Communities: the institutions of the 21st century? An interview with Rachel Botsman.

Since her influential book about how collaborative consumption is changing the way we live, Rachel Botsman has been a leading actor in the collaborative economy and stimulated important debates about its future. OuiShare Fest Co-chair Francesca spoke to her about her vision of the collaborative economy movement, her current work and what she will bring to OuiShare Fest this May.

A lot has happened since your book “What’s Mine is Yours”. Did you imagine the collaborative economy would look the way it does today? Where do you see the movement going now?

Rachel Botsman. When I wrote my book in 2009, it was clear to me that the transformation starting to happen around our consumption habits was just one chapter in a much bigger socioeconomic shift starting to take shape. It’s funny, I discovered the first draft of my book in my study the other day and laughed to discover the title was in fact ‘The Rise of the Collaborative Economy.’ It has a big pencil slash on the front with a note from the editor “It’s not an economy, yet.” Only a few years later, the term “Collaborative Economy” is gaining broad acceptance, which shows how fast the ideas are growing.

I am surprised by the accelerated growth and investment in the space but on the other hand, it amazes me that these ideas are being covered by many media outlets as if this economy just emerged. It’s a natural stage in the evolution that the movement will go through a stage of being attacked and picked apart; it’s how we will discover the weaknesses to make it stronger. That said, I am always careful when championing the ideas not to hype them as a tech utopia.

If this is one larger shift, where do you see the connections between consumption and topics such as peer production, 3 D printing, crowdfunding and open education?

R. B.I fundamentally believe these ideas are linked together by the idea of ‘distributed power’; I define this as the ‘shift in power from top down, centralized institutions to decentralized, connected communities’.

Many organizations were built upon centralized power, from universities to banks to media companies, controlling not just the capital and ‘goods’ but the distribution channels. The loss of control over the way money flows, where people can learn and how content can reach the end user is the disruption that is transforming sectors. I think the reason why we sense these ideas are connected that this disruption is creating more access to things that were previously not accessible (education, capital, manufacturing etc.), thereby empowering the individual.

The reason why I can’t wrap my head or fully embrace the term the ‘sharing economy’ is it only describes one behaviour and it doesn’t aptly describe ideas such as crowdfunding and MOOC’s that are part of this new economy.

Rachel Botsman

Companies like Airbnb and Uber are indeed becoming very large. What does this development mean for the collaborative economy movement?

R. B. One of my concerns is the formation of monopolies in ways that create a loss of diversity and healthy competition. How do we prevent the collaborative economy becoming too centralized? Can we retain the smallness within the bigness? What are the ways technology can create not only efficiency but scale humanness and local communities? These are the types of questions I am digging into at the moment.

How do you think companies like Uber and Airbnb will develop? Will they stay true to their peer to peer models, or will they become more like traditional companies?

R. B. Airbnb and Uber will be the Google and Amazon of the next decade. The rich data they have on our behaviors will enable them to expand into other areas and bigger categories than they are currently in. But the way these companies develop really depends on two things: the founders and investors, and their business model. The former will determine the company’s culture, mission and whether the company stays true to its peer-to-peer market.

 Airbnb and Uber will be the Google and Amazon of the next decade

There is a misconception that the challenge with many large marketplaces is demand when in fact many fast growing companies such as Lyft and Airbnb hit a supply ceiling. Jareau Wade, co-founder of the payments platform Balanced has a brilliant metaphor for this period, he calls it ‘stealing chickens’. The critical issue as companies hit their growth stride is what kind of chickens the companies use to expand supply. For example, with Lyft its ensuring the drivers can embody the qualities and culture of the first ten drivers. Airbnb faces the constant challenge of not ending up with generic blocks of apartment buildings. If companies accept this diluted quality of supply they will become more like traditional companies.

Why are the founders so important?

R. B. Companies develop differently depending on how they begin and who the founders are at their core. I have met many entrepreneurs in this space and I can almost smell right away what their interest is and whether they have the philosophy of the collaborative economy.

What is this “the philosophy of the collaborative economy”?

