By Jeremiah Owyang, Founder, Crowd Companies and Alan Webber, Government Insights Research Director, IDC, (profile and twitter). Last week, A version of this article appeared in the WSJ.
The Collaborative Economy is emerging as the defining societal narrative for 2015 and beyond. In this burgeoning, economic model, individuals use commonly available technologies to obtain resources from their peers, like use of homes, cars, money, and other goods and services. These technology-based companies enable people to bypass inefficient corporations, find favorable alternatives to entrenched, established channels, and confront existing, draconian, government regulations.
Above Graphic: Spectrum of Political Perspectives on the Collaborative Economy
How big is this market? We know that the startups in this space have already been funded with nearly $11 billion, Most of that funding has come in just the last few years. According to PwC, this movement could be worth $335 billion by 2025. Sharing and circular economy strategy was a featured topic at the World Economic Forum at Davos in January, an indication that we should expect to see more Collaborative Economy models and businesses emerging in the future.
Above Slideshare: Spectrum of Political Perspectives on the Collaborative Economy, detailed
Early sharing idealists hoped the sharing model would produce a Libertarian Socialism in which, by using technology, people would operate communally, sharing their homes, foods, clothes, etc. The injection of billions of dollars of venture capital to fund infrastructure and growth for these tech startups means that investors will demand a return in their investment, resulting in IPOs and a return to Wall Street economics. In reality, this is actually a form of tech-based capitalism, not the app-powered, hippie communes some perceived it would be.
As social movements, markets, and industries grow and become more visible, they also become larger targets for politicians and bureaucrats trying to keep public interests in hand, extract relevant tax revenue and spin them for political value. The Collaborative Economy is no exception. Each individual facet might be seen politically as either a positive or a negative. For example, eBay, one of the older sharing marketplaces, allows people to recycle goods and receive money for it. A liberal might consider eBay as a positive in that it reduces the amount of waste that is deposited in landfills and because of the additional tax revenue it generates. A conservative might see eBay as a positive in that it provides a platform for individuals to start and build their own businesses.
Both liberals and conservatives have embraced different aspects of the Collaborative Economy. For example, Senator Marco Rubio (R-FL), speaking at the DC Uber office, praised the “innovative startup,” backing the idea of breaking the juggernaut of big unions and regulated medallion cartels. Rubio said that, “regulation should never be a weapon that is used by connected and established industry to crowd out innovation and competitors” (Miami Herald).
Uber recently hired David Plouffe, a political strategist for the Democrats who was the campaign manager for both of President Obama’s presidential races. Liberal politicians haven’t embraced specific startups in the Collaborative Economy in any political messaging or action, but some have embraced the idea that the underlying social and economic architecture that allows this new economy to grow is dependent on social programs like Obamacare to provide for the growing number of freelancers and small entrepreneurs. California was an early adopter in proposing legalizing many forms of ridesharing, led by the Public Utilities Commission in 2013. The City of San Francisco has legalized Airbnb, gleaning a 14% hotel tax from its transactions.
When it comes to the emerging Collaborative Economy, the only thing that is clear is that there is no definitive ideological line. Both liberals and conservative see aspects of emerging companies and business models that they like and dislike. These technologies will amplify behaviors and value propositions from both perspectives.
A few things are becoming clearer as the Collaborative Economy becomes more normalized across society:
- A new, more flexible, regulatory framework across all levels of government may be necessary if these companies can’t, or won’t, effectively self-regulate. These regulations would likely focus on providing levels of protection for contract labor from both established companies and end users.
- Startups, taking a page out of the dot.com playbook, will be quick to hire politically-connected individuals and lobbying firms to push their case for more flexible regulatory programs in city council chambers, state capitals, and in Washington. Expect a new lobbying group to emerge to protect interests across the entire Collaborative Economy.
- Both political parties will attempt to use this to their advantage in appealing to the American public. Expect the liberals to point out the benefits of sharing within the concept of the Circular Economy highlighted at the World Economic Forum in Davos. It wouldn’t surprise us to see the Right replace Joe the Plumber with “Carl the Uber Driver” and use the sharing economy to appeal to conservative values like independence, community, and resilience.
Sitting in the back of a car during an Uber or Lyft ride, it is possible to see that, like any other company or business, the Collaborative Economy has many different facets that are either liked or disliked across the political spectrum. But, what both sides can agree on is that the Collaborative Economy takes advantage of technologies in both existing and emerging industries, empowering the working person, building resilient and sustaining communities, and leveraging the government for economic benefit.
