9 ms·

Airbnb And The Unstoppable Rise Of The Share Economy

79 points by afkovacs 14y ago

fleitz 14y ago
Sounds like it's classic capitalism as outlined by Adam Smith. Smith didn't envision massive corporations making money by having the government pass favorable legislation, he envisioned many small players making a decent living through competition rather than rent seeking.
- georgemcbay 14y ago
  I know what you mean by "rent seeking", but in this context it sounds funny because what Airbnb is all about is allowing everyone to, literally, rent seek.
  - chii 14y ago
    i suppose rent seeking isn't inherentely bad, but over charging for rent is. And you can over charge rent if the barrier to enter into the rental business (i.e., become a landlord) is high. AirBnB actually lowers the barrier to entry for rent seeking, and thus, make rent seeking fairer over all as theres more competition. To take it slightly off topic, the banking and finantial sector could use some lowering of barriers to entry. Banks aren't bad, but banks that are too entrenched are. What sort of lower barrier could you set so that there could be 'mom and dad' banks?
- fennecfoxen 14y ago
  The free market, remember, is only efficient under certain circumstances, particularly: transaction costs must be low and there must be few barriers to entry. AirBnB et cetera lower the transaction costs and remove barriers to entry.
  - oillio 14y ago
    Easy discovery of price information is also important to capitalistic markets. Of course, AirBnB helps there as well.
doctorpangloss 14y ago
While I think most on this site would applaud efficiently allocating anything, there are some drawbacks to efficiently allocating things strictly for money. Michael Sandel, author of What Money Can't Buy, argues pretty eloquently the economic and social cost-benefit to pricing things like a placement in line, or a spare room in a house. To extend one of his examples, Airbnb gives you a hard-cash price for your extra room—or even your couch. One of your friends wants to couch surf for a week. By past social convention, you'd give it to him for free. He saves money he'd spend on something else. By Airbnb convention, you charge him for it. You kind of have to, because everyone else is, and you can't leave money on the table. You have cash now, but a bit less than he would have, because Airbnb takes a cut. Sandel was interested in investigating this society where the rich get the best of everything first, explicitly at the expense of the poor. So I hope there are some comments investigating whether or not we're better off socially, not necessarily economically, by renting our "excess capacity" or being generous with our "excess capacity."
- angersock 14y ago
  I think you may be missing the part where, by drawing in revenue, you help offset the risk of letting random people make use of your capital. While I agree that perhaps in a better world everyone should simply share resources unencumbered by profit motive, the assignment of a usage fee to a couch or something does help prevent overuse of resources. In the case of a friend sleeping on my couch, there is our personal relationship and desire not to cause future trouble that helps limit the possible risk of the couch getting destroyed--having a pecuniary barrier to entry for a stranger to use my couch seems reasonable.
  - hosh 14y ago
    What is abuse? Abuse is about fairness. Fairness is not about money, though we have tried for a long time to mediate pain and suffering through money. Abuse and fairness are emotional. It is not rational. Putting a monetary value to this is rationalizing what is fundamentally not rational. Just because it is not rational does not make it any less real. You don't negotiate with a hurricane. If you are weighing the pros and cons about renting stuff out to a friend, then there are some deeper issues involved. Is this particular friend widely known for mooching off of you? (Why is such a person your friend anyways?) Generally, if you fear abuse of your assets and personal space/time, then you also have some Jungian shadows related to abusing your friendships. Renting something out to strangers and taking money to mitigate risk -- that seems fair to me. (But risk is emotionally related to the same kinds of issues related to renting or not renting out to a friend, or a friend abusing or not abusing your generosity). There are ways to deal with the underlying non-rationalizable emotions that does not involve money. Hopefully, those methods will become more popular going forward. It's interesting. I have never considered this before. Conducting transactions like this means stripping away the impersonal nature of corporations (http://onthespiral.com/unifying-value-universe http://onthespiral.com/unifying-value-universe), makes you much more aware of human nature, maybe gets people to start dealing with it. Consider also http://playspent.org http://playspent.org ... It turns out: a social net is very advantageous. (http://www.amazon.com/Dont-Need-Rise-Network-ebook/dp/B009K8R7OA http://www.amazon.com/Dont-Need-Rise-Network-ebook/dp/B009K8...)
nugget 14y ago
Airbnb is partly responsible for the massive spike in rental prices around San Francisco. I know a lot of people who rented more apartment than they could really afford because they know they can earn extra income via airbnb. In the short term, this seems like (and may indeed be) a positive trend - people are able to squeeze into better quality apartments than they otherwise could have. But in the medium term, as we now see in SF, market prices simply rise to account for this "new normal" behavior. Unintended consequences follow. First, someone who is not willing to open their apartment to part-time airbnb'rs is now at a disadvantage. Second, at least part, and perhaps most of, the extra airbnb income is now passed on to the landlords in the form of higher rental prices. Remember it doesn't matter how much money you have, it only matters how much money you have relative to other people who want the same things you do.
