Do More, Own Less: A Grand Theory of the Sharing Economy

Why sharing is the inevitable next stage of the information revolution -- and how it's going to change everything from entertainment to Walmart.

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When you start looking for them, "share platforms" are everywhere. Some of history's cleverest business minds understood the power of share platforms, from the aggressive titans who made fortunes building the nation's railroads to Conrad Hilton, who created the first premier brand of international hotels. Now a new era of sharing-based businesses is beginning - businesses as big as Netflix or Zipcar, and as small as a guy who rents Christmas trees.

Up to now, the information revolution has primarily swept through industries and services that are or can be digital - numbers, text, sound, images, and video. Related sectors, such as banking, publishing, music, photos, and movies, have undergone massive change. Now mobile networks are rapidly expanding that disruption to physical goods and venues, including hotels, cars, apparel, tools, and equipment.

The sharing economy is on fire, ignited by business savvy and mobile devices and fanned by post-Recession bargain hunters

That's possible because of our GPS-enabled mobile devices move in real space and time with us. The network can connect us to the things we want exactly when we want them. We can increasingly gain convenient access to these goods, greatly reducing the need to own them. Why buy, maintain, and store a table saw or a lawn mower or a car when they are easily and less expensively available to use when we want them?

Something else has changed, too. The credit and spending binge has left us with a different kind of hangover. We need a way to get the goods and services we actually want and need, but at less cost, both personal and environmental. Fortunately, we're quickly gaining more power to do so. A new model is starting to take root and grow, one in which consumers have more choices, more tools, more information, and more power to guide these choices. I call this emerging model "The Mesh."

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The competitive advantages the Mesh offers in today's information-soaked environment will pose a persistent and growing threat to traditional business models. For example, Blockbuster's Wayne Huizenga grew highly profitable enterprises by recognizing the advantages of share platforms. Whether he was dealing in Dumpsters or videos, his core strategy was to invest in products that customers could use over and over again.

But Netflix knew that Blockbuster's Achilles' heel was late fees. Blockbuster's revenue model depended on the fees, but customers hated them - its best customers were the most likely to be punished. Netflix realized that if it could create a profitable business model that didn't require late fees, it'd win. It introduced a subscription model that allowed customers to watch and return movies at their own pace.

What clinched Netflix's advantage, though, was that it functioned as an information business. Early on, Netflix began using a customer's prior selections and ratings to suggest other videos that might be of interest. As the service developed, the company added layers of information to inform a user's choices, such as reviews from people in the network whose profile of selections and ratings were similar. Recently, it sponsored a contest awarding a million dollars to anyone who could significantly improve the movie recommendation service.

Presented by

Lisa Gansky has been a founder and CEO of multiple Internet companies, including GNN and Ofoto. She is the author of The Mesh: Why the Future of Business Is Sharing.

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