Entrepreneur, Explorer, Angel.
Sometimes all at Once.
14TH March 2014
Sharing needs a referee- Private Link
Why sharing needs a Referee
In business, sharing has almost reached mainstream status, even though, as prominent VC Fred Wilson points out, all we really did was stop buying things and start renting them.
Ever since the internet disrupted traditional print classifieds, ever since Craigslist came along and again reinvented the norm, ever since these new sharing platforms carved up Craigslist and changed the name of the game once more, the ability easily and efficiently share a service with a trusted peer has been nearing. We’ve come a long way in the evolution of what today we call the sharing economy, but we’re still not there yet.
It might seem odd – after all, isn’t the idea of a ‘sharing’ economy that we all just work together and get along? Well, that might be nice, but then there’s reality: The sharing economy isn’t perfect. And yet there is a simple though striking solution to the trust problem still plaguing the sharing economy.
What’s needed? A referee.
Evolution of Trust, Safety and Quality in Sharing
How did we come to trust the services we rely on so heavily today? In the beginning, there were classified print advertisements. Trust wasn’t much of an issue. There was vetting, there was cost, and there was time.
Then along came Craigslist disrupting that model. There was no vetting. No cost, for that matter. And it was relatively fast to get what you needed. As entrepreneur Josh Hannah pointed out in his epic Quora dissection, Craigslist still survives, but new platform companies have eaten away at it in a variety of categories. Today these are often called sharing economy platforms. But where did that name come from, and why are they making money by sharing?
New York University Professor Arun Sundararajan points us to LinkedIn. Initially, this platform didn’t want to be classified as a social network – the company wanted users to know they were all about business. Clearly, the concept of a social network evolved over time. And eventually, they came around.
Similarly, the term ‘sharing’ connotes a more-than-vaguely-countercultural movement. But its roots are in making better use of established assets and skills, and frankly, a distaste for waste. Sharing may have an early nomenclature-generalization problem, but it will survive, and even thrive. That is, if it can solve the trust problem it currently faces.
No matter how much Sharing Platforms improve user experience and design, no matter how much waste they squeeze out of the system, at the last moment, the transaction is turned over to a human. Just like Craigslist, and the classifieds before it.
But man, can humans be human. You can’t always trust them, it seems.
Though some early (and now larger) platforms threw lots of resources at the Triumvirate of Trust – Safety, Quality, and Dependability – to build confidence in their transactions, they did it on their own, in a silo, and by and large kept the basic transaction data to themselves.
Yet their data, both good and bad, does not travel with them. If I’m a great dog walker with a host of positive Yelp reviews, all of that goodwill I’ve worked to establish won’t help me on Dog-Vacay. If I’m a bad apple on Kickstarter, that data won’t show up on AirBnB (true story, read about it). The data doesn’t follow the actor. That’s the Crossover Problem.
When it comes down to it, the issues of trust and safety in the days of classified ads now seem quaint. The exponential change in volume, frequency, and elapsed time once represented by Craigslist resulted in massively greater trust and safety problems. And Craigslist’s scale has since been eclipsed by new online platforms – which again raise the volume and severity of trust issues, by another exponent.
Epic Peer Platform Slip-ups
Each day brings a new headline about yet another sharing economy company slipping up. And for every one that garners a headline, there are probably a dozen that just go silently into the night. This is a not a trivial problem.
Unaddressed, trust – or more properly, the lack of it – can be fatal to the sharing movement. But there is a simple yet striking solution to the trust problem still plaguing the sharing economy.
Sharing needs a referee.
No platform of any scale has been immune to these events, or the aftermath of the publicity that they cause. Here are just a few examples you might be familiar with (caveat, this is based on web research, YMMV).
For the most part, once these events were reported in the press, the platforms did an excellent job of rectifying the situation. But take a deeper look at how they were solved – and the overall impact they caused.
The primary focus of the remediation typically revolved around liability and damages. And it’s no wonder as these companies are either public, or are pulling down successive rounds of massive capital. Capping downside risk for these larger platforms is Priority One, so the nature of the solution quickly came into focus (while a start up platform might come to the same conclusion, but for different reasons).