- SilasX 14y ago
  I agree, as long as it's understood that San Francisco's insane anti-development policies (and indeed, rent control) share at least as much of the blame for the difficulty in finding a place.
- marcojgm 14y ago
  There is no correlation between the rise in rental prices in SF and Airbnb. It's absurd to think that they could impact that at this point. A large chunk of the hosts on the site rent out a room in their own homes. If you want someone to blame for the raising prices, I think it's more rational to point the finger at the spate of IPOs and the newly minted folks who are in the buying market at the moment. Or if that's not your cup of tea, then perhaps blame the size of the city (as it can't get any bigger) or even more appropriately, blame the blood hungry landlords who still insist you pay by check and raise their rates by at least 30% every time one of their properties free up. Either way, just wildly saying that without any substantial evidence is pretty weak.
  - nugget 14y ago
    Nice try, Airbnb PR dude.
geebee 14y ago
I agree that the rise of the share economy is unstoppable, but I don't at all agree that this will or should be a free-for-all with no regulation. We just need to catch up socially and legally with technology. To me, the biggest problem with the rise of AirBnB is in areas that have tourist appeal but are mainly populated with long term residents. People used to occasionally rent out their place, or just let people stay there for free, but there was almost always some kind of social connection. The removal of friction has allowed this to become far more widespread. I personally believe that it most definitely has the capacity for harm. I remember hearing about one incident recently in the california wine country where there are some fruit trees on a public easement. Mostly residential, but lots of appeal to tourists. The neighbors shared the trees as a commons, they'd take a bit, but leave plenty, and would informally contribute time and money to maintenance. One day, the trees were stripped, completely, of any fruit. It turned out that a couple of people renting a nearby house had stripped the trees. The house, which had formerly been occupied by a family with kids, was now a full time vacation rental (at great profit for the owner) and was advertising "fruit picking in the alleyway" as one of the wonderful activities available to short term renters. I know I risk sounding very trivial here, elevating little neighborhood squabbles about crab apples all out of proportion, but I think the story I heard really gets at the problem. Long term residents, to use a vulgar expression, have to sleep where they shit. Short termers don't. The non-legal self-corrective mechanisms that used to provide social harmony, things we weren't even aware of, may be badly disrupted but a very large number of short term residents. We're all willing to (or should be willing to) tolerate the occasional loud backyard party next door. But would we want to have that go on every night, all summer, from vacationers looking to maximize their fun? All of a sudden, we're using the law to regulate something that used to be managed less formally. The law is a terrible tool, way worse than just talking to your neighbors, but when you have a new neighbor every three days,it may be all you've got. And even when the short term vacationers are on their best behavior, there is still a loss. There is also absolutely a loss when families who would like to know and socialize with long term neighbors, especially with children, start to get pushed out because they can't compete on price with people who plan to airbnb the crap out the old neighborhood. I don't have a link to this, but I read once that an economist estimated that good relations with the neighbors were worth about $50,000. I remember PG writing about how new forms of property come into existence with new technologies, just as old ones can go away. We may only become aware that there was this vaguely defined property we owned now that airbnb has found a way to cash in. I really do think that the owner of many of these VRBOs are selling the neighborhood rather than the house itself, and they're harming the neighborhood in the process. I'm more than ok with some use of airbnb, and obviously it opens up new benefits as well. But I think it is very reasonable for communities to strongly resist widespread short term rentals in their neighborhoods.
tehstone 14y ago
All the discussion here seems to revolve around AirBnb in particular and neglect all of the other sharing services mentioned in the article. My first thoughts on this relate to those other services. In particular, car and equipment sharing. Sure it's a great idea to rent out stuff you're not currently using, but if everyone starts to rely on the availability of whatever they need, whenever they need it, what is the incentive to actually buy anything for yourself? Further down the road, when an increasingly large portion of the population just assumes they can borrow/rent whatever they need and have decided to never buy anything for themselves, there will eventually be a shortage in goods to be borrowed/rented. So to me, this seems like a market with a very low cap on growth. Namely, when that threshold of borrowers vs owners is reached.
- cerebrum 14y ago
  When that threshold is reached people will start buying stuff again, increasing said threshold. Eventually the system will converge to a stable point, or it will continually adapt due to changing economics/demographics. Isn't it beautiful how markets can self-regulate?
utnick 14y ago
Is it sharing if you are getting payed for it? Isn't that normal commerce? Sharing economy to me means sites like freecycle, couchsurfing, and your neighborhood listserv .

