THESE days, just about everything can earn you a quick buck if you’re smart about it. That’s what Judy learned when renting out an empty boardroom on pivotdesk to Craig who needed the

space. Of course, Craig has been saving money and making friends through couchsurfing.com, while renting out his own apartment on Airbnb. Craig’s guests are spending the day exploring the city by bi-cycle, thanks to Liquid’s peer-to-peer bike share programme. And with dog lover, Bridget, on the job, the couple can rest assured that their beloved Baxter is in good hands with DogVacay while they’re away.

Down the road, a single mum is using the money she made from selling those dusty fabulous heels on Postmark to rent Kim’s ladder that she found on Snapgoods. And tomorrow Kim will heed Craig’s request on TaskRabbit and take an Uber to the other side of town to prepare the apartment for the next round of Airbnb users. Six degrees of separ-ation just became four in this new economy of col-laborative consumption.

In one way, it’s simply fabulous; the sharing eco-nomy cracks open fresh value on those underused assets around the house. Although, in another way, is the concept risky and our intrepid entrepreneurs have just not realised this yet?

The prolific pop-ups of sharing platforms are generally touted as ingenious, but do we have to ac-knowledge that we’re realistically still in the honey-moon stage. This process has to see the whole cycle scoped through – from macroeconomy to public policy – if we are to grasp its long-term im-pact on society. It’s a robust debate that econom-ists, policymakers, Craig – even Baxter – need to weigh in on.

Our future cities are faced with a dizzying di-lemma. According to a 2014 UN report, two-thirds of the world population will be urbanised by 2050. Considering that another 2.5 billion people will have joined the human race by then, we have a seri-ous case of imbalanced supply and demand on our hands. Naturally, any opportunity we have now to minimise our planetary wear and tear is welcomed. That’s where the sharing economy can offer a bril-liant alternative.

A study conducted by the Cleantech Group found that the fewer resources spent on travellers using home-sharing companies has resulted in 66 per cent less CO2 emission than hotel-based travel (including hotels that have earned five-star effi-ciency ratings). Home sharing has all kinds of other

spin-off benefits, ranging from less food waste to higher recycling rates to significant savings in wa-ter. Car sharing also contributes to lightening the carbon load: According to a UC Berkeley shared-use vehicle survey, every one car made widely avail-able for sharing takes at least 10 off cities’ conges-ted freeways.

Each innovation seems to have us breathing a little easier, loosening the grip on our cities’ necks and helping us to speak a new language of invent-ive opportunism.

But there’s a flip side to the coin. The sharing economy is a fundamentally viral industry and, as such, it predominantly goes unmitigated and un-checked. The digital economy is evolving so fast it is outpacing the rate at which our policymakers can catch up.

Car-sharing network gurus such as Uber and Lyft, for example, are generally not yet adhering to the same taxes and insurance standards that taxis uphold. Accommodation for disabled passengers is generally sporadic; contractual obligations are not articulated; and in some countries it’s debat-able whether drivers even make the minimum wage. Those subscribing to these platforms have to weigh up the privilege of making a buck on the side at their convenience versus the cost of being thrown in the cold if anything goes wrong.

ONLINE HOSPITALITYThe same goes with online hospitality. Startup gi-ant Airbnb has booked over 80 million nights across 191 countries since its 2008 inception. But many of those homes or venues may not be situ-ated or designed to anticipate the challenges of noise, congestion and waste, and neighbours are oc-casionally (and understandably) irritated about the additional infringements on their privacy. While ho-tels are taxed and frequently inspected for health and safety, Airbnb hosts are not yet facing such in-spections.

Some city residents are now crying out for stronger regulation while, at the same time, many of their neighbours are greeting their ubers with open arms. Cities such as Seattle, which were already feeling the housing crunch before online hospitality entered the scene, now have to compete with the new breed of Airbnb entrepreneur who buys up accommodation for short-term rental pur-poses only. The San Francisco property market has sky rocketed, thanks to the influx of vacation rent-als overtaking the city’s scarce housing inventory.

