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The dangers of a “winner-take-all” economy

As with any other economic system, capitalism is capable of creating market failures. With no defined rules, crooked politicians and businessmen can often lead to companies that by definition are very similar to large-scale criminal organizations. This is one of the worst examples, but it is a very human-centric one. In the future the greatest potential to generate even bigger market failures will come from technology.

One of the risks of technological progress is that it has the potential to replace workers across the spectrum. Manufacturing jobs will be lost when robotics begin to usurp workers in factories, and white collar office jobs are also at risk of being replaced by software. The most important question now is what will happen to employment and how will our society adapt to this change?

One idea is the introduction of Universal Basic Income (UBI). UBI was first advocated for by Thomas Paine in the 18th century and involved paying citizens a certain sum of money and providing a basis salary for everyone to live on. UBI is built on the idea that regardless of an individual’s employment status, they will receive a basic income to do with as they like – some will build a business, others will just sit back in the sun and enjoy it for what it is.

One of the benefits of this idea is that it is acceptable to both sides of the political debate. The Right like the idea of giving individuals autonomy and the subsequent gains that can bring to the private sector. The Left, on the other hand, are more aligned with the socialist undertones of the idea itself. UBI is becoming more viable as a model with each technological breakthrough and could be one of the most reassuring ways of keeping a population debilitated by unemployment motivated.

As unemployment continues to increase and company outlooks change, there will be more pressure to explore different ideas such as UBI. Technology, and in particular, artificial intelligence/machine learning, is not only disrupting the economic marketplace on the ground, it is also causing a ‘winner take all’ economy effect across the marketplace as a whole.

A new acronym, FANGs, describes four of the market’s most successful and invested in companies. Facebook, Amazon, Netflix, and Google have been making the most gains over the past five years. One of the reasons they have been so successful is thanks to what economists call ‘network externalities’ – when a transaction between party A and party B influences a third party (party C), who was not involved in the original transaction.

Facebook, Amazon and Google have now amassed $140 billion altogether. Netflix is continuously investing and creating new business and Apple currently has $256 billion. 

To understand this concept more clearly, take Google for example. Google’s clients improve Google’s search engine, as they interact with the platform (A to B) they are generating more data (party C) – and subsequently helping their system to improve. When you have this kind of externality in economics, you have runaway economies and companies that are monumentally ahead of the competition.

This circular recursive phenomenon produces companies that are so ahead of everyone else that in a short time they become monopolies and the ‘winner take all’ economy is realised. This has already happened in technology, but with artificial intelligence, it is likely to become more evident across many other sectors.

Retail, for example, has Amazon. Amazon is home to an “El Dorado of Data” which means that their capabilities are tenfold of that of their competitors. With Alexa, they are still showing that the gap between them and the competition is growing as they continue to reiterate and improve their ecosystem further. History tells us that when companies become so profitable they can also become quite dangerous – as they have a tendency to influence society in unfair ways. Eventually, every sector is going to be dominated by one or two companies. This creates an uncompetitive economy – including all of the high prices and low employment that is synonymous with that.

So what can we do to solve this increasingly emerging problem? Traditionally, what happens in this kind of situation is one of two solutions. One solution is controlling the prices – with the government regulating the prices of the product. This, in theory, could work for a company such as Netflix, but unfortunately, it doesn’t work for Facebook or for Google as they don’t charge for their services.

The second solution is that a government can use is forming anti-trusts – the government splits up a company with too much control into several smaller ones. The most well-known example would be Standard Oil – a company that was once owned by Rockefeller who at the turn of the 20th century held 90 percent of the refining market in the United States. In order to mitigate its monopoly, it was subsequently split into thirty different companies by the government and this helped remedy the market failure for a century.

Established in 1870 by John D. Rockefeller, Standard Oil was an oil producing company but also involved into the transporting, refining and marketing. It was the largest oil company for its time. 

However, this is not really going to work for technology because even if you split a company like Google into thirty companies, eventually one of the ‘new’ search providers will surpass the competition once again thanks to the circular recursive phenomenon. Ten years down the line we will inevitably find ourselves in the same situation.

A different solution, identified by University of Chicago professors Luigi Zingales and Guy Rolnik, could come from more recent history. In the past, we used to have only a few different cellular companies, which meant little competition. The main reason for this was that if you moved from one company to the other you were forced to change your phone number to a new one. Consumers rarely wanted to opt out of their phone numbers, and as such hardly ever switched to different providers. Once the government told companies that the numbers belonged to the clients, competition grew and prices dropped rapidly.