From the liberal left to the conservative right, there’s no clear ideological perspective, as there’s something for everyone in this growing Collaborative Economy.
By Jeremiah Owyang @jowyang, living in Silicon Valley since 1997.
My long-time, close friend, Chris Saad, wrote a helpful essay on 39 tips for startups. He shares many suggestions, based on his personal experience, in the startup world, from his home country of Australia, and in Palo Alto, and in the heart SF’s tech district SoMa.
While I agree with 38 of his tips and suggestions, I’d like to discuss the merits of tip number one. Dear readers please know, I first chatted with Chris in advance, he was aware I was writing this, as I certainly don’t like to surprise a friend.
Chris gives startups the following suggestion as his opening tip:
#1: “Be in Silicon valley. Yes you can succeed in other places, but the chances of any business succeeding are so small, why start with a disadvantage? Some argue that the ecosystem in their area is “getting better” or they’re “going to help build the ecosystem along the way”. Trust me, as someone who’s tried, It’s hard enough building and driving the train, you can’t lay the tracks at the same time!”
I’ve seen many successful startups emerge and flourish outside of Silicon Valley, like Hootsuite, Jive, Bazaarvoice, Omniture, Spredfast, Sprinklr, BuddyMedia, BlaBlaCar, Freelancer, and a plethora of Chinese tech companies that are worth billions and billions, so I guess that rules out any suggestion that all startups must be in Silicon Valley.
Of course, that’s not what Chris was suggesting, his point is that it’s easier to have a successful startup if you’re in the tech center of planet Earth. Oh, and I agree, in most situations, but let’s first break down the pros and cons of having your startup be in Silicon Valley, before we rule on any universal truths.
Here’s the pro and cons, in two simple bulleted lists.
Upsides of having your startup in Silicon Valley:
- In proximity to VC funding, money is literally falling out of trees.
- In an environment where new ideas are embraced, failure accepted.
- Connected to tech talent, and seasoned partners and advisors.
- New ideas quickly emerge, a source of innovative thinking.
- Fantastic climate, diverse culture, and high-quality of living.
Downsides of having your startup in Silicon Valley:
- Expensive, 1 bed apt are $3,250 in SoMa, and office rent is sky-high.
- Competitive salaries challenge loyalty; tech salaries are $100k–350k
- Myopia to other cultures, a limit if you’re aiming at other regions.
- Entangled traffic in bay area makes commuting a frustrating challenge.
- Tech bros, glasshole douchebags, SF aroma is weed+urine, ahem.
Now that we’ve explored the ups and downs of situating your beloved startup in tech mecca, we can reframe the discussion to When it makes sense to have your startup in Silicon Valley. It makes sense to have your startup be based in Silicon Valley if you’re heavily VC backed, or already rich, or if your talent base is in this network, or if you’re seeking a culture of constant innovation. It doesn’t make sense if you’re in an area that already has a tech talent ecosystem, is focused on a different market like Europe or NY media and publishing, or are not cash laden.
So there you have it, your tech startup doesn’t need to be in Silicon Valley, but instead, know when to use pros and cons to your advantage.
Salut to Chris, for sparking this interesting topic, you should follow him on twitter @chrissaad and check out his site. I originally posted this on Medium, and there’s a thriving discussion about this essay, over here on Facebook, and on Linkedin.
Google and Uber are building self-driving cars, it’s rumored that Apple is going to be building self-driving cars, Tesla has launched driver-assistance features, and many traditional auto manufacturing companies are advancing their features to include driver assistance and, eventually, automation.
Ride sharing and car sharing pave the way for the self-driving car industry.
Ride sharing startups, like Uber, Lyft, Sidecar, BlaBlaCar, and car ownership-sharing, like Getaround, DriveNow, Car2Go, RelayRides, and Zipcar are paving the way for this market. Society is learning we don’t need to own a car to complete our journey, increasing the demand for this new product. Yesterday, at a Silicon Valley Forum event in Palo Alto, experts predicted that self-driving cars will be rolling out within 5-10 years, which is just about the time car payments will end on any recently purchased cars. Also, keynote speaker, Stanford’s Stefan Heck shared this stat: “The leading cause of death for 25-40 year olds is human driven cars”, demonstrating the market need for safer and effecient transport. The potential impact to society is staggering. I’ve outlined the findings below.
The four phases of self-driving car development suggest we’re 5-10 years out.
