Culture 25 May 2017
Now more than ever, it is easier to lease, share, and exchange skills, labor, and commodities. According to internetsearchinc.com, there are 17 billion-dollar companies (and 10 unicorns) in the sharing economy, which include giants masquerading as startups like Uber, Etsy, eBay and Airbnb.
In fact, Brian Chesky, Airbnb's founder famously said: “There are 80 million power drills in America that are used an average of 13 minutes... Does everyone really need their own drill? The cheeky answer is no one needs a drill... just the desired hole. Chesky's point, though thought-provoking, is nothing new. After all, people have been bartering for many years, certainly long before the emergence of smart phones, social networks and PayPal.
But technology, partnered with innovation, has resurrected a timeless economic model. The present-day potential represents a lessened carbon footprint and increased opportunities to do social good. Fewer resources are wasted on manufacturing and needless consumption when resources are divvied up among many people in the sharing economy. It's a best-case scenario of discarding inefficiencies and maximizing use, whether it's tangible assets or time, which ultimately means reducing waste and improving resource allocation.
There now exists a myriad of opportunities for the new generation of business leaders to combine social good with business. The sharing economy promotes sustainable consumption while fostering a sense of community.
Uber is arguably the most recognizable sharing economy startup, now valued at an estimated $30 billion, and is the poster child for the sharing economy. Lyft, RelayRides and Sidecar all attempt to maximize the value of idle cars in different ways. The world's leading carrier WiFi provider, Fon, is comprised of people sharing their WiFi. And the concept of sharing is not just limited to millennials.
Richard Branson is a firm believer in the antidote for ownership obsession: “As people's access to the internet grows, we're seeing the sharing economy boom - I think our obsession with ownership is at a tipping point and the sharing economy is part of the antidote for that." Branson invested a collective one million pounds to startups and small businesses who impressed him the most through the 2016 Virgin Media Business “VOOM" competition.
MacRebur Limited won the best startup category, securing a prize package worth 450,000 pounds, due to patenting a method of mixing waste plastics with bitumen, to produce a new asphalt road material, which the company says will revolutionize the world's roads. Besides the companies he's backing through the VOOM competition, Branson explained why he is also putting his weight behind the sharing economy, with investments in companies such as taxi-apps Uber and Hailo – a smartphone app that helps link passengers with empty cabs, saying that it has revitalized London's famous taxi scene.
Branson, who has made a career out of founding startups, started Virgin StartUp almost three years ago, and since then has provided more than 1,100 businesses with startup loans, for approximately 11 million pounds, with nearly 35,000 mentor hours.
Branson, who founded Virgin Group, admits that he has been caught out by emerging technologies in the past, and has learned to adapt, rather than attempt to obstruct progress: “I've been put out of business by new innovations. iTunes destroyed my record business, so we moved into mobile phones, trains, health clubs and into space."
He claimed that taxi lobbying groups (in London) who are fighting to curb Uber's expansion should either accept Uber and embrace it or change what they are doing. He added: “The moment somebody creates something that's better value for the consumer, you just have to accept it."
However, Robert Reich, former U.S. secretary of labor says that the sharing economy is hurtling us backwards. Reich adds that the euphemism is share economy and a more accurate term would be share-the-scraps economy. Newer software technologies permit nearly any job to be divided up into separate tasks, which can be parceled out to workers when needed, with pay determined by demand for that specific job at that specific moment. Matched online, customers and workers are rated on reliability and quality. The lion's share goes to the software-owning corporations with the scraps to on-demand workers.
Reich cites Amazon's Mechanical Turk, which Amazon describes as “a marketplace for work that requires human intelligence," as little more than an Internet job board offering minimal pay for mindlessly-boring bite-sized chores. He goes on to explain that it's an extension of a process that began a little more than 30 years ago when corporations began turning over full-time jobs to temporary workers, freelancers, and consultants.
It's a way to shift risk and uncertainties onto the workers as well as a way to circumvent labor laws that set minimal standards for wages, hours, and working conditions. In short, “on-demand work" is a reversion to commonplace piece work of the 19th century, a time when workers had no legal rights, assumed all risk, had no power and toiled long hours for almost nothing. Uber drivers use their own vehicles, take out their own insurance and pay a hefty fee for the privilege.
According to compensation analysis by ridester.com, the actual earnings, or “what's left" after Uber (and Lyft) gets its cut, fuel costs, car maintenance, insurance and taxes are abysmal. It's amazing people still drive for these companies. Ultimately, these rates fall below minimum wage, and in some cases, drivers are losing money every hour they're on the road. The only exception appears to be Uber's New York City drivers, where there's an actual chance to make a relatively decent income.
