As terms go, collaborative consumption sounds fancy. As ideas go, it is ridiculously simple. As a premise on which businesses can be built, it is ingenious. And as a system around which our lives can be lived, it is powerful.
The currency that drives this ecosystem is not the money in your bank account. Instead, it is the reputation capital you earn and your willingness to give up on privacy. By way of crude analogy, think the number of likes and shares on your Facebook posts, retweets and followers on Twitter, and connections on LinkedIn.
Rachel Botsman, founder of the Collaborative Lab (cclab.collaborativeconsumption.com) and a thought leader on the theme, calls it the what’s mine is yours economy. The reason it is taking off, she argues, is because we’re wired to share. “We were doing it for thousands of years, whether it’s when we hunted in packs, or farmed in co-operatives, before this big system called hyper-consumption came along and we built these fences and created our own little fiefdoms. But things are changing, and one of the reasons why is the digital natives, or Gen Y. They’re growing up sharing—files, videos, games, knowledge. It’s second nature to them.”
So how do these models impact how we live? Botsman thinks it will happen in three ways.
• Markets for redistribution like Title Trader (www.titletrader.com) are emerging. After you’re done with using, say a book or a DVD, swap it with somebody who owns something you need. After all, it’s not the book or DVD you need, but the content it contains.
• The emergence of time banks like TaskRabbit (www.taskrabbit.com). You need some errands run at home, but are busy at work. I have time on hand and offer my services at a time banking marketplace. For every hour of my service, I earn time credits. When I’m busy and need somebody to care for my older parent, I can redeem these credits to avail the services of someone on the marketplace. An Indian equivalent is Timesaverz (www.timesaverz.com). But as things stand, the platform offers services for a payment, not time credits. It is only a matter of time though before time makes its presence felt as a currency in India.
• Then there is the product-service system. You pay for the benefit of the product without owning the product. This model has begun to take off in India. Gurgaon-based Rajat Gandhi, chief executive of Faircent—a peer-to-peer lending platform, and Bengaluru-based David Back, co-founder at Zoomcar, India’s first self-drive car company, are die-hard evangelists who’ve built businesses on the back of this philosophy.
Gandhi’s proposition is one he thinks will “disrupt incumbent banks and financial institutions”. While he admits these are early days, Faircent’s (www.faircent.com) proposition is interesting.
Assume you’re an individual sitting on idle funds in the bank, but would like the money to work harder for you. You register as a potential lender on the Faircent platform and look up potential borrowers. Their profiles, credit-worthiness and reasons for borrowing are listed against their names. Person X may be looking for 20,000 and is willing to pay 10% on it. Person Y may be looking for 50,000 and is willing to pay 13% while person Z may be looking for 1.5 lakh and is willing to pay 15% to access the money.
As a lender, you like all three, but want to spread your risks. So you may choose to lend person X 5,000, person Y 8,000 and person Z 10,000—or any permutation and combination of your choice. “Think of it like building a portfolio on the stock markets,” says Gandhi. “But here, instead of stocks, your investments are a portfolio of borrowers.” And like in the markets where you have blue chips, mid caps and penny stocks, borrowers are categorized into class A, B and C after an assessment by Faircent.
Borrowers have the advantage of seeking only as much as they need. Gandhi points out that often times while they don’t state it explicitly, conventional institutions choose not to lend to “small and medium enterprises (SMEs), doctors who practice Ayurveda, lawyers, policemen and members of certain communities.”
On this platform though, because the market is distributed, and information transparent, these barriers hold no meaning and anybody can bid for loans. By way of example, Ayurveda practitioners who had no access to funding can get it here on average at 20%. The only problem, Gandhi says, is “while we’re finding good lenders, there are not enough borrowers.” That said, over the last one year, Faircent disbursed 12 crore. The platform makes money by charging a listing fee from both lenders and borrowers.
David Back (www.zoomcar.com) has an equally compelling proposition. Why own a car when you can rent it by the hour? “Philosophically, it is an obsession with using resources more efficiently,” he explains. The way it works is simple. Need a car? Use the mobile app to find one close to you. Book a car of your choice from a location closest to you and return it when done.
Back argues the opportunity is huge both as a business and to positively impact the environment. By way of illustration, he argues, India has 12 cars for every 100 people and Indians emit on average three tonnes of carbon dioxide (CO2). If the numbers of cars on the road go up, Indians will move closer to the global average of 12 tonnes of CO2 and the “consequences can be disastrous”. Which is why, he thinks collaborative consumption is an elegant solution.
