[Essay] The Social Seeds of Sharing Economy and Subscription Economy

The Social Seeds of Sharing Economy and Subscription Economy

Do you prefer to buy record CDs or LPs from Tower Records near your home to listen to the latest music at home? If so, you are most likely an older generation. Do you search for artists on Spotify and stream music to listen to the latest albums from your favorite musicians? If so, you are most likely a young generation living in 2021. [1] Just over a decade ago, buying and owning almost all goods was the only way to use them. But over time, we started to pay more for things to ‘use’ than to ‘own’. Now, the center of the market is moving rapidly from an ownership-based economy to a subscription and sharing-based economy. Many people think that the ideas of genius entrepreneurs with some creative business acumen played a decisive role in creating this new market. In this essay, however, I would like to argue that the recent emergence of the expanding subscription and sharing economy is the inevitable result of a new generation of people playing a pivotal role in society but not receiving enough wealth to match them. Everything in the world created by previous generations who accumulated wealth in a high-growth era is excessively large and expensive for a younger generation who has just entered society in a low-growth era. Fortunately, however, they overcome these practical limitations while freely using new technologies.

The term 'sharing economy' was first used by Professor Lawrence Lessig of Harvard University Law School in 2008, and is defined as: “The sharing economy is an IT-facilitated peer-to-peer model for commercial or non-commercial sharing of underutilized goods and service capacity through an intermediary without transfer of ownership.” [2] It was born before and after the economic crisis caused by companies such as Airbnb (2008), Uber (2009), and WeWork (2010) have created representative sharing economy service models. [3] Since then, the market size of sharing economy services has continued to grow, and experts estimate that the size of the sharing economy from $44.8 million in 2013 will grow to $86.5 million in 2021. [4] As of 2021, the sharing economy service is repeatedly expanding to more diverse fields. In the early 2010s, service providers provided rental services in areas such as lodging, automobiles, and offices, but now they are expanding to baby products, personal clothing and fashion items. In the past, things that we thought would never be possible to rent are now coming to the extent that they can be rented one by one. Even the Seoul government in South Korea is running a bicycle rental business that can be used throughout the city. [5]

Since the time when representative companies providing sharing economy services were born around 2008, many people can think that the 2008 economic crisis provided a decisive cause for the creation of sharing economy services. [3] However, the seeds for the birth of sharing economy services were already growing.

The first seed is aging and population decline. Currently, most of the developed and developing countries around the world are entering an aging society. In fact, according to the Urban Institute, the number of Americans 65 and older in the United States has reached 54 million today, from 18 million in 1960, and is projected to reach 80 million by 2040. By 2040, 1 in 6 people will be over 65. [6] On the other hand, the fertility rate is constantly declining. In the United States, between World War II and 1960, the fertility rate was 3.5 children, but dropped to 1.9 in 2019.[6] Considering that the minimum fertility rate required to maintain population size is 2.3 children, the number of new children born in the United States continues to decline without significant influx of immigrants out of the country. If this trend continues, an increasing number of older people will not be able to enjoy consumption as in the past, and the number of younger generations who will have to enter society and lead consumption will decrease. Eventually, the size of the charter market will gradually become smaller. I am going to stop noting citations. There was a memo sent mid semester about this. Any item that you had to look up or read somewhere to know it requires a citation. Your discussion about the data does not need a citation.

The second seed is the relative poverty of the younger generation. According to Project Equity.org in 2020, baby boomers born between 1946 and 1964 own nearly half of privately held companies in the United States. [7] This means that most of the social wealth is still concentrated on baby boomers. The NZ generation, on the other hand, are now college graduates and are taking their first steps into society. Not only do they still have a marginal social impact, they are not free from student loans.[8] As a result, society is experiencing significant inequality of wealth between generations. According to Federal Reserve statistics, millennials own only 4.6% of all wealth in the United States, while baby boomers control over 53% of wealth.[9] That's why most people (especially for the younger generation) no longer see consumption as a virtue. Now, rather than consuming something bigger and better, people now want to consume what works for me and is more efficient. We consider it an unnecessary waste of wealth to spend on something bigger and more luxurious than we ourselves need. In the past, big houses were considered a symbol of wealth and everyone had a dream, but now I think of big houses as a kind of black hole that costs a lot of money and expensive. In Thomas Stanley's book, The Millionaire Next Door., the author points out that most millionaires live in average homes in working and middle-class neighborhoods as of 1996. [10] The authors also say that people who spend too much money on cars and houses to get wealth generally tend to owe the bank more than they own.

