary, but gives rides on the way to work for a few bucks to pay for parking. His “entrepreneurship” earns him a few thousand dollars a year, which is a nice offset to parking and gasoline costs. Both use the power of peer marketplaces to connect with others who want their services. And finally there is Rohan, who after years of struggling now drives nights so his wife can works days, earns a decent living and has the flexibility to take care of his son. These people will never get Zuck-level rich, but the peer economy allows them to be financially secure and also lead full, interesting lives.
Dangers to the Peer Economy
Like any new disruptive movement, the peer economy has its opponents. In this case, the opponents are the industries being disrupted. Entrenched interests are fighting back using their pull with regulators as a weapon. Local governments are especially vulnerable to complaints from groups like local taxi medallion owners and hotel operators who may be financial supporters. When they complain about peer economy companies or unfair regulation, the elected official will likely respond. Meanwhile, marketplaces like Sidecar and Airbnb can only be successful if they can scale globally. Having to devise rules for every city and town will destroy the peer economy’s ability to grow and prosper. Country-level rules are needed for the peer economy to flourish. A great example is how Internet businesses are generally treated versus telecom businesses. Policymakers rightly saw that the copper-wire telecom service is a natural monopoly while the Internet is not. Worldwide it’s a generally accepted that Internet services should not be regulated like traditional monopolies, even if they compete with them. Such is the case with services like Skype, which competed with traditional telecom and caused the price of long distance calls to plummet. While this was unfortunate to telecom, it was good for consumers and the overall efficiency of the economy. What if Skype had been regulated by the same regulators as the Regional Bell Operating Companies?
Implications for Corporations
What are the implications for large corporations today? If you are one of the companies being disrupted, you’d better move quickly and innovate to better serve your customer. Corporations are built on the need to minimize the cost of doing transactions in an organization instead of a marketplace. The peer economy, however, reduces the cost of a marketplace transaction to almost zero. What if your customers could reach out to one another to provide the service that you provide? What if they could connect directly to your suppliers, designers, investors and distributors? Would they still need you? If the answer is “no,” then you better find a way to disrupt your competitors before a start-up comes in and disrupts your entire industry.
What’s next for the Peer Economy?
The nature of the Internet makes the peer economy possible and the smartphone will make it ubiquitous worldwide. We can expect that the mobile revolution will create new platforms for peers to collaborate and many new innovations will emerge on the scene. To win in the emerging peer economy, it’s important for companies and organizations to listen to what is possible with the technology and connect that with the needs of consumers and businesses. Yes, it’s that basic and fundamental, because the peer economy is that fundamental a change
reposted from: http://www.linkedin.com/today/post/article/20140325113956-1302-state-of-ridesharing-rise-of-the-peer-economy?trk=object-title