79 points by afkovacs 14y ago

Sounds like it's classic capitalism as outlined by Adam Smith. Smith didn't envision massive corporations making money by having the government pass favorable legislation, he envisioned many small players making a decent living through competition rather than rent seeking.

georgemcbay 14y ago
I know what you mean by "rent seeking", but in this context it sounds funny because what Airbnb is all about is allowing everyone to, literally, rent seek.
- chii 14y ago
  i suppose rent seeking isn't inherentely bad, but over charging for rent is. And you can over charge rent if the barrier to enter into the rental business (i.e., become a landlord) is high. AirBnB actually lowers the barrier to entry for rent seeking, and thus, make rent seeking fairer over all as theres more competition. To take it slightly off topic, the banking and finantial sector could use some lowering of barriers to entry. Banks aren't bad, but banks that are too entrenched are. What sort of lower barrier could you set so that there could be 'mom and dad' banks?
fennecfoxen 14y ago
The free market, remember, is only efficient under certain circumstances, particularly: transaction costs must be low and there must be few barriers to entry. AirBnB et cetera lower the transaction costs and remove barriers to entry.
- oillio 14y ago
  Easy discovery of price information is also important to capitalistic markets. Of course, AirBnB helps there as well.

doctorpangloss 14y ago

While I think most on this site would applaud efficiently allocating anything, there are some drawbacks to efficiently allocating things strictly for money. Michael Sandel, author of What Money Can't Buy, argues pretty eloquently the economic and social cost-benefit to pricing things like a placement in line, or a spare room in a house. To extend one of his examples, Airbnb gives you a hard-cash price for your extra room—or even your couch. One of your friends wants to couch surf for a week. By past social convention, you'd give it to him for free. He saves money he'd spend on something else. By Airbnb convention, you charge him for it. You kind of have to, because everyone else is, and you can't leave money on the table. You have cash now, but a bit less than he would have, because Airbnb takes a cut. Sandel was interested in investigating this society where the rich get the best of everything first, explicitly at the expense of the poor. So I hope there are some comments investigating whether or not we're better off socially, not necessarily economically, by renting our "excess capacity" or being generous with our "excess capacity."

angersock 14y ago
I think you may be missing the part where, by drawing in revenue, you help offset the risk of letting random people make use of your capital. While I agree that perhaps in a better world everyone should simply share resources unencumbered by profit motive, the assignment of a usage fee to a couch or something does help prevent overuse of resources. In the case of a friend sleeping on my couch, there is our personal relationship and desire not to cause future trouble that helps limit the possible risk of the couch getting destroyed--having a pecuniary barrier to entry for a stranger to use my couch seems reasonable.
- hosh 14y ago
  What is abuse? Abuse is about fairness. Fairness is not about money, though we have tried for a long time to mediate pain and suffering through money. Abuse and fairness are emotional. It is not rational. Putting a monetary value to this is rationalizing what is fundamentally not rational. Just because it is not rational does not make it any less real. You don't negotiate with a hurricane. If you are weighing the pros and cons about renting stuff out to a friend, then there are some deeper issues involved. Is this particular friend widely known for mooching off of you? (Why is such a person your friend anyways?) Generally, if you fear abuse of your assets and personal space/time, then you also have some Jungian shadows related to abusing your friendships. Renting something out to strangers and taking money to mitigate risk -- that seems fair to me. (But risk is emotionally related to the same kinds of issues related to renting or not renting out to a friend, or a friend abusing or not abusing your generosity). There are ways to deal with the underlying non-rationalizable emotions that does not involve money. Hopefully, those methods will become more popular going forward. It's interesting. I have never considered this before. Conducting transactions like this means stripping away the impersonal nature of corporations (http://onthespiral.com/unifying-value-universe http://onthespiral.com/unifying-value-universe), makes you much more aware of human nature, maybe gets people to start dealing with it. Consider also http://playspent.org http://playspent.org ... It turns out: a social net is very advantageous. (http://www.amazon.com/Dont-Need-Rise-Network-ebook/dp/B009K8R7OA http://www.amazon.com/Dont-Need-Rise-Network-ebook/dp/B009K8...)

nugget 14y ago

Airbnb is partly responsible for the massive spike in rental prices around San Francisco. I know a lot of people who rented more apartment than they could really afford because they know they can earn extra income via airbnb. In the short term, this seems like (and may indeed be) a positive trend - people are able to squeeze into better quality apartments than they otherwise could have. But in the medium term, as we now see in SF, market prices simply rise to account for this "new normal" behavior. Unintended consequences follow. First, someone who is not willing to open their apartment to part-time airbnb'rs is now at a disadvantage. Second, at least part, and perhaps most of, the extra airbnb income is now passed on to the landlords in the form of higher rental prices. Remember it doesn't matter how much money you have, it only matters how much money you have relative to other people who want the same things you do.

