Author: Vsevolod Klivak
Economic is developing. Our contemporary life is pretty hectic due to enormous information, which surrounds us. However, these modern vibes are key to understanding how businesses shall work to be prosperous. Airbnb, Uber, Amazon, Ali-Baba, they are only platforms, which as the matter of fact don’t produce a thing, but still making decent money. Sharing economy is an umbrella term with a range of meanings, often used to describe economic activity involving online transactions. In this article, I will try to shape the term “sharing economy”, see what perceptions are popular now and what make sense.
There are few approaches on how to describe it. [1]Andur Sundararajan in his book “The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism” two years ago described the phenomenon of present-day approach. He’s an award-winning scholar who writes with a clarity that masks the complexity of his subject, explains how organizations needed to meet consumer demand are driving today’s economy and explores how these developments spell the end of employment as we know. Basically, the author defines in his book how your business or career shall alter to be prosperous in the modern circumstances. He mentions platform businesses as the most thriving in the modern state of the art. I may describe his point as the most neutral and precise, however, his book may give only a glance of what future might bring.
This success of matchmaking businesses is more elaborately described in the book “Matchmakers: The New Economics of Multisided Platforms”. In "Matchmakers," David Evans and Richard Schmalensee[2] explain how matchmakers work best in practice, why they do what they do, and how entrepreneurs can improve their chances for success. Whether you're an entrepreneur, an investor, a consumer, or an executive, your future will involve more and more multisided platforms, and "Matchmakers" rich with stories from platform winners and losers is the one book you'll need in order to navigate this appealing but confusing world. They specify crucial points for prosperous matchmaking platform, like the crucial number of participants on both sides, which is vital for the fruitful platform. Therefore the most challenging part of this venture is to make the right marketing steps to gain enough “population”. It is also worth mentioning that proper monetization of the matchmaking services. They should be not hectic and irritating but fetch shiny coinage. However, the main issue is that if you follow steps of success, which he has described. It won’t give you 100% confidence that your platform will strive and probably it will be much beneficial to analyse why some start-ups didn’t a success and describe it more precise than a luck.
Jeremy Rifkin set it in a bit another perspective. He called it [3]“Third Industrial Revolution”, which brings us[4] “Zero marginal cost economy”. He points out issues, which new approach might solve. First of all temporary capitalism is really wasteful and these sharing way may resolve it. Transportation adviser Paul Barter has confirmed longstanding claims by urban planners that, on average, cars are parked 95% of the time [5]. What is vital for all quantitative researchers is the Internet of Things. The project of that kind has already been started to implement in Europe (Digital Europe) and China (China Internet Plus). More precise measurement is key to the rationalisation of resources using an increase in productivity. Thus building new infrastructure and “real enter” of the internet era is highly important for the sharing economy. This principle continues in the zero marginal cost [4] theory. In standard business, every new product will bring a pretty significant increase in variable cost. It’s not applicable however in modern approaches. For example, if you are a blogger it doesn’t really matter how many videos you will make if the average cost of each video is the same. The economy of next decades won’t be about possessions and basic property, but about shared utility and goods, according to Rifkin. There are some issues, which he doesn’t mention. It is a transition period. Although sharing society may be our future, there are a lot of big firms, which won’t and this problem is vital to address.
It is really hard to disagree with the authors, which were mentioned above. If twenty years ago economics was as near as your local grocery shop. Now it’s on top of your fingers, in your smartphone. Given the tendency started by introducing the outsource solution. The nice example will be the taxi market. Modern Uber or Lyft have much more chances for success that old-fashioned taxi services. Crucial point will be flexibility. From the drivers perspective it is easy to pick the best conditions like time, direction and passenger the analogical advantages are provided for a ride-seeker. When in standard business it is quite hectic to connect driver and passenger in the most expedient way, Matchmaking algorithm makes much easier, faster and comfortable for everyone.
Figure 2, Number of rides in Indonesia 2016
Conclusion
Unfortunately, there are no flawless things in our universe, therefore people have concerns about the future development of the economy. First of all there not a lot, or at least enough leverages, which could control the power of platforms. Is it wise to regulate Airbnb in the same way as the hotels? Probably not. Preoccupations consist of unsure pricing, quality of service and safety overall. Owners of the platforms claim that the base mechanic of the platform could solve it. Price will be measured by old fashioned “hand of the
market”, other aspects could be regulated by basic forums. Either room-seeker or landlord may comment on each other and give ratings to each other. Therefore the market will regulate itself.
Figure 4
References
1)Sundararajan, Arun “The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism” 2016
2)Evans David and Shlamensi Richard “Matchmakers: The New Economics of Multisided Platforms” 2016
3)Jeremy Rifkin “The Third Industrial Revolution; How Lateral Power is Transforming Energy, the Economy, and the World” 2011
4)Jeremy Rifkin “The Zero Marginal Cost Society: The internet of things, the collaborative commons, and the eclipse of capitalism” 2014
5)http://fortune.com/2016/03/13/cars-parked-95-percent-of-time/ “Today’s Cars Are Parked 95% of the Time” David Z. Morris March 13, 2016
7)http://bruegel.org/2016/02/uber-and-the-economic-impact-of-sharing-economy-platforms/
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