Teach a parrot to say, “Supply and Demand”, “Profit Motive”, and “Competition” and you’ve got yourself a trained classical economist qualified to practice during the time of Adam Smith, under the doctrine of laissez faire. That was during the early stages of capitalism when the economy was made up mostly of farmers, butchers, bakers, and other entrepreneurs guided by self-interest or profit motive and openly competing in the market.
Fast-forward to corporations, monopolies, big government with stringent rules and regulations- and the school of classical economics becomes irrelevant. Enter the age of smart phones and light speed communication media and society gets shrunk, proportional to a village, albeit a global one. We are again seeing entrepreneurs or independent contractors guided by self-interest openly competing in the market, circumventing strict rules and regulations.
Uber, Airbnb and other sharing platforms are not only competing, they’re redefining the model of doing business today. It’s a model more in line with classical economics than novelty.
These companies use apps that connect consumers with independent contractors who provide services. It hasn’t been the demand for rides or hotel rooms that’s changed. Nor the supply. What’s changed is how the players in these companies describe themselves. You’ve got what I want. I’ve got something people need.
Ryan Graves, head of Uber’s global operations explains there’s a desire “to build a business that serves millions of people, not be slaves to a brand,” That makes sense. People are tired of feeling tricked by big business. In the shared economy model, the utility is transparent and the exchange is transparent. You need a lift? Hop in. A place to stay? I’ve got space. It’s simple. People get what they need directly from someone who has it.
Say you want to rent out a beach condo somewhere for a week. You find the perfect rental. You’ll pay Airbnb to handle the transaction and provide assurance, it’s straightforward. When you return home, it dawns on you that your little mountain condo could have been a nice vacation spot for someone while you were gone. Anyone can participate. Everyone realizes they have something to offer.
So it’s possible to be a producer in this business as well as a consumer. You can rent out your own home or register your own car and make some money. It’s an idyllic circle and it takes us back to the very basics of bartering, trading and sharing.
There is empowerment of independent contractors. Taxi cab owners that have been driving for decades are mad. That’s competition. Apart from price and accessibility, there’s a huge difference between the backseats of a cab and an Uber car. The taxi driver’s in a bad mood and the Uber guy wants to chit chat. Self-interest demands good customer service.
The mindset of an employee is far different than that of an entrepreneur or businessman. The employee wants a paycheck as a result of his work. The businessman is passionate about his work and makes profit. For consumers, it’s natural to want to do business with people who are genuinely excited about their product / service. That’s classical economics 101. Why dampen the entrepreneurial spirit?
Hilary Clinton has it wrong about future jobs. Employees are expensive! More and more people are wary of being employees. So let them be independent contractors. Airbnb’s estimated worth is $25 billion. Unemployment is low. Businesses aren’t suffering from the competition as many assume.
For many hotels the Airbnb concept doesn’t appeal to their target demographic. For luxury properties, guests are often married, have children, discretionary income and prefer the amenities of a hotel suite, says Classic Hotels marketing manager about beach hotel properties. Millennials and budget travelers may seek to save money and go with Airbnb. That’s not to say lower-cost hotels lose out. Instead, the travel industry expands. People have more options for vacation so they’ll take more vacation!
It takes a village. Everyone gets involved, open markets flourish, the economy is vibrant and back to the simple classical model. A parrot can again become an economist