Our On Demand Economy

Comcast is notorious for its On Demand movie service. With any Comcast cable box comes the ability to buy or rent the newest movies, TV shows and everything in between. No need to drive to rent a movie (RIP Blockbuster) or go to the nearest grocery store Red Box. Now, you don’t have to leave your couch and any movie you want to watch is at the click of a button. Of course, Netflix, Hulu and other streaming services have made watching TV even easier. But now, it’s not just movies that are on demand. Instead, we are now living in an entire on demand economy which NYU Stern’s Professor Arun Sundararajan dissects in a quick 25 minute lecture. Here are the highlights:

What is the Sharing Economy?

Professor Sundararajan describes crowd-based capitalism and the sharing economy as “difficult to define” but easier to explain with examples we all know and love such as uber and Air BnB. The concept is actually very simple: individuals are connecting with other individuals who can offer them something they need or want.

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Our ability to access products and services through the mobile device in our pockets has made our economy shift to a dependence on peer-to-peer markets rather than institutions to purchase products or services. Not only are these services now faster and more convenient than ever (who knew you could get your own personal valet service?) but they’re also cheaper than traditional, alternative sources.

Sundararajan highlights the capitalization that these digital startups are attracting. Only 1/9 of the companies below are publically traded yet all are bringing in billions of dollars of private capital. Why?

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“Investments are being made predicated on the belief that at this point in time… creating efficiency in these peer-to-peer markets will create value”

 

In other words, companies like Uber are creating capabilities for consumers and capitalizing on value in an otherwise decentralized peer-to-peer market. And, because it is extremely unlikely that our economy will shift backwards away from sharing, these digital intermediary platforms have huge growth potential.

Economic Impacts

Digital companies in the peer-to-peer market have created more variety for consumers and according to Sundararajan:

More variety = Greater Consumption = Economic Growth

Not only does the peer-to-peer market boost the economy as a whole but what’s even better is that the value created will be inclusive. This is the “most promising” aspect of the shared economy: that most of the value will be captured by people below the median income mark. Additionally, it will cause a shift in the work force, as the on demand jobs give more opportunity for employment, such as becoming a task rabbit or an Uber driver.

Economic benefits always come with economic challenges, which in this case include the ability to ensure the “safety net” of a full time job to part time workers as well as regulatory challenges.

What’s next?

Sundararajan started by focusing on examples in which the crowd is the source of the need, such as labor or information. In the next generation, he predicts a shift to the crowd actually becoming the market in a totally decentralized way, meaning that the participants and managers are one and the same. Bitcoin has already proven that this is possible with decentralized payments.Sundararajan then raises the question, “where will the value capture come from if there are no intermediary platforms?” He then jumps to a create example of when the Internet was first launched. It was just a place that allowed users to create content. It was totally decentralized. However, companies like Google captured value on this otherwise decentralized platform by making search more efficient. In essence, they created a capability that the Internet otherwise wouldn’t have had and capatilized on that. The same will happen, Sundararajan suggests, in the future. Companies will create layers of capabilities in search and discovery, logistics and trust which will capture value in a decentralized world.
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Group 2B’s (and my personal) Take

At the beginning of our discussion, we all quickly established that these peer-to-peer services are integrated into our every day lives and we all take them for granted. At this point, we can’t even imagine our lives with out them. We even went to the extent of saying that when we can’t get our hands on something immediately through digital means, it’s frustrating for us. We’ve become so accustomed to ordering Ubers to our doorsteps and having PeaPod deliver our groceries that mundane tasks which used to be just part of the day now seem to be extremely strenuous and irritating.

While some may see this as a negative, that millenials are getting lazy or too dependent on technology, I see this as a positive. These digital intermediary platforms have made our lives extremely efficient so that we have more time to spend doing things other than grocery shopping or calling a cab. We can now focus our time and energy on more productive tasks. In addition, people who may not have otherwise been employed now have an outlet to use the skills they have to make a paycheck each week. It seems to me that everyone in society benefits from the newly on demand nature of our economy.

 

 

 

 

 

2 comments

  1. Thanks for this great post. I think the way that these new services are revolutionizing the way we interact and do business is a very positive thing. I agree that the positive results of the sharing economy definitely outweigh the negative ones. Furthermore, I think that many of the negative results are blown out of proportion by people who are afraid of things changing around them. The economic opportunities created for people by the new sharing economy are tremendous. I am excited to see what new services will become available in the next few years.

  2. I agree with your takeaways. What I find more interesting is how dependent we have become on these services in such a relatively short period of time. Pretty amazing if you think about it.

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