How does the Collaborative Economy Weed out the Jerks?

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Question: When the crowd gets what they need from each other, who will monitor, regulate, ensure, and even insure?

Olivier Blanchard, a leading voice for digital business, posed a great question to a Facebook group in which we participate, asking how the sharing economy will contend with jerks that will mess with the sharing space. I’m paraphrasing his excellent question: “There are millions of jerks out there who will either resist this outright or try to twist it into something else if they get a chance.” He’s right. There are incidents that have already happened where someone visited an Airbnb and trashed the house, a car-sharing driver killed someonecrowd-funding has been used to commit fraud or, in the gift economy where people share goods for free, haven taken all and given little. This important topic was addressed at yesterday’s Resilient Summit, an event in Kansas City that I’m co-hosting.

Four Ways the Collaborative Economy Weeds out the Jerks.
I’d like to share the ways I’m seeing these crowd-based systems develop that are helping to identify jerks, and purge them from the system, as well as reward behavior that the community is seeking. Here’s what I’m seeing:

  1. Background checks to vet out bad players. First of all, some of these startups provide a form of screening, although quality widely varies. Airbnb for example, requests that hosts, and often guests, provide driver license screenshots which can aid in background checks. Companies like Scoot Networks (electric scooters on demand) conduct background checks for driver records. I’ve read, and heard, that Lyft and Uber conduct very light checks on safety of cars, but due to scale likely can only confirm if a car is newish model. There’s an opportunity for more rigorous background data to be shared across the industry and from traditional players.
  2. Tapping the social graph as a form of trust. I frequently make the case that the first phase of sharing is social media, and that the collaborative economy (the physical world) is the second phase. I studied a sampling of 200 sharing startups and found that 74% of the startups had integrated some form of social profiles, recommendations or even Facebook Connect. For example, Airbnb offers Facebook Connect, so you can see which of your friends (or friends of friends) is offering a place to stay – or which of your friends has actually stayed there. Since we don’t have the trust mark of a brand like a major hotel logo, the crowd leans on real world personal profiles, like Facebook.
  3. Two-way ratings, where buyers and sellers rate each other. Traditionally eBay, Amazon and others have enabled customers to rate the selling company’s goods and performance. Now, because trust marks (brand logos) are not readily apparent in the peer-to-peer collaborative economy, we’re seeing new rating models emerge. We already know that buyers are rating sellers. For example, unlike Taxis, Uber riders can rate their drivers and cars. I’ve learned that Uber drivers must maintain at least a 4.6/5.0 rating or they are booted. On the flip side, the drivers are rating the passengers! If you don’t maintain a high rating, you may not get picked up on that late night out on the town. So, do as our moms taught us. Behave.
  4. As a failsafe, new insurance products are emerging. This new market is complex and risky.  The rules of liability are unclear as we shift “to a lifestyle of access over ownership,” as Lisa Gansky refers to it. Consequently, we’re seeing new forms of liability coverage emerge. When I rented out my car, RelayRides promised me a $1m coverage. But I still felt somewhat uneasy, as I wasn’t clear about to what extent this would protect me. Also, ride-sharing services like Lyft have announced that they’re expanding their insurance coverage.
  5. Update Feb 2015: Uber has now introduced a “panic button” on the app.

The system will break, then fix. Accidents will happen and jerks will game the system. Then the system will self-correct. Expect this self-healing process to go on for many years. The process of self-correction is a component of nearly anything systemic. On a similar note, in the social media space, we saw the rise of trolls. Then Facebook, Twitter, Wikipedia and eBay launched reputation, purge and block features to try to rid of jerks. It’s working, but it’s still not perfect. Of special interest for me, my legal contact, Kyle-Beth Hilfer, just published a relevant paper with Collen IP discussing branding and IP usage in the Collaborative Economy, citing some of my work on the subject.

The Uber NYE accident is a landmark case. While I’m not suggesting anyone in this case is a jerk, on NYE a few weeks ago, a young child was struck by an Uber driver and killed; the family injured. There’s uncertainty, as the driver was an Uber driver, but was in-between rides and didn’t have a paying customer in his car. Furthermore, many groups could be liable, including the city, the driver, the drivers insurance, the family or Uber themselves. This is a landmark case and will set precedent on future incidents.

The crowd will develop its own insurance products. Expect a crowd-designed and crowd-funded insurance product to emerge that covers individuals as they traverse the world in in a sharing and access lifestyle, one that protects both the buyer and seller for this P2P transaction economy. We might also see a hybrid version where a traditional insurance company resells their coverage to an organization in the crowd, creating a “pan-coverage” plan. Imagine how two-way ratings could actually reduce your liability and, therefore, your rates in a crowd-funded insurance plan.

Photo used under creative common license by Mark Atwood