At some point the question needs to be asked: Does it really make sense to work for a company that pays less than minimum wage but demands you bring a $20,000 – $30,000 piece of equipment to the job? Wouldn't people be better off working at a fast food chain for minimum wage? At least then people would not be forced to bring a $20,000 dollar, four-wheeled-piece of machinery to work.
Asset-sharing and time (labor-sharing) are the two main categories of sharing economy startups. The former, think Airbnb and Fon, are here for the duration and it's easy to understand why because owners have the opportunity to maximize the value of assets by renting the experience of ownership for a reasonable price - a “win-win" for both parties because the market determines values.
The future for labor-sharing services like Uber and Lyft is less certain. While Uber and their drivers provide a notably better experience than taxis, there remain concerns about the societal impact of said services. While some economists laud on-demand work as a means of utilizing people more efficiently, the greatest challenge isn't using people more efficiently – it's finding ways to better allocate work and the gains from the labor.
3 Min Read
"How did you ever get into a business like that?" people ask me. They're confounded to hear that my product is industrial baler wire—a very unfeminine pursuit, especially in 1975 when I founded my company in the midst of a machismo man's world. It's a long story, but I'll try to shorten it.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up—even if it involved a non-glamorous product. I'd been fired from my previous job working to become a ladies' clothing buyer and was told at my dismissal, "You just aren't management or corporate material." My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Over the years, I've learned quite a few tough lessons about how to successfully run a business. Below are five essential elements to keep in mind, as well as my story on how I learned them.
Find A Need And Fill It
I gradually became successful at selling various products, which unfortunately weren't profitable enough to get me off the ground, so I asked people what they needed that they couldn't seem to get. One man said, "Honey, I need baler wire. Even the farmers can't get it." I saw happy dollar signs as he talked on and dedicated myself to figuring out the baler wire industry.
I'd never been interested to enter the "man's" world of business, but when I discovered a lucrative opportunity to become my own boss, I couldn't pass it up.
Now forty-five years later, I'm proud to be the founder of Vulcan Wire, Inc., an industrial baler wire company with $10 million of annual sales.
Have Working Capital And Credit
There were many pitfalls along the way to my eventual success. My daughters and I were subsisting from my unemployment checks, erratic alimony and child-support payments, and food stamps. I had no money stashed up to start up a business.
I paid for the first wire with a check for which I had no funds, an illegal act, but I thought it wouldn't matter as long as I made a deposit to cover the deficit before the bank received the check. My expectation was that I'd receive payment immediately upon delivery, for which I used a rented truck.
Little did I know that this Fortune 500 company's modus operandi was to pay all bills thirty or more days after receipts. My customer initially refused to pay on the spot. I told him I would consequently have to return the wire, so he reluctantly decided to call corporate headquarters for this unusual request.
My stomach was in knots the whole time he was gone, because he said it was iffy that corporate would come through. Fifty minutes later, however, he emerged with a check in hand, resentful of the time away from his busy schedule. Stressed, he told me to never again expect another C.O.D. and that any future sale must be on credit. Luckily, I made it to the bank with a few minutes to spare.
Know Your Product Thoroughly
I received a disheartening phone call shortly thereafter: my wire was breaking. This horrible news fueled the fire of my fears. Would I have to reimburse my customer? Would my vendor refuse to reimburse me?
My customer told me to come over and take samples of his good wire to see if I might duplicate it. I did that and educated myself on the necessary qualities.
My primary goal then was to find a career in which nobody had the power to fire me and that provided a comfortable living for my two little girls and myself.
Voila! I found another wire supplier that had the right specifications. By then, I was savvy enough to act as though they would naturally give me thirty-day terms. They did!
More good news: My customer merely threw away all the bad wire I'd sold him, and the new wire worked perfectly; he then gave me leads and a good endorsement. I rapidly gained more wire customers.
Anticipate The Dangers Of Exponential Growth
I had made a depressing discovery. My working capital was inadequate. After I purchased the wire, I had to wait ten to thirty days for a fabricator to get it reconfigured, which became a looming problem. It meant that to maintain a good credit standing, I had to pay for the wire ten to thirty days before my customers paid me.
I was successful on paper but was incredibly cash deprived. In other words, my exponentially growing business was about to implode due to too many sales. Eventually, my increasing sales grew at a slower rate, solving my cash flow problem.
Delegate From The Bottom Up
I learned how to delegate and eventually delegated myself out of the top jobs of CEO, President, CFO, and Vice President of Finance. Now, at seventy-eight years old, I've sold all but a third of Vulcan's stock and am semi-retired with my only job currently serving as Vice President of Stock and Consultant.
In the interim, I survived many obstacles and learned many other lessons, but hopefully these five will get you started and help prevent some of you from having the same struggles that I did. And in the end, I figured it all out, just like you will.