Good piece by Brooke Masters on FT about the strategic implications of the sharing economy. Some highlights:

Streaming is at the forefront of a trend that threatens to upend a much wider range of industries. Technology-based groups are encouraging consumers to rethink their approach to everything from textbooks and party dresses to housing and transportation. The changes come in several categories. Platform apps are linking owners of goods and services — bicycles, spare bedrooms, even solar energy — to a host of potential users. And companies that traditionally focused on selling their wares, including clothing retailers and carmakers, are now exploring subscription and rental options.

For the most successful companies, the decision to focus on intangible assets, such as intellectual property, has been a huge boon. The move allows them to grow rapidly without having to invest in building factories or hire enormous amounts of staff. But for those at the other end of the scale, the lack of real property leaves them with little to borrow against or sell when they run short of cash. When British budget airline Monarch collapsed in October, its main asset turned out to be its UK landing slots. “Once companies go asset light they can scale up tremendously. But I don’t think people have really thought through the implications of consumers being asset light,” says Jonathan Haskel, professor of economics at Imperial College, who has co-written a book on the subject, Capitalism without Capital: The Rise of the Intangible Economy. “Consumers will be able to be more flexible but they will also have to change their lifestyle.”

In many cases, the shift to a sharing economy will also affect the nature of the goods that are being shared. Currently, most cars spend most of the time sitting idle. If drivers stop buying their own cars and instead sign up for a rental service or use Uber’s ride-hailing app, each individual vehicle will receive a lot more use. That means carmakers will face pressure to produce fewer, better-made cars that are able to withstand constant usage. The obvious parallel would be to supplying a laundromat versus a home: commercial machines must be faster, heavier and stronger.

Increasing the usage of durable goods such as washing machines, cars and bicycles would clearly be good for the environment and should also benefit consumers by bringing down their overall costs. It would also fundamentally reshape the broader employment market. In the sharing economy, the winners will be companies that can effectively match people and resources, rather than simply those that can sell the most goods. Jobs, meanwhile, will shift away from manufacturing and into tech and services.

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Posted by Carlos Alvarenga

Carlos A. Alvarenga is the Executive Director of World 50 Labs and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

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