Sunday, August 26, 2012

TRAGEDY OF THE COMMONS 2.0: DARK SIDE OF COLLABORATIVE CONSUMPTION


Last week I read a blog by Australian Tosh Szatow criticising Collaborative Consumption  as an enabler of more mass consumption.  Though I don’t agree wholly with Tosh, I think there is some truth in his view. After developing and running YourJobDone in London for three years, I have spent a while experiencing and reflecting on some of those challenges.

Collaborative Consumption is broadly a phenomenon with positive outcomes. The social, mobile web is enabling connectedness- including connectedness of human needs and the fulfillment of them- in a way that was unimaginable even five years ago. But there is also a dark side to collaborative consumption businesses, some of which enable utilisation of assets (like apartments, cars and driveways) beyond conventional norms. This has the power to enable a Tragedy of the Commons 2.0 whereby every shared or public asset is exploited to the limit of its capacity.

Earling warnings are already in the mass media. Regulation in governments, councils, strata-boards and rental contracts are going to have to catch-up to deal with a new wave of exploitation of the common resources that enable our urban areas.

Background


Collaborative Consumption (also known as CollCons) is an umbrella term devised by Rachel Botsman, co-author of “What’s Mine is Yours”, encompassing web-based marketplaces that have two components:


  • A targeted online-marketplace platform and 
  • sharing, community, social or trust framework for that platform.


A common example of such a marketplace is eBay. The fundamentals are an auction or listing platform with geographic filters and a feedback-driven trust system.

The same principle can be applied to buying, selling or borrowing anything: skills, a ride in a car, a short sublet, etc. The focus of the startup I co-founded, YourJobDone, was low skilled odd-jobs around London. Stuff like “assemble my Ikea cupboards” or “clean up my garden and mow my lawn”. YourJobDone was all about connecting geographic and temporal coincidence of mutually-fulfillable needs, in real time.

Collaborative Consumption: connecting needs in real time


We focussed on connecting people where we could deliver a genuine win-win. Where we could connect keen underemployed or unemployed people to jobs in their local area. We had great successes like this one. In that example, not only did an underemployed person get a job, cash, and a sense of satisfaction, the job got done very well at  great price, with very little travel and all tools carried on public transport (one less handyman’s van in Shoreditch, London!).

Many similar startups have followed, like Zaarly and TaskRabbit in the US, Milk.ly in the UK and AirTasker in Australia. You can check out current startups in different verticals here

CollCons has an aura of green values about it, because it is seen as a means to utilise existing resources better through sharing, and therefore reduce waste. It is a concept which has support from organisations like the UK’s NESTA.

With the rise of smart-phones and the social web, the foundations were laid for a new generation of web-based marketplaces, including CollCons, with vastly improved efficiency, reliability and trust facilitation.

Such is the existing and potential efficiency of these new marketplaces, whole new markets will be created where previously the friction of pursuing a transaction made  the transaction unworthwhile. Take a moment to look through the jobs currently posted on Zaarly, TaskRabbit or AirTasker and you’ll see what I mean. Ron Conway, the Silicon Valley superangel, early investor in Twitter and founding partner of Y-Combinator had this to say in November 2011:

“this whole concept of collaborative consumption is a multi-billion dollar brand new market”
 (From 1’16” here )

Putting aside concerns about safety and trust (problems which are solvable through engineering), there is a sinister side to Collaborative Consumption. Along with enabling true win-win transactions, CollCons also enables some resources to be consumed beyond normal or acceptable limits.

Who cares about the norm?


The norm, often perceived in startup and innovation circles as some stodgy, backward barrier to human development, I think is actually important to many people’s lives. It’s important to my life. For example, having other 8AM-to-5PM professionals living in the flat above me, rather than some back-packing Europeans on a holiday of regular all-night parties, is important to the amenity and sleep I enjoy.

We have as a society imposed on ourselves many laws and regulations to enforce a norm. There is an expectation of how capital (including space, tools, road capacity etc) will be utilised. Let’s delve into two specific examples on which there has been some recent discussion.

Short term lets


Platforms for short term lets, amongst which Airbnb is a pioneer, initially came under criticism for issues related to trustworthiness.

Can you trust the person whose place you’re staying at? is it safe? Paul Carr famously thought not, and defended New York City’s early move to try and limit Airbnb.

Can you trust the person who’s staying in your flat or house? Evidently not always. The trashing of one Airbnb user’s house was so bad and so mishandled that it came to be known by the tech press as “Ransackgate”.