R. B. I tend to look at the space through the benefits to the user community. I would describe the core values as ‘empowerment’ ‘collaboration, ‘openness’ and  ‘humanness’, and in terms of the underlying philosophy, it’s about putting these values above the end goal of profit maximization.

Which industry do you think will be disrupted or transformed next by the collaborative economy, and how?

R. B. The industries that will be disrupted and subsequently transformed are those that have operated for a very long time with layers of the 3 I’s – infrastructure, intermediaries and investment. It is also prevalent in sectors where trust in ‘big’ is broken. Here you see a shift from institutional trust to peer trust, a dynamic that will make the development and meaning of brands in the 21st century fascinating.

I believe we are at the start of one of the most profound reconfigurations of our banking system and the very concept of money that we have seen in centuries

Financial services are a prime example. I believe we are at the start of one of the most profound reconfigurations of our banking system and the very concept of money that we have seen in centuries.

Insurance is another area ripe for change. When we shift from ownership to access models, the concept of ‘risk’ and subsequently ‘liability’ is transformed. I also see two big opportunities in retail: companies can either turn their product into a service (through rentals, for instance), or engage with their communities in totally new ways to collaboratively design, develop and distribute products. It will fundamentally reshape the type of goods made and how they get to market.

How can the collaborative economy help solve pressing environmental and social issues?

R. B. Let’s not lose sight of a core principle of the collaboration economy; the optimization of assets that have idling capacity. From an environmental perspective, it would be interesting to create a measure that assesses how much new wealth a marketplace can create from converting an existing idle asset, whether it’s a spare room or a seat in a car, into a productive form of use.

What is the role of government?

R. B. It’s a big question that we could dedicate an entire interview to! In short, governments can help create an enabling environment that takes out the friction and unnecessary red tape for companies and users. Regulation can play an important role if its ultimate goal is to protect the public, not to protect vested interests. Peer-to-peer does not mean that the platforms do not have a responsibility to their community. There is a thin line between empowerment and exploitation.

Should and are traditional companies sufficiently embracing the collaborative economy?  

R. B. Many leaders believe the disruption is smaller and further away than the reality. We typically see companies entering the space through partnerships, investment or business model reinvention. The first is the most common because through partnerships such as the ones GE has formed with the likes of Quirky and Taskrabbit they can dip their toe into the water.

Many leaders believe the disruption is smaller and further away than the reality

You also see companies trying something on the side such as DHL’s new peer-to-peer courier service ‘MyWays’. We are still in the early days at looking at the collaborative economy as a model for reinvention but it is coming.

What do you think of the fact that in France, for instance, the state postal service is getting involved in the online trust space with their service for real-life identity verification (“Identité Numérique”)?

R. B. It’s brilliant. Identite Numerique is a great example of how to reinvent a brand that already has trust and scale to stay highly relevant and create value in this new economy. I don’t know anyone better suited to verify identity than a trusted state brand with a physical distribution footprint such as the postal service.

What part of the collaborative economy interests you most currently? Can you tell us anything about your next book?

R. B. What interests me is the broader vision of the collaborative economy and how it is changing education, finance and production. Another important topic for me is the relationship between institutions and decentralized communities. Will communities become the institutions of the 21st century?  What is their role for the collaborative economy?

I think we are going to see a reinvention of what formal institution look like in the 21st century, in a decentralized, distributed way

I think we are going to see a reinvention of what formal institution look like in the 21st century, in a decentralized, distributed way. It is this macro vision of the collaborative economy and the relationship of institutions and communities that I will also speak about at OuiShare Fest.

What do you expect for OuiShare Fest?

R. B. This will be the first event I speak at with a room full of people who are all there because they are interested or passionate about the space. I am curious as to the type of energy and debate this will create around ideas shared.

Events such as OuiShare Fest have an important role to play in progressing the collaborative economy forward for a much wider community than those in the room.

Of course we don’t need to all agree, but I hope we don’t just take different corners without really listening and clarifying what these ideas have in common.

Thanks Rachel, looking forward to seeing you in Paris!

If you would like to meet Rachel at OuiShare Fest, get your tickets on ouisharefest.com