Zingales and Rolnik go on to explain that the same principle can try to be applied to Facebook, Amazon, Netflix, and Google. You can try to legislate an individual’s ‘social graph’ (that is, a map of all of the digital connections a person has made) in such a way that all data and metadata gathered by these giants on an individual belongs to them and them alone. If you want to switch from one service provider to another, then the provider you are already using must surrender all of the information they have on you and give it to your newly selected provider. This porting of data to competitors will strip the ‘winner take all’ giants of their monopolies – providing space for competitors to arise – they could, for example, offer something different such as better or more niche UI design. Such a system would create competition in the sectors we currently see none and provide opportunities for businesses stuck in sectors with decreasing amounts of opportunity.

Ultimately, competition creates more jobs, more innovation and prevents a handful of companies from wielding an unethical amount of power. These principles will, of course, require some form of government sanctions, and it is worth noting that this is also a solution for a predominantly Western, capitalist democracies. However, it is without a doubt obvious that more imaginative approaches are needed to provide solutions to an ever growing problem. A “winner-take-all” economy, with only a few huge corporations dominating sectors, will mark a dark period of economic history. Coming at a time when widespread job loss is likely, it is critical that we find a solution to slow this process down.

What is Li-Fi?

Light, the potential creator of life on earth, doesn’t get much of a mention on the world stage anymore. But with Li-Fi, it looks like light is once more going to help us reach a brighter future. Li-Fi stands for Light Fidelity, it is a form of visual light communication and is essentially the fusion of Wi-Fi and light.

Li-Fi hitchhikes across the spectrum of visible light, travelling across space fired from Light-Emitting Diode (LED) bulbs. Like the smoke signalling of old, the transmission occurs during a rapid switching on and off of the bulbs – fluctuations that occur so fast that we are unable to even register them. This data is then registered by a special piece of equipment resulting in wireless Internet connectivity.

If you are already familiar with the term “faster than the speed of light” – then you already have an idea of how fast Li-Fi can transfer data: up to 10 Gbps to be exact, or approximately 250 times faster than the speed of ‘superfast’ broadband. The embedded and easily accessed market of LED bulbs also means that we can further the reach of Wi-Fi to places thought previously out of grasp – aeroplanes and submarines for example.

But it gets even better, today, diminished personal privacy and cybersecurity are two of the cornerstones of our fears of the future. With Li-Fi, your digital defence is given a new bulwark thanks to the simple fact that light is incapable of penetrating walls – meaning that it would be impossible to hack into a Li-Fi network unless you were present in the room. Not only that, but because it has zero electromagnetic interference it can be used in places that Wi-Fi interferes with crucial systems such as nuclear power stations and hospitals.

The final and perhaps most crucial point in regards to Li-Fi is that there is a unnervingly-named “Spectrum Crisis” on its way. Wi-Fi, which uses a finite amount of radio waves, is congested and reaching its apex. However the visible light spectrum which Li-Fi relies on is 10,000 times larger than the entire radio frequency spectrum meaning that Li-Fi could therefore diminish the pressure on Wi-Fi and quash any danger of running out of online capacity.

So what is Li-Fi? In a world where we are not only faced with diminishing capacity but demand for better efficiency, Li-Fi could be our knight in shining armour.

A tale of space and time, and of running out of both

The wheels of retail are turning and the industry is witnessing unprecedented change across all continents, spaces and industries. Understanding why these changes are happening, and their underlying meanings, is crucial in bearing the force of change that is sweeping retail right now.

To begin with, we have to look at the physical space retailers occupy. This design and use of this space is pretty much the same it has been decades ago. But recently, we are witnessing an increase of mixed and blended formats between brands – two brands partnering on the same space or brands adding food or bar concepts into the store – and this is set to continue. On top of this, the rise in e-commerce and its brutal efficiency allows us to rethink how we view consumer behavior in the city. The classic department store model is dying, and within the next decade, we will see completely different retail formats. Brands will use less space in different ways – not simply sending customers up and down the aisle. Instead, customers will go to stores to experience products and services, and later purchasing online.

Brands will learn how to work with less space. A huge amount of inventory will come to market making space for new concepts and new creativity in urban planning. We will hopefully see lots of green spaces and new pedestrian zones; the entire inner city will be transformed.

Credit Suisse estimates retailers will close more than 8,600 locations around the U.S. this year. Despite this, the $274 billion U.S. apparel market – the world’s largest, according to Euromonitor – remains an attractive next step for European retailers looking to expand.

