Jeremy Rifkin, a widely published economics pundit, argued last week that non-profts are going to play an increasingly important role as our economy shifts to a zero-marginal cost “sharing” economy. (Example for the uninitiated: it costs Netflix nearly $0 to stream Ferris Bueller’s Day Off to your TV.)
We all understand how Netflix works, but why does he think charities will be crucial to this transformation? In his words:
The answer lies in the civil society, which consists of nonprofit organizations that attend to the things in life we make and share as a community… we are constructing an Internet of Things infrastructure that optimizes collaboration, universal access and inclusion, all of which are critical to the creation of social capital and the ushering in of a sharing economy. The Internet of Things is a game-changing platform that enables an emerging collaborative commons to flourish…This collaborative rather than capitalistic approach is about shared access rather than private ownership.
…the new employment opportunities [will] lie in the collaborative commons in fields that tend to be nonprofit and strengthen social infrastructure — education, health care, aiding the poor, environmental restoration, child care and care for the elderly, the promotion of the arts and recreation.
I wanted to examine this a bit further. Are charities really going to be the driving force in enabling “shared access”?
First let’s take a look at a few companies that have been creating this sharing economy in the first place:
Airbnb – the archetypical example, Airbnb lets property owners lease out their homes directly to other travelers. I’ve used this in LA and it was fantastic. Cheaper than a hotel and the homeowner was gracious. Oh, and they’re being valued around $10 billion these days.
ZipCar – allows city dwellers to rent cars by the hour, day, etc. Hopefully they clean out the McDonald’s french fries left underneath the seat by the previous driver. Similar companies include Getaround and Relay Rides, which allow you to rent from individual owners.
Citi Bike – same thing as ZipCar, but for bikes. In NYC only right now. People ride these things a lot more than you’d think!
eBay – ever since I sold used parts of my crusty mountain bike in the early 2000’s, I’ve loved eBay. These days I’m focused on building out my collection of mannequin feet, but eBay is still the ultimate sharing platform.
TaskRabbit – people aren’t just selling goods, they’re selling their time, with services like TaskRabbit.
Just Soles – ladies, if you buy a $600 pair of shoes and wear them 4 times before they go out of style, you just paid $150 each time you went out on that lousy date. That’s why Rent the Runway exists: you can rent fashion for the few times you need a special item at a much lower cost per use. Rent the Runway does the same thing for dresses.
That’s just a short list. Shared ownership and distribution is becoming a major trend, but I haven’t seen any non-profits contribute to this movement yet.
Why is that? It has to do with risk.
Any time an organization attempts to forge a new economic model, risk is involved. The risk is that the model doesn’t work, and whatever time and money went into the idea is lost. Zipcar has to face the financial risk of profitably buying, leasing out, and maintaining a fleet of cars in a much different fashion than traditional car rental agencies. Airbnb deals with the liability risk that renters won’t thrash the place where they’re staying. eBay deals with scale risk, as its model doesn’t offer value unless millions of people are using it. TaskRabbit and Just Soles are faced with competitive risk, as the services they offer can be easily duplicated.
However, non-profits are typically very risk averse, and they often aren’t in a position to risk their capital (or even their time) on endeavors that don’t have a clear outcome. Instead, they’re asked to do the things near and dear to donors’ hearts: feeding children, caring for animals, stoping diseases, and saving the rainforest. So it’s no surprise we’ve seen them on the sidelines thus far.
However, I think we will see two things happen as the sharing economy becomes more pervasive:
First, we’ll see a continued rise in alternative corporate structures, such as L3C (a low-profit limited liability company) and B (benefit) corporations. My hunch is that startup-minded individuals will find new ways in which a zero-marginal cost economy can solve social problems. There are already nearly 1,000 B Corporations, and the designation is only a few years old. Organizations like RecycleBank and Better World Books are great examples of this. I wrote about this while ago, and I still believe that the distinction between for-profit and non-profit will continue to break down.
Second, I think that partnerships between for-profit and non-profit companies will be more common. Not every company’s focus lends itself to solving social problems, but that doesn’t mean its investors don’t want to contribute. Toyota Cars for Good and Patagonia are classic examples of companies who’ve created strong support for causes in line with their products and values, even if they’re not tackling those problems head on.
Either way, the shift to a sharing economy will mean that both for-profit and non-profit companies alike will have to adapt. How do you think non-profits will participate in this new model?