- The possibility of a substantially cashless society has been tantalisingly close for some years
- 47 per cent of occupations may be automated in the next few decades
- For finance professionals and business advisers, the challenge is to embrace the revolution before losing it
By Michael Pascoe
In the polite world of hipster conference speakers and trend spotters, they call it the “sharing economy”.
Sure, sharing in the way a crocodile shares a riverbank with his dinner.
“Peer-to-peer business” is an alternative title, but from Uber “sharing” rides to Airbnb “sharing” rooms, what’s really happening is another chapter in the technology-enabled revolution that’s overthrowing the established order, destroying fortunes, trashing business models. And it’s coming to get you, if it hasn’t already.
“Digital disruption” is another euphemism. Schumpeter’s “creative destruction” is more like it – and a quick check of whether the Austrian economist deserves credit for that term throws up an example of the waves of revolution: Wikipedia.
The CD-ROM severely damaged Encyclopaedia Britannica, its salesmen and printers. Then the internet wiped the latter two out – after 244 years. Britannica now is primarily a “learning business”. Wikipedia at least is something that is genuinely shared, a cooperative resource. The most obvious early victims of the revolution – physical newspapers, bookshops and record stores – are being killed or degraded by others eating their lunch. And breakfast. And dinner.
Failed newspaper boards and management had neither the vision nor gonads to cannibalise their own rivers of classifieds gold, and thus allowed others to devour them.
The newspaper publishers have had no government licensing authority that might protect their investments in plant and people. That’s not the case with the latest high-profile battle field – the global taxi industry.
From London to Chicago, Berlin to Sydney, the owners of many billions of dollars’ worth of taxi licences are calling up all the government favours they can muster to be saved from the Uber business model that is better for consumers and drivers, but severely damaging for them.
Politicians who allowed taxi licences – whether Melbourne’s “plates” or Chicago’s “medallions” – to appreciate with all the rent-seeking stupidity of an artificial government-run market, must now decide to whom they owe their allegiance.
There is very big money at stake. Sydney, for example, last year had 5,647 plates each worth the better part of A$400,000 – call it A$2.2 billion. A Deloitte study for the NSW Taxi Council put annual NSW taxi revenue at A$1.3b.
According to a Washington Post story on Uber’s Chicago fight, that city’s medallions were worth about US$350,000 each, but an attempt to auction new medallions recently found no buyers. The Post reports the threat to medallion owners isn’t that they’ll lose passengers to these services, it’s that they’ll lose drivers. A taxi driver can earn comparable fares driving UberX passengers in his private car, without paying a lease fee.
“Without the drivers, we’re dead, we have no money,” says an owner of 50 medallions. With lease fees uncertain, financiers are retrenching in Chicago. “This is going to be a self-fulfilling prophesy: the less liquidity, the less activity; the less activity, the less liquidity. It’s a horror show. And it’s all because we’re losing drivers.”
The Uber revolution is being allowed to roll out in some cities and is being opposed in others. London is being Uber-ed despite taxi opposition. The Victorian government is fining Uber drivers for not having hire car licences. Auckland authorities are maintaining that Uber will have to meet their licensing standards.
The defenders of plate owners claim Uber is a danger to passengers – but the disruption of the Uber app is that it rates drivers and removes cash from the transaction.
Meanwhile, a taxi driver gang in Sydney reportedly has been skimming credit cards, violence by and against taxi drivers is not unknown and many a taxi I have stepped into seemed less than healthy.
There’s nothing new about bed-and-breakfasts, but Airbnb has put the power of BnBs and holiday rentals into everybody’s laptop. Or phone. It’s a darling of the “sharing economy” set.
Some cities are fighting it, most famously New York. The existing hotels don’t like the competition, the city doesn’t like the loss of tax revenue, co-op neighbours don’t like the hallway traffic of tourists, landlords hate tenants sub-letting rent-controlled properties at a profit they’re denied. But there’s something relentless about a revolution backed by the force of renters and rentees who support it.
So far, you might be feeling safe. Surely the revolution will only decimate some other industries, not all. Oh, there’s some back-office stuff that’s been outsourced, a little design work was done via Freelancer.com.au, MYOB and the like make SME accounts easier – but how about the prospect of 47 per cent of occupations being automated in the next few decades?
That’s the proposition of Oxford academics Carl Frey and Michael Osborne, casually mentioned in a challenging Economist feature on the earthquake set to shake universities.
Education is overdue for a revolution, suffering as it does from “Baumol’s disease” – the tendency of costs to soar in labour-intensive sectors with stagnant productivity. Whereas the prices of cars, computers and much else have fallen dramatically, universities, protected by public-sector funding and the premium employers place on degrees, have been able to charge ever more for the same service”.
The Economist had a dire warning for universities: “Were the market for higher education to perform in future as that for newspapers has done over the past decade or two, universities’ revenues would fall by more than half, employment in the industry would drop by nearly 30 per cent and more than 700 institutions would shut their doors. The rest would need to reinvent themselves to survive.”
Cash itself could be a victim of the revolution, according to my Fairfax colleague Peter Martin, citing the expense of physically making, moving and accounting for notes and coin compared with what binary code and mobile phones have already demonstrated as being possible in Africa.
The possibility of a substantially cashless society has been tantalisingly close for some years as the likely protagonists have tiptoed around the technology. No, not the banks, but the phone companies and IT giants. Apple, Google, Samsung, network providers – a combination of any or all of them could leapfrog the nascent tap-and-go cards with the wave of a smart phone.
A cashless economy could have interesting ramifications for the black economy. And many accountants.
For finance professionals and business advisers, the challenge is to embrace the revolution before losing it. That it’s an evolving revolution doesn’t help.
Rupert Murdoch initially expressed disdain for the internet’s impact on his empire, then boldly embraced it by, among other things, purchasing MySpace for top dollar – just in time for Facebook to effectively destroy it.
Michael Pascoe is an Australian financial journalist and commentator.
This article was first published in the September 2014 issue of Acuity magazine.