Retail Banking is a sector that will look significantly different in the next ten years and will be disrupted beyond recognition. Early this year Wells Fargo announced that it plans to close 400 bank branches by 2018 following its closure of 86 branches in 2016 in a bid to save $2 billion in costs. As banks are selling intangible goods, the rise of new, tech-driven business models is unavoidable.

One can imagine a self-service retail banking location that operates without any humans present. Specialized banking services can be managed through video calls, which would be the only human connection between customer and bank.

Do you remember the banks of the past? They were big warehouses to store paper money, now we trust a digital number on our home banking app.

In the Automotive sector, changes to retail strategy will happen at a slower pace. Cars are still very much emotional products, expensive products and complex products. Most people want to drive a car before purchasing it, and get advice when configuring the details. Dealersocket and Google did a joint research project and found out hat only 33% of consumers would like to buy a car online.  Technology will take longer to disrupt the retail side of the industry. Tesla has one of the most advanced e-commerce channels, yet for now stores are the bridge to that future. But what if you buy you Model S in 10 years and you pretty much know exactly what you are getting?

In fashion, ten years ago retailers were convinced that stores will remain the most powerful sales channel. You can never replace the touch and feel when buying clothes. Now, look at the success of Amazon and Zalando. Both are on the verge of dominating parts of the fashion industry in the US and Europe. And there are hundreds of small, data driven online fashion retailers that are attacking the most lucrative fashion verticals. One of the more established ones, London based company FarFetch, a premium, boutique focused e-commerce platform, now has a billion-dollar valuation.

But in fashion there are also a number of highly successful brands with a dominant retail sales channel. Most prominently, fast fashion retailers like H&M, Zara and UNIQLO have been highly successful by innovating around discovery, production and supply chain management.

So which companies are doing interesting stuff? Apple is still leading the pack when it comes to a holistic user experience, from product discovery to purchase, after sales and support. Amazon has arguably the most powerful digital retail infrastructure, from frontend to backend, and with the acquisition of Wholefoods, and plenty of initiatives around innovative retail technologies, we should expect to see a number of innovations coming out of the Seattle-based company in the near future.

When looking at the startup world, the US still has a lot of the important ingredients for success: a huge economic zone with similar consumption patterns in combination with the largest venture capital market in the world, and the largest retail market in the world. But China is a close second, and has the potential to out-innovate the US in some areas soon.

Retail will transform, and, like in many other industries, we are about to see the biggest changes in history in the coming years. A very exciting time for companies and people ready for change, ready to adapt to an accelerating future, driven by technology and and constantly changing consumer behavior.

The post-virtual world: Invisible interfaces and our experience of reality

Later this century, we will enter a “post-virtual” world. While pundits announce Virtual Reality’s (VR) coming of age, arguing how far and fast the technology might advance, these are concerns of the next decade or so. Anyone living for a couple more decades will encounter a world where VR and its cousins, Augmented and Mixed Reality, become commonplace.

What happens as the distinctions between “real”The and virtual fade?

While today the distinctions between virtual and real are relatively easy to discern, what happens as these distinctions fade? Research trajectories already suggest worlds where modified or synthesized environments are experienced as deeply real. As this occurs, they are likely to become considered as alternative, complementary versions of experience. Reality from a wider palette.

We can already discern capabilities that will enable this journey. We’ll address two here: invisible interfaces and intelligence-to-intelligence (i2i) communications.

How do you move your arm? The interface exists, and you’re blissfully unaware.

How do you move your arm? Do you remark, “Siri, move my arm,” or punch a keyboard? Of course not. It just happens. The interface exists, and you’re blissfully unaware. The same will occur with respect to our interactions with computing systems and eventually with each other. Through invisible interfaces.

Human-computer interactions are rapidly moving beyond screens and keystrokes. Voice-activated Human Computer Interfaces (HCI) that use natural language capabilities in smart phones are becoming common. As impressive as voice interfaces are, technologists have already surpassed these with direct mind-activated systems, or Brain-Machine Interfaces (BMI), such as the direct control of artificial limbs illustrated by the work of John Donoghue’s team at Brown University.

Technology trends extrapolate to vanishing interfaces between brains and technologies.

This trend extrapolates to a disappearing interface between brains and technologies. Currently, BMIs are either not accurate enough to replace traditional methods, or too invasive to be offered outside of clinical settings, but thought activation of peripherals is already being pursued by research labs and technology companies alike. From 2013 – 2015, the European Union funded a major survey of BMI research and development that resulted in recommendations for significant applications within the next decade.

Such interfaces could lead us to bypassing some of our most established modes of communication. People might still desire keystrokes or voice interfaces in certain circumstances, similar to how some people prefer a hand-written letter to an email. Nonetheless, as these technologies become more capable, they are more likely to become mechanisms of choice for an ever-wider range of purposes.