The Personalized Car event, hosted by SVForum was held on illustrious tech-centric Sand Hill Road in Palo Alto, with speakers from Stanford, BMW, consulting firms, investors, inventors, entrepreneurs, and forecasters. Four states currently allow the testing of self-driving cars, including California, Florida, Michigan, Nevada, as well as the District of Columbia. The speakers discussed the four phases of self-driving car automation (see maturation chart, courtesy of Morgan Stanley, below) at the most basic-level, driver-assist features, like Tesla’s autopilot. The second phase, which we’re in now, is where cars can self-drive along with human fail-safes, like the Google self-driving car I see whizzing around Silicon Valley. In the next phase, we can expect to see cars transporting people, without assistance. In Phase 4 the need for human drivers will be eliminated altogether.
Above: The event verbally cited these four phases of car automation.
Speakers at the opening panel discussion were asked to forecast when they might expect to see self-driving cars for mainstream deployment. They forecasted 5-10 years, in agreement with the preceding Morgan Stanley graphic. Many of the speakers discussed the impacts self-driving cars might have on society at large. Here’s a list:
Partial list of who’s disrupted by self-driving cars:
- Taxis compete with Uber, Google, Apple self-driving cars. Ride sharing was just the first blow.
- Ride sharing drivers at Uber, Lyft, Sidecar, BlaBlaCar will be disrupted as autonomous cars do a safer job at lower cost.
- Local couriers, like TaskRabbit, Instacart and bike messengers will be impacted.
- Mid range and long range transportation and delivery services would be impacted as local delivery becomes automated.
- Retailers may see a change in foot traffic as people order goods to be delivered to their homes by driverless cars.
- Auto and life insurance should be impacted, due to fewer accidents and the introduction of per-mile-based insurance.
- Paramedics may be impacted if victims choose self-driving cars to whisk them to ER for less than severe injuries.
- Car ownership could dwindle. Self-driving cars means fewer cars will be needed, as they’re efficiently routed as needed.
- Airbnb may benefits as urban areas convert garage spaces into living areas for short term stays.
- The parking industry could suffer, as lots are converted to other uses.
- Parking fines and local taxes could dwindle with fewer cars on road and robotic efficiency.
- Radio and podcasts could become less popular, as people play video games and watch videos in the self-driving rides.
- Short distance airlines could suffer, as people choose to take a relaxing trip in a mobile living room.
- Communities or attractions not connected by rail could prosper as people easily travel there for business or pleasure.
- Auto repair could be impacted as self-driving cars automatically head for maintenance without the driver or owner present.
- Hotels and motels could be affected as families are able to sleep in the comfort of a self-driven vehicle on the way to their destination.
- Leave a comment, below, on who else might be disrupted.
I’m on the advisory board of Sparks & Honey, an agency based in NY that looks at future trends and their impacts on society. They recently published this SlideShare, below that shows the impacts of self-driving cars on logistics, retail, culture, and even our love lives. Their list of disruptions goes far beyond what was mentioned at the event yesterday. Also, I captured notes from the event in real time on my Facebook feed, which you can read, along with community reactions.
Impacts to Business and the Crowd.
My current focus is on the Collaborative Economy, how the crowd obtains resources directly from each other, using commonly available technology. The key finding is that the startups in this space will also need to adjust their business model to adopt automation and prepare for people to be slowly eliminated from the driving process. Given that Uber is indicating that they’ll be creating self-driving cars and that Google will be adding ride-hailing apps to summon their self-driving cars, we can see how this is already coming to fruition. Get ready for more disruption, led by technology. To prepare us for this next phase, I’ll continue to cover this topic from time to time, based on what I see and learn.
Update: The day after I posted this, Volvo announces they’re releasing a self-driving car, by 2017, in just two years. Hat tip Lisa Woods.
There’s more discussion about this article on Linkedin, and on Facebook.
Here comes Google, with a series of five market moves injecting them as a central player for the collaborative economy.
Google’s mission is to organize the world’s information. But it doesn’t just start and stop there. They also want to organize the world’s logistics, commerce, local transportation, service economy, and even how people obtain and receive loans.
In the past, our perspective of the Collaborative Economy has been through startups, like Airbnb, oDesk, Lyft, Uber and Lending Club that enable people to get what they need from each other, using commonly available technologies like online marketplaces and mobile apps.
Today, Google has entered the Collaborative Economy with a series of announcements that leave a casual reader scratching their head. But placing the announcements line by line, you can see an organized attempt to enter this space traditionally dominated by early stage startups.
