Why Does China Love The 'Sharing Economy'? Not Because Of Communism...

from the if-you-rent-a-cheap-bike,-you-may-be-the-product dept

Something strange has been happening in China. People have been going nuts about bicycles. Specifically, investors have gone crazy over startups that allow people to rent bikes for a fraction of a dollar per hour, and then leave them anywhere, rather than only at special bike stations -- what is known as "dockless" bike-sharing. And now that sector is in trouble, as Bloomberg reports:

In the space of 18 months, dockless bike-sharing has become one of the hottest investment trends in China, with the two biggest players each having raised over $1 billion in venture funds, respectively. That money has funded a revolution on the traffic-choked streets of Chinese cities, giving urbanites a low-cost, carbon-free means to get around quickly. What it hasn't produced is a viable business model. A little over a year into China's bike-sharing boom, the industry's future looks precarious.

Given the extremely low margins, that's no surprise. What is more surprising is that billions of dollars have been invested in these startups, and in similar ones based on renting out everyday objects for short periods of time, letting people pay by using smartphones to scan in QR codes. Other examples include companies offering umbrellas, basketballs, refrigerators, luxury handbags, phone chargers, and even sex dolls (that one didn't last long). An illuminating article in the New York Times has a plausible explanation for China's fascination with the so-called "sharing economy", even though it has nothing to do with real sharing:

None of China's bike-sharing companies are turning a profit yet. But even as they fight for market share, the data is the destination. "Collecting data is the first goal of the sharing economy," says William Chou, the head of Deloitte's telecoms, media and technology practice in China. Every time consumers scan the QR code on a bicycle -- or basketball, handbag, umbrella -- they provide information about habits, locations, behaviors and payment histories. That's invaluable not just to [Chinese Internet giants] Tencent and Alibaba but also to city planners seeking precise information about where to build roads, bridges and subways.

In other words, these "sharing" services are conceptually similar to Facebook or Google: they are provided (nearly) free of charge, but you pay with detailed information about what you do. In the case of Facebook and Google, it's data about your online activities; for the "sharing economy", it's about what you do in the physical world. That's highly prized by companies that want to sell something to people. In China, it's also of great interest to someone else -- the government:

what happens as this data filters into China's new social-credit system, which promises to rate every individual by her financial, social and political worth? In fact, Beijing has authorized Tencent and Alibaba to conduct social-credit pilot testing, and their bikes serve as the perfect vehicles. There are no walls of privacy. The government has the ability to access company data, good or bad, faster than you can scan a QR code.

The ability of "sharing" companies to capture, and governments to access, highly-personal data is an important issue for potential customers in the West, which currently lags behind China in the uptake of these kinds of services. However convenient some of them seem, it's worth considering whether you may be paying more than just the attractively-low fees when you use them.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: china, sharing, sharing economy

When The 'Sharing Economy' Turns Into The 'Missing Or Stolen Economy'

from the anybody-seen-my-300,000-umbrellas-lying-around? dept

The sharing economy -- actually better-described as a rental economy -- is very much in vogue, inspired by the high-profile examples of Airbnb and Uber. But Western enthusiasm pales in comparison to that of Chinese entrepreneurs, who seem to have taken the view that the model will work for anything. For example, alongside the companies that rent out homes and cars, there are now some that will let you pick up an umbrella in a public spot, use it for a short while, and then return it. At least, that's the theory. But the South China Morning Post reports that the Sharing E Umbrella startup ran into a few problems:

Just weeks after making 300,000 brollies available to the public via a rental scheme, Sharing E Umbrella announced that most of them had gone missing, news website Thepaper.cn reported on Thursday.

The company was launched back in April, and is operating in 11 Chinese cities. Customers borrow umbrellas after paying a deposit of about $3, and a fee of 10 cents for every 30 minutes. Undeterred by the fact that each missing umbrella represents a loss of $9, the company's founder says he hopes to proceed on a larger scale by making 30 million of them available across the country by the end of the year. Here's why he's convinced he's on to a winner:

After seeing the launch of bike-sharing schemes across the country, the Shenzhen-based businessman said he "thought that everything on the street can now be shared".