In the above examples, a rear-guard liability-based strategy was generally adopted – something like:
1. Inform the parties involved that the platform will work diligently to get the issue resolved (and tweet to make it a matter of transparent, public record).
2. Ask the parties involved to file their own liability claims with their respective insurers.
3. If that doesn’t work, offer to settle out of their coffers (or, eventually, back it up with overflow insurance from Lloyds or such).
And while this might have proven an adequate strategy to deal with the platform’s immediate financial liability, it neglects to consider three key factors critical to the very essence of the sharing economy:
1. One – or both – parties to the transaction have suffered some degree of fractured trust.
2. Potential users of this – and other – sharing services have lost potential trust, due to an increase in perceived risk.
3. The user’s dissatisfaction with the transaction has still not been addressed. If anything, the focus on the platform’s liability is a slap in the face, saying clearly that the user’s issue is secondary.
Interestingly, the key to addressing the first two issues might lie in solving the third, much more concrete, factor of user dissatisfaction.
Think about it: What if there were a way to quickly, effectively, and efficiently resolve user dissatisfaction in the case of performance problems? It would both minimize lost transaction trust, and address eroded views of future risk. In the sharing economy, customer satisfaction can play a pivotal role – and can be managed through clearly delineating a non-partisan, third party referee.
Let’s Separate Liability from Satisfaction
In today’s sharing economy, where do liability claims end and customer satisfaction claims begin? If Uber execs could talk (more openly) they’d probably tell you, the line isn’t always so clear.
I’ve reviewed before how sharing platforms have dealt with the omnipresence of liability in our digital world. But as it turns out, solving liability issues only partly addresses customer satisfaction issues.
Recently, Peers came out with a solution that addresses provider liability spun off during these sharing economy transactions. That’s sorely needed. To date, liability insurance has been a snafu of layers that overlap the provider, the user, and the platform, which is either expensive, incomplete, or both.
But liability claims are limited. What about all those customers whose complaints don’t make the headlines, but are none the less dissatisfied with their experience? They don’t file a claim. They don’t call the press. They might complain to their friends, but they largely remain another silent voice.
And even if liability is solved, those silent voices are the biggest threat to a platform’s success in the trust, safety and quality categories. That’s why satisfaction claims are different.
Once a platform has addressed a headline-grabbing liability (or the provider has hooked up with Peers and everyone is happy), there remains the huge customer service headache called satisfaction. When you’re in scaling-at-any-cost-because-you-have-a-war-chest mode, most claims are simply paid. But that can only last so long.
Once a platform’s customer satisfaction problems become a systemic pattern, paying out quickly starts to hurt the bottom line. But in those instances, too many firms wrongly follow their first instinct: To dig in their heels about claims, make users file in triplicate, require claims to be notarized, make users call five times, the barriers go on.
The end result follows perfectly from the strategy of minimizing liability: Users who are not satisfied in their own mind will still blame the platform that wronged them in some way.
And on top of it all is a possible regulatory peril: Section 230 of the Communications Decency Act (CDA 230 for insiders) allows platforms to provide a forum for third party sharing without the platform assuming liability for that sharing. The layman’s interpretation is more straightforward: One doesn’t want to be considered as the one offering to share his or her time, property or services – or vouching for that person. Note: I would urge any existing or wanna-be platform to give that act a good read.
What does this have to do with customer satisfaction in the sharing economy? Plenty. Any desire that a budding platform provider might have to do right by his customers comes up quickly against the horrendous employer-liability consequences of doing so. If the act of righting a wrong means you take responsibility for the wrong, and taking responsibility means you incur eternal risk across the entire platform, I can almost guarantee that will have a special way of taking the generous-impulse wind out of your sails.
Here’s some more food for thought:
… The CDA prohibits treating an “interactive computer service” – essentially any website or other internet-enabled electronic platform – as the speaker (“developer”) of the content or conduct of users of the platform. Thus, for example, online marketplaces are immune from claims seeking to hold them liable for the conduct of their users, including vendors or individuals offering their goods, services or property for sale or rental on these platforms.
