The economy of scarcity versus the economy of abundance
The above illustration is an interactive map by CartoDB of the properties available to rent in Paris via Airbnb, and was created by Julien Guillot and commented on in this tweet by CartoDB. It is literally one of the best illustrations I have seen of what we might call the abundance economy, as well as of the effect that a platform like Airbnb can generate on a city’s tourism sector.
What we have here is a vast, dense cloud made up of tiny dots which when a cursor is passed over them provide information about prices and their characteristics. This provides a picture of the available space below the supply and demand curve in a much more complete way than traditional hotels do. If you haven’t seen the interactive version, please try it out: there are rooms for around 35 euros a night, right up to luxury apartments in the center of the city for several thousand.
There was probably never any real shortage of accommodation in the French capital, but a map of what was available before Airbnb was around certainly didn’t look like this. So what are we talking about here? To begin with, an problem of the first order for those who were responsible for administering property on an economy of scarcity basis: the economic variables of a post-scarcity system are clearly not to their liking, and they will do all they can to put a stop to it using all kinds of arguments, true and false.
The hotel sector will now lobby the relevant authorities, attempt to win over public opinion, take legal action, manipulate, defame, and do whatever it takes, because its members are about to see the tourism cake divided up among a great many more players than ever before. They will talk about unfair competition based on the rules that they have to obey, they will say that they owners of these apartments don’t pay their taxes, highlight the dangers of the submerged economy, and even that this represents a danger to public health. With the exception of a few visionary competitors, the hotel sector will unite to fight this terrible threat to their industry, pressuring the government to come up with restrictions to prevent Airbnb from operating, including banning it by law.
And it will all be to no avail: in the end, there is simply no preventing somebody from choosing to rent a room or an apartment rather than staying in a hotel, especially when the owners of the accommodation in question go to so much trouble to provide a personalized service, thus creating a bond between seller and buyer. If the regulators attempt to restrict this they will in effect be acting contra natura, and they will rightly be criticized for doing so.
What has happened here? Simply that it used to be difficult and risky for owners to rent accommodation out for short periods, and equally so for those looking to rent. Now there is a platform that provides huge amounts of information that allows both parties to reach agreement, and even to take out insurance. This is a platform that has been taken up en masse, and that is now a pleasure to use. Having got this far, there is no going back: the phenomenon is unstoppable, and anybody who gets in the way will be run over.
Which leads us to the fundamental question: who benefits from this? The owners of apartments are clearly happy, and obviously, so are tourists to have such a wide range of options. Hotel owners can protest all they like, but this is now where we are. What will happen now is the greater good will prevail.
Let’s now switch to another industry: below, a tweet in Spanish by a Barcelona taxi-driver: “monopoly, a cursed word. I know. But Uber simply wants to inundate the city with cars”.
It’s the same situation as with Airbnb: an industry that used to operate on a scarcity basis, highly regulated to restrict supply, and that is now being confronted by a platform that allows anybody to enter that industry. Obviously, if the city is inundated with cars, Barcelona’s taxi drivers will lose out.
In this case, there is also a powerful human element to the situation. The majority of taxi drivers are self-employed and have had to indebt themselves to the hilt to buy a license, and repaying that debt takes up a significant part of what they earn. They stand to lose out heavily if the sector is suddenly opened up to anybody.
In any event, Barcelona isn’t going to be inundated with cars: in fact, Uber’s system makes far better use of the city’s car pool by using vehicles that would otherwise simply be parked up. At the same time, the availability of cheap and plentiful transport will likely prompt growing numbers of people to either get rid of their cars or put them to use to earn a bit of spare cash by doing some taxi driving in their spare time.
Taxi associations around the world are responding to the challenge from Uber in the same way that the hotel industry has, and in some cases by using violence to prevent a newcomer taking over their market. We have heard stories about dirty vehicles, about non-payment of taxes, and many other issues that even if they were true, could be solved by adequate supervision and regulation. We have heard that Uber operates out of a tax haven, when the reality is that 58 percent of Fortune 500 companies operate out of the same US state, Delaware, and apply the same (legal) tax optimization practices.
At bottom, all that is happening here is that a new platform has appeared that has turned an economy of scarcity into a potential economy of abundance, and that is providing extremely popular among the general public.
And again, the question comes down to who benefits: anybody who wants to use their car to earn some cash; the public who now have more choices in how they travel; and even tourists, who can now travel around foreign cities using a service that inspires greater confidence, and that they may even know from their own city. And who loses out? A group of people who used to benefit from scarcity: taxi drivers.
The thing here is that it doesn’t matter whether you like Airbnb or Uber: they are now both a reality, and one that is here to stay. To me they are simply potent examples of something I have spent my professional life studying: technological disruption, in this case real life and up to the moment, and about which there is a huge amount of information available. I have no axe to grind. So please…
(En español, aquí)