Perhaps he should have waited a little before modelling his business on bike sharing. Caixin reported last month that Wukong, one of the smaller players in this crowded market, has just closed down -- after most of its bikes went missing:

Wukong operated its 1,200 bikes in the southwestern city of Chongqing. But most of the bikes were lost because the firm didn't embed GPS devices in the vehicles. By the time the company decided the devices were necessary, it had run out of money and failed to raise more

Wukong isn't the only rental company that lost track of most of its bikes, as Shanghaiist.com notes:

Wu Shenghua founded Beijing-based 3Vbike in February, using 600,000 RMB ($89,000) of his own money to purchase the first 1,000 bikes. But only four months later, he told the Legal Evening News that there were only dozens left.

Despite those failures, money continues to pour into the Chinese bicycle rental sector: last month, one of the leading startups, Mobike, announced $600 million in new funding, which it will use it to expand outside China. Let's hope people there remember to bring the bikes back.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: bikes, cars, china, sharing economy, theft, tracking

Airbnb Competitor Sues San Francisco For Making New 'Legalize Airbnb' Law Too Restricted To Airbnb

from the interesting-legal-theories dept

We've reported a bunch of times on the various legal fights that Airbnb has had to go through lately. Just a few weeks ago, NY's Attorney General Eric Schneiderman (who has admitted in the past that his interest in Airbnb is really about protecting NYC's big hotels), said that he believed most Airbnb listings in NY to be illegal. Under his standards, every Airbnb I've stayed at in NYC would almost certainly be illegal, despite the fact that I have had nothing but fantastic experiences with Airbnb in NYC (much better than my experiences with hotels). San Francisco seemed to be going in a different direction, however, with the city passing a new law just last week that effectively legalized many Airbnb rentals. This law was actually fought by so-called "housing interests" in San Francisco (who seem to have some trouble understanding basic economics).

So you might assume that any legal challenge to the law would come from those "housing interests." Instead, however, it's Airbnb's biggest competitor, HomeAway, perhaps best known for its VRBO site (unofficial motto: "we were Airbnb before Airbnb, dammit"). HomeAway is arguing that the various restrictions that San Francisco put in this new law to appease those "housing interests" are actually unconstitutional in that it unfairly enables Airbnb's particular business model, while limiting HomeAway's. The key issue: many of the people who use HomeAway use it to rent out second homes, while the new law targets short-term rentals of primary residences only.

How could that possibly be illegal? Well, that's where you have to dive into the convoluted legal argument of HomeAway, which argues that this new law violates the Commerce Clause of the Constitution by "discriminating against interstate commerce" because there's "differential treatment" between SF-based residents and non-California residents.

The Ordinance violates the Commerce Clause because it discriminates against interstate commerce through differential treatment of San Francisco-based and non-San Francisco-based interests that benefits the former and burdens the latter. This unconstitutional discrimination takes two forms. First, by its express terms, the Ordinance allows only permanent San Francisco residents to rent out on a short-term basis (which the Ordinance defines as thirty days or less) residential property they own or lease in San Francisco. Non-permanent residents of San Francisco who own or lease property in San Francisco are barred on the face of the Ordinance from renting out their property on a short-term basis. Second, the Ordinance requires entities that provide “Hosting Platforms,” on which owners and lessees of property may advertise their property for short-term rentals, to conform their business operations in San Francisco to one particular model, and no other, under pain of monetary penalties. This anti-competitive measure forces those seeking to rent property to turn over control of selecting short-term tenants to entities that operate the type of Hosting Platform model sanctioned by the Ordinance and to pay whatever fees those entities might charge today or in the future. While facially neutral, the Ordinance’s Hosting Platform rules have the purpose and effect of discriminating against non-San Francisco-based interests.

This seems like a massive longshot.

Admittedly, many of the restrictions in the law do seem silly and pointless. It seems reasonable to let people rent out their homes for short-term rentals whether or not it's their primary residence. But to sue the city of the law? And, it seems worth noting that it's not clear that anyone was seriously enforcing the existing law (which is why Airbnb has been so successful), and even with this law in place, it's not clear that anyone would be enforcing it against VRBO owners. Still, it's interesting to see the kinds of legal fights these new kinds of services are facing from all angles these days. It's hard to innovate without a legal team, apparently.

Filed Under: commerce clause, interstate commerce, san francisco, sharing economy, short term rentals
Companies: airbnb, homeaway, vrbo

The Interesting Thing About Google's Delivery Drones Is Not The Drones, But Massive Societal Shift They Envision

from the the-sharing-society dept

Alexis Madrigal, over at The Atlantic, has the big scoop story concerning Google's project to create delivery drones, in its Google X moonshot factory. The project, unimaginatively dubbed Project Wing, has many people comparing it to Amazon's similarly announced plans for delivery drones. And, of course, for years before that, we discussed ideas like the TacoCopter (and the LobsterCopter) which some people were trying to build to deliver food via drones. Google has confirmed the project (notably never using the term drone, but instead "self-flying vehicles") with this video: Of course, as we've been noting since the TacoCopter days, the big problem here is that the FAA hates drones and insists that they are 100% illegal for any for-profit effort no matter how useful or reasonable.

