A Sign of the Times

There was an interesting op-ed article in The New York Times by Thomas Friedman called “Welcome to the Sharing Economy.” For people who don’t know, Thomas Friedman is the author of blockbuster books like The Lexus and the Olive Tree, The World Is Flat, and more recently This Used to Be Us. He’s also my favorite mainstream author, and I don’t like many.

The point of his recent article was that, since 2008, there is a burgeoning new market for people renting out their rooms, tree houses, garage apartments, and mother-in-law units to travelers.

Friedman starts with the example of two friends who ended up rooming together to save rent. Despite that, they were still a little financially strapped so they turned their house into a bed and breakfast, even though they had no extra beds. They simply got some air mattresses and advertised the available place to sleep.

They started renting space to travelers when there was a big convention in San Francisco and hotels were sold out. They took in three guests, who slept on the air mattresses. They cooked them breakfast each morning and became their local guides. All for just $80 a night. Per guest.

Eventually this gig was covering the cost of their entire rent for them.

But that wasn’t the end of it. Their success lead them to start the website Airbnb, which has grown so large and fast in the last two years, it’s literally the size of a major global hotel chain like Hilton.

Who would have thought so many people would want to sleep on the floor and be part-time innkeepers?!

When Friedman interviewed these guys, they had 140,000 people staying in Airbnb rooms. They expect to have 200,000 a night by the summer peak.

They have 23,000 listings in New York and 24,000 in Paris.

They are in 192 countries and 34,000 cities.

They have castles, yurts, tree houses, caves, teepees, water towers, private islands, motor homes, glass houses, light houses and igloos listed. And guess which of those is most in demand? The tree houses!

In fact, there is a new TV show called Tree House Masters, which tries to show how cool and upscale tree houses can be made today.

The key to the success of this unlikely innovation?

Building trust.

After all, who wants a stranger staying in their house, and who wants to stay in a stranger’s house? Yet glance back at those numbers I mentioned earlier. Clearly there’s a market here and Airbnb has captured it by creating the means for hosts and guests to verify licenses, passports, e-mail, Facebook profiles, etc.

But most important, as on Amazon and many major retail websites, the rooms AND guests are reviewed and rated. That means there’s heavy pressure to be good because a few bad ratings can kill you – guests included!

Plus Airbnb offers $1 million in insurance against damage and theft, so what do you have to lose?

This is just another way the new economy is turning the average Joe into an entrepreneur, a principle I’ve stressed in my books on the new network organization, and that I cover in my upcoming nine-CD business course.

Airbnb has not only spawned a huge Internet site that generates billions of dollars in economic transactions, it’s created networks of part-time people who clean, cook, guide, drive, you name it.

And that’s exactly what you’d expect to see arise from the ashes of a downturn.

The challenges that come with downturns always inspire innovation and entrepreneurial businesses. That’s why they’re such a necessary part of our economic growth and evolution.

The winter economic season we are currently moving through, and which will be with us until around 2023, is the most challenging of the four seasons in the 80-year economic cycle. Think of it like that time of year when snow and ice clears the ground so new life can break through.

This new approach to accommodation is just one of the many green shoots we’ll see as this winter season takes its toll.

What’s coming next? Who knows. Maybe renting out power tools and other household goods that are rarely used. Whatever it is, know there will most definitely be something.

Welcome to the new sharing economy. Are you ready for the ride?

Harry

 

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Categories: Economy

About Author

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.