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De-materialization — The Move to an Asset-Light Life

My new pattern requires renting cars at the airports as needed. I am progressively ceasing to own things, not on a political-schism basis,…but simply on a practical basis. Possession is becoming progressively burdensome and wasteful and therefore obsolete. — R. Buckminster Fuller, Operations Manual to Spaceship Earth

Fuller was a bit ahead of his time, but he was right to observe that the world has a lot of excess capacity: our cars sit unused for most of the day, our houses sit empty while we are away at work or socializing, just to name a few obvious examples. What companies like Lyft and AirBnB do is provide a platform for that spare capacity to be put to work. Technology is adding to and facilitating this process in ways large and small. For example, I loaned someone a book off my Kindle the other day — it was quick and easy, and further simplifying the process, the book will be automatically returned after a set amount of time.

Median income is down 7%, and median net worth is down 28% over the last 10 years (BLS) while costs have risen, but these business models, which offer access to goods and services without the substantial investment required for an outright purchase, have been successful during the downturn. The same thing is going on in the corporate world as US companies have been functioning with less capital and fewer people since 2008. Companies are also utilizing less space per employee as more people work from home. Similarly, there has been a rise of co-working spaces, a form of shared office space, as various companies, often (but not always) aligned around a single field or ideology, pool resources to time-share space rather than outright owning it.

The top three expenses for young people are housing, transportation, and education. The rental markets are strong, and the demand is increasingly concentrated in the form of micro-apartments in major cities. Home ownership has not bounced back from the housing bubble. On the transportation side, the number of people who have driver’s license is steadily decreasing, and the number of miles traveled per year is at a multi-decade low in the US. And with the rise of open online courses and other technologies, the traditional degree is under threat, a trend that will continue with the ongoing increase in the cost of physically attending brick-and-mortar universities. It would cost me twice as much today to get my degree from an in-state school, a cost that I simply could not have borne.

While this phenomenon is driven by the economy, I think that there is a generational effect here as well. When you grow up posting, sharing, and tweeting, you are used to being constantly connected, often to people you don’t actually know. All of a sudden, it doesn’t seem so strange to loan someone your car or rent them a room in your condo. There’s definitely a cultural spillover from growing up connected to sharing physical goods and spaces.

It’s interesting to think about what’s next. What big asset do you own that you don’t have to? Where else is there spare capacity? What is the most valuable thing you own, and would you share it with someone else? It’s fascinating to watch how mobile technology is manifesting change in the physical world, attacking everything from taxi to hotel business models. But that’s not a bad thing for society at large (the individual taxi driver or hotel owner is a different story, of course). At the end of the day, if it leads to more efficiency and less stuff, it will be a huge win.

The Cost of Mobility — A Driver’s License or a Mobile Phone

Take teenagers 20 years ago and ask them would they rather have a car or a computer? And the answer would have been 100% of the time they’d rather have a car, because a car represents freedom, right? Today, ask kids if they’d rather have a smartphone or a car if they had to pick and 100% would say smartphones. Because smartphones represent freedom. There’s a huge social behavior reorientation that’s already happening. —Marc Andreessen, Fortune interview

What would you rather have — you get to pick only one — a driver’s license or a mobile phone? I’d take my phone without a second thought. It has an app to call a car (Uber), directions (Google), and public transportation maps and schedules for every major city (Embark). And the data is clear — the driver’s license is losing (i.e., ownership is steadily decreasing).

Drivers_Licenses

From an economic standpoint, the cost difference is dramatic. I just switched to T-mobile, which gives me unlimited voice and data for $70 a month (including internationally). That’s $840 a year in operating expense and maybe, if I bought the phone with no package, $500 in capital costs. Spread the phone cost over three years and call it $1,000 a year.

Compare that to a car: the average consumer spends $1,500 a year on gas alone. Plus, it’s a capital investment of tens of thousands of dollars. The all-in driving costs are probably close to $5,000 a year for most people, especially if you factor in the depreciation in the value of the car.

When I got my driver’s license, it was a big deal. There was no Internet (Marc Andreessen was working on Mosaic in Champaign, but it had yet to be launched), and mobile phones were by no means ubiquitous. The car thus was a form of freedom. Today, though, your friends, the news, and just about all other services are all available on your phone. As the graph from the Atlantic shows, there has been a fundamental shift regarding the number of people with driver’s licenses. With this shift, we as a society are driving far fewer miles and thus using less energy and importing less fuel. It’s amazing, the consequences of that little device in your pocket — the mobile phone has shifted consumer demand and literally affected the trade balance of the US (along with higher fuel efficiency standards).

The future is one of automated drivers and shared cars. It makes economic sense, it will be more efficient, and it will be safer. I never learned how to ride a horse growing up, and I’m guessing many kids in the near future will never learn to drive a car. And I for one cannot wait for the day that I can hop into a driverless car to head off to work. Looks like comedians will soon have to ditch all their jokes about the DMV (they were getting stale anyway).

Further Reading

Inside the Mind of Marc Andreessen, Fortune
The Dramatic 30-Year Decline of Young Drivers (In 1 Chart), Atlantic