Wei Xiao'an: Putting Idle Items to Use with Sharing Economy

The Philosophy Behind Sharing Economy

In terms of sharing economy, our focus is not on ancient times, nor modern times, but on the contemporary era. Overall, sharing economy encompasses several aspects:

Firstly, diversified consumption is a basis of the market. The diversity of consumer goods is greater now than it ever was before, which means choice has expanded immensely, and will continue to expand. This freedom of choice is a tremendous and fundamental freedom for humanity. We used to have no choice. For example, during the planned economy era, consumption was all ticket-based, and there was no possibility of diversification, but now there is. Also, diversified products have led to the fragmentation of demand. Even for the same product, people have different needs. This kind of fragmentation has already made it very difficult for old methods of mass production to satisfy demand. Therefore the supply has to be diversified, and this kind of diversification will be essential in the future. Recently, the central government has expressly mentioned lateral reforms for supply, which on some level is essentially a directive for the development of a sharing economy.

Thirdly, ownership and right of control have weakened, while right of use and right of consumption have risen in importance. The service economy is dominating. The less fortunate Chinese have only just begun to grasp the meaning of private ownership (only around 15 years since its appearance in China, prior to which everything was state-owned), and now it is already gradually diminishing. Nations with a Developed market economy have had the concept of private ownership for centuries. In those countries, these concepts are deeply entrenched, to the point where they are considered natural. To us, it is more coincidental than natural, which is good because it means people are less conceptually resistant to the development of a sharing economy. However, the next step is undoubtedly the dominance of the service economy, because with the development of the manufacturing industry, as well as various other industries, one problem is arising, which is the zero cost, or the disappearance or near disappearance of marginal cost. In these circumstances, many industries will have a hard time developing, but the service economy is perfectly positioned to benefit from this kind of phenomenon, that is for certain.

Fourthly, composition will become mainstream. Composite products, composite consumption, composite work, composite identities, and a composite society. One person may hold five to six professions, in which case what would his identity be? This will undoubtedly happen in the future; in fact, it already has. If you ask me what I do, I wouldn’t know. If you ask me what I’m interested in, what I’m good at, that I would be able to answer. Thus, a composite society will be born, whose people’s identities will be multifaceted. People will have pluralistic self-images, life will be rich and fulfilling, and work will be recreational because people will think of work as recreation and recreation as work. These kinds of problems will be commonplace in the future, and eventually people will get used to it, even though they might find it odd right now because of the new ambiguity and complexity that this kind of composition has undoubtedly caused.

Fifthly, businesses of sharing economy will be divided into three types: platform-style businesses in the air, specialized businesses on the ground, and modularized businesses in the middle. A good business should be both sophisticated and down-to-earth, and it is continuously evolving, so it is hard to say which model is the “best,” only which is suitable for the present. By the time we enter the next stage, perhaps that model would again need to be adjusted.

Idleness vs. Liquidity

In the end, idleness and liquidity are at the root of the development of a modern sharing economy. From a societal perspective, idleness is wasteful. From an individual perspective, some idle items are a waste, others not necessarily. For example, if I simply want to keep something where it is, then there is nothing to argue–it’s no longer an economic problem. On the other hand, liquid items can be allocated for use, so to allow things to flow freely is the basis of a sharing economy. The more idle items are circulated, and the greater the range of their circulation, the more productive it is in terms of resource utilization, which is a benefit to society. Overall, there are four types of idleness:

Firstly, there’s idle funds. This has led to the birth of various forms of investment, large and small, as well as P2P. In today’s society, young people don’t want to have money just lying around, it has to be utilized. This is not the past where peasants save a couple of silver dollars, stuff it in a jar, bury it, and leave it for their offspring. Things have changed.

Secondly, there’s idle objects, which have led to various forms of sharing. Idle objects have become the norm, but of course China still has not reached this particular stage. In developed countries, when people move out of their homes, they simply put all of their items on the sidewalk and sell them off for very low prices, with some items essentially being given away for free. But as long as there is someone to take it, that gives them joy, unlike us who would rather destroy it than give it away, which is the way a peasant thinks. And so these sorts of idle objects gave birth to flea markets, and now from flea markets we have progressed into sharing objects, which is actually very logical. Moreover, for items that are rarely or infrequently used, putting them to use would be better than leaving it idling.

Thirdly, there’s idle space, which can be used in a myriad of ways. For example, a house can be seen as idle space, as well as a kind of an idle object. Using a broader definition of idleness, a city with a good environment would be considered idle if no one went there. If someone goes to experience the city, that would also be a utilization of resources. This is inevitable in logic, theory, and reality, as evidenced by the birth of the tourism industry.

Fourthly, there’s idle time, from which various forms of leisure have developed as a result. We do not need to concern ourselves with what is considered tourism, and what is considered leisure; that is not important. What’s important is defining leisure. What is leisure? Leisure is the freedom to use your time in diversified ways, which inevitably leads to diversified forms of leisure.

