So, between uncounted growth from the new economy and creative destruction of parts of the old economy, our traditional macro indicators have the potential to be more confusing than they have been in a long time.
The Sharing, Gig And Circular Economies
Three models essentially characterize the new economy that I am discussing here: the sharing, gig and circular.
The sharing model comprises companies such as Getaround, Airbnb, CameraLends and Loanables, which allow individuals to rent out their cars, homes or tools when they are not fully utilized.
Dan Neil, in The Future of Everything, explains that, “The utilization rate of automobiles in the U.S. is about 5 percent. For the remaining 95 percent of the time (23 hours), our cars just sit there, a slow, awful cash burn, like condos at the beach” as stated in The Wall Street Journal's “The Future of Everything” 2015 supplement.
And Davidow quantifies the economic impact of sharing:
“The annual cost of a Honda Civic used for, say, 7,500 miles per year, is around $6,500 per year, or 85 cents per mile. Using a Zipcar for 500 hours a year, approximately the same amount of driving, would cost only $4,250, a saving of $2500—equal to about 4 percent of a middle class family’s income,” according Davidow’s “The Invisible Economy.”
The sharing model may be in its infancy, as it potentially applies to many of our belongings. Airbnb CEO Brian Chesky told The New York Times in a 2013 column, “There are 80 million power drills in America that are used an average of 13 minutes. Does everyone really need their own drill?”
In a slightly different vein, BlaBlaCar connects drivers and passengers willing to travel together between cities and share the cost of the journey, while Lending Club puts potential borrowers in touch with potential lenders.
The gig model, with sites like TaskRabbit, FlexJobs or Gig.com, is the Internet morphing of the traditional freelance economy, where people offer and rent out their skills and talent for specific missions, often for a finite period of time.
The sharing and gig economies often overlap. Uber, for example, is positioned at the intersection of the two, since it allows a car owner to share his car while he also is performing a gig by operating like a taxi driver.
The circular model aims to replace companies’ traditional “resource to waste” way of functioning with a circular “resource to resource” dynamic. Historical industrial processes and the lifestyles that feed on them deplete finite reserves to create products that end up in landfills or in incinerators, while traditional recycling is energy-intensive and generally degrades materials, leading to continuing high demand for virgin materials.
The circular economy aims to design out waste through repair, reuse and remanufacture. BMW, for example, remanufactures parts to the same quality specifications as new BMW parts, with the same 24-month warranty, at a 50-percent cost saving for customers compared to new parts, according to the book, Waste To Wealth—The Circular Economy Advantage.
In the lifestyle area, eBay, Swap.com, thredUP and Refashioner, which allow people to recycle their clothes, accessories or almost anything, are good examples of the circular model.