- Google is a major investor in Uber and Lending Club. They started with investments, a great way to test the waters. Google Ventures made their largest investment in Uber ($258 million), lending promise for a future of a lifestyle and logistics app which enables people to bypass car ownership and more. Then, Google invested in the P2P money-lending platform, Lending Club ($110 million), which enables individuals to bypass traditional banks. This gives Google additional market insight and a foothold from which to deploy.
- Google plans to roll out self-driving cars, competing with car manufactures. Last year, Google unveiled their friendly-looking, self-driving car, which they suggest will enable anyone to be mobile, reclaim time driving, and reduce the need for car ownership. In Silicon Valley, I often see self-driving Google cars whizzing around in Mountain View and on the major freeway, U.S. 101. Google suggests that these will be available in mass production for the public within five to 10 years.
- Google now resells P2P loans, competing with banks. P2P marketplaces of buyers and sellers are in every aspect of society. Take a look at the Collaborative Economy version 2.0 to see over twelve industries that are impacted. Last month, Google announced they’re going to resell bank loans from Lending Club, reducing the need for individuals to get loans from banks, competing directly on ease and price.
- Google partners with Airbnb and Lyft, challenging hotels and taxis. Last week, Google announced the expansion of “Google Now,” a mobile app that intends to be the starting point for our daily needs. They will aggregate Airbnb and Lyft data and more, enabling us to quickly and efficiently find the right on-demand services in real time. Don’t expect the partnership to stop there. Just as Google leaned into Open Social to connect with many social networks, they’ll partner with many startups who want to connect their API. Imagine Homejoy, Yerdle, Sprig, Instacart, TaskRabbit, Munchery SpoonRocket, and others.
- Google is reportedly building a ride hailing app to compete with Uber. It has been suggested that self-driving cars could be idling in our neighborhoods, waiting for us to order food, groceries, electronics, or even get a ride. With this new system, people are sharing ownership of cars with neighbors, hailing them on demand. It’s worth noting that Uber was absent in last week’s announcement of Google Now, although a partnership with Lyft was announced.
What it means to the Ecosystem:
Google’s announcements, in sequence spell considerable impacts to the entire ecosystem of startups, purists, investors, businesses, merchants, and of course, to the people, here’s how each ecosystem player is impacted:
- Google will be in a dominant position if they can successfully deploy. Google is the homepage of the internet and, as a result, the start of the Collaborative Economy, as they own the ‘intent’ phase with Google Search. In the future, they’ll organize information about what people need, and be able to deliver in real time, dolling out links and customers to startups, sometimes through their self-driving vehicles.
- Google and Uber are in a tenuous relationship. Over a year ago, I predicted that Uber + Google is a threat to Amazon. In reality, it looks more like Google may be a threat to Uber and Amazon, as they could potentially offer the same things, but on a broader scale. Google has greater ambitions and, perhaps, the business models (or egos) don’t align at Google and their investment, Uber.
- Startups have no choice but to evaluate partnering with Google. By connecting to Google Now’s API, they can quickly gain market expansion by potentially being listed in search results, tapping a verified set of Google users, accessing new data types (like intent and location), and accessing historical customer data, all on a proven platform that will stand the test of time.
- Sharing economy idealists feel threatened as large, tech companies embrace the concept. The notion of quaint neighborhood sharing will quickly be supplanted as Google makes it easy for ordinary people to participate in this new economy. The one difference is that, when sharing is efficient, it actually looks like an on-demand delivery model. I’ll stand firm, that this is tech-based commerce and capitalism, not neo-socialism.
- Investors embrace Google’s streamlining of the market. This injection of such a large entity further validates the investment thesis that collaboration of unwanted resources in two-sided marketplaces is a profitable business. With Google’s multi-million dollar cash injection and shared offerings of search, apps and self-driving cars, they’ll provide additional market acceleration.
- Brands seek to separate hype from reality with new commerce models. Many are already deeply hooked into Google’s ad business. Eventually, they’ll have the opportunity to offer their wares, services and solutions on the Google Now platform, as well as connect to various APIs to expand their business reach. Google+ self-driving cars spells opportunity for local merchants, restaurants, and retailers who seek solutions for the ‘final mile’ of delivery.
- For the people, this mainstreams access to real-time services rather than ownership. Most importantly, for the public, and I mean mainstream, normal people, this provides validity for the Collaborative Economy. Using commonly available search tools or apps, people can quickly get services, rides and products from companies in one trusted space: Google.
Google’s mission is to organize the worlds’ information, but they won’t stop there. They’ll also organize our delivery, our transportation, our food service, our money, and our lives.
Here comes Google. Get ready.
(image from Mark Fiser)