SilasX 14y ago
I agree, as long as it's understood that San Francisco's insane anti-development policies (and indeed, rent control) share at least as much of the blame for the difficulty in finding a place.
marcojgm 14y ago
There is no correlation between the rise in rental prices in SF and Airbnb. It's absurd to think that they could impact that at this point. A large chunk of the hosts on the site rent out a room in their own homes. If you want someone to blame for the raising prices, I think it's more rational to point the finger at the spate of IPOs and the newly minted folks who are in the buying market at the moment. Or if that's not your cup of tea, then perhaps blame the size of the city (as it can't get any bigger) or even more appropriately, blame the blood hungry landlords who still insist you pay by check and raise their rates by at least 30% every time one of their properties free up. Either way, just wildly saying that without any substantial evidence is pretty weak.
- nugget 14y ago
  Nice try, Airbnb PR dude.

geebee 14y ago

I agree that the rise of the share economy is unstoppable, but I don't at all agree that this will or should be a free-for-all with no regulation. We just need to catch up socially and legally with technology. To me, the biggest problem with the rise of AirBnB is in areas that have tourist appeal but are mainly populated with long term residents. People used to occasionally rent out their place, or just let people stay there for free, but there was almost always some kind of social connection. The removal of friction has allowed this to become far more widespread. I personally believe that it most definitely has the capacity for harm. I remember hearing about one incident recently in the california wine country where there are some fruit trees on a public easement. Mostly residential, but lots of appeal to tourists. The neighbors shared the trees as a commons, they'd take a bit, but leave plenty, and would informally contribute time and money to maintenance. One day, the trees were stripped, completely, of any fruit. It turned out that a couple of people renting a nearby house had stripped the trees. The house, which had formerly been occupied by a family with kids, was now a full time vacation rental (at great profit for the owner) and was advertising "fruit picking in the alleyway" as one of the wonderful activities available to short term renters. I know I risk sounding very trivial here, elevating little neighborhood squabbles about crab apples all out of proportion, but I think the story I heard really gets at the problem. Long term residents, to use a vulgar expression, have to sleep where they shit. Short termers don't. The non-legal self-corrective mechanisms that used to provide social harmony, things we weren't even aware of, may be badly disrupted but a very large number of short term residents. We're all willing to (or should be willing to) tolerate the occasional loud backyard party next door. But would we want to have that go on every night, all summer, from vacationers looking to maximize their fun? All of a sudden, we're using the law to regulate something that used to be managed less formally. The law is a terrible tool, way worse than just talking to your neighbors, but when you have a new neighbor every three days,it may be all you've got. And even when the short term vacationers are on their best behavior, there is still a loss. There is also absolutely a loss when families who would like to know and socialize with long term neighbors, especially with children, start to get pushed out because they can't compete on price with people who plan to airbnb the crap out the old neighborhood. I don't have a link to this, but I read once that an economist estimated that good relations with the neighbors were worth about $50,000. I remember PG writing about how new forms of property come into existence with new technologies, just as old ones can go away. We may only become aware that there was this vaguely defined property we owned now that airbnb has found a way to cash in. I really do think that the owner of many of these VRBOs are selling the neighborhood rather than the house itself, and they're harming the neighborhood in the process. I'm more than ok with some use of airbnb, and obviously it opens up new benefits as well. But I think it is very reasonable for communities to strongly resist widespread short term rentals in their neighborhoods.

tehstone 14y ago

All the discussion here seems to revolve around AirBnb in particular and neglect all of the other sharing services mentioned in the article. My first thoughts on this relate to those other services. In particular, car and equipment sharing. Sure it's a great idea to rent out stuff you're not currently using, but if everyone starts to rely on the availability of whatever they need, whenever they need it, what is the incentive to actually buy anything for yourself? Further down the road, when an increasingly large portion of the population just assumes they can borrow/rent whatever they need and have decided to never buy anything for themselves, there will eventually be a shortage in goods to be borrowed/rented. So to me, this seems like a market with a very low cap on growth. Namely, when that threshold of borrowers vs owners is reached.

cerebrum 14y ago
When that threshold is reached people will start buying stuff again, increasing said threshold. Eventually the system will converge to a stable point, or it will continually adapt due to changing economics/demographics. Isn't it beautiful how markets can self-regulate?

utnick 14y ago

Is it sharing if you are getting payed for it? Isn't that normal commerce? Sharing economy to me means sites like freecycle, couchsurfing, and your neighborhood listserv .