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The idea of using the Internet for peer-to-peer
interactions – "P2P" in trade shorthand – got off to a rocky
start. In the beginning, most P2P had to do with file sharing. People would
digitize their music collections and pass them around to friends who shared
their tastes. Then Napster took the next logical step, removing friends from
the equation and creating a centralized meeting ground in cyberspace, where
anyone could post files to be shared with anyone else who logged on. The
genie was out of the bottle.
That set off a predictable firestorm of protest from
the entertainment industry, resulting in a long parade of lawsuits,
prosecutions, and government attempts at regulation. Though Napster is long
gone, along with subsequent file-sharing services like LimeWire, the issues
remain largely unresolved. What once only affected music is now spreading to
movies, thanks to increasing storage space and bandwidth, and to books,
thanks to the mass adoption of e-readers in recent years.
While music and film "piracy" may be what
most people think of when P2P is mentioned, the concept is fundamental to the
structure of the Internet, and thus was bound to eventually find its way far
beyond the file sharing realm. Today, business are
sprouting up around the world based on the idea of connecting individuals
directly to each other to trade products and services. While the idea is very
much in its infancy still, like the music business at the dawn of Napster,
we're beginning to grasp the potential.
On March 8 in this space, Alex Daley wrote about the
new phenomenon of peer-to-peer lending, a web-based service that connects those needing
loans to those willing to make them – without putting a bank or other
large financial organization in the middle. As yet, P2P carves out just a
small slice of the lending pie, but it is growing fast, with more than $1
billion in loans originated to date and annual growth projected to double
that in half the time it's taken to get to the first billion.
Concurrently, there has been a sharp rise in P2P
service-trading sites, where those with a skill or resource can offer their
wares and get paired up with those looking for that service... sometimes at
below-market rates.
For example, do you love to travel but are put off
by the soaring cost of hotel rooms? Then maybe CouchSurfing.org is for you. CouchSurfing gives users access
to members in some 230 countries, with whom you can connect to arrange to
stay as a guest in their homes or to offer a space in your own home (perhaps
the eponymous couch) to a fellow traveler. Or you can just make a date for a meetup with someone of similar interests in a strange
place.
As Forbes wrote:
"CouchSurfing boasts a surprisingly large user base of
three million people in 81,000 cities. Some 5.6 million connections have
taken place on the site – whether that's people sharing a couch, a
coffee, or simply local knowledge of the best bars, restaurants and
sight-seeing spots with other diehard CouchSurfers.
The organization recently learned that a Mongolian livestock farmer has
hosted over 100 CouchSurfers in his yurt in the
capital of Mongolia."
Other websites are creating jobs – to
repeat this election year's never-ending political mantra – in a more
direct way, by cutting out the middlemen, which must always include
government. Democrats and Republicans alike tout the ability of government to
"create" jobs. Yet they never admit that government can't employ
Peter without first taking from Paul the money to pay him. Furthermore, there
is little stomach in Washington, D.C. – in either party – for
rolling back some of the regulations that stifle entrepreneurs who would
otherwise be creating real jobs.
New York Times writer Anand
Giridharadas recently wrote of governmental meddling:
"Say
you want to start a home catering business in New York city. According to the
city government, you'd need, among other things, a food protection
certificate, a food service establishment permit, a gas authorization,
professionally installed range hoods, a licensed carting company for waste,
registration as a sales tax vendor as well as compliance with portable fire
extinguisher rules and the unincorporated business tax."
That's a pretty formidable list; and it doesn't even
include state and federal registrations and compliance. As a result, many
entrepreneurs now are circumventing all this and taking to the streets. Or,
to be more precise, to the biggest street of all: the Internet. They're
creating P2P sites that make it easy for people on both ends of a transaction
to contact and work with each other.
Have some small job or errand you'd like to
outsource? Just go to TaskRabbit. Founded in 2008 in San Francisco, the business is
currently operating in Boston, the Bay Area, San Antonio, Austin, Chicago,
Seattle, Portland, Los Angeles, and New York. You just post your need to
their website, the company puts your request out to those on its contractor
list with the requisite skills, and they bid on it. Lowest bidder gets the
work.
