Peers Inc

Introduction

BACK IN 2000, sleepless at night during the early months of building Zipcar, I had a recurring nightmare. Lying in bed next to my husband, I imagined the mafia—the rental car mafia—bursting through the door, black machine guns bearing down on us. I understood clearly that we were on a path that was going to break a hundred-year-old industry.

What I failed to appreciate back then was the much larger movement made possible by the Internet. Zipcar was a trailblazer. When you can connect and share assets, people, and ideas, everything changes, not just how you rent a car. Google, eBay, Facebook, OKCupid, YouTube, Waze, Airbnb, WhatsApp, Duolingo—all are part of this transformation of capitalism. Web 2.0, the sharing economy, crowdsourcing, collaborative production, collaborative consumption, and network effects are simply terms we’ve created along the way in an effort to capture what is going on. Attributing all this to “the Internet” misses the building blocks and therefore the ability to replicate this type of activity in a more controlled way. There is one structure that underlies all these—excess capacity + a platform for participation + diverse peers—and it is fundamentally changing the way we work, build businesses, and shape economies. I call it Peers Inc.

Peers Inc combines the best of people power with the best of corporate power. One can think of it as using every resource and every stakeholder efficiently. The “Inc” delivers only on industrial strengths (that require significant scale and resources), and the “Peers” deliver on their individual strengths (localization, specialization, customization). When Incs and peers focus only on what they do best, each handling what is difficult, annoying, or just plain impossible for the other, the resulting collaboration is compelling and sometimes miraculous.

In a world of scarcity, Peers Inc organizations create abundance. Harnessing resources we already have—physical assets, skills, networks, devices, data, experiences, processes—these organizations grow efficiently, and sometimes exponentially. Peers Inc redefines our understanding of assets—proprietary versus in common, private versus public, commercial use versus personal use—and requires a rethinking of regulations, insurance, and governance. Tapping into a diversity of peers, these organizations are creative and have the potential to learn exponentially. Peers Inc rewrites the rules for value creation: Shared resources unlock the greatest efficiencies, shared minds the greatest innovation.

Peers Inc is driving the transition from the industrial to the collaborative economy. The old economy was built upon the idea that wealth is created by hoarding assets and selling them off bit by bit. This is why we invented patents, copyrights, trade secrets, certifications, and credentials. It is also why I owned my own car and why I bought hundreds of records. We all hoarded stuff, kept it close, and locked it up, because we believed that this was the way we (individuals, corporations, institutions, governments) would reap the most value. The result was an enormous loss of potential—excess capacity just yearning to find the light of day. When we look deeply into the whys and hows of Peers Inc accomplishments, we see again and again that open and connected assets and minds result in the greatest value.

In our volatile world, Peers Inc collaborations can create change with a pace, scale, and quality we previously thought impossible. Creativity, innovation, resilience, and redundancy are intrinsic to every Peers Inc endeavor. This is the structure for our times: With it we can experiment, iterate, adapt, and evolve, quickly. We can solve large problems cost-effectively and rapidly. We can scale globally yet adapt to the very local. The old industrial model cannot solve climate change. It is too slow, too inefficient, too exclusive. Peers Inc is driving the rapid transformation of our economy and will also provide an answer to the conundrum of disappearing jobs, escalating income inequality, and devastating resource scarcity.

What we do now will have profound and lasting effects on our future. We are at the end of the old fossil-fuel-saturated, consumption-based industrial economy. We are at the beginning of the new collaborative economy, which thrives on sharing, openness, and connectedness. What we choose to leave behind and how we prepare for the new will determine whether we make this transition in time and how many people we help cross the chasm. It’s an all-hands-on-deck moment.

HOW TO READ THIS BOOK

Entrepreneurs, businesspeople, the digerati, the revolutionaries, policymakers, and the naturally curious should all find novel, thought-provoking ideas within. The arc of the book runs like this:

Part I: The Building Blocks

Chapter 1: Zipcar start-up story, where it all started. Then the three components of Peers Inc: excess capacity (Chapter 2), platforms for participation (Chapter 3), peers (Chapter 4). Chapter 5 (the three miracles): This is one of my favorite chapters and the fulcrum on which this book pivots.

