The Sharing Economy: A Story of Creative Destruction and the Erosion of Barriers to Entry

Research Paper, Disruption, Gerard A. Lucyshyn, Lee Harding

It was a most unusual funeral. On April 29, 2017, 20 people walked mournfully through Toronto’s Kensington neighbourhood. Incense wafted from the front of the procession, followed by a saxophone player and a traditional drummer. Behind them two people carried a mock casket. People followed with protest signs. Who was the object of their mourning? Actually, it was no person at all. The ceremony
was a “Requiem for Rental Housing.” And, according to these protesters, the neighbourhood’s long-term rentals did not die a natural death. They were murdered. And the killer was the short-term rental company, Airbnb.1

It was not the first time Toronto has witnessed a public demonstration against the “sharing economy,” nor was it the most dramatic. In December 2015, Toronto cab drivers took to the streets to protest Uber, the largest ride-sharing company in the world. They slowed down traffic at major access points and blocked an ambulance.

One cab driver banged on the window of an Uber driver and held onto the car door handle as the car sped off, dragging him away from city hall. The man had driven cab for 22 years and even compared Uber to the terrorist group ISIS. One of his colleagues claimed half of his taxi business had been lost to Uber.2

The sharing economy, illustrated by Uber, has challenged the status quo in far more places than Toronto. Over the past decade, Airbnb and Uber have spread around the world and created new ways for people to offer services and utilize their personal capital resources to make money. Consumers have recognized the value of such services as shown by their willingness to pay for them.

However, the loud outcry from those threatened by such changes has often found the ears and minds of our policy makers. This should not necessarily be the case. Every innovation that advances a country’s economy will also threaten another part of it. This reality, called “creative destruction,” has been acknowledged for a long time. It is the unavoidable price of advancement, where something is left behind when something better is embraced. One day, Uber and Airbnb may be on the losing end of this process themselves.

Read the entire paper here: FC-PS213_SharingEconomy_AP2518_F1