All of it begs the question, is the sharing eco-

nomy actually benefiting the economy at large? Many would say it is, as even granny can now

find her inner entrepreneur and make her pension stretch. Yes, intrepid entrepreneurs are availing themselves of the new sources of revenue they can leverage out of their existing unused assets, but the warning to existing traditional businesses is that they are tapping a customer who is dissatisfied and disgruntled with the current business models. And therein lies the wake-up call to those awake enough to heed it.

Shareable founder, Neal Gorenflo, would argue that these unregulated ventures are having a dis-turbing impact on the future socio-economic fabric and flow of our neighbourhoods and cities. He refers to Uber and Airbnb as “Death Star platforms” that will eventually outstrip all facets of traditional competition.

Whatever side of the fence you’re on, you can’t deny the fact that Pandora’s lid is wide open and off its hinges. Consumers now want choice. They are tired of faulty and antiquated services that call the shots and cripple creative mobility by clinging to the past. They seek the personal independence and disintermediation that mega startups such as Uber and Airbnb defend. “Death Stars” they may be, but ingenious opportunists who simply saw the gap and took it, they are as well.

At either end of the debate, the message is con-sistent and clear: business, beware. Those who fail to listen and to see what their customers actually need, disregarding the invitation to innovate, may very well be “ubered” some day. In a sweeping di-gital paradigm that stops for no one, there will only be winners and losers. And businesses that believe they are immune to disruption are probably already on the way to being disrupted. They just haven’t got the memo yet.

The debate is rich and all too early to draw solid line conclusions. Contrary to criticism, the growth of the sharing economy is probably not going to be a case of capitalistic “checkmate” where Uber and their cronies take all. More likely, there’s room for different players on the board. But traditional busi-nesses will urgently need to catch up if they want to stay in the game. Should they stand around and wait for regulations to evolve and tighten the reins, they will probably be too late.

❚ The writers are from Aurecon. Mr McGuire is chief innovation officer and Ms Boshoff is senior communications advisor.This article was first published on Aurecon’s Just Imagine blog.

By Charlene Y Chen

WE have all had those days – stuck in a traffic jam on the expressway as we head towards that important meeting;

it’s PSLE time and the daughter still hasn’t mastered fractions; or the washing machine re-pair man can’t come till a week later but the wash-ing’s piling up – that sense of helplessness and loss of control.

My team and I set out to discover how this state of mind – when we are placed in a position in which we feel we have little control – affects our behaviours, particularly in how and what we buy. Put in another way, how do we react in our daily routine – such as shopping – when we are over-come with a feeling of loss of control?

Our research shows that when consumers feel a sense of loss of control, they are more likely to buy useful and functional things, than pay for lux-urious and indulgent goods. Practical purchases such as an assessment book that teaches frac-tions, or a screw driver – that is, with problem solv-ing elements – help consumers regain a sense of control.

In our first study, we analysed the behaviour of shoppers at a mid-size supermarket. We first ma-nipulated their sense of control by having parti-cipants recall a situation in their life where they ex-perienced either a loss of control or a high sense of control. Then, after they completed their shop-ping, we looked at their supermarket receipts. Par-ticipants who felt they had less control bought more functional, or utilitarian, products than those who felt a heightened sense of control.

Functional products such as stationery and household cleaning agents are typically pur-chased as means to solve a problem. For example, sticky tape holds objects together and air freshen-ers refresh a smelly bathroom. Low-control parti-cipants are attracted to such products because of their association with problem solving, which in turn returns a sense of control to them.

In contrast, the opposite would be hedonic products, or goods that are primarily consumed for pleasure. For example, chocolates and essen-tial oils are items without any practical use other than for the intrinsic pleasure they afford.

