The Lyft IPO tells us “new economy models” are now mainstream
With Lyft going public today, our attention is fixed on the “gig economy”, “collaborative economy” and other “new economy models”. What most of these new economy models have in common is that they are based on “Platform Business Models” aka “Networked Markets”. These multi-sided, market-generating approaches to building new enterprises are having an inestimable impact on industry as well as how we as individuals use technology to work with each other.
What is it about the gig economy that makes us nervous?
While the benefits of these transformative platform businesses are being reaped by millions, there is something about them that gives us pause. And it’s more than simply people getting replaced by machines or established businesses being disrupted.
There are lots of specifics we could go into, but one critique stood out to me back in 2013 by Jeremiah Owyang, an industry analyst and strategic thinker. In his “The Dark Side to the Collaborative Economy”, he listed several points that I really agreed with. And one point that I disagreed with:
Socialistic values are at odds with free market capitalism. Boom. I swore to myself I wouldn’t bring it up in public, but it warrants a discussion. The collaborative economy, like the internet and social media is a form of socialism where the crowd gains power over institutions. History is rife with examples of variations of socialism being challenged, notworking at all, or in a few cases, working just fine (see Northern Europe). Nothing I learned in business school prepared me for these radical models where corporations, and capitalism as we knew it, are upended by this radical change.
“Socialist values are at odds with free market capitalism.” While I agreed with this statement at a very general level, at the time I didn’t think it applied to most collaborative economy or gig economy platforms. If anything, the collaborative economy, rather than evolving along socialist lines, is more likely to turn into something worse if not tempered with a healthy dose of humanity. This potential scenario is that of a rampant, omnipresent form of capitalism that I like to call, for lack of a better word, “Hyper-Capitalism.” To describe this concept, let’s speculate upon some new economy scenarios that, if you think about it, get really dystopian, really fast.
“Smart stuff” and the internet of things
We are just now starting to scratch the surface of the data surrounding our lives. This includes:
— Our likes, dislikes, technology usage patterns, locations, and social connections
—Pyschometric and behavioral data indicating our likelihood of performing an action
— Data regarding the things we own
— Sensor data (including biometric data) from all of our devices as well as other devices these now interact with
The day is coming when it will be hard to find a product that isn’t “smart” and “connected” to the internet / IoT. This environment of computing power and communication surrounding us has far reaching implications for ourselves personally as well as for the most mundane durable goods we purchase for ourselves.
Thought experiment: the skilsaw that makes money when you’re not using it
To the extent our durable goods (e.g. washing machines, power tools, furniture, lighting, sporting equipment, etc) are smart/connected, they are potential candidates for inclusion in “sharing economy” and other new economy models. This has some really huge implications, namely:
— Any smart/connected durable good can be contributed to the sharing economy and become a source of personal revenue
— Like the hotel industry, we will see “overcapacity” of durable goods (why buy a skilsaw if you can borrow one from somebody down the street for $5)
— New smart/connected durable goods will be connected to IoT sharing platforms before they are ever purchased and will be priced based on IoT sharing revenue participation (i.e. if the seller participates in IoT sharing revenues, you might get a significant price discount on that skilsaw)
All of this results in us really optimizing our choices around which durable goods we really want to own, and which ones we want to borrow. We will potentially make those decisions based on how much our durable goods will make for us based on the “capacity utilization” and revenue of such goods in our area.
In essence, the average consumer becomes a capitalist at a very personal level as each durable goods purchasing decision gets scrutinized from the standpoint of an efficient, return-maximizing allocation of hard-earned cash.
The part where things get really dystopian
As we start to optimize our ownership of things based upon the returns our things are providing, we will similarly scrutinize how we spend our time as well because, after all, “time is money”. We start to think about our return on that spare hour on a Thursday evening. Or the trip home from the office with an empty car and just enough time to pick up someone’s groceries and drop them off for them. Or maybe we quit our jobs altogether if we see we can make more per hour by making our time and skills as people available on the gig economy / collaborative economy.
Are we turning people into things?
As we start to compare “capacity utilization” and “IRR” of people and things (something that clearly Uber is considering as it moves towards autonomous vehicles), the danger is that we start to think of people AS things, as inputs in an equation that has outputs. The greatest nightmare of all is not people being replaced by machines so much as people being treated LIKE machines and having this form of thinking and living being persistent and omnipresent in our lives and social interactions.
People are not commodities. People matter in a way that equipment doesn’t. Just as the industrial revolution’s mechanization trended toward the dehumanization of work, new economy models, if not tempered, could have a dehumanizing streak to the extent people’s time becomes a commodity assessed in the same way that machine time is.
A human future is one with meaning
A world of incessant measurement fails to realize the value of things immeasurable. As we build new economy models and businesses, let us strive to contribute to the meaning each human derives from their work and help them fulfill their unique potential