Part II: Execution

Chapter 6 (building your own Peers Inc), Chapter 7 (government’s role), and Chapter 8 (legacy institutions) provide concrete ways to act on this new paradigm, and, of course, lots of stories. Chapter conclusions propose unconventional policy recommendations that build on each other. I was surprised where writing this book led me!

Chapter 9 is all about the power of money and funding. If you are looking to stir up the revolution, this chapter has the seeds for how to work around the status quo.

Chapter 10 is one of the reasons I wrote this book. It lays out the case for how the Peers Inc structure is the only way we are going to meet the speed, scale, and local adaptation requirements to address climate change in time to prevent the catastrophic change that we’ve set in motion. This chapter is both sobering and optimistic.

Chapter 11: The conclusion is really a beginning. I make a strong case that transition to the collaborative economy is inevitable.

PART I

The Building Blocks

ONE

“Hello, Zipcar. This Is Robin.”

My Three Theses

AFTER I CO-FOUNDED ZIPCAR, a national magazine described Antje Danielson and me as “two moms” from Cambridge, Massachusetts.1 While it’s hard to see this statement as anything except condescending, it named pieces of my life experience that absolutely made me the most qualified person to run Zipcar—namely, being a mother of three. But let me start at the beginning.

My father was an American diplomat. I lived in seven countries and went to thirteen schools before graduating from high school in Alexandria, Egypt. This upbringing made me resourceful, adventurous, and independent, and I learned quickly how to navigate new cities and be pragmatic about transportation. From an early age I’d been given the freedom to go where I wanted by foot, push scooter, and bike, exploring Damascus (Syria), Jerusalem, Mbabane (Swaziland), and Arlington (Virginia), and getting out of my mom’s hair—she had six children and a laundry list of responsibilities. While most American teenagers were pining for their driver’s license and the freedom it would bring, when we moved to Alexandria, Egypt, for my senior year of high school, my transportation options gloriously expanded to include very cheap taxis and trolleys.

After all those years of movement and a life of constant novelty, as an adult I ended up in Cambridge, Massachusetts, for twenty years. Twenty whole years! How could I feel a similar independence in Cambridge, finding the fastest and most convenient ways to move myself and my three young children through the busy and complicated dance of day care, work, food shopping, time in the park, playdates, and after-school activities? In our urban environment, this usually meant traveling by foot (no car seats, no seat belts, no search for parking) or by public transit. But having occasional access to a car would have simplified rather than complicated things.

My self-reliant, resourceful, adventurous, and impatient attitude came into play in those early months of building Zipcar. Much later—post-Zipcar—I learned in conversation with a friend, Karim Lakhani, whose meticulously researched PhD thesis was on innovation platforms, that the best solutions and the most creative practices usually come from people as far removed as possible from those who are “experts” in a field.2 I would be such a person. By contrast, the people with the money, prospective angel investors and venture capitalists that Zipcar needed to make the company work, were car owners and daily drivers. Our idea of sharing cars, rentable by the hour and by the day, went against what they knew about people, status, lifestyle, technology, operational difficulty, financing, and women as founders of car companies.

Zipcar started on a bright back-to-school day in September 1999. September has always felt like the month when, no matter my age, I think about the future, change, and the promise of the year stretching ahead. Perhaps this is because I live in a northeastern university town where herds of young people arrive with full backpacks just as the leaves change and the wind picks up. That September Antje and I were in Ras Café, a few blocks from our children’s elementary school, with a couple of hours before school let out. Her son and my youngest daughter had been best friends the year before in kindergarten, two active rapscallions who had recognized a partner-in-crime. Antje described what she had seen on a recent vacation to her hometown in Germany. Sitting in a café in Berlin, she had seen a shared car parked across the street. She had investigated and found it was available for rent by the hour and by the day. She was smitten by the idea. What did I think? Would it work in Cambridge?

Mine was the perfect ear to hear this: the right person at the right place at the right time. I’d recently attended a reunion at MIT’s Sloan School of Management and had listened to my classmates’ stories of start-ups and successes. Metro Boston was a hotbed of technology start-ups at the time. Raytheon, DEC, Data General, Wang, and EMC had all been founded here—it was the East Coast equivalent of Silicon Valley. The current dot-com boom, enrapturing investors and entrepreneurs alike, reached its peak a year later, in March 2000, with the NASDAQ at an all-time high.

