What label should we give to businesses like AirBnB and Uber?
Stop calling it the sharing economy, cries marketer Olivier Blanchard in a blog post describing how the label is inappropriate and doesn’t accurately describe the imbalances in the relationships between providers, users and the online platforms that facilitate them.
The question is what do we call the business model of companies like Uber, AirBnB and the myriad other services that take providers’ time and resources – cars in the case of Uber, homes or spare rooms for AirBnB – then make them available to people who can use them, taking a commission in the process of course.
Blanchard wonders if much of the success of these companies is because America’s cash strapped middle classes are desperately trying to find additional source of income and there is very much a strong argument for that.
More importantly, is what do we actually call these businesses? While they are potentially are as exploitative as the free labour models that have evolved in the media with businesses like Huffington Post, at least they provide some type of income even if for Uber drivers the net returns may be marginal at best.
Blanchard himself suggests the Microtransaction Economy however that’s not a satisfactory label as the transactions – which may be many thousands of dollars for some AirBnB rentals – are not always small.
Maybe we should call it the downtime economy, where we’re using the time we’re not busy or when we’re not using our homes, cars or others assets to earn income. That too though doesn’t strike me as satisfactory although it does seem to address the underlying idea these services are really only intended to supplement somebody’s earnings, not be their primary livelihood.
None of these labels though are satisfactory and maybe we have to ditch the economy moniker. It’s time to start thinking about what we really should call these businesses.
Taiwan looks to publicise its attractions for incentive travel
This is a paid post as part of the Nuffnang blogger program
Last year the Taiwanese trade promotion agency MEET TAIWAN launched Asia Super Team, an Asian business contest to promote the island as a desirable destination for meetings, incentives, conferences and exhibitions.
In its second year, the contest has been expanded to Australian businesses, with the Aussie finalist winning an all-expenses-paid tour of Taiwan to experience the beauty of the country’s incentive offering. The global winner will receive an incentive travel package to Taiwan worth USD 50,000 plus MEET TAIWAN will donate USD 5,000 to a charity of the winner’s choice.
The Asia Super Team contest starts with an online proposal submission, followed by public voting to determine the finalist from each country – this year being Australia, Japan, South Korea, Singapore, Malaysia and Thailand – who will win a trip to Taiwan to attend the final stage of the competition.
Often overlooked by MICE (Meeting, Incentives, Conferences and Exhibition) travellers, Taiwan is a unique destination. While the West Coast strip is one of the world’s largest electronics manufacturing centres, most of the island is rugged and picturesque, overlaid with a complex Twentieth Century history. The capital of Taipei and the second city of Kaohsiung are vibrant, global cities.
To enter the competition the online stage invites organisations to submit an itinerary proposal illustrating their passion and understanding of Taiwan’s incentive travel attractions. The contestants then share their proposals on social media to help attract the highest number of public votes, determining the finalists who will go through to the tour in Taiwan.
For the successful finalists the tour of Taiwan includes participating in a five-day-four-night competition that will test them with a series of team-bonding challenges. These may include hunter training in an indigenous tribe in Leshui; performing a drum session with Grammy nominated Ten Drum Art Percussion Group at the Ten Drum Ciaotou Creative Park in Kaohsiung; and singing popular Taiwanese songs on board Taiwan’s parade floats.
The public can vote for their favourite proposal on social media to be entered into a draw to win round-trip China Airlines air tickets to Taiwan.
The overall winner will receive an incentive travel package to Taiwan valued at USD 50,000 and a donation from MEET Taiwan of USB 5,000 to the not-for-profit of their choice.
Registration and proposal submissions to Asia Super Team: Team Up for Good are open and run until 30 August with the public voting running from August 3 until 30 August 2015. You can enter through the MEET TAIWAN website.
As one of East Asia’s economic powerhouses with a fascinating history and spectacular scenery, Taiwan is well worth a visit.
Is technology taking us into a post-capitalist era?
Is capitalism dead? Journalist Paul Mason discusses his book outlining a post capitalist future on a Guardian Live panel that covers how technological change is undermining the foundations of what we understand to be capitalism today.
While it’s arguable that capitalism is dying, more likely its evolving away from the current corporatist, consumerist model driven by easy credit, the panel makes some excellent points about how technology is changing the underpinnings of our society’s economic structures.
While the video’s long at 90 minutes, it’s well worth watching for some interesting observations on how our society and economies are evolving in a connected century.