After having been rejected by “at least 500 investors”, Zoomcar managed to convince a consortium of angel investors including Larry Summers, former US treasury secretary, and professors from Wharton and Harvard Law School to pitch in with $2.9 million. “I am proud to have been an angel investor behind Zoom. In a developing, dense country like India, there is even more benefit from automobile sharing,” Summers said.
After having started out from one location in Bengaluru, it is now present at 40 places including Pune with 250 cars in its fleet. Plans include expanding into Delhi, Mumbai, Chennai and Hyderabad. To fund these plans, the company is currently raising $8 million from Sequoia Capital, T.V. Mohandas Pai of Manipal Global Education and Abhay Jain of Manipal University.
Consumption in this universe is a function of sophisticated technology. Gandhi and Back are clear that in the longer term, their operations will have no human intervention at any point. But the way things are, if you need to participate in their models, you need a high credit score. Right now, Faircent relies on theCredit Information Bureau Ltd (Cibil) and Zoomcar on a refundable security deposit of 5,000. Over time though, as all of these models permeate the cloud that is the Internet, the currency will be your reputation.
As Botsman puts it, “In the old consumer system our reputation didn’t matter so much, because our credit history was more important than any kind of peer-to-peer review. But now with the Web, we leave a trail. With every spammer we flag, with every idea we post, comment we share, we’re actually signalling how well we collaborate and whether we can or can’t be trusted.”
If Faircent and Zoomcar are to successfully disrupt the spaces they operate in, they need to keep costs low, which is why their reliance on technology to assess reputation. That engine in place, eventually Faircent may not have to deploy people or rely on Cibil scores to authenticate a lender or borrower’s intentions. Zoomcar may not have to expend time on processing security deposits because they know an individual who borrows a car from their fleet will return it in impeccable condition.
At a time bank, it is possible to imagine high-reputation capital translating into a premium for time credits in your account. And on a re-distribution platform where you’ve earned a reputation for swapping superior content or services, you could swap more for what you have on hand.
The catch here is that reputation is contextual. Just because somebody can care for an older parent does not mean he is necessarily good at housekeeping. That means you need a holistic view of somebody before you decide to collaborate with an individual. “I envision a real time stream of who has trusted you, when, where and why,” says Botsman. “They’ll all live together in one place, and this will live in some kind of reputation dashboard that will paint a picture of your reputation capital.”
Trustcloud (www.trustcloud.com) is a good example of what this dashboard could look like. It works much like a credit card, except that the currency embedded into this virtual card on your browser is your reputation.
“Facebook, Twitter and LinkedIn are versions 1.5 of sharing your life. When version 2.0 goes mainstream and you begin to share your life there, more businesses will evolve and flourish around it,” says Gandhi.
Sure, this means giving up on significant parts of your privacy. But the upside is that as your scores on your reputation index move up, the playing field levels out and people with talents who would otherwise remain undiscovered will move to the top.
Airbnb (www.airbnb.co.in) is one such platform that allows people to rent out their living spaces to travellers from other parts of the world and earn a livelihood. But it isn’t as straightforward as that. Until you’ve gotten enough positive votes as a passionate host, you don’t matter on the platform. Because end of the day, Airbnb is more about people than the spaces they inhabit. So much so that it is now beginning to disrupt the hospitality business.
Then there is Stack Overflow (www.stackoverflow.com), a platform for programmers of all kinds from across the world to showcase their talents and solve problems. Until the time you’ve received enough positive votes from your peers, your reputation doesn’t move up. But when it does, your ability to wrest the most lucrative assignments goes up exponentially.
“In the 20th century, the invention of traditional credit transformed our consumer system, and in many ways controlled who had access to what. In the 21st century, new trust networks, and the reputation capital they generate, will reinvent the way we think about wealth, markets, power and personal identity,” signs off Botsman in her talk at a TEDGlobal conference on the theme.
Moral of the story: To thrive, the only currency you have is reputation. If that means opening up to public scrutiny, so be it. Think your privacy a thing of the past and give it away to the dogs.
This article was published in Mint on November 27, 2014. All copyrights vest with the newspaper and no parts of it may be reproduced without permission from the publisher