Not only was I ready to do a start-up, I also was the target market for car sharing. My husband drove our car out to his suburban office every morning, where it would sit in a parking lot all day. And while I definitely needed a car sometimes, there was absolutely no way I wanted to buy another, park it on the street in our city neighborhood, maintain it, and shovel it out after snowstorms. I didn’t want to deal with remembering the monthly alternate-side-of-the-street-cleaning days and dashing out to move the car when I heard the garbled 7:00 a.m. warning from the tow truck loudspeaker. For me, as for most people who live in a city and don’t need a car to get to work, the costs of car ownership are far greater than the potential benefits. Once, maybe twice, and under duress, I’d borrowed a neighbor’s car. But asking to borrow it regularly would make me feel like I was a moocher. I needed Zipcar.

Two months after incorporating, we got our first angel investment, $50,000, from Jeannie Hammond, an MIT classmate. The bulk of that money went to one engineer, Jim Lerner, who worked closely with me to build Zipcar’s first website, the member application page, the car reservation and payment processes, the basic fleet management system, and the database integration that underpinned these. A significant but smaller amount went to logo and website design. Four months later, Zipcar had $68 in its bank account and three days before going live. The plan was to place four cars in four reserved parking spaces, one near each of four consecutive subway stops in Cambridge and Boston. We already had a new lime-green Volkswagen Beetle that we had named Betsy. I had bought the car myself, using my house as collateral, and was paying it off in installments of $299 per month. Three additional cars, all Volkswagens—a Beetle, a Golf, and a Passat—were scheduled to be delivered the next morning.

Then I got a call from the vice president of the leasing company. He informed me that he would feel “more comfortable” with a $7,000 security deposit for each car before he would release the vehicles to us. You’d think I might have panicked. Instead, I just felt tired. Nothing had come easily. Here was just another hurdle.

It was late afternoon and I didn’t have the brainpower to think through options, so as a distraction, and because it was on my calendar, I went to a 6:00 p.m. launch party for another start-up. The reception was in a barely renovated factory building: cement floor, walls newly painted white, long catering tables covered with white paper tablecloths against one wall. I had just walked in when Juan Enriquez, an angel investor I’d been in touch with, came over. I would get to know Juan later, but on that June day we had a remarkably short and direct conversation.

“Hi, Robin. How’s Zipcar going? What can I do for you?”

“I need $25,000 by tomorrow morning.”

“Done,” he said.

And indeed, by nine o’clock the next morning, when I called the bank, the money had been wired in. I gave the lessor the money, we got the cars, and Zipcar launched.

But I still had to raise real money. In 2000, the online networks and marketing portals that connect would-be funders with would-be innovators had yet to be invented, so peer lending, crowdfunding, and one-stop shopping for angel investors were not options.

My first tip-off that venture capitalists and I might not see eye to eye was at my third meeting with one of Boston’s founding fathers of venture capital. We were eating together in the office building lunchroom after our more formal meeting. I learned that he had children too—nine! I am fifth in a family of six. I told him that my favorite movie as a child was Peter Pan, and that after I saw the movie for the first time on TV, when I was five or six, I had climbed up on to the top of the dresser in my shared bedroom and had jumped off with the hope of flying. I landed on the floor with a hard thud.

He told me that he had put one of his children, at age two, on top of the dresser in the bedroom. Holding out his arms to his child, he told him, “Jump! Jump!” The child hesitated. “Jump! I’ll catch you,” he repeated. The child jumped, and he stepped away and let him fall. “I had to teach him at an early age that you can’t trust anyone.”

That story stayed with me on the subway ride back home to my house, and when I went to pick up my six-, nine-, and twelve-olds from school. It ricocheted through my head all afternoon. And I repeated it to my husband once my children had been put to bed. It seemed that venture capitalists and I had completely different worldviews. I thought you could trust people. That the vast majority of people were good. That I could count on my father, and even a stranger, to catch me if I fell within arm’s reach. Every day, perhaps naively, I try to find and build the world I want to live in. From the outset, I saw Zipcar as an example of a different way of thinking about business, in which assumptions about trust, responsibility, and collaboration were changed.