The third seed is technological advancement that acts as an enabler of change. Nevertheless, the younger generation of today is not just as unlucky? as the younger generation of the past. Because they are witnessing new technologies pouring into the world. And they have the ability to acquire and utilize these new skills faster than any other generation. [11] The latest emerging technologies bring to the world products that can provide the same or better value than before at a lower cost. Taking this one step further, we have in the past had to acquire perpetual ownership through a purchase to use a particular service or product. However, with new technology, we only pay for what we borrow or spend to use the same service or product. [12] In the past, we had to go to a car shop to buy a car to use it. In recent years, we have been able to rent a car for a limited time and pay a small fee anywhere in the world without having to buy a car. Now that cars are equipped with autonomous driving capabilities, we may be able to use the cars we buy for ourselves or rent them to others for a fee during idle time. In Seoul, South Korea, people rent and use bicycles connected to the internet through internet-connected smartphones without human assistance. [5] Artificial intelligence and the Internet are not the only technologies that are helping us use these services. As more and more technologies are incorporated, we will be able to rent or subscribe to more.

In a 2019 article by Katy Kelleher for Curbed entitled ‘The Homeownership Obsession,’ the author states that buying a home was once a coveted dream, but now it can be a nightmare. [13] According to the author, the shape of society and people's lifestyles are changing, and accordingly, people's preference for real estate in the United States and how they buy/own it are also changing. Indeed, in the past, people preferred to buy generously sized houses on the outskirts of the city and live with large families. Now, however, the younger generations do not live in one area throughout their lives. Instead they are leaving their extended families and constantly moving between different occupations and locations. [14] That is why, for them, a house is a place where they can live for a short period of time or an investment vehicle that can increase their wealth. Over time, people are becoming more free from local constraints. People no longer have to develop or write software sitting with designated people in designated offices in designated areas. People called digital nomads can now stay anywhere in the world and maintain their livelihood as long as they have a notebook PC with internet access. The background to the birth of this new lifestyle was the reinterpretation of the jobs that people had, the reinterpretation of possessions, the reinterpretation of the way of life, and the technology that made them possible. Although the recent COVID-19 pandemic has also limited freedom of movement for many people.[15] However, this can be considered a one-time event that is too short to change the direction of social change that has been ongoing over a long period of time.

In this paper, I examined how demographic changes and the redistribution of wealth brought about by social change over a long period of time have changed people's perceptions of property. And the continuously emerging technologies have played a decisive role in changing people's perceptions and actually changing their lifestyles and consumption patterns. As a result, the world gave birth to the sharing economy and the rental economy, which are now devouring more and more things in the world. We believe that the pace of these social changes and technological development is sure to accelerate. Even the recently emerging metaverse platform is nurturing a new virtual world, and people are starting to lead a different life in this space. Perhaps, in this space, a completely different form of consumption can be born, rather than purchasing, renting, or subscribing to existing products/products. What we can do now is to watch and actively experience the birth of a value system in a new world.

Now, let me shift my perspective from the present to the future rather than the period from the beginning of the sharing economy to the present. Our future to come may be drawn similarly to the trajectory of the past, or it may proceed completely differently. Actually at this point I would like to ask two questions. First, the sharing economy, which has a history of about 10 to 15 years, may seem to be reviving around the world now. In the hype cycle defined by Gartner, we are not sure whether the current sharing economy is passing the 'at the peak' or the 'climbing the slope'.[See figure 1][19] Also, we do not know yet whether this revival will be merely a temporary phenomenon or will change the way people produce and consume for a very long time. If so, perhaps our future could be the foundation of a whole new economy. Second, if the sharing economy is going to change the world for a long time, how will businesses and companies that mass-produce products change to survive? They will likely no longer enjoy the economies of scale that can be achieved by mass production. Instead, they may focus on reducing production costs by using robots, etc., transforming existing products into shapes suitable for the sharing economy, or producing products that are not suitable for the sharing economy. I think these questions are the limitations and weaknesses of this essay. Therefore, I would like to start the topic of my next essay with these questions.

[Figure 1. Gartner Hype Cycle]

 

Reference:

[1] Kevin Westcott, 2018, 'Digital media segments: Looking beyond generations', Deloitte, 5 October, viewed 16 November 2021, <https://www2.deloitte.com/us/en/insights/industry/telecommunications/media-consumption-behavior-across-generations.html>.