Intelligence-to-intelligence (i2i) communications— metaphorically, communicating eye-to-eye.

If brains can interface directly with machines, then two or more brains could potentially interact directly as well. In 2013, Miguel Nicolelis and his team at Duke University electronically connected the brains of two rats, perhaps the first demonstrated brain-to-brain interface. Transmission and translation across invisible interfaces enabling seamless communications between humans, or between various forms of intelligence. True “intelligence to intelligence” communications, or i2i — metaphorically, “eye-to-eye.”

As our understanding of language advances, the ability to parse content generated in the brain, deriving and conveying semantic meaning, could enable us to overcome the spoken language barrier. Transfer a thought from one brain— human, artificial or cybernetic— to another without the need for verbal communication. Verbal communication will likely remain essential for humans for some time, but we have no way of knowing the choices our descendants will make after they have assimilated i2i capabilities.

“Society progresses by increasing the number of things we can do without thinking.” —Alfred North Whitehead

Sensory and cognitive systems seamlessly supplementing the biological brain could support a range of activities without conscious thought, analogous to the autonomic nervous system controlling our basic living functions. A genius of such systems would be the continuous operation of essential functions in the absence of conscious intervention. As British philosopher and mathematician Alfred North Whitehead suggested, “society progresses by increasing the number of things we can do without thinking.”

From “Virtual” to a Wider Definition of Reality

As comfort with VR advances, the notion of virtuality will change, perhaps fading altogether. What we generate and experience, with increasingly subtle, disappearing interfaces, would thus become recognized as additional aspects of reality — wider and more diverse, yet no less real.

The notion of virtuality will change, perhaps fading altogether.

Consider the experience of dreaming. During sleep the brain generates a rich environment with realistic encounters that fool us into belief. Only upon waking do we realize the fact that these existed only in our dream world. Current VR systems fail to generate such a comprehensive experience. We know we can remove the goggles and with them our virtual world. Similar to waking from a dream, but we are fully conscious of the choice to exit a VR experience. In most dream states, the choice to exit does not seem operative. Since we trust our senses more than we might recognize (e.g., we rarely question the impressions our eyes propose) an interface capable of thwarting cognitive disbelief might support experiences interpreted as real, generating a full set of emotions, desires and thoughts.

The first screening of a filmed event, the arrival of a train into a station, “caused fear, terror, even panic.”

One of the first examples of a filmed scene presented to a live audience, L’Arrivée d’un train en gare de La Ciotat (August and Louis Lumière, 1896), showed the arrival of a train into a station. As the steam locomotive approached, more realistic that any virtual experience yet presented, journalist Hellmuth Karasek commented in Der Spiegel that, “it caused fear, terror, even panic.” While historians debate the intensity of the reaction, many who experience recent VR technologies report dissonance, even fear. Walking off a simulated cliff creates a notoriously uncomfortable, even frightening physical and emotional response—even while standing on solid ground. We know we will not plummet to our deaths. Instincts overtake rationality.

The only way we’ll know a well-simulated reality is simulated, is that we’ll know it is so.

The only way we experience what we know as reality is through stimuli collected by our senses and interpreted by our brains. The only way we’ll know a well-simulated reality is simulated, is that we’ll know it is so. Absent any other frame of reference or qualifying information, simulated stimuli could generate experiences identical to reality. While the proximate causes might differ, our experience could be the same. If we can simulate what we experience as real, we can also invent new experiences such as a comprehensive feeling of unaided flying (as described in my post here on January 2, 2017). No longer simply pale simulacra, the dimensionality of ‘real’ will expand and diversify, subsuming what we today consider virtual. The post-virtual world is coming. Our concept of reality will need to evolve.

This article was first published in the Huffington Post on 21/01/17

3D-printing the future

We sit down with entrepreneur Lin Kayser, one of the founders of Hyperganic, a startup focused on developing advanced software technology for 3D printing, and discuss some of the many industry-changing doors 3D printing is opening.

How will 3D printing change the design process?

With 3D printing it now only takes a couple of days to print an entire building. It doesn’t matter if your building is intricately shaped or has curves or has lots of curves and complex designs because it costs exactly the same amount as creating a building that’s just rectangular. A lot of the stuff around us is limited by our production process.

Do you know why your room is rectangular? It’s the cheapest way to build it. Why doesn’t your desk have ornamental legs? Because in the current manufacturing process it is very costly to produce something with sophisticated shapes. This all changes when 3D printing processes, also called Additive Manufacturing, are used. This is really the path that excites me and I think eventually it will permeate into almost every aspect of our lives – making designs possible that designers currently wouldn’t even contemplate because they could never pay for the production.