MY THREE THESES

My three most fundamental beliefs, which gave me faith Zipcar would work, gave most investors and business reporters pause.

Robin’s Thesis #1: People are willing to “share” cars instead of owning them because the economics make sense.

Investors’ response: The American psyche is tuned toward consumption and ownership. Americans have a special relationship with their cars and our status is bound up in our cars. We don’t want to use cars. We want to own them.

Robin’s Thesis #2: A technology platform leveraging the Internet and wireless technology makes sharing effortless.

Investors’ response: The technology hurdles are too high, too complex. It’s never been done before. You aren’t an engineer.

Robin’s Thesis #3: The company can trust people to pick up and drop off the cars without supervision, fill them up with gas using the company credit card, and take their trash when they go.

Investors’ response: The people doing it in Europe are Swiss! We Americans will never treat cars so well.

There are quotation marks around the word “share” in that first thesis because I learned that about 40 percent of the people I surveyed in the fall of 1999 had really negative associations with that word. To them, sharing implied “dirty,” “poor quality,” “having to wait,” and “hippie-ish”—all qualities that were far from the service we intended to build. As a result, I abandoned use of the word sharing, but not the idea. We believed that technology would transform sharing into a seamless and efficient transaction. Zipcar would provide a high-quality service, and our customers wouldn’t have to coordinate with other people or wait for a turn.

As it turns out, my belief in the potential for sharing foretold what would unfold in social media over the next decade. Facebook and other social media companies have since thoroughly rebranded the word sharing. Fortunately, my prediction that people were willing to share was accurate. Hardly a minute after the Zipcar website went live (but before the launch), the phone rang.

“Hello, Zipcar. This is Robin. How may I help you?”

“Hi, I’d like to rent a car.”

“Are you kidding me? We just went live! This is incredible! Sure!”

And so Craig Kleffman became the first Zipcar member. He rented our cars by the hour to transport his drum set to gigs he played at, and rented them by the day to get himself to the out-of-town triathlons he participated in. For people like Craig, who live in cities and don’t need a car to get to work, both car ownership and car rental mean getting more car than they actually want to use. People chose Zipcar because sharing was the financially smarter choice—and we were cool, smart, fun, urban, convenient, and reliable as well. Upon its sale to Avis in 2013, thirteen years after its founding, Zipcar had 760,000 members sharing 10,000 cars across the United States, Canada, and the United Kingdom. Recent purchases of local car-sharing providers in Spain and Austria, and a launch in Paris in 2014 continue to extend Zipcar’s reach.

Zipcar’s goal was to make renting a car as easy and convenient as getting cash from an ATM. We needed to deliver simple, convenient, reliable access to cars that were available—just like ATMs—throughout the city. Users needed to be able to reserve and unlock cars in seconds, at any time, and with no one standing between them and the vehicle.

It took me six months to come up with this simple ATM metaphor for what we were trying to do. Today I think we were successful not because we made renting a car as easy and convenient as getting cash from an ATM but because we made renting a car easier and more convenient than owning one. The “Wheels when you want them” tagline foreshadowed the movement toward giving consumers access rather than ownership. Why own (and store, manage, and pay for) the whole thing when you can be assured of having it at hand only when you need it? That said, delivering on this new way of consuming took a lot longer than half a year.

I knew that nobody would rent a car for an hour if it took fifteen minutes to pick it up—finding a service location, standing in line, and filling out the requisite forms—and almost as long to return it. The logic for a very low transaction effort (and cost) was compelling from our business perspective as well: For Zipcar to work, we needed to be indifferent between eight 1-hour rentals and one 8-hour rental. Getting our transaction costs as close to zero as we could was absolutely necessary. When our fleet grew and I needed to hire a VP of operations with big-fleet experience, the candidates from the car rental industry would ask me, “So what’s Zipcar’s transaction cost?” At that time, almost all of our hard-won investment dollars were being poured into technology. Our development costs were huge. But the result was zero marginal cost for each transaction.