While most people are comparing this to Amazon's drone delivery idea, or talking about the nature of "instant gratification," it seems like many are totally missing the much bigger thinking behind Google's effort here. Like most truly disruptive innovations, the interesting thing here isn't in just delivering packages faster, but how such a move could totally reshape society -- a vision that the team behind this at Google apparently are well aware of. From Madrigal's writeup, this key part is buried in the middle, but is the most important point. This isn't about faster delivery. This is about how faster delivery can totally change our relationship to physical things:

The idea goes like this: Because people can’t assume near-instantaneous delivery of whatever they need, they stockpile things. They might have a bunch of batteries, slowly decharging in a drawer, or a drill that they use for 10 minutes a year. Each of these things is a personal possession that sits around, embodying all this energy and industrial effort unproductively.

If this sounds familiar, it should: It is the argument—even down to the drill example—that organizations like Worldchanging made in the mid-00s for the creation of “product-service systems.” Those ideas, in turn, became key planks in the original conception of the “sharing economy,” imagined as one in which the world could make much less stuff because efficient, digital logistics would let each asset be used by more people.

“It would help move us from an ownership society to an access society. We would have more of a community feel to the things in our lives,” Teller preached. “And what if we could do that and lower the noise pollution and lower the carbon footprint, while we improve the safety of having these things come to you?”

People like to mock ideas like "the sharing economy" for putting things like homes and cars to more efficient use rather than leaving them idle all the time. But drones that can move things about easily, quickly and efficiently really could absolutely change how we think about property and ownership. Now, for those who are worried about Google, they might not like Google being at the center of this, but it's hardly likely that they'll be the only player in this space.

But this is also why the FAA's restrictions could be so damaging. The FAA, like so many government bureaucracies, has trouble viewing the future. They only view it through the prism of the past. So, drones are seen as toys that might "interfere with airplanes." The FAA is in absolutely no rush to allow commercial drone use (which is why Google's tests are all being done in Australia), because to FAA bureaucrats, what's the big deal? Drones are toys. The fact that they could reshape certain aspects of the way society works doesn't even enter the picture.

But if you're trying to understand where the future of innovation is going, dismissing projects like this as just being about toys -- or even just being about delivering things faster -- means that you're missing everything.

Filed Under: consumerism, delivery, drones, economics, google x, ownership, predictions, sharing, sharing economy
Companies: google

Yes, The Guys Using Legal Loopholes To Screw Over An AirBnB Host Likely Also Scammed Kickstarter Backers

from the this-happens dept

Recently, Russ Roberts had YCombinator's Sam Altman on his absolutely wonderful podcast Econtalk, and the discussion is fantastic and worth listening to (which is true of most Econtalk episodes). Among many interesting and thought-provoking points that Altman made about innovations and new startups like AirBnB and Uber was that with those kinds of new solutions there were always the growing pains -- the stories of crazy drivers or the AirBnB guests throwing crazy house parties. Those stories generate a lot of attention, and they tend to highlight issues where service can be improved, but they do little to slow down the momentum of those startups (in some cases, the publicity actually helps). The simple fact is that there are some people who will always abuse the system, but that alone doesn't deny the amazing opportunities created by some of these services.

But still, with the stories of scams and loopholes, there are always going to be some people who actively seek to take advantage of them. That's just something that happens. These are the same people who take advantage of loopholes in traditional ways as well. I knew a guy in college who bought a really expensive TV, but always returned it right before the 6-month money-back guarantee was up -- only to buy another TV to do the same thing over and over again. Same guy would also figure out ways to drop certain classes strategically to get better grades. He basically spent his life looking for loopholes. Such people exist, and apparently two Russian brothers who are good at that sort of thing are getting some attention for trying to effectively build some scams off of two popular online platforms these days: AirBnB and Kickstarter.

The AirBnB side of the story got attention first. Apparently, one of the brothers, used AirBnB to "rent" a condo in Palm Springs for 44 days, paying the first month in advance. However, he then stopped payments, and made use of a California renters/squatters law that says if you reside in a place for more than 30 days you're a "tenant" and if the owner wants to get rid of you they have to go through (very complicated) evictions. It seems clear that this was the plan all along.