TaskRabbit can hook you up with willing labor for everything
from deliveries and household chores to skilled tasks like carpentry,
electrical work, and plumbing. For safety, the company puts applicants who
want to become Rabbits through a process that includes a video interview,
federal background check, Social Security number trace, and lastly, a test to
determine if they have what it takes. Once in the labor pool, Rabbits also
earn ratings based on user feedback.
The company is growing dramatically. Last October,
founder Leah Busque said it is handling $4 million
in bids per month. Most Rabbits are retirees, stay-at-home moms, or students,
but the unemployed are finding a place as well. "Our most active
TaskRabbits are cashing out about $5,000 a month," Busque says, making
tasking a full-time job. And she says she is also looking into the
possibility of group health insurance for her contractors.
Or consider this. What is your car doing when it's
just sitting there? Nothing. But it could be earning you money, if you want
to list it on RelayRides. This is a P2P service that matches those needing a
car for a short time with those willing to provide one to a stranger on an
hourly or daily basis. Sounds a bit dicey, of course, since there's always
risk involved putting any human behind the wheel of a vehicle. RelayRides
tries to mitigate that risk by providing insurance, renter verification and
screening, and 24/7 roadside assistance.
The service launched in Boston in 2010 and this
March went nationwide. Car owners set their own prices, and the company takes
35%. Owners can earn up to $7,000 annually, the company estimates. I checked
for available wheels in my general area, and found everything from a basic
2011 Mazda at $6/hour to a 2005 BMW sports convertible at $20/hour.
(Competitor Getaround is similar, and includes the ability to grab cars
right from the San Francisco airport, from a Prius to a Porsche.)
Then there's oDesk, which brings together employers and remote
contractors for part- or full-time jobs in such fields as writing, Web and
software development, graphic design, customer service, and marketing. The
service uses a unique "Work Diary" feature to verify that time
billed is actually time spent on the project. Though it doesn't do any
withholding, oDesk does report contractors' yearly earnings to the IRS.
This is just a small sample of the P2P websites now
operating. A few others you might wish to take a look at include: airbnb, through which people can rent out their spare
rooms; Kitchit, where you can hire a private chef for your dinner
party; and Etsy, an online marketplace for your crafts or other
handmade items.
A question that naturally arises is: is all of this
legal? After all, much of what goes on in the P2P space involves transactions
that, if they were conducted in the more traditional business world, would
face the kind of government regulation that New York imposes on wannabe
caterers.
For instance, is RelayRides analogous to you lending
your Toyota to your buddy for the day, which would be unregulated? Or is it
more like Hertz, which has to comply with a full range of regs? Shelby Clark,
the founder of RelayRides, admits that his service exists in "a little
bit of a legal gray area."
That gray area includes questions about where legal
jurisdiction lies. Does a supplier in a peer–to-peer network require a
local business license? Or does the network manager have to register in all
locations where services are provided? Who is liable if something goes wrong:
the supplier, the network, or both? And of course, there still – always
– is the matter of taxation.
Taxing online commerce is of course a hot topic of
the moment. Governments strapped for cash can be expected to cast a covetous
eye on any new potential sources of revenue. Taxing P2P deals will be more
complicated than placing a levy on Amazon sales, but it's certainly not
outside the reach of government.
Government busybodies, as always, are running behind
technological innovation. So it'll take time to sort all these issues out,
with no certainty as to what will eventually happen. What is certain, though,
is that P2P interactions can form the basis of a powerful business model,
creating a wealth of new jobs – without any helping hand from
Washington, D.C.
It's here to stay.
Technological
innovation is changing the way the world works far beyond the marketplace. It's
given us myriad inventions that make us much more productive and life
infinitely more enjoyable. It's made assembly-line workers as obsolete as
candle-makers. It's saving the lives of military men and women, who can now
control robotic soldiers instead of putting themselves in harm's way.
But perhaps
one of the biggest benefits technology offers to mankind is in
the medical field, particularly in the realm of cancer research.
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