Any industries, in particular, making big gains?

Right now, mostly it’s industries like aerospace, where, for example, a small reduction in weight can translate to millions of dollars saved in fuel costs. But I’ll give you a few examples of industries that most people don’t think of, when we talk about Additive Manufacturing.

For example most of the 3D printed clothing that we’ve seen so far is very ornamental and not really practical because it’s mostly made out of rubber or plastic or something like that. But now, the first printers are here that can print very intricate fabrics.

Eventually it will revolutionize how we build/create clothing for ourselves because right now clothing is basically stitched together from rectangular pieces of material as that’s the only way we can build it. Imagine if you could if we could three-dimensionally shape your T-shirt, how would you then design it? I think it would be will be quite transformative.

It’s the same thing with pharmaceutical companies. There is like a lot of research going on with customized medicines: instead of taking five pills you can just take one that has all of the medications 3D printed together. Then there are scientists who are starting to print living organs. It’s still experimental, and it doesn’t work completely yet. But I’m pretty sure in the next decade we will be able to print replacement parts for our bodies.

There is also a huge interest currently within the food industry. Right now it’s mostly for decorative purposes, but there are several startups that are interested in printing food that looks great, tastes perfect and contains all of the nutrients that you need.

I mean the interesting thing is that Additive Manufacturing works with essentially every material imaginable, whether it’s steel or plastic, chocolate or even living cells. And so eventually it will end up in almost every industry.

Which businesses should be approaching 3D printing?

If you deal in hardware or build hardware, it’s a no-brainer, you should buy a 3D printer as it accelerates prototyping dramatically. Companies that generally work with physical objects should have at least a few 3D printers so that people learn to play around with them, and actually get to know what the process is capable of.

Oftentimes it doesn’t quite make sense to invest in 3D printing for end-use parts, because, unless you redesign your objects, the process is too expensive. But if your designers and engineers have access to printers, they will start to come up with designs that cannot be fabricated in any other way. Maybe one of these designs will eventually be so advanced that you will jump into the space of 3D printing for end-use parts. It’s not going to really take off as a technology unless we begin to give designers and engineers time to get to know it.

How will Additive Manufacturing affect the supply chain of industries?

It will disrupt almost every part of the supply chain because it essentially eliminates it entirely. If you look at the factory today – it’s mainly a big logistics hub. There are lots of parts going in on one side and you have lots of assembled product coming out of the other. Now I believe that 20 years from now we will have 3D printers all around us – there’s no reason the supply chain and fabrication of products has to be centralized when that happens.

With 3D printers you can decentralize production and move production very close to the consumer. Essentially what will happen is the creation of micro-factories inside cities that produce functional parts that are then shipped to you, with ever increasing proximity. This will dramatically reduce logistics, containers will become a rarer sight, fewer trucks will be needed on the road, which is better for the environment (3D printing greatly reduces wastage anyway) and there will be fewer big factories in remote places. It will disrupt the industry as we know it.

How can 3D printing affect the developing world?

Again it will be down to how 3D printing influences supply chains. When we talk about 3D printing we mostly think about the West – ignoring the developing world. In developing countries, what is often the case is a lack of a perfect supply chain. They can’t just order stuff online and get it shipped to them within a day or even a week. So for entrepreneurs in the developing world managing a reliable logistics can be a nightmare.

If you digitize the supply chain and manufacture products on demand locally, a lot of these problems go away. There’s a good chance Additive Manufacturing will catch on earlier in Africa and other developing regions, because it offers an immediate benefit.

And in space? How will 3D printers effect what’s going on up there?

Well a company named Made in Space now actually have their second printer up on the International Space Station (ISS) and it goes way beyond that. If you think that in Africa logistics are a nightmare – just think how much harder it is to get something up onto the ISS. If the astronauts don’t have the right sized screwdriver, it costs millions of dollars to send one up to them and they’ll have to wait months for the next rocket launch.

So being able to print something like that is completely revolutionary. Additionally, in the future, the plan is to mine asteroids and print in situ. In other words, we will mine the materials from the moon or an asteroid and then use the local materials to 3D print structures in space.

And in fact it’s already being done: Made in Space used a piece of an asteroid to 3D print a part thus validating the process. So it’s not quite science fiction anymore, it’s actually doable. Obviously it requires a lot of investment and a lot of refining of the technology but we are getting there. Imagine how transformative it would be to use materials that are in space and use solar energy to print large scale structures – this is going to make space colonization actually possible because now we will be able to build for comparatively small sums of money.