The immunity provided by the CDA is put in jeopardy, however, where the platform itself offers a performance guarantee. By offering such a guarantee, the platform is voluntarily assuming an obligation to ensure the workmanlike performance of the service provider, and can be held liable for the service provider’s failure to perform. Furthermore, by voluntarily assuming that obligation and vouching for the provider’s performance, it is possible that a court could find that the platform was a co- developer along with the service provider and should therefore be stripped of all CDA immunity. No court has yet addressed this specific issue, but it is not a stretch to suggest that a court may so hold if such a lawsuit were to be brought.
Satisfaction exists solely in the user’s mind, and platforms are serving as the sole arbiter. This is bound to backfire, either because it’s too expensive, because of the threat of CDA 230, or because the moral hazard is too high. When left to their own devices, both the user and the provider would want to call the shots.
So, when is user satisfaction really guaranteed?
In this race to disrupt, to bring yet another sharing economy platform out into the marketplace, where did consumers lose sight of the satisfaction or service guarantee? Or did we? Unaddressed, trust – or more properly, the lack of it – can be fatal to the sharing movement. We’ve seen it happen, poor service in an uncharted territory that stops a start up dead in its tracks and leaves consumers dissatisfied in the wake. That’s why Sharing needs a referee and a satisfaction or service guarantee.
There is an analog.
Take a look at the electronics industry. Best Buy sold $42 billion of product in 2013 (per their 10-k) and reported that about $2.4B of that was in Warranty and Guarantee services. There is very little liability to discuss with plasma TV, and probably even less with a smartphone. But there are satisfaction issues, in spades. Electronics retailers were in the same position as many of the new sharing economy platforms. They had scale. They were (are) completing millions of transactions for millions of users. And those not satisfied were making claims.
So, some forward-thinking electronics retailers took an enlightened approach: They appointed a referee to adjudicate.
This had some interesting effects. Suddenly, in a claims situation, they could rise above it and not be blamed for any outcome (after all, it was in a third party’s hands).
A third party referee changes the paradigm of the marketplace. In the case of Square Trade, for instance, valid claims are processed swiftly and with minimal friction. And the users loved it –here is the YouTube channel to prove it. Suddenly, people could transact with confidence that, if anything went wrong, there would be a referee available to hear their case empathetically, and quickly move to resolution – no public threats or headlines needed.
Sharing could use a Referee to Ensure Satisfaction
Now, apply that to every new and existing sharing platform placing service providers in front of real humans and real assets. What if there was a referee that could stand behind each platform and guarantee satisfaction in every transaction from a qualified provider?
A major platform recently polled its users in collaboration with TrustCloud: 43% were interested in such a service. Another 28% reported that they would have benefited from a protection plan in at least one past service experience, and 48% reported wanting the protection plan for a transaction(s) they plan to do in the next year. The willingness to pay increased greatly for this type of service when a trust and liability coverage element was brought into the equation. For more information on this confidential study, please contact TrustCloud.
If this solution to customer satisfaction existed, it would give the entire sharing economy, and its consumer base, a turbo-boost, creating more confidence, more users, more trust, and indeed, more profit.
So, call them what you will – sharing, on demand, networks, platforms, collaborative – they all share one common issue. They need a referee to manage Trust, Safety and Quality disputes to ensure confidence in their transactions.
[I don’t need credit here- happy to share for good distro]
Miles Spencer is a digital media entrepreneur and angel, currently Chairman and Chief Exec of TrustCloud, based in San Francisco, CA. He is an avid Sharing Economy user with a TrustScore of 806.
Don’t blame the traditional insurers – this sharing thing is hard to get your hands around.
- Fire and Fury? Well, Havana’s safe as ever, guys. (IMHO)
- January 06, 2018
- An Entrepreneur’s Life
- January 01, 2018
- How’s it going in Havana? See for yourself.
- December 08, 2017
- 10 Things to ask before Investing with someone
- May 08, 2014
- Angel investing for Family Offices: What if you knew ‘Zuck… back then.
- July 10, 2013
- Now I really want to be like Peter Thiel
- June 11, 2016