What I’m Reading

Editor’s note: Guest author Semil Shah is an entrepreneur interested in digital media, consumer Internet, and social networks.  He is based in Palo Alto and you can follow him on twitter @semilshah.

Many years ago, after graduating college, I came home before moving to NYC, wondering how I would scrounge together the money for the first month’s rent and security deposit so my friends and I could all live together in the Big Apple. I had one month to get the cash, and instead of going out for traditional, hourly-wage work, I decided to go through all of my old stuff and throw it on eBay. In those days, I got online through dial-up, would have to mail a hard copy of the pictures to interested buyers, and would ship items to auction winners only when their check arrived by mail and cleared into my bank account. In one month, I got rid of winter jackets, sports equipment, and baseball cards to the tune of $7,000, tax free, enough to buffer the move to NYC.

A few years later, when I moved to San Francisco, it was Craigslist to the rescue, helping with initial sublets, furniture, stereo equipment, and the odd jobs I did to soften the transition. Without knowing it, I was stumbling through life fueled mainly by a peer-to-peer (P2P) network and economy that helped me connect supply and demand, as well as time and money. Instead of using consignment shops or hosting a garage sale, or instead of buying new items in a traditional store, I buffered my moves to NYC and SF primarily fueled by P2P networks.

That was P2P 1.0, anchored by eBay and Craigslist, networks that have connected billions. And, while these companies continue their march, we are already into the next peer-to-peer evolution: P2P 2.0.  Unknowingly at the time, I was exposed to the thought a few years ago in graduate school, when my classmate, James Reinhart, came up with the idea for a “Netflix for used clothes,” which has morphed into venture-backed thredUP, a P2P network connecting parents to trade gently-worn baby and kid clothes, goods that are very expensive to buy new. Another success is Lending Club, a peer lending site connecting lenders with borrowers primarily for refinancing credit card debt or small business loans.

Today, P2P 2.0 is in full-swing, and that’s putting things lightly. Y Combinator breakout Airbnb began as an ad-hoc solution for the founders to earn a little extra scratch during a convention when tight hotel supply provided an opportunity to rent out air mattresses in their apartment, with the added touch of breakfast. The result today is a rapidly growing company and brand that aims to connect those who seek space with those who need it—you can rent boats, treehouses, and even castles. Airbnb has been so successful that it’s spawned a handful of international copycats and motivated the likes of GetAround, a P2P car-sharing network.

The newest entrant into the P2P space is the concept I’m most excited about: Zaarly. The founder, being taller than average, realized prior to boarding a flight in economy class that he would be willing to pay someone on the same flight to swap for an exit row seat. That moment gave birth to Zaarly, a new service that will leverage a mobile device’s location to connect those who demand something to those who can provide it. Imagine busy New Yorkers with disposable cash demanding something immediately, delivered right now: “Zaarly it.” The Zaarly concept connects time and money in the P2P vector, just like eBay connects sellers and buyers.

All of this activity in P2P 2.0 is now possible because of advancements in location sensors in mobile devices and social network platforms. The time is ripe for even much more advancement in P2P ideas, leveraging today’s technologies in new ways. Even as consumer-focused entrepreneurs work to build the next solutions, they are raising money on P2P services like Angel List, which connects fundraising entrepreneurs with seed stage capital and has shaken up the early stage investing game. Task Rabbit connects individuals and businesses with “task runners” that provide an outsourced task service, and Listia is an eBay for trading free stuff, where site users earn and spend credits. (Many others are also emerging, please add them here.)

During all these P2P transactions, companies like Square, Roam, and Bump leverage mobile phones to help drive payments. For instance, buyers and sellers can trade data by bumping their phones together, where Bump technology measures the movement from the accelerometer and pairs two users together. Square connect buyers and sellers using a credit card and mobile device. A merchant can charge a customer for goods or services by using the Square reader attached through a device’s audio jack to read a buyer’s credit card (like a cassette tape) and transmit the signal to help complete the transaction. (Surprisingly, not many others have yet fully leveraged the phone’s audio jack or accelerometer, making Square, Roam, and Bump standout.)

The driving force behind all of this P2P activity is the fact that today’s technologies make many more types of transaction possible between average consumers by finding an equilibrium between time and money, supply and demand. Transactions once locked up and never realized now create entirely new economies, free of established brands and fat middle-men.

In a world where everyone is rushing to drive all commerce online, some P2P solutions sprinkle a dose of humanity into the transaction. Will P2P services keep bringing more of this human element, personalization, and discovery into the foreground? Will services like Housefed, which provides a personal meal service, create a welcome alternative to nuking frozen food for dinner? It will be fascinating to see what new types of businesses are built on top of these P2P engines, and what traditional businesses they will disrupt.

The U.S. economy, struggling its way slowly out of a major recession, will only benefit from a continuous flow of new ideas to help connect people and keep things going. And, the potential for these services overseas is just staggering, especially within cultures that already have strong informal economies baked into their DNA. So big, in fact, that the simple desire to swap airline seats or find a reasonably-priced place to crash during a convention could create, accelerate, and fortify new informal micro-economies in the far corners of earth.

Photo credit: Flickr/ NASA Robonaut