Sunday, January 31, 2010

Collaborative Consumption

Last week I spoke with Rachel Botsman & Roo Rogers, authors of the upcoming book What's Mine is Yours: The Rise of Collaborative Consumption. They are tracking the rise of new economies based on sharing, swapping, and lending - democratically distributing ownership. These new economies are being made possible by new technology, and have the potential to radically reduce the costs of certain goods for people as well as lower their environmental impact.

This concept has already upended certain industries. Netflix, which is basically just a better way of sharing DVDs that other people have watched, has eaten into DVD sales. Its ease of use and
recommendation/filtering engine make it superior to old video stores. Ebay and Craigslist have given people much more efficient ways to get rid of products they don't need anymore, without making them go to waste.

Botsman and Rogers point out that the Green movement often emphasizes personal sacrifice and guilt - not the most enticing bandwagon to jump onto. Instead, these new systems have the benefit of being in the users' own self-interest; in fact, that's the only way that they can work.

Several of these programs are on the cusp of going mainstream. Two that could have drastic environmental impact (for the better) are car-sharing (as Zipcar as done) and a smart energy grid, which would allow customers to sell back any energy they generate, and distribute it with less waste.

In the past, economies were small and local because not only was it difficult to communicate across large distances, it was impossible to trust people you didn't know. So, transactions were limited to people in your local circle and couldn't scale. Along came large corporations, which were able to take advantage of economies of scale and drastically mass-produce goods. Great, except in order for that to be efficient, all the goods had to be relatively similar commodities. This introduced a lot of waste as people settled for things not 100% perfect for them. In addition, buying your own copy of something (a lawn mower, say, or a DVD) was the most efficient thing to do, because it was the cheapest option. But the negative externality of environmental harm was never factored into the cost.

Today, technology can allow non-local trust. You can reliably enter into contracts with individuals around the globe, online. This is because people have ratings (think ebay or Amazon resellers.) A positive rating from 100 or 1,000 people becomes equivalent to a first-hand rating of someone we've actually met. Better, perhaps. What the authors predict, and argue for, is an aggregated reputation system across all your web sites and transactions. This becomes a reputation that you can't escape, just as you couldn't escape a bad reputation in a small town in the past. There would be no way to cheat that system.

Those are just some items the authors discussed, along with my own interpretation. I'm definitely looking forward to reading the book.

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