These are surmountable problems. Though even eBay still has challenges with community trustworthiness after more than ten years of operation, it is clear that the foundations for comprehensive  inter-platform trust management are now being laid. Trust rating will no doubt become as significant as financial credit rating. The online world will become ever safer and more transparent, and I would venture, with the exception of first generation platforms that lack a trust framework (like Craigslist and Gumtree), are already safer and more reliable than offline market mechanisms.

Breaches of trust  have brought sensational  news headlines, but I think that is really a sideshow. What will matter in the long-haul is how these new, low friction, efficient web marketplaces enable a kind of asset utilisation that was not possible in the past. When you’re short of cash you can now put a bed in the sunroom and let it out, without the hassles of 2008.

But this is not just exploiting your own asset (your floor space). It’s also exploiting other people’s in a small way. That itinerant tennant, who isn’t too concerned about maintaining the amenity of the apartment block, also has a bike and isn’t too worried about leaving tyre marks on the walls of the stairs. That 2AM party meant the doctor next door lost sleep and later concentration during surgery the next day. That extra person living in the sunroom is wearing out the carpet and bathroom fittings 50% faster than the two people who the landlord thinks are living in there.

The impact is real, and as the New York Times recently reported, there are even vigilantes scouring the pages of airbnb for people subletting in their appartment blocks.


Driveways and parking


Offering up your home garage or parking space seems superficially like the an ideal application for Collaborative Consumption. Unlike say having a stranger stay in your house, the potential for a personal property or safety risk seems very low. It looks like a victimless win-win. My driveway is free while I’m at work, you need a parking spot, you give me money to use it. Easy.

But if we dig a little deeper, we realise the money that comes from leasing out a driveway is not just about using something that wasn’t used, it can be about using something more than it was intended to be used.

Parking availability control is often used by town planners to indirectly regulate the cost to the individual driving. Limiting parking spaces in cities and nearby areas is a key control to limiting driving by making its cost greater (whether direct,  like parking station costs, or indirect like more difficulty and time spent looking for a park). Cities like London and Sydney strictly regulate the availability of parking, as a proxy to control traffic congestion. Even municipalities in suburbs outside cities can ban new additional parking- like the Municipality of Waverly in Sydney. If you buy a house in Bondi  (in that municipality) with no driveway or garage, you cannot build a new driveway or garage.

The existing relationship between parking availability and traffic regulation is a consequence of historical norms. A typical suburban driveway has one car leaving in the morning and returning at night. If, as a consequence of the new market enabled by web-based marketplaces, now a second person (car) can use that driveway during the day, that is, C.p., double the utilisation of the road system for that single driveway.

The act of leasing a home driveway during the day, where parking is otherwise unavailable, does not just enable the utilisation of the driveway, but the whole road network from origin to destination, at the cost of everyone to some imperceptible extent. It bypasses society’s efforts, realised through town planners appointed by democratically elected officials, to manage road utilisation and traffic congestion. If you want to know more about why traffic is regulated by restricting availability of parking there are many resources on the web, but I would also recommend getting a copy of the seminal town-planning work “Traffic in Towns”, authored by Collin Buchanan and others.

Many people in the Australian startup scene have rushed to the defence of parking space letting platform ParkingMadeEasy, recently criticised by a mayor of an Australian municipality. It is clear however that this is an area in which Collaborative Consumption platforms are enabling more consumption, more fuel burned, more traffic congestion. Importantly, it is more consumption at the expense of external parties, through the increased utilisation of The Commons, not just the driveway.

Though they haven’t done a great job expressing why this is a problem, as with the short-lets, the affliction motivating the vigilantes and community complaints is utilisation of assets beyond long-established norms, with a flow-on impact on The Commons and amenity.


Imperceptible Increments Amount to a Dire Whole


At the moment while these platforms remain in the “early adopter“ stage, these are issues are on the fringe. Resistance to this utilisation of driveways beyond established norms is, as with short lets, as nascent as the collaborative consumption movement itself.

It is much like automobile traffic congestion on the fringe in the 1930s. No one can perceive the impact of their one extra car in a traffic jam of 20,000 cars. Yet somehow over the decades each of those imperceptible increments adds up to a crippling whole. No one can perceive the impact of that one little bit of marginal utilisation, but somehow it will always add up.