Overall, we have these four forms of idleness and their corresponding new models of utilization. In terms of liquidity, the free flowing of information in modern society has become the basis for the free flowing of all other things. Modern transportation has become the means of this flow. Zero marginal cost is the reason all things are flowing freely in the first place.

When it comes to analyzing sharing economy, these are the basic problems. Essentially it is a study of the relationship between idleness and liquidity, idleness and utilization. The more this develops, the more prominent these issues will become. We can no longer rely on our life experience to make decisions, if we do, we will find that our decisions are often inaccurate. Thus, a theoretical foundation is required, such as The Zero Marginal Cost Society, which is a fantastic work detailing the theoretical basis and a series of analytical processes in regard to such a society. Reading this book, you will feel like every page has something to be gained from. I have talked about all of these seemingly new concepts, but we are actually already facing these changes of life style and new economic structures in our daily lives.

Add, Subtract, Multiply

The flow of information is the key, so the Internet has become the decisive means for establishing a sharing economy. The past few years have been observing the Internet integrating with various industries, and whichever industry it integrated with, the traditional operations of that industry would diminish, followed by the rise of a new model for that industry. For example, when the Internet integrated with brick and mortar businesses, shops closed down in large numbers, and a new form of business was born: express deliveries, which solved the “last kilometer” problem. Express deliveries then became an important field of employment. Upon close examination, this has occurred in all kinds of industries. Take tourism for example, when Internet met with traditional tourist agencies, agency names have stayed the same but their old operations became obsolete. In its place is tourism e-commerce, so only bets in this new model will have any future. On the other hand, the sharing economy has utilized the Internet as a platform, with similar results. Add that to a zero marginal cost society, and wherever the Internet goes, it puts a damper on traditional operations. Some businesses are eliminated in this process. It’s only natural that all these things would happen. But what kind of businesses will prosper in this environment? That is the true million-dollar question, the question that’s worthy of further study. For example, short-term rentals. Right now, it is clear that the biggest effect has been on the traditional hotel model. How big an effect? Revolutionary. In four years, Tujia has expanded to 420,000 properties. There are 13,000 star-grade hotels in China. They have acquired, after 36 years, a total of 1.3 million guest rooms. In other words, Tujia has already expanded to a fourth of that number in a fraction of the time. After a few years, we will suddenly find that this behemoth has risen out of nowhere. This problem, in fact, has already created an intense reaction in Europe and America. The Chinese hotel industry currently hasn’t reacted at all. I’ve talked with some hotel managers, they think it doesn’t matter. They hardly give it a second thought, thinking how could those things compete with us? But ever since this year, things are different. This year, the concept of non-standard housing has come into shape, and everyone can see it. Ten years ago, I had some thoughts on this topic, namely, the development of the hotel industry from the perspective of the greater accommodation industry. At the time, I divided the greater accommodation industry into eight types. These new models hadn’t appeared yet, but once they did, it was immense. For example, the taxi industry is currently very sensitive, because the entire world’s taxis are protesting against the taxi-on-demand service, even to the point of resulting in violence. It is unlikely that China right now will produce these kinds of incidents, but if people take issue with it, is there anything that can stop it?

Sharing Economy Is Rooted in Demand

First is satisfying practical demands. Right now, all of the things they do, they do them to satisfy practical needs.

Second is unearthing potential demands. Short-term rental, for instance, is an example of digging for potential needs. These needs have always existed, but they were not recognizable, so products which previously did not exist are now coming into existence.

Third is creating new demands. Many needs need to be created. When we didn’t have TV, how could we have a demand for TV? We didn’t even know what a TV was. When we didn’t have smartphones, we couldn’t have needed smartphones either. Only when smartphones came out did we realize how unsophisticated we were.

Fourth is leading future demands. Since we are analyzing sharing economy and the future of leisure, we should ask, what are the demands of the future?

Those who discover demands have an advantage. Those who control demands control the world. Catering to practical, existing needs is a competitive race, while digging for potential needs is a road to uncontested market space. The process of creating new demands and leading new trends for demands is undoubtedly proactive. The next step in development, from a market economy to a collaborative economy, will entail a shaking of some fundamental beliefs. For instance, we used to believe in planned economy, and when that didn’t work, we realized market economy was still the most effective economic system. But now, we have to question that again. Under the new economic situation, collaborative economy is the key. Moreover, we will see a shift from “exchanging value” to “sharing value.” We used to pursue the exchange of goods, or the exchange of labor, but now the value of exchange is gradually declining, while the value of sharing is increasing. This means that demand will change, and many employment fields will also change. For example, non-profit organizations have already become an important field of employment for developed countries, taking up at least over 10% of all employment. Our reaction is that we must control these non-profit organizations; we cannot let them develop. Then when freelancing becomes a major career option, reaching 40% in the United States, we think this is not real work, because it’s informal. On the surface, this is an issue of a difference in management or administrative philosophy, in reality it is a difference in values, and this kind of change is fundamental.

(This excerpt is taken from Sharing Economy and a Future of Leisure by Wei Xiaoan, with certain portions omitted.)