06 July 2015
By Stephen A Chadwick
Peer-to-peer rental market, collaborative consumption, or more commonly known these days as the “sharing economy”, is big business and growing at an astronomical rate. AirBNB, the San Francisco based lodging website, has over a million bed and breakfastlistings in 34,000 cities around the globe and after its latest round of fundraising is now valued at $24 billion, yes that's right - $24 BILLION. This is a company that wasn't even a scribble on a beer mat a decade ago.
Whilst AirBNB is undoubtedly the current poster child for the sharing economy business model, it's only the tip of the iceberg. If there's a service you require and you're looking to save some money, somebody somewhere can help. Going on holiday and cant face leaving Fido in kennels? No problem, DogVacay.com is full of "hosts" ready to share their couch and bed with your pet for a truly "home from home" experience. Need to borrow a car? RelayRides.com will sort you out with a neighbour's wheels for the day (backed byGoogle Ventures no less). Not got the time to wash your own underpants? TaskRabbit.com has an army of workers ready and willing to tackle the stubbornest of stains.
One of my favourite pastimes, a hobby if you will, or recreational activity if you must, is photography. I spend a good deal of time on Ebay eyeing up camera bodies, selling lenses, upgrading my kit. I'm always looking for a bargain and yet when I've got one, once I've got past the euphoria of placing the winning bid, and having acknowledged Ebay's congratulations with ecstatic yet dignified aplomb, I'm always left slightly concerned that the following morning I'm going to receive a letter from the tax office, claiming a hefty sum in unpaid revenue from my "trading" activity. Perhaps I worry too much, a few Ebay transactions a month hardly makes me Lestor Piggott. Nevertheless, I'm always a tad jittery for a day or two afterwards.
It dawned on me the other morning that it's this preoccupation I have with doing things by the book, following guidelines and generally trying to be a good citizen that is holding me back in life. I can't help being quietly stunned by the likes of Uber; a multi-billion dollar unregulated taxi service employing non-professional drivers. I would have assumed there would be a queue of people, not least: governments, police forces, safety standards inspectors and tax office officials chomping at the bit to come down on these companies like a ton of bricks. But rather than being hampered by regulation, they appear to be thriving on it. So how do they do it? How do they get away with it? Is there in fact anything to get away with? Are they exploiting loop-holes in the law? Or is it as simple as it appears and I'm completely missing the point?
Certainly my overly-cautious approach to company formation is why I find myself writing about dotcom billionaires instead of becoming one. Where these internet start-ups see dollar signs I just see endless hurdles to overcome. Where sharing economy entrepreneurs have a crystal clear vision of what they want to achieve, I see only the murky, turbid waters of liability insurance, company tax status conundrums, fundraising headaches and unfathomable employment laws.
Within minutes of having an absolute epiphany of a business idea, I'm already putting it to rest as far too complicated and more trouble than it could ever be worth. I could never have started Facebook, I'd have been too worried about invasions of privacy and data protection laws. I'd never have got Ebay off the ground for fear of prosecution by Trading Standards. I could never have launched Amazon; I swear Jeff Bezos must still spend every waking minute looking over his shoulder, worrying if a Waterstone's or Barnes and Noble hired assassin is tailing him.
Mock me if you like, but I've had some gems of ideas. A Kickstarter campaign to buy a whole tanker full of petroleum whilst gas prices are low, then sharing the profits as prices surge every time trouble bubbles up in the Middle East. But then I'd probably die at the hands of some Russian Oligarch's henchman before I ever reaped the rewards. Or purchasing a wind turbine for the 1500 residents in the village where I live. Any neighbour could chip in for the initial outlay, get free electricity for life - we might even make a profitselling excess power back to the grid. But then I fretted about turbine maintenance costs, having to fly specialists in from Munich to mend a snapped rubber band.
I thought of a house exchange system. You want to sell your house, you want to avoid agents' fees? How about a P2P direct swap site which you could top up with cash if neccesary? But I knew exactly what would happen; It would just be my house on the entire website. A few months later someone called Gavin from Sandwich would join, looking to exchange his fire-damaged mobile home on the wind-swept Kent coast for a 5-bed detached house with double garage in the Tampa Bay area.
So I tend to look at these sharing economy firms with an equal mix of envy - "I could have done that", admiration - "I could never have done that" and genuine bewilderment - "How the hell have they got away with that?"
And then I look at the valuations placed on these companies, companies that in effect have no net assets whatsoever, they're merely networks. Uber's latest 40 billion dollar valuation puts it on a par with Delta – one the world's biggest airlines. Delta was founded in 1924, has more than 700 state-of-the-art aircraft in its fleet, 80,000 employees, it flies to 333 destinations in 64 countries and operates from 10 domestic (US) hubs and 3 international hubs (Amsterdam, Tokyo and Paris). The business has been built up over the best part of a century.
I like to picture the confused executives at Delta having their morning meetings in a plush conference suite, looking at their stock prices and PL ratios compared to some of these sharing economy startups, then looking at each other in utter bewilderment, wondering if they wouldn't be a whole lot more profitable getting soccer moms to fly their customers around in borrowed crop dusters whilst they simply run a mobile app from a warehouse in Georgia.
Oh I know how cynical it sounds, but I can't help feeling we've been here before. Who can help but snigger at the Time Warner / AOL merger of 2001, regarded by many (including Time Warner chief Jeff Bewkes) as the biggest mistake in corporate history. I could be totally wrong, I often am (my wife can attest to that), but I can see a dotcom crash 2.0 in the next 18 months and, given the precarious state of the global economy, it could be even uglier than before.