How Does The Sharing Economy Thrive In A “Trust Crisis”?

May 9, 2017 |

The sharing economy’s rapid, worldwide expansion is no secret. Trust sits at the heart of every peer-to-peer transaction, and examining the overall evolution of trust in society provides a better understanding of the sharing economy’s continued proliferation. What political trends, consumer desires, and other factors have fueled the sharing economy’s explosive popularity?

The Trust Economy

In the pre-digital era, advertising and marketing firms asserted a brand’s quality and reliability in order to gain consumer trust. Later, individuals relied on peer review systems included on sites like Hotels.com that allow users to rate local establishments. Over the past decade, the so-called ‘trust economy’ has evolved to include peer-based ratings on sharing economy platforms, which allow users to rate other individuals’ homes, skills, and overall service after any transaction in the peer-to-peer marketplace.

“While we’re experiencing what Edelman terms a “trust crisis”, the sharing economy continues to grow”

The increasing reliance on peer-based review systems over brand-name promises has coincided with an overall shift in trust from institutions to individuals. In fact, Individuals no longer place much faith in the large institutions that shape our daily lives. The 2017 Edelman Trust Barometer Global Report found that trust in media outlets, businesses, government institutions, and non-governmental organizations (NGOs) has declined significantly in the past decade.

Some symptoms of such trust erosion are obvious — the United Kingdom’s decision to leave the European Union and the results of the 2016 United States Presidential Election, which favored a populist demagogue over a more traditional candidate. However, while we’re experiencing what Edelman terms a “trust crisis”, the sharing economy continues to grow. How is this possible, given that the sharing economy operates on trust between users?

“The increasing reliance on peer-based reviews has coincided with an overall shift in trust from institutions to individuals”

In the Edelman Report, media outlets and government institutions received trust ratings of 43% and 41% respectively. Trust was notably lowest in Western-style democracies like the United States, United Kingdom, South Africa, and Australia. Unsurprisingly, the Report also gave CEOs and government officials 27% and 29% trust ratings. Furthermore, individuals worldwide believe that their hard work isn’t sufficiently rewarded, and that the system of institutions that makes policies which affect their lives isn’t working. People fear automation and innovation, and highly distrust foreign companies that have stakes in their country.

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — –

Trust Ratings Earned by Establishment Individuals & Institutions

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — –

In such a climate, people increasingly favor protectionist policies that aim to curb the effects of globalization — even if these same voters understand the negative economic effects.

Allure of Populists

Such disenchanted individuals turn to reformers who they believe will shake things up. Instead of trusting experts or professionals like CEOs, government officials, and media spokespeople, individuals described as similar to respondents were given 60% trust ratings. This phenomenon is reflected in the corporate structure — where ‘average’ employees receive higher trust ratings than senior executives, CEOs, consumer activists, and even academics.

“While trust in traditional institutions has eroded, people have turned to each other for mutual benefit and societal improvement”

Consequently, it’s no surprise that populists like Trump have won the hearts of voters who want to elect politicians that purportedly possess the same values as themselves.

Rise of Peer-to-Peer Trust

Since sharing platforms rely on trust between users who are often complete strangers, a global shift of trust from institutions to average individuals has catalyzed the popularity of peer-to-peer (P2P) transactions. P2P trust has evolved from peer reviews on sites like Hotels.com to full-on home-sharing with Airbnb. People have gone beyond simply trusting stranger’s opinions — they now host each other in their homes and borrow their expensive tools.

“A global shift of trust from institutions to average individuals has catalyzed the popularity of P2P transactions”

Sharing platforms aren’t entirely infallible as, after all, they’re still businesses and are susceptible to the same kinds of scandals that hurt traditional corporations. For instance, Uber released a significant amount of financial records to instill confidence in investors after a series of scandals involving toxic company culture and the CEO’s affiliation with a controversial political figure.

A Better Tomorrow

Sharing activities have been shown to encourage sustainable consumption, foster social cohesion, and promote economic development. It’s encouraging that while trust in traditional institutions has eroded, people have turned to each other for mutual benefit and societal improvement. Peer-to-peer transactions facilitate contact between people who might otherwise never meet. Even if these relationships only last for the length of a single ride-share, they help foster a culture where strangers are greeted with friendliness and not apprehension.

Perhaps increased socialization on a macro-scale will help decrease ideological polarization as individuals worldwide become better disposed to empathizing with life experiences and beliefs far different from their own.