The Indian government looks to creating a digital startup culture
“If Indians can work in Google. Why can’t Google be made in India?” Indian Prime Minister Narendra Modi asked last week when he launched the Digital India program.
Digital India is an ambitious project based on three areas of vision; getting infrastructure to all billion Indians, digitally empowering those citizens and improving government through the use of technology.
In the past, India has been notable for its slow, bureaucratic business ways but Prime Minister Modi is promising to change all of that under the Digital India initiative.
“The world is changing, quicker than ever before and we cannot remain oblivious to that. If we don’t innovate, if we don’t come up with cutting edge products there will be stagnation”
That task though is necessary as South Asia has for decades lagged the growth of the countries to their East however now countries like India, Pakistan and Bangladesh have the benefit of younger workforces while powerhouses such as China, Japan and South Korea age.
Should we see an Indian Google in the near future it won’t look like today’s Silicon Valley giants given the cultural differences between America’s Bay Area and India’s business communities.
However if we do see an ‘Indian Google’ it will be huge given the size of the nation’s domestic market. Like China’s Alibaba, a successful local enterprise can become a global player just based on its user numbers.
There’s many barriers to an Indian Google happening but those who scoff at the idea should remember how fifty years ago the thought of Japan being a high tech manufacturer were laughed at and the idea of China being the world’s factory was unthinkable.
While the Initial Public Offering still remains one way for startup businesses to release wealth to founders and early investors, the number of mergers and acquisitions has seen the total number of public companies fall over the last two decades.
Most of the fall has been due to existing companies being bought out through mergers and acquisitions while there have been fewer new businesses listing to replenish the stocks.
Last year we interviewed Don Katz, the founder of talking book service Audible which was listed in 2000 and acquired by Amazon in 2008.
Katz found the running of a listed company was onerous and more value, and investment funds, was added by being part of a larger organisation.
The view of Katz and Audible’s shareholders that there is better access to markets and capital through larger companies probably drives much of the enthusiasm for M&As along with serving to increase the economic concentration of large corporations.
Ritzholtz speculates another reason could be the deepening pools of private equity and venture capital which mean newer businesses don’t have to rush into a listing to raise funds or give founders and early investors an exit.
Another reason could be that companies have become more profitable with US corporations being more profitable than any time since before the 1929 stock crash. More money coming in means it’s easier to fund the business using cash flow and investors can make a good return on dividends rather than share sales.
The cost of money could also be affecting listings, with debt so cheap companies can raise bonds cost effectively without diluting their equity or having the hassle of running a listed corporation.
Finally, it may be the ease of setting up a business makes listing not so necessary. A software company needs nowhere the capital required by a manufacturing venture so going to the market just isn’t necessary.
Should the lack of listing be a permanent thing then again we may see another force changing management and business cultures.
An evolving workforce means changing markets, something that businesses have to pay attention to
While the discussion of the workforce of the future focuses, quite rightly, on the role of workers how employers and businesses fit into a changed economy is important as well.
For businesses, the future of work affects not just the staff they employ but also the markets they cater for as those workers are also their customers. This is even truer for small businesses catering for local markets.
The Committee for Economic Development Australia (CEDA) report issued last week describes some of those shifts in the economy and they are as important to businesses as workers.
Where the money is
The key thing from the report is that some communities are going to be more seriously affected by automation than others. The map of Australia that accompanied the CEDA report showing the likelihood of jobs being lost in across the nation underscores that imbalance.
In those areas expecting large disclocation, business is about to get tougher as workers find their skills are no longer valuable in the face of automation.
Similarly, if local industries are becoming more automated then businesses servicing those industries are also going to need the skills to meet their customers’ more advanced needs.
Consumer facing risks
So small businesses in those districts of great disruption have to consider their markets; if they are consumer facing then their customer base could be shrinking while if they cater to other businesses then capital investment and finding skills in the new technologies are going to be required.
Even there, the picture is cloudy as upstream industries will be affected. A town that serves as an agricultural centre, for example, will see smarter farms using less labor.
In that town, those businesses servicing other businesses that serve local consumers will see their market getting thinner while those servicing the smarter farms and processors will need to buy new equipment and find workers with the skills to operate it.
This isn’t a new phenomenon, it describes what’s happened to rural communities around the developed world as farming became industrialised through the Twentieth Century and the process is continuing as combines become self driving and automation replaces a lot of tasks currently done by labourers or manually operated machines.
