At the end of December 2012 I wrote an article highlighting 10 business resolutions for a prosperous 2013. While it’s still early in the year, we’ve seen some developments unfold that have been suggestive of how the trajectory of technology will influence the economy moving forward.
About two weeks ago Twitter released a new social video app called Vine, and companies are using iterative methodologies to find the greatest return on investment (ROI) – my friend Benji Rabhan in his new book Failure is Obsolete discusses the power of constantly testing and refining concepts to maximise conversion rates – both on and offline. What Francis Fukuyama proclaimed would be the End of History could similarly be a harbinger for the end of failure – A/B split testing and minimum viable products as the means through which predicting the immediate future in the least capitally intensive ways possible could bring an end to investing in projects that don’t yield high adoption rates and robust profits.
In hypothesizing the trends that I feel will move the needle in the business world, I hinted at the importance of the micropreneur, but I left out a very important concept that I think will form a huge part of the new economy – something that I will refer to as “spare capacity.”
The idea of spare capacity is not a new one. A factory that can produce 100 widgets, but that only has current demand for 80 can rent out its spare capacity to another company for the production of 20 extra widgets, thus enabling the factory owner to maximise its resources and optimise its ROI. But applying the notion of spare capacity to an individual is more novel.
More and more, individuals are viewing themselves as businesses. Take the Airbnb model, for example. It’s a site that allows owners of homes to rent out spare rooms, apartments, or entire houses when they are not being used – in effect, creating a whole class of business owners whose main asset is its spare capacity. Lyft is another application that enables owners of cars to rent out rides when they have availability. The ability to provide the use of an otherwise depreciating asset for the purpose of capitalising on spare capacity is a significant development in our economy.
Moreover, the ingredient that makes the share economy that much more potent is the way that we have commoditized trust – in essence, turning it into a currency. Welcome to the share economy – the marketplace that takes spare capacity and injects it with instantaneous demand with a trail of online breadcrumbs in the form of feedback, reviews, ratings, and fan clubs. Your reputation precedes you.
In her 2012 Ted Talk, Rachel Botsman makes the case for trust as the most important currency in the new economy. Our ability to offer our own spare capacity and be rated for our services – and the overall experience we offer – underscores the power of collaborative consumption as a means to make a living and become more integrated societally. Your reputation becomes another one of your greatest assets as more and more people look to the internet for an aggregation of experiences – and namely the experience that you can provide.
I sense that as an economy, we will increasingly search for ways to capitalise on our spare capacity and look for opportunities to turn our sunk costs into cash-flowing assets that might even provide for our financial independence. Rent your watch out to a dinner-party or gala attendee, lend your extra winter coat out to someone visiting from a warmer climate – there are numerous possibilities.
What this means for our economy is that assets will be shared and used like never before; currencies such as paper money and hard metals will gain competition from traditionally more intangible ones such as caring and trust; and finding ways to use what’s already in the marketplace to reduce monetary expenditure and production will become ever more important.
I think what we’re collectivity realising as an economy is that resources are scarce and need to be consumed responsibly. Many of us have been duped into believing that we need to invest individually in assets or goods rather than in the sharing of them communally. The new generation of conscious consumers is aware of some of the externalities of doing business and wants to reduce the collective footprint by sharing more and producing less. It is also a generation that needs ways to make extra money as the economy isn’t providing the job security to which prior generations were traditionally accustomed.
Technology provides scale and accessibility in ways that has created a whole new cadre of business owners and operators. I imagine that we are just at the beginning of the cycle of sharing our way to profits and viewing trust as one of the currencies that will empower a whole new class of micropreneurs who will leverage their reputations and material possessions to create financial freedom and capitalise on the one asset that will forever be scarce – time.
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