In our follow-up study, we framed the same problem differently. We presented a pair of sneak-ers as being functional, versus being worn for fashion. Participants in the low-control group were more likely to buy the pair of sneakers and more willing to pay a higher price for it (on aver-age 23 per cent more) when it was framed as being functional; and less likely to buy the sneakers if they were presented simply being as stylish.

These studies reveal that when we experience a loss of control over situations in our lives, we are propelled by the powerful and urgent need to regain that sense of control. This motivation does not only reveal itself in the domain in which we have lost control, but can manifest even in unre-lated domains, such as when we go shopping. In an aversive state, we are more likely to pick a prob-lem-solving utilitarian product. That action has the effect of restoring our sense of control.

These results have implications across a range of fields.

For retailers, depending on their target audi-ence, this knowledge of shoppers’ behaviours could help them calibrate their marketing strategy. For instance, marketers could perhaps frame their products as functional rather than fashionable, to reach out to different segments of consumers. Or retailers could tweak the con-sumer environment to appeal to different types of customers, such as a busy and crowded market-place, that would make shoppers lose their sense of control and steer them towards more func-tional products.

ATTRACTING CONSUMERSAside from the ethical issue of such a retail strategy, of course, businesses have to consider the fact that low-control situations are not static and are influenced by many other factors. Just as consumer behaviour and purchasing trends are dynamic and constantly changing, retailers armed with such knowledge may consider how the problem-solving aspects of products can be harnessed or augmented to attract consumers.

Understanding therapeutic benefits of purchas-ing functional products has implications for con-sumer wellbeing. One neglected form of retail therapy is buying functional products This is espe-cially pertinent as our research shows such con-sumer behaviour does not have to be targeted at the source of control threat. Rather, problem solv-ing in and of itself would boost perceptions of con-trol over the environment.

Could buying utilitarian products, especially those with a problem-solving component, be per-

haps a useful therapy? For example, would a first-time young mother of an infant, who have a higher propensity to perceive herself as lacking control, feel better after acquiring a utilitarian product? Certainly, it is less expensive and health-ier to head down to your nearest supermarket to buy a tin of infant formula, instead of splurging on artisanal chocolates.

The reverse also holds true. Another of our studies with sugar cane juice showed that con-trol-deprived individuals cited the problem-solv-ing properties of the sugar cane (nutritional value) – rather than the hedonic value (taste) as their reason for choosing it. Marketers could increase the problem-solving component to attract this group of consumers. Shoe brands such as Arch An-gel (http://www.archangel-shoes.com/) show us marketers’ creative approach in promoting its functional shoes, highlighting the correction of high feet arches or flat feet in their brand name.

The understanding that loss of control can sig-nificantly affect consumer behaviour and that the purchase of utilitarian products can be used to me-diate control issues opens up a wide range of strategies in both the marketing as well as therapy fields for businesses.

❚ The writer is assistant professor of marketing and international business at Nanyang Business School, Nanyang Technological University. She is also a research fellow at the Institute on Asian Consumer Insight. The research project mentioned in this article is co-authored with Leonard Lee from National University of Singapore and Andy J Yap from Insead.

There’s room for different players in sharing economy

By Simon Johnson

Washington, DC

OFFICIALS in President Donald Trump’s administration fre-quently talk about getting annual economic growth in the United States back above 3 per cent. But they are doing more

than just talking about it – their proposed budget actually assumes that they will succeed.

If they do, it would represent a significant improvement over re-cent performance: the US economy has averaged less than 2 per cent annual growth since 2000. And, while an increase to 3 per cent might sound small, it would make an enormous difference in terms of em-ployment and wages.

Unfortunately, left to its own devices, the economy will most likely continue to sputter. And the policies that Mr Trump’s Republican Party has proposed – for healthcare, taxes and deregulation – will not make much difference. The assumption of higher growth is more of an accounting smokescreen for tax cuts than anything else. If adminis-tration officials acknowledge that a 3 per cent annual rate is not feas-ible, they would need to face the reality that their forecasts for tax rev-enues are too high, and that their proposed tax cuts, if enacted, would dramatically increase the budget deficit and the national debt.