Challenging the commuter belt
The question though is not just for rural enterprises, it applies for businesses everywhere as the workforce changes. It may well be the areas affected the most are commuter belt suburbs where white collar workers are displaced by artificial intelligence and algorithms creating problems for the local economy that’s based on services the needs of those middle class households.
It’s difficult to say for sure and that’s why the CEDA measures are based upon probability. For business owners and managers though, they’ll need to watch shifts in their marketplaces closely and watch for the opportunities that will undoubtedly arise from a changing economy.
The future of work is going to need new classifications of workers
With the ‘sharing economy’ becoming more widespread and freelance workers possibly being the norm in the future, the question of how are they defined arises.
The simple answer is they become contractors after the California Labor Commission ruled for an Uber driver in a dispute over expenses incurred on the job. However it’s still possible that the level of control many of these services exert over workers may see many defined as employees.
For the ‘sharing economy’, the definition is important as the business model depends on shifting all the costs onto the contractors and customers. The service, like Uber and AirBnB, is only there ostensibly as a platform to match buyers and sellers.
Buzzfeed’s Caroline O’Connor suggests a third definition of worker, a ‘dependent contractor’. Under this category contractors would receive social security benefits, insurance and other features of permanent employment with the flexibility of being on call.
In many ways O’Connor’s suggestion is similar to the national insurance schemes of many European countries where workers contribute towards their eventual retirement or for the benefits they may receive should they be unfortunate to become sick or unemployed.
While the suggestion is worthwhile, it’s still not hard to see how the ‘sharing economy’ companies would want to put their contractors in whatever category reduces their costs and risks.
The discussion about workers’ protection and social security benefits needs to be had as we enter a period of economic change not dissimilar to the 1920s or late nineteenth Century where work patterns changed and there was substantial dislocation.
Technology promises to free the next generation of poverty and labor but a new social compact will be needed.
How will the future workforce look? A report by Australia’s Committee for Economic Development seeks to give a picture of how employment might look at the end of next decade.
Australia’s Future Workforce is a weighty tome covering the current structure of the nation’s economy, its trends and the factors affecting employment over the next two decades.
The report makes it clear the economy will be very different observing 40 per cent of Australia’s workforce, more than five million people, is likely be replaced by automation over the next twenty years.
In the opening chapter, Reshaping Work for the Future, Professor Lynda Gratton of the London Business School describes the share of the future workforce where roles are more specialised and automation increasingly takes over less complex jobs.
An important aspect Professor Gratton also flags is the aging population which in a rapidly changing economy will require frequent retraining.
From a technology perspective Professor Hugh Bradlow, the Chief Scientist of Telstra, suggests the workforce will be more mobile and employed in fields less amenable to computerisation involving skills like social intelligence, creative talents and social intelligence.
Those without those skills are deeply at risk with Bradlow being the first in the report to cite the likelihood that two fifths of the workforce are at risk of losing their jobs.
Bradlow concludes his analysis with the observation that if we work to satisfy our basic needs then machines looking after these requirements free up the workforce to address higher intellectual pursuits.
Rethinking management
Belinda Tee and Jessica Xu, both of IBM, agree with Bradlow that technologies like IBM Watson will help skilled workers like doctors and teachers deliver their services more efficiently.
Xu and Tee suggest change in the workforce will need to start at the top with managers needing to enhance collaboration within the organisations and build diverse teams working on open data.
A two speed economy
How the effects are distributed across the workforce is probably one of the most important aspects of this report with a team from the soon to be abolished National ICT Australia mapping the regions that will be most affected by automation.
The news for many of the country’s regions is not good with the survey finding workers in most areas have more than a fifty percent chance of losing their jobs to automation.
In many respects the CEDA report is disappointing, while it flags many of the issues facing today’s workforce and the forces shaping it, the survey doesn’t identify the industries and occupations likely to benefit.
Despite not stating the growth sectors, the report’s overall view of the future workplace is optimistic as Telstra’s Hugh Bradlow says: “The change could result in a new generation free of poverty and the burden of labor, thereby unleashing the next wave of human innovation and creativity in directions we can never imagine.”
This may be the case but the to achieve that will require, as the report later suggests, a new social compact.
It’s building that new social compact which could be the greatest task ahead of us.
The lean startup model is based on getting the minimum viable product into the marketplace and should users be enthusiastic seeking investor funding to develop the business further.
