Rent out your house, your car, even your bike—are there any limits to what people will part with (and what regulators will allow) in the new sharing economy? We called on Shelby Clark (MBA 2010)—founder of the car-sharing service RelayRides and executive director of Peers, a nonprofit dedicated to supporting the sharing economy—to answer your questions.

With the increased reaction among incumbent businesses, how can sharing economy services (especially car and home) best get around the barriers represented by regulations?
—Derek Bennett (MBA 2010)

I see two questions. One is how can the players work with incumbents, and I would say the best approach is to help them realize that the world is changing, and there’s an opportunity here to participate in their own disruption. At a high level of the automotive sector, both carmakers and car rental companies have actually engaged with the sharing economy as opposed to trying to repress it. Daimler and Volkswagen, for example, now have their own car-sharing services. Companies should be trying to frame the conversation in terms of “This is changing, it’s going to change whether you want it to or not, and here’s how you can benefit from it.”

And the second is laws and regulations. These are designed to protect consumer interest, so companies should be regulating themselves in advance of any regulations that may be imposed on them. But they should also be working with regulators to find reasonable solutions. And I think to some degree, we’re seeing that.

What can individuals do to make sure the sharing economy continues to grow?
—Francis Tapon (MBA 1997)

There are two main barriers to growth in the sharing economy. The first is awareness, and the second is trust. Many people just don’t know that there’s a platform that makes it safe and convenient to let somebody in your neighborhood rent your car. In terms of trust, I think that for many people it’s a big barrier to let a stranger drive off in their car or to let a stranger sleep in their house. In reality, people behave pretty well in these platforms. And people need to have the experience, or maybe one of their friends does, of “Hey, I rented my car to a stranger, and it worked out well.” As more people have those experiences and they talk about it with their friends, it’s going to help them trust in these systems.

What can we do to help the insurance industry learn how to support these sorts of shared business models? If you were the CEO of an insurance company, how would you address the conflicts between this model (splitting ownership and usage) and the traditional, well understood, and easily priced (and therefore cheaper to insure) models of risk?
—Assistant Professor Ethan Bernstein (MBA/JD 2002, DBA 2013)

I will give the industry some credit and say that it has come around in the last couple of years. I launched RelayRides in the fall of my first semester at HBS, and it took me a year and a half to find an insurance policy that would work. So it was extremely challenging. Nobody wanted to take a risk on this.

But since then I’ve had a lot of dialogue with insurers that are looking at the sharing economy as an opportunity—some out of necessity. Society is becoming more urban; urban dwellers are increasingly moving away from car ownership. So if fewer and fewer people are buying insurance policies, what are insurers going to do with their business? They should look at this as a changing market and realize that if they get in now, they could have a commanding mindshare of these sectors. And if they have a really hard time with taking a risk, price for it. In many cases, inability to buy insurance can be an absolute deal breaker to launching one of these businesses. You can always start by overcharging.

What types of regulations do you think help the industry by increasing its credibility with consumers, and what types of regulations hurt the industry?
—Allegra Jordan (MBA 1995)

I think that there are a couple of key parts to regulation. One is that it needs to be dynamic. The most interesting innovations that we’re seeing are around car-pooling: UberPool and Lyft Line are matching people on similar routes to share a car. That’s incredibly innovative. But some of the regulations don’t address—or sometimes even prevent—this innovation. The legislative process is slow and cumbersome, and to have these regulations not be able to be responsive is a mistake.

My other concern is around transparency. I’d encourage the regulators to take a hard look at the important metrics we need to protect consumer interests and make sure they are clear and published.

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