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In the Sharing Economy, Reputation Is Key

In the Sharing Economy, Reputation Is Key inploi Team | 19.04.2016

In just over a decade we have witnessed the rise of the so-called 'sharing economy'. But for the major players, how important has reputation been in accounting for their exponential growth and success?

In March 2015, Havas Media’s Tom Goodwin penned these now much used lines:

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening”. [1] 

Whilst perhaps overused, they do hit upon the essence of a fundamental shift that is occurring in the way economies work and the way people, as economic actors, interact. In days gone by, someone with something to sell would take it to market, in a town or some other central meeting space, where they would be able to interact with people who might buy their goods or procure their services. For the most part, producers and consumers were in very close contact with one another. Reputation was often the means by which particular merchants were successful— reputation for fair dealing, for good quality goods and services, and for reliability. 

Economic progression over the last century has seen the erosion of these relationships as corporate enterprise has assumed control of large aspects of supply chains, producing and marketing much of what people consume and purchase. One no longer knows the man who built their furniture, for it came from a fluorescent lit showroom in some or other warehouse, or was quite probably purchased online.

Over the past few years however, ‘something interesting’ has indeed been happening. The growing reach and capabilities of technology is enabling an unprecedented reinvention of the ‘marketplace’. Or rather a reversion, allowing markets to operate as they did in days gone by, disintermediating entire industries and putting economic actors in direct contact with one another once again. One aspect of this has been the rise of the now dubbed ‘sharing’ or ‘collaborative’ economy— of economic ecosystems and platforms which enable direct consumer-producer contact, for transactions involving both human and physical resources.

The democratisation of markets that is occurring is causing a great deal of excitement, and there are many reasons for it to do so, from greater accessibility and flexibility to increased transparency. However at the risk of overlooking the great deal that has been made possible already, there is still a lot to be done, and a number of concerns that have arisen which need to be addressed. 

The decentralisation of information made possible by marketplace technology brings us closer, in some regards, to Tim Berners Lee’s vision of an internet that is ‘decentralized by nature and thus remains open to all’. The sharing of resources via virtual marketplaces makes individual freedoms manifest, and highlights the power of ‘community’. As Forbes’ Adam Ozimek points out, ‘in a country with a corrupt government, would you be more confident having a cab driver with a long list of good reviews or one with a bureaucratically issued license?’’ [2] 

In a sentence, the power of community in the sharing economy is clear.  However, central to this power is the effective functioning of self–regulating groups of users. How can the enormous potential of the collaborative economy be realised whilst ensuring the security of users and their transactions? 

It can be agreed that disintermediation — cutting out the middle man — is more often than not a good thing. Putting people in direct contact with one another saves time and money and makes transactions more transparent. Yet, there is a risk that in removing intermediaries a degree of security is forfeited.

Without an established intermediary, there is no independent third-party to whom both vendor and buyer are accountable — nobody ensuring that they play by the ‘rules of the game’ (even if those rules are skewed to favour the referee). Although the technology that now pervades our lives comes with comprehensive terms of use and usage policies, the vast majority of people don’t read them. It could then be argued that the most powerful protection in these ecosystems is the feedback and insight that other, real, verified, people provide. This aspect of the marketplace ought not to be underestimated: peer review takes us back to the essence of trustworthiness, to transactions premised on reputation. The adequate facilitation of this sort of feedback, and the ability to ensure it is legitimate and sincere is a key challenge.

Another point to consider is the way particular aspects of the world economy are developing, in conjunction with the rise of the sharing economy. It is a curious paradox: at a time of immense freedom and empowerment made possible through technology, in some areas of the economy the opposite has happened in spite of this. John Gapper writing in the Financial Times notes succinctly:

“the new world of work is [now] both more exiting and less secure”. [3] 

It is in this that a hard truth needs to be confronted: not everybody is sharing in the sharing economy. Many aspects of the economy in the post-‘great recession’ world of austerity see workers losing out. The drive to cut costs, in a pro-business environment, has left millions of people employed in relatively ‘low-skilled’ sectors of the economy in vulnerable positions as companies transfer risk and attendant insecurity to workers. This is a global phenomenon. In the UK, it is manifest in the soaring number of people employed by labour agencies and forced to work on ‘zero-hours’ contracts.

The UK has 1.2 million agency workers, and 1.5 million positions contracted on a ‘zero-hours’ basis. These arrangements provide employers the benefit  of workers on demand while leaving employees to skirt the paper-thin line between ‘flexibility’ and income insecurity. If one applies the marketplace principles of the sharing economy to this problem the potential for a drastic rebalancing of the relationship between employers and employees is clear. Scores of workers could benefit from improved security of income, and employers from access to a wider pool of reliable workers.

The impact of marketplace technology on economies is immense and is precipitating a reversion to transactions premised on reputation. It is imperative for the security of actors in these markets that this aspect of digital spaces —generally reviews and ratings — functions effectively and reliably. It is here that the real power of a community of self-regulating users is clear. Furthermore, if it is assumed that democratised and disintermediated relationships between economic actors is desirable, it is essential that those at the ‘bottom’ of the economy are not overlooked. If the power of marketplaces and the sharing economy is to be fully realised and the functioning of the world economy truly, fundamentally altered, then nobody can be left behind.

Interested in the future of work? Read our article on the end of zero-hours’ contracts here.




 *As published on Ogilvydo (

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