Guy Kawasaki described this in an interview last year where he described the minimum viable valuable product idea of getting the most basic service to market at the lowest cost and then getting users and investors on board.
However it might be that model only works where “startup entrepreneurs have full access to eager and intelligent business customers, hosts of industry angels and venture capitalists with money to burn,” reports Canada’s Financial Post.
Blank came to that conclusion on a trip to Australia where he met with sports tech startups: “Meeting with a coalition of entrepreneurs in the tech and sports space, he realized the lean startup framework didn’t account for the vagaries of local economies. Australia sports-tech entrepreneurs trying to scale their businesses would find that their major customers are in the U.S., halfway around the world. And unlike most Valley startups, the Aussies would need to source manufacturing expertise — which means budgeting for several trips to China.
The problems facing Australia’s entrepreneurs probably extend further as the nation’s investors are notorious risk averse and the high cost of doing living means the burn rates for startups are much harder.
Blank’s recommendation is any region looking at establishing a startup community should identify its own strengths and advantages then build its own playbook.
We can be sure the next Silicon Valley – be it in the US, China, Europe or anywhere else in the world – will have different strengths than the Bay Area today.
Published last February, The Most Common Job in Every State used US Census data to examine which were the most common jobs in each state. The change with each census starkly illustrates the changing workforce and, worryingly, a declining diversity.
In 1978 US states boasted a mix of occupations ranging from farm hands and farmers through to machine operators and secretaries. By 1986 secretaries dominated.
Then came the personal computer and the role of the secretary declined to be replaced by truck drivers, although the NPR article notes the definition of a truck driver by the US Census office is very broad.
Interestingly truck drivers themselves seem to have peaked in the 2006 Census with software developers and primary school teachers overtaking them.
For those truck drivers – and forklift operators, couriers and delivery staff who also seem to come under the definition – the future probably doesn’t bode well as automation is increasingly going to take their roles.
The NPR article is an interesting series of snapshots of how an economy is a dynamic beast, assuming industries and the roles in them are static is misguided if not downright dangerous.
Indeed we may well find in twenty years time we’re commenting on the rise and decline of software developers.
What’s an interesting footnote, and worth considering, is what happened to all of the secretaries displaced by personal computers during the 1990s? That’s probably worth considering in another post.
Deceased tycoon and embezzler Alan Bond’s life story provides a good parallel for Australia’s economic development
Last week convicted fraudster and one time Australian national hero Alan Bond passed away. In many respects Bond’s rise, fall and comfortable dotage tells us much about Australia today.
Originally born in England, Bond was a ‘ten pound pom’ – like this writer and two of Australia’s last three Prime Ministers – whose family took advantage of subsidised immigration programs to leave the cold climate and dismal British economy for sunnier, more prosperous parts.
Building the Australian dream
In Australia Bond prospered. On leaving school he became a sign writer and set up a business where he quickly gained a reputation for sharp practices and cutting corners. However as with much of his generation real wealth was to be made in property speculation.
As Australian cities expanded through the 1960s, developers and speculators were at the forefront of the nation’s economic growth. Perth, Bond’s home town, doubled in size between 1961 and 71 and the once dodgy sign maker made his mark as a wheeler and dealer as he traded properties and build his fortune.
As the 1980s began a cashed up Bond was ready to take advantage of the economic orthodoxy of the time that to compete internationally, Australian businesses had to consolidate domestically to gain the scale required to be global players.
Bond added to his claims in 1983 when he wrested the America’s Cup out of the cold dead hands of Long Island’s Newport Yacht Club. Suddenly businessmen were the national heroes and Australians, particularly politicians, fell over themselves to bask in the glow of the nation’s entrepreneurial summer.
Dancing on the world stage
Around the time of the America’s Cup win the newly elected Hawke Labor government deregulated the Australian banking industry providing a ready supply of hungry financiers prepared to fund the global ambitions of Bond and his contemporaries.
The rest of the decade saw Bond leading a wave of Australian entrepreneurs using easy money to build international empires. Bond himself ended up building one of Australia’s brewery duopoly, holding prime Hong Kong property, buying the nation’s most popular TV station and owning a Chilean telephone company.
Naturally much of his money ended up in Switzerland and Lichtenstein, something that would work in his favour early in the 1990s.
The larrikin streak
Bond’s disregard for the law, investors and anyone unfortunate to get between his cronies and a bag of money – politely described as a ‘larrikin streak’ by many – continued as regulators and governments indulged his behaviour.