What is Transportation-as-a-Service?

Fifty years ago, having your own car was a sign of adulthood, the badge of your independence and your ticket around town. Following rapid urbanisation, refined transportation methods and rising CO2 levels we are now approaching the finishing line of this mindset – all of a sudden sitting in a car alone isn’t so trendy.

TaaS stands for Transportation-as-a-Service and marks the biggest shift in mobility since the rise of automation. Also known as Mobility-as-a-Service (MaaS), TaaS has created an existential crisis within the transport sector worldwide.

“I believe the auto industry will change more in the next five to 10 years than it has in the last 50” General Motors CEO Mary Barra stated recently at the World Economic Forum. Unsurprisingly, she isn’t wrong. A recent report acknowledged that although there will be fewer cars, TaaS vehicles will be available on-demand 24 hours per day, providing door-to-door transport to passengers. Right now individually owned cars are used only 4% of the time, TaaS vehicle utilization will be 10 times that. 

So how is it going to work? There are many different ideas and many more arising daily. But in general, TaaS will be enabled by combining transportation services from public and private transportation providers through a unified gateway that creates and manages the trip, which users can pay for with a single account.

And what will charge the TaaS disruption and make car-fanatics worldwide step out of the drivers seat? The same as most things: economics. The average American family will save more than $5,600 per year in transportation costs, equivalent to a wage raise of 10%. As a result, Americans will keep an extra $1 trillion in their pockets – it’s hard to imagine any customers keeping their keys when faced with that amount of savings.

Outside of the customer (literal) journey, TaaS will also help radically transform our cities. As individual ownership dissipates, there will no longer be a need for parking or repair facilities, creating a surge in free space.

So what is TaaS? Transportation-as-a-Service is the future of transport, the future of our cities and the biggest disrupter the automotive world has seen in the past 50 years.

Learning to share

Did you hear the story of a Chinese umbrella seller who didn’t see the storm coming? If not, know that this is not a joke but a fact that occurred last July and was reported by the South China Morning Post, a story which confirms that the world is changing at a surprising pace.

Well, to tell the truth, it was not a man but a company and it didn’t sell umbrellas, it rented them. The Chinese start-up E Umbrella was born to offer an affordable solution to that age-old question: why do I have to bother taking the umbrella if I’m not sure it’s going to rain? And their answer was: rent one if you need it, by paying a couple of euro plus 7 cents every 30 minutes of use. In July, E Umbrella found itself in stormy waters because around 300,000 were never returned, having been stolen or forgotten God only knows where.

The case is both riveting and revealing because it tells us that today almost every object can be integrated into the so-called sharing economy, an economic model in which goods and services are not sold and bought anymore but lent and rented for a given time. In brief, the sharing economy flourished around the idea that it doesn’t make sense to own things when you can enjoy them without paying the full cost.

Don’t fool yourself into thinking that is a passing mania of hipster-like people who love to live fast and travel light, refusing the slavery of the materialism and capitalism’s main rule of gaining to get. The sharing economy has deep roots in our economic environment and, at the same time, it’s transforming it by reshaping our habits and mentality. According to Bank of America’s Merrill Lynch recent report, its value is thought to be around 250 billion dollars and is expected to reach 335 billion dollars by 2025.

That virtually no sector has been left untouched gives the idea of this change’s reach. There’s no need to own a car when there are companies like Turo (formerly Relay Rides), Getaround, HiyaCar or Share’ngo (to rent electric cars) which essentially are peer to peer car sharing marketplaces. Need a bike or any outdoor sporting gear? No worries, you can rent the item you need the most via Spinlister, the Santa Monica headquartered company with listings in 63 countries and users from more than 120 countries – recently acquired the Dutch platform Cycleswap.

The winning idea behind the mushrooming of these apps and sites is that of extracting value from unused or underused things, thus transforming bored owners into small entrepreneurs. Did you buy a guitar that you only play every once in a while? Rent it. Do you own hundreds of DVDs or CDs you don’t play so often? Do the same. A garden or even a large apartment can become a kennel thanks to DogVacay. But the same concept applies to people too. If you have free time to fill in a way or another, just hand yourself on the recently IKEA-acquired TaskRabbit, the virtual marketplace where people can be hired to do works, chores, and tasks for other people, things like washing the car, landscaping, fetching something somewhere and so on and so forth.

