Undercover Economist

Last updated: April 21, 2012 12:12 am

The one-night stand gets a digital makeover

Collaborative consumption websites and microlabour services may lower transaction costs but they raise the issue of internet-based trust

Loyal readers will recall the second-hand Volvo I bought six years ago. After an unpromising start, it’s now ticking over nicely. Well, ticking over may be the wrong phrase. Mostly it just sits around. It is occasionally invaluable for our family of five. Still, it hasn’t moved today. It didn’t move yesterday. It feels like a waste of a good car, but what is the alternative?

Digital technology is providing several alternatives, making it easier and easier to unlock the hidden value in such assets. Companies such as Zipcar will rent you a car by the hour. More radical are the likes of WhipCar, which allows owners to rent out their cars when they don’t need them. The opportunities are obvious, as are the obstacles.

WhipCar is an example of what the hip kids are calling “collaborative consumption”. The term seems to cover a multitude of activities. Ebay will let you sell your old stuff to someone who wants it more than you do. It was radical when it first appeared, not because the idea of a second-hand shop was new, but because of its unparalleled ability to find buyers – and sellers – for narrow niches.

More recent sites such as Swap.com or Freecycle will let you swap with others, or simply give away unwanted kit. On Zopa, lenders find borrowers without the need for a bank. Then there’s Airbnb (WhipCar for your spare room), or Landshare (people with unruly gardens meet people who want to do gardening).

Alongside the collaborative consumption sites are microlabour services such as TaskRabbit and Amazon’s Mechanical Turk, both of which connect people with small tasks to be done and people with time to do them. The actual offerings seem very different: TaskRabbit operates in just a few markets, such as Boston, Chicago and San Francisco, and is full of cheerful-looking background-checked locals who will run errands for you or put together an Ikea desk. Mechanical Turk distributes digital tasks anywhere in the world – but it has acquired an unenviable reputation for rock-bottom pay and spam.

For all the variety on show here, collaborative consumption and microlabour share two important characteristics. The first is that digital technology is lowering transaction costs, making it easier and easier for people to sell (or swap, or share) very small offerings. The second is that because so many of these offerings are in the hands of individuals rather than branded corporations, mechanisms for maintaining trust are very important. If we are going to let strangers stay in our homes, or drive our cars, or have custody of our dogs, on a one-night-stand basis, we may need some kind of reassurance.

Internet-based trust mechanisms where website users rate each other after each transaction also seem to be working tolerably well. Online rating systems can be tricked, but have held up better than anyone might have anticipated 15 years ago. Rachel Botsman, an evangelist for collaborative consumption, argues that trust is the pivot on which many of these new possibilities turn. It is hard to disagree. Presumably the likes of Google and Facebook are licking their lips as they contemplate their role in creating digital identities where your punctuality on eBay, efficiency on TaskRabbit and cleanliness as an Airbnb guest can be stitched together in a seamless tapestry of reputational capital.

And there is a curiosity here. Enthusiasts such as Botsman celebrate the way in which the internet enables human connection, where you can transact with real people rather than faceless corporations. But the other thing that is emerging is an ever-more-perfect market, with high price transparency, low transaction costs, and few interactions that cannot be priced and paid for.

The promise is either of creating value with a far more human touch, or of a hyper-competitive global marketplace. It would be fascinating if these things amounted to much the same.

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