The Airbnb Scandal Won't Slow the Sharing Economy

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Sharing used to be for hippies. Now it's for everyone.

615 apartment nice reuters.jpgLucas Jackson / Reuters

Airbnb is an online service that lets users rent out their rooms for a night. Like all good ideas, it's simple enough to appear too simple ("So, renting your floor to a stranger is a business model, now?"), yet is deceptively disruptive.

The vacation rental market is an $85 billion industry. In large cities, a decent hotel room can run hundreds of dollars. Airbnb lets average renters or homeowners set lower prices to rent out their floor, couch, islands, or, you know, airplane sticking out of a tree. The mutual benefit is clear. For renters, it's a stream of revenue that would have been harder to secure without a formal company to set up the transaction. For customers, it's a money-saving alternative to Hilton. In fact, as Forbes' managing editor Bruce Upbin wrote, the company could claim more rental units than Hilton by the end of next year.

But two months ago, Airbnb suffered a predictable set-back. A San Francisco renter writing on her blog claimed that an Airbnb renter had torn through her home and stolen her jewelry. She further accused the company of ignoring her plight. Similar incidents have surfaced in the last few months.

As an observer, consumer, and breathless fan of the sharing economy, my great huge sympathy for victim is paired with great umbrage at the idea that the crime invalidates the company. Airbnb has offered to set up an insurance fund worth up to $50,000 for renters. This is the right idea, even it if unfortunately establishes another set of pernicious incentives to not only steal but also defraud the company for insurance money. Atlantic Technology editor Alexis Madrigal wrote convincingly that it "isn't just for Airbnb's health, but for the sharing economy as a whole" that peer-to-peer sites solve their security questions to reach mass appeal.

These concerns are legitimate, but they're small hurdles in the bigger picture. Airbnb is a great idea whose time is ripe, the child of recessionomics and the Web's ability to tear down walls and find demand outside normal producer-merchant-customer chains of command.

If the latest batch of Web-enabled start-ups -- LivingSocial, Groupon, ZipCar, ThredUp -- share one thing in common, it is their ability to maximize the use of otherwise idle inventory.  Every day, food goes stale, cars sit in driveways, clothes get thrown in the trash, and empty rooms stay empty. Some time ago, there wasn't much that merchants could do about this besides lower their retail prices. But these new companies find nimbler solutions to that waste. Deal sites can drive demand for shops at the very moment they need a burst of foot traffic. Sharing cars, clothes and rooms increases consumers' access to these services without requiring that they buy anything. Ownership goes down. Use goes up. Efficiency follows.

That the sharing economy ramped up during a recession is either fortuitous timing or cause-and-effect. Either way, it should last into the next boom, because its values -- thrift, efficiency, an ability to match supply and demand in real time as with an auction -- aren't specific to any one generation. They are fundamental economic principles. Sharing used to be for hippies. But the sharing economy is for everyone.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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