It seems the triumph of a sort of informal or neighbourhood economy but it is much more than that when you think about the weight and power gained by these share economy based economies like Airbnb or Uber. They are changing the rules of the game as far as accommodation and urban transport is concerned. The latter sector showing the most obvious impact of the sharing economy. People can now choose between many options according to their needs: car sharing, carpooling (Blablacar, Zimride), ridesharing (Uber, Lyft, Didi Dache in China, Ola in India) – the list of companies that can be mentioned is now quite long.

The result is that in many cities owning a car is useless. Some giants of the automotive industry have understood this and are taking the needed countermeasures and to jump in this new business. BMW launched the WhyBuy initiative, allowing potential buyers to get a car without buying it. One can rent a BMW vehicle for 24 months and then choose to return it, buy it or try another one.

That two major industries have surrendered to the “on demand” economy is proof that something is afoot. The rise of this consumption – without the possession business model – has been enabled by the massive spreading of social networking and ignited by the de facto disappearance of the middle class and the shrinking of the upper one both in Europe and in the US.

As shown by Giana M. Eckhardt and Fleura Bardhi in the Harvard Business Review’s book Sharing Economy, it is isn’t about sharing at all, this economic model has more to do with an attempt to have the same but to pay less: cutting expenses, choosing unprofessional services whenever possible or partly renouncing comfort in order to enjoy an “experience”. Not by chance, it is happening in a time of shrinking incomes and the casualization of work (being that the two are often combined).

So we’re back to the core idea behind the spreading of the sharing economy, that it doesn’t make sense to own things while you can enjoy them without paying the entire costs related to their possession and maintenance. But these latter costs are part of the economic chain too. That’s why this seismic shift is more a sign of our global economy’s awkward long lasting moment than an antidote to the disease.

What mobility can learn from a quarter inch hole

Ted Levitt’s much-quoted mantra that “people don’t want to buy a quarter-inch drill, they want a quarter-inch hole” is useful in that it succinctly sums up the philosophy behind the changes that the automotive industry is witnessing today.

Taking the manufacturing of mobility products as a starting point. If you look at Europe and the United States, OEMs drive a lot of sustained innovation with an evolutionary, not revolutionary approach. They are value chain masters. Only 20% of the vehicle is being produced in-house and 80% of the value add comes from other supply chain players. Within their existing ecosystem they are kings, but in a world where that paradigm is changing, automotive giants become vulnerable.

It is no longer about the car. It’s about addressing people’s mobility needs, getting from A to B regardless of any single product. When you look into the assembly line of your traditional OEMs, the entire cockpit is delivered by Tier 1 suppliers just in time and in line, sequence specific to an individual assembly order. The orchestration of a complex supply network and the speed and precision at which cars are assembled with minimal defects is nothing short of impressive. But what happens once the car rolls off the assembly line and is delivered to a dealership for sale? From a car maker’s perspective nothing much. Automotive brands spend a lot of money on marketing their brands, but they fail to engage their customers over the entire vehicle ownership life cycle. This is what the industry calls “Ship to Forget”. Apart from a product recall or warranty claims, consumers have little if any touch points with carmakers.

But the OEMs of tomorrow, take Tesla for example, are playing the game in an entirely different way. Teslas are more like computers on wheels than just a car. They “Ship to Remember” first and foremost – constantly staying in touch with their owners. They see how customers use the vehicle on a daily basis and create passionate brand enthusiasts along the way. To a point where consumers happily share data from their onboard systems to help Tesla not only improve their cars, but teach them how to drive autonomously. Through over the air updates Tesla provides new features and monetizes the relationship with the consumer beyond the initial purchase.

Elon Musk understands that the car of the future is part of a larger ecosystem, so he opted to build it. Besides a comprehensive network of electric charging stations, Tesla is also in the business of generating renewable energy using SolarCity and more recently through the Tesla Solar Roof. But the shift towards ecosystems goes much further.

Traditionally the industry has been organized alongside horizontal silos: suppliers, OEMs, dealers and customers. The future of mobility might be a less car centric and more about intelligently connecting different modes of transportation – not just shared cars, but public transportation, new forms of vehicles such as electric bikes, personal electric vehicles, skateboards etc. We might even want to encourage people to walk – and redesign our cities to become more walkable. The new mobility world may allow cities to repurpose parking spaces and create more liveable cities by giving public space back to the community. To create pedestrian zones, street cafes, parks and playgrounds.

