I think there’s a very good chance that if sharing economy activity becomes sufficiently widespread, it could very well reduce income inequality. It takes flows of commerce that used to be between individuals and companies and shifts them to being between individuals and other individuals. If you think about a thousand dollars flowing from you to Hertz, then that thousand dollars now flows to RelayRides or GetAround or some combination of them and Lyft and Sidecar. I think that this will have an equalizing effect on the income distribution.

Interview by Sara Horowitz of the Freelancers Union:

“Arun Sundararajan is a professor at NYU’s Stern School of Business who studies digital economics. He’s obsessed with how technology transforms business and society.

Sara Horowitz: I’d love to hear a little bit about how you would describe the sharing economy, and how you see your role in all of this?

Arun Sundararajan: The role that I traditionally play is as someone who thinks about, does research on and writes about how digital technology is changing things. Over the last two years, we’ve seen a transformation in consumption that is now being called the sharing economy. To me, it’s just another example of digital technology transforming something substantial in our society. IT’S CREATING A WHOLE NEW ARMY OF SUPPLIERS WHO CAN BECOME AIRBNB HOSTS AND LYFT DRIVERS

Sara: So what is it that digital systems are really changing?

Arun: When I was a graduate student, companies were discovering the Ethernet and networked computing. Companies used these powerful new digital technologies to radically change the way they organized work. The ’90s were characterized by “reengineering work”.

Fast forward a couple of decades, and now we’ve got consumers with powerful, networked, mobile computing technology in their palms. Everything is being driven by consumer needs now. Microsoft, Facebook and Samung are not looking primarily at what a company needs–they’re looking at what the consumer needs. Mobile phone companies are developing technologies for consumers first, then adapting them for businesses. This is a massive, historic transition. So the time is now ripe for us consumers to “reengineer” the way we consume.

Sara: So then, what is that power that consumers have? Is it just to consume more efficiently?

Arun: It’s broader than that. It expands choice.

Let’s take a family of five. Their vacation options used to be constrained by the fact that they would have to get two to three hotel rooms, or try to find a vacation rental. Now with Airbnb, there’s suddenly a wide array of accommodation alternatives. This makes travel and tourism more widespread.

In cities where you have numerous ridesharing options, people can organize their days more efficiently with the knowledge that with the click of a button, they can get a taxi. So I don’t actually think that people are doing this just to save money. They’re also growing their opeions and possibly changing how they live.

Sara: So it seems that if we think about the sharing economy, like Airbnb, the transaction is individual-to-individual, but on a platform, it’s the summation of individuals acting and sharing together.

Arun: Yes. Companies like Hertz on Demand and Zipcar are thought of as being part of the sharing economy, and they sort of are, but really they’re the transition business models. Like Rent the Runway and Girl Meets Dress, these are corporations renting things to consumers more efficiently. The really exciting part is the peer-to-peer part, because it’s creating a whole new army of suppliers who can now become Airbnb hosts, Lyft drivers, RelayRide fleet runners.

WHAT’S REALLY POWERING THE SHARING ECONOMY IS TRUST.Sara: It lets individuals be more entrepreneurial and enter the market much more easily. They don’t have to have the capital to start a hotel, they just have to have a room.

But one of the things I wonder about is, why don’t communities get together to create platforms so that they’re encouraging a more local economy of sharing?

Arun: That’s a great question actually, because a few years ago, when Facebook became popular and successful relative to MySpace or Friendster, it was because early on there was this really close tie between the digital and the geographically constrained community of a university. There was this back and forth between the digital community and the real-world community that reinforced both of them.

That’s what’s interesting about the sharing economy: It’s not purely digital. There’s a physical, real-world aspect to it, where you’re entering someone else’s space or entering someone else’s car or using someone else’s asset.”