Sharing Economy = Variable Cost Economy

The Economist's The Rise of the Sharing Economy provides an excellent overview of this growing segment of the global economy.  Key quote:

The big change is the availability of more data about people and things, which allows physical assets to be disaggregated and consumed as services. Before the internet, renting a surfboard, a power tool or a parking space from someone else was feasible, but was usually more trouble than it was worth. 

Most coverage of the sharing economy focuses on the social and environmental aspects of this trend: sharing means fewer resources used and a more sustainable economy.  These are clearly good things.

But there is surprisingly little coverage of how sharing turns fixed costs into variable costs and what this means for businesses, consumers and the economy.

The technologies that have produced the sharing economy are the same as those turning fixed costs into variable costs.

These technologies are also driving the increased use of outsourcing, partnering and business infrastructure service companies (UPS for logistics, contract manufacturers for production, Amazon on others for IT and web services, etc.).

The use of variable cost business models and services reduces the need for capital, provides businesses the ability to scale up and down much more easily and cuts business risk. It also allows small businesses to tap into world class and scale business infrastructure on a "pay as you go" basis.

These are big changes.

The shift to variable costs also is changing the employee/employer relationship. Companies are increasing their use of contingent workers and turning their human capital fixed costs into variable costs.

This is fundamentally changing the labor force and the social contract between companies and employees.  

The sharing economy is exciting on many levels. For those looking for more information check out Shareable, which covers all things related to the sharing economy and Collaborative Consumption, which is from the authors of the book on the sharing economy What's Mine is Yours.