[2] Lessig, L. (2008) Remix: Making art and commerce thrive in the hybrid economy. New York: Penguin.

[3] Callum Burroughs, 2020, ‘The 2008 financial crisis heralded giants like Uber and Airbnb. We asked top investors what they are looking for during a downturn.', Business Insider, 13 April, viewed 16 November 2021, <https://www.businessinsider.in/tech/news/the-2008-financial-crisis-heralded-giants-like-uber-and-airbnb-we-asked-top-investors-what-they-are-looking-for-during-a-downturn-/articleshow/75119654.cms>

[4] Statista, Number of sharing economy users in the United States from 2016 to 2021(in millions), viewed 18 October 2021, <https://www.statista.com/statistics/289856/number-sharing-economy-users-us/>.

[5] Michaela Cricchio, 2020, ‘How To Rent Bikes In Seoul: Bike On The Han River Or Just Get From A To B', The Soul of Seoul, 10 November, viewed 16 November 2021, <https://thesoulofseoul.net/2020/11/10/how-to-rent-bike-in-seoul>

[6] Urban Institute, The US Population Is Aging, viewed 18 October 2021, <https://www.urban.org/policy-centers/cross-center-initiatives/program-retirement-policy/projects/data-warehouse/what-future-holds/us-population-aging>.

[7] Ellen Sheng, 2020, 'The $68 trillion transfer of wealth in America is evaporating amid crisis', CNBC, 5 November, viewed 18 October 2021, <https://www.cnbc.com/2020/11/05/68-trillion-transfer-of-wealth-in-america-is-evaporating-amid-crisis.html>.

[8] Hanson, Melanie. 2021, ‘Student Loan Debt by Generation’ EducationData.org, 12 October, viewed 18 October 2021, <https://educationdata.org/student-loan-debt-by-generation>.

[9] Alicia Adamczyk, 2020, 'Millennials own less than 5% of all U.S. wealth', CNBC, 9 October, viewed 18 October 2021, < https://www.cnbc.com/2020/10/09/millennials-own-less-than-5percent-of-all-us-wealth.html >.

[10] Stanley, T. J., & Danko, W. D. (2010). ‘The millionaire next door: The surprising secrets of America's wealthy’

[11] Emily A. Vogels, 2019, ‘Millennials stand out for their technology use, but older generations also embrace digital life', Pew Research Center, 9 September, viewed 18 October 2021, <https://www.pewresearch.org/fact-tank/2019/09/09/us-generations-technology-use/>.

[12] Anna Holligan, 2014, ‘Sharing website helps people to borrow instead of buy', BBC, 13 November, viewed 18 October 2021, <https://www.bbc.com/news/av/business-30033682>.

[13] Katy Kelleher, 2019, 'The Homeownership Obsession', Market Watch, 13 November, viewed 18 October 2021, < https://www.curbed.com/article/why-buy-house-homeownership-history.html>.

[14] Sarah Landrum, 2017, ‘Millennials Aren't Afraid To Change Jobs, And Here's Why’, Forbes, 10 November, viewed 18 October 2021, <https://www.forbes.com/sites/sarahlandrum/2017/11/10/millennials-arent-afraid-to-change-jobs-and-heres-why/?sh=66db32019a50>

[15] Bryan Lufkin, 2021, ‘Is the great digital-nomad workforce actually coming?’, BBC, 15 June, viewed 18 October 2021, < https://www.bbc.com/worklife/article/20210615-is-the-great-digital-nomad-workforce-actually-coming>

[16] Alessandra Malito, 2017, 'More Americans want to downsize their homes than supersize them', Market Watch, 3 March, viewed 18 October 2021, <https://www.marketwatch.com/story/more-americans-want-to-downsize-their-homes-than-supersize-them-2017-03-01>.

[17] Laurenti, R. et al., 2019. Characterizing the Sharing Economy State of the Research: A Systematic Map. Sustainability, 11(20), p.5729. Available at: http://dx.doi.org/10.3390/su11205729.

[18] Schlagwein, Daniel; Schoder, Detlef; Spindeldreher, Kai (2019). "Consolidated, systemic conceptualization, and definition of the "sharing economy". Journal of the Association for Information Science and Technology. 71 (7): 817–838. doi:10.1002/asi.24300.

[19] 'Decide which technologies are crucial to future proof your business', Gartner, viewed 18 October 2021, <https://www.gartner.com/en/marketing/research/hype-cycle>.