In the United States, any car has a total of four parking lots and spends 96% of its life stationery. The cost of providing parking space for the community of vehicle owners is largely carried by society. Not only is space being wasted, but it is being wasted unnecessarily. The norm right now means that the drill is only being used 4% of its lifetime. Tesla is introducing ideas to combat this wastage – if a Tesla isn’t being used its owner can make it available to others and the car might be able to pay for itself. In 2014, approximately 440 million parking spaces across Europe, split between the functions residential, work, shopping, airports, railway, hospitals and leisure. 

There might always be users who like to own a car. And one of the main questions today is why do people own cars today? What do cars mean? What does property mean for us? Ultimately people like to own something, especially if it has an emotional value for them or is a representation of their status. Is the shared economy compatible with our very DNA?

With ageing populations, increased urbanization and a younger generation that wants to free itself from the burden of ownership, we will see a decline in car ownership in favor of on demand access. Mobility evolves, but, like the horse, older models of transport will never disappear entirely – there will still be privately owned Porsches and Ferraris. But for the everyday person, car ownership might go away. At the end of the day, autonomous taxi fleets will create a compelling cost advantage over owned vehicles. A recent study by Rethink estimated transportation-as-a-service (TaaS) using a shared fleet of autonomous electric vehicles could be four to ten times cheaper per mile than buying a new car in 2021 and two to four times cheaper than operating an existing vehicle in 2012.  

The sharing economy will emerge in different forms in different places. In the developing world we have countries where this model is the only hope in providing affordable mobility to a large part of an underserved population. Africa skipped landlines and went straight to the cell phones. The same thing might happening in car ownership – many will never own a car but will have access to mobility. In the developed world, the sharing economy might be our best chance in avoiding gridlock in view of the finite capacity of existing infrastructure and global warming. We simply can no longer afford to waste our life in traffic jams, sitting in a 2 ton car all by ourselves.

We might end up sharing assets. And we might not even own cars in the future. Instead, we will access them on demand whenever we need them. But is the sharing economy we see today really a sharing economy? Given the importance of mobility to provide access to education, jobs and social life, should we really make ourselves dependent on powerful platforms that extract profits from every trip? Do we want platforms that provide a mobility service without owning assets or taking social responsibility for their drivers?

Ride-hailing services are multi-sided platform businesses that essentially leverage data to match demand for mobility services with supply created by independent drivers and their vehicles. They establish trust between the requesting passenger and the driver and facilitate financial transactions. In a true ‘sharing’ economy we are ‘prosumers’ – driver today, passenger tomorrow. We rent an underutilized vehicle to a driver to monetize the vehicle by transporting passengers. Just like we borrow a drill today from our neighbor.

What if we could leverage technologies to establish trust between peers without a central intermediary? What if we could set our own terms in our local communities and provide a living wage to drivers as members of our local communities? What if we could engage in a true peer-to-peer sharing economy without the need for platform intermediaries? Blockchains and, more generally Distributed Ledger Technologies, form the basis for such a future. They create a shared, self-sovereign identity to create access to a variety of mobility services and enable peer-to-peer transfer of assets and monetary exchange.

Distributed Ledger Technologies also enable us to retain control and ownership of our data. Today we generously give away our most personal data to platforms in exchange for “free” services. Our data is valuable. More valuable than most people realize.

Should we give up ownership and control of our data, the key asset that fuels the new age of mobility? Given that data forms the basis for machine learning and AI, we must more than ever care about who has access to our data. Shouldn’t we have our very own personal digital assistant learn our unique patterns and find that best ever quarter-inch hole? After all, there are many ways to drill a hole in the world of multi-modal, on demand mobility.

Maintaining control over our own data is not selfish but smart. The people in a community share an interest in clean air and a functioning, affordable transportation system. As local citizens, we might be willing to share certain data to mesh it with data generated by public infrastructure across our smart cities. ‘Data as a Commons’ enabled by Distributed Ledger Technologies provides smart cities the data required to make smart mobility and transportation a reality without impacting our privacy or giving up the rights to our data.

The ultimate problem for the mobility sector will be how to address our individual mobility needs as part of a thriving community of shared interest. Cities and people will all have to adapt to the rapid changes that are coming and solve their own quarter inch drill conundrums. New promising technologies and business models will emerge. But we should always keep in mind how critical access to affordable mobility is to social mobility and the wellbeing of our communities. In that sense, mobility is almost as important to a society as affordable and clean energy.

The world of mobility will see profound change in the years to come. Traditional product-centric supply chains make way for consumer centric business networks that seek to deliver the best quarter-inch hole. This year Ford changed its name from the “Motor” company to the “Mobility” company and replaced its CEO to embrace this transformation. Other automakers are following a similar path, knowing that they will need to adapt to survive. The auto industry can either be a part of the problem, or a part of the solution.