A few days later, however, it came out that the brothers staying at the condo were Maxksym and Denys Pashanin, who also had a history of running a big Kickstarter project that raised $40,000, but hasn't delivered. They've also set up a second Kickstarter campaign, but (not surprisingly) it seems to be having trouble finding backers.

Making the situation even more bizarre is that Maksym appears to have logged into the Kickstarter account for the first game to comment on the story by joking about the situation: In the end, though, some are trying to make a big deal out of what this means for "the sharing economy" or for these kinds of new platforms that are all the rage online these days. And the answer is: absolutely nothing. It may provide some details on how these companies can do better fraud prevention in the future, but the simple fact is that there are always people who are going to look to pull scams. That was true a thousand years ago and it was true a hundred years ago and it was true ten years ago. It's still true today. In fact, the difference might be that these guys, in pulling these scams, are getting plenty of attention for it. Their latest Kickstarter campaign is a dud, and it seems likely that they'll now have this reputation stuck to them going forward.

Of course, the other possibility is to use some of these new platforms to get them back as well. Forbes reporter Kash Hill has already suggested (jokingly, we're sure) perhaps using TaskRabbit to beat these guys up...

Filed Under: crowdfunding, denys pashanin, eviction, maxksym pashanin, sharing economy, tentant laws
Companies: airbnb, kickstarter

You Don't Have To Be Desperate To Believe That Trust Is A Good Thing

from the overreacting dept

Wired Magazine recently had an interesting cover story entitled How Airbnb and Lyft Finally Got Americans to Trust Each Other. It's a basic discussion of how much of the so-called "sharing economy" is built around trust, and how that's a sort of surprising thing, considering how little people tend to trust each other. Over at New York Magazine, writer Kevin Roose played the grumpy contrarian, arguing that the success of the sharing company has nothing to do with trust, but is all about desperation. And thus a big debate has kicked off. I'm going to argue that the debate is meaningless because it's not an either/or situation and neither point really matters much anyway.

First, the whole "desperation" argument is really somewhat nonsensical. You could make the same argument about any major cultural or economic shift in history if you wanted to. Did mass production and the industrial age come about because of desperation? Why, yes, you could show how that's the case as well. But it still created tremendous benefits around the globe and created tremendous progress (even for those who were desperate). I mean, you could equally argue that nearly all work is the result of desperation. If you don't have a job and aren't independently wealthy, you're pretty desperate for a job. But we don't automatically argue that all economic productivity is because of desperation.

Second, the whole "trust" issue is overstated in the Wired article. Even the article itself notes that studies show that Americans actually trust each other a lot less today than in the past (potentially for good reason). And that's because people seem to be confusing general trust with specific trust. What these services enable are ways to have a better sense of who you can trust. In fact, you could argue that what these services have done is help show who you can trust within an inherently untrustworthy population.

But my major takeaway from this argument is that both sides are missing the larger point of why this is so important. Just recently, we were discussing Jeremy Rifkin's new book, in which he argued that this is actually the beginning of an entirely new economic paradigm that eclipses capitalism. But, as I argued in the piece, I think it's just a much more true form of capitalism that allows for much more efficient uses of resources for everyone -- and that's regardless of whether or not there's more trust or desperation in the system.

Prior to industrialization, trust was more prevalent, in part because you would have many, many interactions with the same small group of people. You didn't deal much with outsiders, and tended to know the people you dealt with on a regular basis. That engendered trust, because relationships were built, and you knew that abusing trust would come back to bite you in future interactions. With industrialization and urbanization, some of that trust broke down, because you no longer only dealt with a close-knit community of folks over and over again. You had many more transactions where you likely would never deal with the counterparty ever again -- opening up a lot of opportunity for fraud and scams. Like in the classic Prisoner's Dilemma experiment -- when it's run only once, people tend to cheat. When you know it'll be run many times over, people learn to "trust" each other, because it leads to much better long term outcomes.

So, without those regular interactions with the same kinds of people, government often stepped in with regulations to try to effectively force a more trustworthy framework on the world. You had health inspectors for food, safety regulations for work, general regulations on hotels and taxis and a variety of similar laws -- all designed to make sure that these kinds of transactions, which are generally one-offs, can be trustworthy and safe. Given the overall world they existed in, those regulations made perfect sense.