The US economy used to grow at more than 3 per cent per year; in fact, this was the norm in the second half of the 20th century. Since then, however, the US has been forced to confront three major con-straints.

First, the US population is ageing. As the baby-boom generation (those born after the end of World War II) retires, the proportion of re-tired people in the total population increases. Over time, this demo-graphic shift has reduced potential US annual growth by perhaps as much as half a percentage point.

The details of what will happen to health insurance remain un-clear. But making it harder or more expensive for lower-income and older Americans to get health insurance is not likely to encourage people to work. The best independent assessment of these policies, produced by the Congressional Budget Office (CBO), does not predict any economic miracles – just that around 20 million fewer Americans will have health insurance.

And lurking in the background are potential policies that would re-strict legal immigration. The US currently allows about one million mostly working-age people per year to take up residence and work in the country. Moreover, immigrants’ tendency to have more children than non-immigrants does keep the US population growing faster than in other developed countries (for example, in Europe or Japan). So, any move to reduce annual immigration – some Republicans are proposing 500,000 people or fewer – would make 3 per cent annual economic growth even less likely.

BARRIERS TO GROWTHThe second economic constraint is the slowing rate of productivity growth. There was a major increase in average output per person in the post-World War II years, as better technology was developed across a wide range of sectors. And there were hopes in the 1990s that the information technology revolution would have a similar effect. But the impact on productivity has been disappointing. Northwestern University economist Robert Gordon’s recent book, The Rise and Fall of American Growth, argues that, despite all the hype from the tech sector, we are unlikely to see a dramatic change on this front.

The Trump administration argues that by reducing taxes and “re-forming” healthcare, it can boost productivity – for example, by en-couraging capital investment. But the tax cuts that will soon be on the table are likely to resemble closely those implemented by President George W Bush’s administration, which did not lead to any kind of eco-nomic boom (a point that James Kwak and I examined in detail in our book White House Burning).

The third constraint stems from the 2008 financial crisis. One danger inherent in pushing for high growth is that it is always pos-sible to juice an economy with short-term measures that encourage a lot of risk-taking and leverage in the financial system. Deregulation in the 1990s and early 2000s did exactly that, leading to slightly higher growth for a while – and then to a massive crash.

The details of the Trump administration’s plans remain to be de-termined, but officials will most likely push in the direction of relax-ing limits on leverage (thereby allowing banks to borrow more relative to equity). Any boom generated in this way is likely to end badly – not just financial ruin for millions of individuals, but also a long and diffi-cult recovery.

The two least political and most influential official forecasts – those issued by the CBO and the Federal Reserve’s Open Market Com-mittee – both foresee 2 per cent growth, on average, for the coming decade and perhaps beyond. Assuming 3 per cent growth is, to put it generously, wishful thinking.

Worse, it is deeply misleading and potentially dangerous. If those pushing for tax cuts stick to their guns and refuse to accept reality, their agenda, if enacted, would result in a significantly wider budget deficit, which would increase the national debt to unprecedentedly high levels. PROJECT SYNDICATE

❚ The writer is a professor at MIT’s Sloan School of Management and the co-author of “White House Burning: The Founding Fathers, Our

National Debt, and Why It Matters to You”.

Practical purchases such as an assessment book that teaches fractions, or a screw driver – that is, with problem solving elements – help consumers regain a sense of control.

Feeling out of control? Try buying cleaning fluid

Car-sharing network gurus such as Uber and Lyft, for example, are generally not yet adhering to the same taxes and insurance standards that taxis uphold. PHOTO: REUTERS

Traditional businesses will need to catch up if they want to stay in the game. BY JOHN MCGUIRE AND JODY BOSHOFF

Trump’s growth plans need more than just sheerdetermination to succeed

The Business Times | Wednesday, August 2, 2017 ●OPINION | 27