One good example of the free pass he received from Australian regulators in the 1980s were his insider dealings with his then mistress Diana Bliss, the latter of whom exquisitely timed a purchase of a small energy exploration company stocks in 1988 a week before Bond Corporation announced a take over offer.
Regulators at the time dismissed any claim of insider trading after being assured that neither Bond nor Bliss would ever countenance such behaviour, the Sydney Morning Herald later reported.
When the luck runs out
Eventually the 1980s Australian economic miracle and the entrepreneurs leading it proved to be chimeras based upon property valuations. When the 1990 downturn hit, the rampaging Aussie business heroes all quickly fell as their overindebted empires collapsed.
Bond’s personal fortune however survived thanks to his judiciously salting away assets controlled by loyal advisors. His 1994 bankruptcy hearing ended in farce when he successfully convinced the court he was suffering dementia and couldn’t remember anything of his business dealings.
He couldn’t stay too far ahead of the courts however and ultimately Bond served two prison terms totalling four years for dishonestly pillaging companies to keep his operation afloat.
At the same time Bond was being chased through the courts, Australia’s banks were licking the financial wounds incurred from their irresponsible exposure to the nation’s entrepreneurs. The lessons they learned define modern Australia.
Bearing the brunt
The country’s small business community eventually bore the brunt of the Australian banks’ losses as lenders’ balance sheets were rebuilt through high interest rates, massively increased fees and charges and tightened lending criteria. Many of those high fees and rates continue to cripple Australian business twenty-five years later.
Adding to the Aussie small business sector’s woes, the 1998 Basel I Accords were coming into force favoring property lending over business finance. Increasingly it became harder for any Australian businessperson to raise money from local banks while property speculators were welcome.
Over the next twenty years the result was stark. One chart from the Macrobusiness website illustrates the huge growth in Australian residential property lending and the stagnation of business finance since 1991. Only at one stage, in 2008, has business lending matched the levels of the late 1990s.
That shift to an economy based upon property prices, particularly speculation on residential accommodation, has served Australia well with the nation not experiencing a recession since the 1990s downturn.
The Australian economic miracle
Australia’s success allowed Reserve Bank governor Glenn Stevens to sneer in 2010 that Microsoft founder Bill Gates’ warnings about the Australian economy lack of diversity were misguided and foolish – the mining boom coupled with never ending property price growth guaranteed the nation’s prosperity.
In this respect, all Australians have become Alan Bond. Just as the bold riders of the 1980s boom based their future on property valuations so too have Australian households and the entire economy thirty years later.
Hopefully for Australians in general it will end better than it did for Alan Bond in 1996.
One though should not weep too much for Alan Bond, after being released in 2000 he quietly rebuilt his empire and in 2008 BRW magazine estimated his wealth at $265 million and named him among the 200 wealthiest people in Australia.
Time will tell if Australians share the deceased tycoon’s luck but in a way we’ve all become little Alan Bonds now in our dependence upon the valuations of our real estate holdings and the indulgence of those financing our lifestyles.
It may well be having a few bob hidden away in Switzerland might the best way for Australia’s indebted homeowners to protect their future.
The economics of cheap data change industries the same way abundant energy defined the Twentieth Century
I’m preparing a corporate talk for next week on the changing economy and one theme that sticks out is how the Twentieth Century was defined by cheap energy and physical mobility as mains electricity and the internal combustion engine became ubiquitous and affordable.
The picture accompanying this post illustrates that shift, Sydney’s Circular Quay a hundred years ago was just at the beginning of the automobile era. The previous fifty years had bought trams, the telegraph and reliable shipping but the great strides of the Twentieth Century were still to happen.
At that stage the steam engine and advances in electrical transmission had bought reliable power to the masses, although it was still expensive. What was to come over the next fifty years was that energy was about to become cheap and abundant. That drove the suburbanisation of western societies and the development of industries around the availability of cheap power and a mobile workforce.
At the time though information was still expensive, the control of broadcast networks by a few license holders and print operations by those who could afford the massive costs of producing and distributing magazines or newspapers made data difficult to get and worth paying for.
Today we’re at the start of a similar shift in information; it’s no longer expensive or difficult to obtain.
What that means for the next thirty years is what industries will develop in an economy where information is basically free and ubiquitous. Just as cheap energy created the consumerist economy, we’re going to see a very different environment in an age of cheap data.