However, as is often the case in a regulatory environment, they also introduced certain inefficiencies in the process, making running those business more expensive, locking in certain (perhaps less-than-efficient) business practices, and often keeping out new upstarts and innovators. As we've seen, overtime, incumbents (despite claiming to hate regulations) will often embrace such regulations because they keep out competitors.

So here's where the interesting shift has come into play. Things like Lyft and AirBnB are using a combination of transparency and information to create systems that allow for both the more efficient use of resources and making transactions more trustworthy even without making use of those regulations. This freaks some people out and it clearly does not always work perfectly. But, on the whole, it has created some really amazing new opportunities on both sides of the markets, in which greater information transparency steps in and provides a better solution to legacy regulations, with significantly less overhead. That's freeing up economic resources by increasing efficiency in a really compelling way.

And this is why the traditional players, who had embraced the regulations wholeheartedly, are so pissed off. It does seem unfair that AirBnB can effectively compete with hotels without complying with hotel regulations. But part of the reason it does so is that the system that AirBnB has created doesn't need those kinds of regulations. While it's just anecdotal, my own experience using AirBnB has consistently resulted in a much better experience than at hotels, and one where that kind of trust that is built up matches much more with the pre-industrial version. As an example, I'm actually Facebook friends with one AirBnB host whose apartment I used once, and I will likely stay at his place again in the future. He didn't join AirBnB out of desperation, but because to him it's a great way for him to run his own business, which he's always wanted to do.

Thus, I think arguing over whether or not these services have increased trust or are a result of desperation is sort of a meaningless argument. It's happening one way or the other. What's much more interesting about this is how it's actually opening up all sorts of new efficiencies and economic opportunities for everyone -- and doing so by using information to show why old regulations, no matter how much they made sense at the time, may be inefficient and obstructionist today.

Filed Under: desperation, economics, efficiency, innovation, regulations, sharing, sharing economy, trust
Companies: airbnb, uber

Is The Zero Marginal Cost Society The End Of Capitalism... Or A Way To Fix Capitalism?

from the interesting-book,-questionable-premise dept

As regular readers here on Techdirt will know, I've been talking about the importance of understanding what happens to economic equations when the marginal cost of something is zero for over 15 years already. It's a very common theme around here. One of my complaints has been that those who came out of an economic world viewpoint in which economics is entirely about dealing with the efficient allocation of scarce resources, tend to fall into a weird intellectual black hole when they try to put a zero in the equation. But I've long argued that this is the wrong way to look at things. The basic equations still work fine, it's just that you have to recognize the flip side of zero is infinity. When you have a zero marginal cost item, you are creating an infinite good -- a resource that can never run out. When you begin to realize that you have a new form of resources -- inputs in economic terms -- suddenly you realize that you're massively expanding the pie, allowing incredible new things to be created from that limitless pool of resources. That's powerful stuff.

So, as you can imagine, I was excited when the publisher of Jeremy Rifkin's new book, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, reached out to send me a promo copy a few weeks ago. I am only halfway through it, so I'll probably write more about it when it's done, and there's an awful lot of really interesting examples and profound thinking going on. So I'm really enjoying the basic part of it. However, there's one aspect of the book that I have trouble with, and it's exemplified in Rifkin's op-ed in the NY Times a few weeks ago, called The Rise of Anti-Capitalism. You can probably already suspect the problem I'm seeing, based on the title. The explanation of zero marginal cost and how more and more of our economy is heading there is spot on. And, as we've been noting for over a decade as well, this goes way, way beyond just "content" like music and movies. It's going to impact nearly every important industry in our lives:

The first inkling of the paradox came in 1999 when Napster, the music service, developed a network enabling millions of people to share music without paying the producers and artists, wreaking havoc on the music industry. Similar phenomena went on to severely disrupt the newspaper and book publishing industries. Consumers began sharing their own information and entertainment, via videos, audio and text, nearly free, bypassing the traditional markets altogether.

The huge reduction in marginal cost shook those industries and is now beginning to reshape energy, manufacturing and education. Although the fixed costs of solar and wind technology are somewhat pricey, the cost of capturing each unit of energy beyond that is low. This phenomenon has even penetrated the manufacturing sector. Thousands of hobbyists are already making their own products using 3-D printers, open-source software and recycled plastic as feedstock, at near zero marginal cost. Meanwhile, more than six million students are enrolled in free massive open online courses, the content of which is distributed at near zero marginal cost.

