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How to Make the Most of the Sharing Economy

Northwestern MutualVoice Contributor •  October 7, 2014 | Home and Family

By Lisa Wirthman

Thanks to the rise of startups such as Airbnb, Lyft and Relay Rides, you can now rent out just about any kind of asset—from homes and cars to power tools and parking spaces—directly to peers via the Internet.

Peer-to-peer services can offer extra income to owners as well as discounted prices to renters. The Internet and smartphones with maps and satellite positioning also make it easy to match up providers and consumers.

So far, the sharing economy is booming: Some 15 million travelers have used Airbnb to rent spaces in other people’s homes, while car-sharing service Uber was recently valued at close to $17 billion.

What’s going on? Wired has a feel-good theory that Americans are finally learning how to trust each other, while New York Magazine claims the sharing economy is a movement born out of desperation in a depressed labor market.

The reality is more pragmatic: Americans are sharing more because it’s convenient and cost efficient, with sustainability as the icing on the cake, according to a survey of 90,000 people by Crowd Companies and Vision Critical.

“Trust is overhyped in this market, as people don’t need to blindly trust strangers,” said Jeremiah Owyang, founder of Crowd Companies. Instead technology has provided trust systems, such as ratings and reviews of transactions, and social network data that lets consumers know what services their friends have used. Some sharing services also provide traditional insurance policies, such as automobile insurance, that protect both providers and partakers of services, he added.

Void of formal rules, the sharing economy tries to ensure good behavior through the use of social media tools, such as Facebook Connect, that enable people to see which services and providers their friends recommend, as well as two-way peer reviews for both buyers and sellers.

In many cases, this evolving trust system of reviews, ratings and recommendations serves as a stand-in for government regulation. It also allows participants to retain a healthy dose of skepticism and still reap the benefits of sharing.

“Don’t suspend your common sense because it’s the sharing economy,” said Neal Gorenflo, publisher of the online magazine Shareable. “Read the terms for use of the platform, understand your risks and choose whom you share with carefully, using all of the available tools. Then make the experience as fun for you and others as possible. The social dimension is the best part.”

Although the more well-known examples of sharing—such as letting a stranger drive your car or sleep in your bed—are also the most disquieting, there are more practical and privacy-conscious ways to benefit from a collaborative economy.

Bike-sharing programs are popular in many cities, for example, and communities have embraced tool libraries for do-it-yourself projects and home repairs for decades. Gorenflo also points to websites such as NeighborGoods.net that help people share in a way that protects both their privacy and their belongings.

If you want to give sharing a try, start with stuff you don’t use very often, such as party supplies or sporting equipment, advises NeighborGoods. Shareable also offers a multitude of how-to-guides for would-be participants in the sharing economy.

It’s also important for both partakers and providers to be aware of regulatory, insurance, tax and legal considerations. For example, in 2011 guests ransacked the San Francisco apartment of an Airbnb host, which led Airbnb to eventually set up safety features such as a $1 million host guarantee that reimburses hosts for property damages; a 24/7 customer-service hotline; and a dedicated Trust and Safety department that reviews suspicious activity in the community.

As the industry has grown, landlords have started to crack down on tenants who violate their leases by subletting their properties; cities have begun to mandate taxes; and peer-to-peer car-rental services have started offering their own insurance coverage.

The issue of liability in an accident came to a head following a New Year’s Eve tragedy, when an Uber driver struck and killed a young child. The driver was logged into Uber but was between fares. Was he on company time or his time when the accident occurred?

Colorado was the first state to provide a legislative answer to the question with a new law in June that regulates car-sharing services—and places insurance responsibility on the startups.

For services that potentially put his safety at risk, Crowd Companies’ Owyang said he looks for higher insurance and background checks. “For more casual services like Pley (toy rental) or Yerdle (used goods), there’s very little to lose, as it’s just the exchange of physical items,” he said. Owyang also checks to see how responsive services are on Twitter, which can indicate how much they value customers’ experiences.

With a little due diligence, participants can use the sharing economy smartly and safely and reduce expenses, too. “It can take some getting used to,” said Gorenflo. “But you may never go back once you adjust. It’s just better.”

Lisa Wirthman writes about business, sustainability, public policy, and women’s issues. Her work has been published in The Atlantic.com, USA Today, U.S. News & World Report, Fast Company, Investor’s Business Daily, the Denver Post and the Denver Business Journal.

This article originally appeared on Northwestern Mutual Voice on Forbes.com.

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