Why Uber is not part of the Sharing Economy

I keep reading posts that Uber is an example of the ‘sharing economy’, the one in which people freely share what they have with others. But it’s NOT – it is instead part of what I call the ‘Utilisation Economy’ which is about use of spare capacity. About 15 years ago I began writing about the emerging generations being more likely focused on ‘Access to’, rather than ‘ownership of’, products and services and this was a reason why big ticket items were of less appeal. Access to was the early sign of the sharing economy which works more like this – if I can borrow a friend’s camera/car/house/surfboard why do I need to buy one?

And as the sharing economy evolved its offerings, the capitalist view also met it coming in the other direction for a question was always hanging about: ‘how can we monetise this idea?’ And Uber therefore is fundamentally NOT about sharing and it IS about Utilisation. What the Utilisation economy opens up for the sharing economy is the money flow. Sharing is sharing. It’s FREE. This article about stickers on letterboxes is a true example of the sharing economy. Utilisation is about underused capacity that can be offered for a small price and it is where both consumer and provider win – the consumer through access to a need at a typically lower cost and the provider getting something (less) for what would otherwise go to waste.

The formalisation of the Utilisation Economy is the change in business models that have existed in part at an informal level for some time. In supermarkets for instance, food nearing its expiry date is often marked down substantially to encourage a purchase – the risk of a non sale is a total loss of sale value and so a small purchase price is better than none. Airlines will often dump seats onto the market at a bare cost to help fill a plane (though more often now a days the tendency is to cancel flights at short notice and force consumers onto a plane flight they did not want, with no recourse).

In my work with a wide number of manufacturers I encourage the development of the Utilisation Economy approach by opening up spare warehousing space to partners or even providing access to machinery or equipment during quiet times or after hours so that they can maximise payback on capital investment.

Just recently Uber has copped some significant global PR flak for what might be described as price gouging during the Sydney seige wherein a man with a history of domestic violence held almost 20 people at gunpoint for almost a day. That incident took place in central Sydney and if you know anything about Sydney you know it can be an awfully difficult place to navigate. Uber uses an algorithm that automatically increases prices during periods of high demand aimed to (also) increase incentives for providers to make themselves available. And during the crisis it did just that as this article on Triple Pundit explains.

The reason the PR has been so bad is because people think that Uber is (and Uber has been happy to align with) part of the sharing economy and therefore is held to higher ethical standards than the arguably ‘morally bankrupt’ for profit economy players. But this is misguided because Uber is first and foremost about capacity utilisation. It’s a Utilisation Economy player, not a sharing economy player. It brings together a consumer need with existing spare capacity at a fee acceptable to everyone. And let’s be clear, the concert industry, airline industry, hotel industry, petroleum and many many others are more than happy to gouge (sorry) ‘utilise’ supply and demand pricing structures to maximise revenues. Uber is just like them except it’s not.

With no capital outlay, ownership of plant, equipment or vehicles of its own, Uber is not the same kind of bricks and mortar business. And because it doesn’t do what it does for free, it’s also NOT part of the Sharing Economy. Instead it fits in the world between the two – it is part of the Utilisation Economy and it is a business model that we are going to see much more of in the future. The trucking industry already use this with ‘backloading’ successfully for years so get used to it. Even if some states or countries try to legislate it out of existence, the Lyfts and Ubers of this world will keep appearing. They may be smaller, less formal or less well known, but they’ll have a loyal band of consumers and providers who see the significant value in utilsing spare capacity.

The Utilisation Economy is here and it’s growing. Just don’t confuse it with the Sharing Economy