Frankly, I think the power of zero marginal cost goods -- or, as I prefer to call them, infinite goods -- is almost entirely ignored in energy, manufacturing and education (and, importantly, also in healthcare and finance). So it's certainly encouraging to see Rifkin highlight where this is all heading. Where I run into trouble, however, is his belief that this then leads to "the end of capitalism" or "anti-capitalism." To be clear, he explains how what comes out of this, a more collaborative society, will be a great thing. And, again, there's some agreement there. I just think that it's still very much capitalism. Capitalism does not mean that collaboration does not happen. In fact, collaboration is a key part of a well-functioning capitalist society. Ronald Coase famously laid out his theory of the firm in 1937, which explains how transaction costs are a key element in leading people to create long term collaboration. A zero marginal cost world will change the nature of those transaction costs, and will certainly change the nature of collaboration and companies, but it's not anti-capitalist. It's actually more exactly capitalist, where collaboration takes place with more transparency and more information. Those who believe that collaboration is anti-capitalist tend to misunderstand capitalism -- either as extremist Randian Objectivists, or those so opposed to capitalism, often based on believing capitalism is what Randian Objectivists say it is.

Take, for example, this aspect of Rifkin's argument in the NY Times piece:

THE unresolved question is, how will this economy of the future function when millions of people can make and share goods and services nearly free? The answer lies in the civil society, which consists of nonprofit organizations that attend to the things in life we make and share as a community. In dollar terms, the world of nonprofits is a powerful force. Nonprofit revenues grew at a robust rate of 41 percent — after adjusting for inflation — from 2000 to 2010, more than doubling the growth of gross domestic product, which increased by 16.4 percent during the same period. In 2012, the nonprofit sector in the United States accounted for 5.5 percent of G.D.P.

[....]

This collaborative rather than capitalistic approach is about shared access rather than private ownership. For example, 1.7 million people globally are members of car-sharing services. A recent survey found that the number of vehicles owned by car-sharing participants decreased by half after joining the service, with members preferring access over ownership. Millions of people are using social media sites, redistribution networks, rentals and cooperatives to share not only cars but also homes, clothes, tools, toys and other items at low or near zero marginal cost. The sharing economy had projected revenues of $3.5 billion in 2013.

Except, when you look, the most successful and disruptive examples of this "collaborative" approach are not non-profits or civil society, but rather perfectly capitalist companies, that have actually unlocked tremendous potential for revenue not just for themselves, but their users. Things like AirBnB, Uber, Lyrt, Sidecar, FlightCar, RelayRides, Zaarly, LendingClub, AirTasker, Kickstarter, LiquidSpace and many, many more are disrupting all sorts of industries, but doing so in ways that are actually about the more efficient use of resources, unlocking potential that had previously been locked up (often because the transaction costs were too high). But they're not anti-capitalistic at all. They're making capitalism much better. They're helping to move away from power being held by just a few large companies, towards ones where individuals have more power directly.

These aren't non-profits or civil society creating these disruptions, and it seems odd for Rifkin to imply that's what's happening. That's not to knock non-profit organizations or civil society groups -- both of which do great things in many cases. But it conflates a variety of different issues to argue that the response to a zero marginal cost society and infinite goods is that non-profits and civil society "take up the slack." Instead, what we are seeing is that new forms of (very capitalist) companies are forming. They're disruptive -- but disruptive in a good way. They're often about providing more economic freedom and power out to users, such that the transactions are actually beneficial to all players, rather than having a few large companies hoarding the power in the middle.

But having companies hoard power has never been true capitalism in the first place. It's always been the problem that occurs when you have transaction costs that are too high, sometimes driven through political and regulatory capture, allowing certain firms to gain monopoly or oligopolistic control over certain markets, allowing them to create economic friction, increase transaction costs, and keep most of the value created, rather than distributing it to the end points. However, the new disruptive players in the market are often reversing that trend. They're increasing trust, decreasing transaction costs, spreading much of the value to the end points, and simply taking a small cut of the transaction along the way. That's not anti-capitalist, or the "end of capitalism" -- it's about a better recognition of what true capitalism is supposed to be about: more efficient transactions, with minimal friction, where all parties benefit from the transaction.

So there's plenty that I find compelling in Rifkin's book and theories, but I think that he makes a leap too far in arguing that it somehow goes against capitalism, or that civil society and non-profits are somehow "the solution" to a problem that's not clearly a problem.

Filed Under: capitalism, economics, efficiency, infinite goods, jeremy rifkin, non-profits, peer economy, sharing economy, transactions, zero marginal cost