“What is your transaction cost?” I’d prompt. I learned that in the rental industry the cost was between $8 and $12 per transaction! Yikes. No wonder they required a one-day minimum for every rental and extension.

What was good for us was also exactly what the customer wanted. To make the transaction cost zero, to make sharing effortless, we needed technology that had several parts:

1. Customer-facing software. Initially customers used the website to join Zipcar, reserve cars, pay their bills, and manage accounts (smartphones didn’t exist yet).

2. Back office: The web pages—that only we could see—allowed us to manage customers, cars, and parking locations.

3. In-vehicle hardware. The Zipcard reader under the windshield allowed customers to walk up and unlock the car they had reserved. An antenna enabled communication with the reservation system, and a small black box let us physically unlock the doors, enable the ignition, know what distance had been driven, and understand why the check-engine light might be on.

When Craig, our first member, reserved a car, it would go something like this. Say he wanted to do a big grocery store run on Tuesday night and needed a car from 7:00 to 9:00 p.m. At Zipcar.com he could see the schedule by calendar week for “Betsy,” an eye-catching lime-green Beetle (Volkswagen had only just introduced the new Beetle months before Zipcar’s launch). If Betsy was booked until 7:30 p.m. on that Tuesday night, Craig could decide whether he wanted to leave half an hour later or preferred to go on Wednesday night, when the car was free.

In an old-school car rental company, the schedule would be visible to employees only.

CRAIG: I want Beetle Betsy Tuesday from 7:00 to 9:00 p.m.

OLD SCHOOL: Not possible. It is booked. Do you want a more expensive car?

CRAIG: No.

OLD SCHOOL: Do you want to go Wednesday night?

CRAIG: No.

OLD SCHOOL: Do you want to walk to a car that is ten blocks away?

CRAIG: No, never mind.

Craig alone knew what mattered most to him, and putting the decision into his hands instead of the company’s was faster, cheaper, and smarter. He could rapidly and effortlessly make the trade-offs inside his head.3

Zipcar’s service was a little more than six months old when we got incredible outside validation for our scrappy start-up. It was a weekday morning in early 2001, and our new VP of operations, Mark Heminway, was in safari mode, leaning against the cool concrete wall of a downtown Cambridge parking lot waiting to observe our proof-of-concept moment “in the wild.”

Mark had worked at Hertz Car Rental for the previous fifteen years, eventually heading their North American fleet operations. Where he once would call up Ford and GM and order 300,000 cars over the course of a year, now with Zipcar he’d call up those same colleagues and say, “Hey, I’d like to buy … two.” Mark understood the seasonal patterns of car use and the car rental industry’s business model. He and his colleagues had worked their way up, living through industry fluctuations, mergers and acquisitions, layoffs and rehiring, so they all had a network of friends dispersed throughout the industry.

Mark’s good friend Jay Inslee stood by his side in the parking garage. Many years earlier, Jay had been Mark’s boss. Now he was the COO at Dollar/Thrifty. Jay had flown in from Tulsa to get an up-close look at Zipcar’s technology and customer service innovations. Earlier in the office, Mark had shown him how a member quickly signs in to the website and is presented with the calendar for his favorite car. He could book that one or any other car in the network in about twenty seconds. Reservations were sent wirelessly to the cars, so the right car would open only to the right person at the right time. Switching to see inside Zipcar’s virtual back office, Mark had noticed there was a rental scheduled for 11:00 a.m. in a parking garage just a block away.

As the two men waited in the municipal garage, anonymous and unnoticed, a young man in a business suit walked rapidly toward the Zipcar parked in its reserved space on the garage’s ground level. He held a briefcase in his left hand; his right was up at his ear with a cellphone. As he approached the driver’s-side door, he removed Zipcar’s proximity membership card from his breast pocket and held it over a small gray box tucked beneath the inside corner of the windshield. Both Mark and Jay were too far away to hear the click as the door unlocked, but the member wasn’t. He put the Zipcard back in his pocket and opened the car door. Still talking on the phone, he dropped his briefcase onto the passenger seat, shut the door, and put on his seatbelt. He started the car with the keys that were dangling from the steering column, backed out, and pulled away.

Jay’s response was just one word: “Wow.” I glowed when Mark debriefed me.