Personal Finance

Collaborative Consumption, Trust and the Evolution of Credit

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Jeremy Barton owns a nice Subaru Impreza, but he rarely drives it. As a co-founder of a tech startup in San Francisco, he usually just rides his bike to work. So when Barton heard of a new website called Relay Rides that lets regular people rent out their own cars, it sounded perfect.

“Not only does it help pay my car payment and my insurance, but I also get a really good feeling knowing that someone can use it,” says Barton, who’s 27.

But getting started as a do-it-yourself car rental company proved more difficult than Barton expected. For weeks after he joined Relay Rides, his Subaru continued sitting in its parking spot, unused. With no reviews of Barton or his car on the website, borrowers skipped over him to use cars that already had been well-reviewed.

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And when Barton finally received a text message informing him that the car would be rented, he had some concerns. Who was this mystery borrower? Would they trash his car?

“I was nervous about it, to be honest,” says Barton. “I didn’t panic. But I would’ve liked to know more information about the person. It would’ve given me a bit more ease.”

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So Barton, the very definition of an early adopter, decided to do something about it. His company,, uses data culled from social media sites including Twitter and Facebook to help users on websites similar to Relay Rides figure out who’s trustworthy and who’s not. After all, if Barton had a moment of trepidation about lending his car to a stranger, imagine how much work lies ahead for Relay Rides, as it tries to expand its network of car lenders and borrowers across America.

“To create a true collaborative consumption industry, finding a way to establish trust between strangers is an absolute requirement,” says Shelby Clark, co-founder of Relay

And yet, despite the hurdles, it’s happening. Consider the case of, a website that lets people rent out their apartments directly. According to the company’s website, AirBnB rents out apartments in more than 19,000 cities and 192 countries, and consumers have booked more than 2 million nights through the service. Then there are the peer-to-peer lending websites like, Prosper and Lending Club, which collectively facilitate the lending of billions of dollars a year between peers all over the world. To date, according to stats on its site, Lending Club alone has processed more than $460 billion dollars in loans that have generated nearly $40 million dollars in interest paid to investors.

The activity on all of these sites is a form of “collaborative consumption.” That sounds like a mouthful, but actually it’s very simple. For the last two centuries, capitalism has grown around the idea that if you need something, you buy it. Need to drive to work? Buy a car. Need to mow your grass? Buy a lawnmower. Need any service at all, from babysitting to grocery delivery to a college class on how to use Excel spreadsheets? Buy them.

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All About Community

Collaborative consumption is based on the idea that each of these problems actually could be solved in a variety of different ways, often at greater profit to the seller and lower cost to the person in need. Instead of buying a car, you could use a website to connect with people looking to share their cars, or others hoping to carpool. Rather than buying a garage full of lawn tools that get used once a month, a collaborative consumption service could help you barter tools and lawn care services with your neighbors. To handle those annoying chores of modern life like carting home groceries or building Ikea furniture, maybe you could use an online community to find people who actually like doing those things, and who would trade their services for access to things you already know or own.

“The generation I’m in values experiences and purpose more than material goods,” says Michael Karnjanaprakorn, a cofounder of, where people offer to teach each other classes on anything from how to make baby food to becoming a pro flea market shopper. “People say, ‘I don’t need to buy this stuff anymore, so why don’t I make my life richer and have better experiences?'”

There’s another realization at work here, too: To sell things, we no longer need so many middlemen. The Internet is a peer-to-peer distribution mechanism that allows individuals to conduct transactions directly with one another.

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Considered individually, a website like Relay Rides seems like exactly that: Just one more website. But taken together, collaborative peer-to-peer sites actually are at the core of a brand-new industry, one that supporters say could alter the fundamental way that commerce works.

“I believe that we’ll look back and see this period as a collaborative revolution,” Rachel Botsman, a writer and entrepreneur who focuses on collaborative companies, told an audience at a recent TED conference, “a turning point where we use technology to reinvent entire sectors, leapfrog over broken consumer models, and find a healthier balance between the needs of individuals, the needs of companies and the greater good of society.”

Heady stuff. But everybody who works in this new collaborative consumption field agrees that none of that transformation can happen until they figure out ways to build real trust online. Which is why the brand-new industry of collaborative consumption has sprouted an even newer industry: Trust verification. In the last few months, a score of small startup companies has spring up, all of them trying to figure out ways to help users of collaborative websites figure out whom to trust, and whom to avoid.

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The New System of Credit »

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