Always room for a bit more utilisation: San Francisco Bay Bridge morning peak (Source J.R.Caldwell/ GE)
Always room for a bit more utilisation: San Francisco Bay Bridge morning peak c-1959 (Source GE) 


Conclusion


Collaborative Consumption is having a positive transformational impact, enabling superior allocation of resources and less waste. But it also has a sinister side, enabling a market for utilisation of personal and collective assets beyond established norms, thereby enabling some to profit from disproportionate exploitation of common assets.

Startup warriors have become accustomed to disrupting and battling inefficient incumbent businesses in all spheres of human enterprise.  Anyone who has ever worked on a startup is eager to offer their support to "The Man in the Arena”. But I think when the protest is coming from the community (not from incumbent businesses defending their turf), it’s time to pause, listen to the objections, and consider whether we are doing the right thing.

6 comments :

  1. Nice post David! There are myriad reasons why some markets do not exist. In some cases because society has decided (implicitly or explicitly) that the costs outweigh the benefits (the parking space availability example). In other cases because the transactions costs are too high. Lower transactions costs and new markets are in general a very good thing for consumers. It is probably preferable for society to rely on explicit means of addressing the tragedy of the commons.

    Of course, there is another group that may be less enthusiastic about collaborative consumption - namely, producer interests - whatever the benefits for consumers. I'm thinking of what is surely the biggest example of collaborative consumption of our time - illicit file-sharing.

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    1. Thanks Hasan. Yes I certainly agree lower transaction costs/ friction are in general a great thing, and I'd say it's time to start looking at those explicit means sooner rather than later.
      For sure file sharing is a great example of where sharing is capable of a negative impact on producers and therefore willingness to invest. There may be solutions to that problem (e.g. in music relying on tour revenue rather than record sales, and in software on transactions rather than installations).

      I think there is no market solution though to the Tragedy of the Commons, aside from somehow monetising what are currently treated as externalities. e.g. It's theoretically possible that one day we'll all be billed for road access for every metre we drive, a full "user pays" framework as a function of the units-of-Commons-consumed, but that is I suspect much further off than the broad adoption of collaborative consumption.

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  2. I welcome discussion on this subject. The City of Nedlands did not initiate a clamp-down on renting of driveway and verge spaces but acted in response to complaints from residents about increased traffic and parking pressures that are lowering the quality of their living environment. Around 30,000 people currently come into the City each day, largely to the University of Western Australia and the QEII Medical Complex. The number is expected to double over the next 20 years. The University does not provide parking for students; QEII does provide parking for medical staff and visitors but not enough. Traffic and parking pressures are being transferred to adjoining residents and the Council. This in unacceptable.
    Max Hipkins, Mayor, City of Nedlands.

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    1. Hi Max, thanks. Your experience with community anger at the extra burden on their living environment is certainly consistent with the experiences related in the New York Times article I cited.

      No doubt as the Perth grows, that pressure will become greater still. At 30,000 per day I would have thought it was approaching the point where the economics would work for a connecting rail line between the Uni, Hospital and the Fremantle line.

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  3. Firstly - great site. It's good to see people actually reference material to back there argument.

    I can whole heartedly understand the frustration of those people affected by this collaborative consumption relating to car parking. However, where there is an effect there is a cause.
    Personally, i do not subscribe to the idea that this is a 'new market'. Collaborative consumption has been around (perhaps more solely in the Collaborative lifestyle aspect) since life began. Sharing of space, resource and time is not a brand new idea. The web has just been a tool to make it easily accessible for these types of 'transactions' thus increasing the size of this market.
    I do almost think of this Collaborative Consumption as a more complex view on what is essentially a simple trade. As in trade there can be a disproportionate exploitation of common assets also. Example, clearing trees for paper, timber or development will come at a cost for the natural ecosystem. There will always be a cost/benefit relationship for everything we do. Much like allowing Cars in my driveway will affect the surrounding suburbs road users. What we have actually created is a brilliant self generating identifier. By highlighting areas of Collabrative Consumption it then allows us to look at the cause over the affect. Example, an exploitation of shared driveways in the City of Nedlands. The what has allowed us to look at the why.
    I will admit that I have probably taken a too simplistic view on Collaborative Consumption. I only do so to allow the general community to engage, be active and address what are community issues without having to get right down into the nitty gritty - which can overcomplicate and bore these issues which require greater attention before it is filed in the "too hard basket" or covered in bureaucracy red tape. There are many issues which need to be addressed in our community and no doubt that will come at a cost. Lets not do this at the expense of Co-existence and mutual assistance.

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