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Wednesday, September 24, 2014

The answer is: No

A few months ago I rubbished the NYT's Claire Cain Miller for some rather uncritical #WarOnWymyn reporting. There have been several opportunities since, because the NYT is bound and determined to apply the same sort of objective rigor to the #WarOnWymyn they have made their hallmark in Globa … Climate Cha … Disruption.

But fair is fair, and I must note she has hit on an interesting question: Is owning overrated?

Things that you can now rent instead of buying: a power drill, a song, a tent, an office for an hour, a Prada handbag, a wedding dress, a painting, a dog, your neighbor’s car, a drone.

This new way of consuming — call it the Netflix economy — is being built by web start-ups that either rent items themselves or serve as middlemen, connecting people who want something with people who own it. They are a growing corner of the broader sharing economy, in which people rent out rooms in their homes on Airbnb or drive people in their cars with Uber or Lyft. Soon, tech entrepreneurs and investors say, we’ll be able to rent much of what we always thought we must own.

I'm betting some New York City provincialism is sneaking in there, but perhaps she is on to something. For things that are relatively costly, but have a low utilization rate, and the need for which is predictable, that sounds like making sense. Particularly when aggregators remove the research overhead required to find what's out there. After all, that is one of the primary benefits stores bring with them: they, too, aggregate. The downside, of course, is the paying full freight for something rarely used.

Tools are a good example. Ten years ago I built a deck. I bought a power planer I have used once since. As part of the Hand-Me-Down project, I bought a vacuum pump and manifold gauge set to diagnose the air conditioner.

I failed, by the way. Far smarter to have rented these tools than to have bought them. Along with a bucket-o'-clues.

Other things, not so much. Outside dense cities, where car ownership really can be occasional, Uber and Lyft are just taxi companies by a different name. The rental market for aspirational fashions beyond the self-obsessed blue enclaves isn't as robust as it might appear from New York.

Still, at first glance, renting in lieu of ownership might be an economic game changer. We wouldn't need so much consumption, which means the earth could start to heal, and the rise of the seas slow.

This is, after all, an NYT article.

Perhaps not, though. Ms. Miller has forgotten that there already is a rental market for many things — including the AC tools I bought. Which I can, in yet another now familiar arrangement, put into the serial rental market.

EBay. You may have heard of it.

My guess: companies like Uber and AirBnB are alternative ways of doing the what we have long done, whose effect will be to greatly expand supply while not changing amount. RenttheRunway can put women into designer dresses and accessories for one-off occasions, but only in specific locales.

Beyond that: nothing.




29 comments:

Bret said...

For transport, I think that one day cars will drive themselves (ubiquitously), and at that point, a driverless car version of Uber will evolve, that will hit a critical mass where a car is always within seconds to a couple of minutes away (except in rural areas), and then it will become far more convenient and cheaper to just Uber your transport.

Other than the commute to work, the vast majority of driving for me involves errands. Errands usually involve parking, then walking from the parking spot to the store. Much better to be dropped off at the door, and then the car autonomously goes on its merry way to transport somebody else to somewhere else, then a different car pulls up when I'm done with my errand and off I go. Just think how many gazillions of acres of parking lots would be saved!

Clovis e Adri said...

Yeah, self-driven taxis may well be a wonderful thing in future, but they'll still have the cost/benefit limitations human taxis have: there is a number X of kilometers per day you run after which to have our own car is cheaper than paying for cabs.

In a country of far away suburbs and commuting routes like the US, that makes Skipper's point a win.

For smaller and denser countries (like in Europe) things may go differently.

Howard said...

Self-driving cars will be welcomed by many boomers when they can no longer drive themselves safely.

Annoying Old Guy said...

The problem with EBay as a rental facility is the transaction risk. If I rent, I can predict the cost. With EBay, who knows what price I'll get or even if I will be able to resell at all. On the other side, if I rent, I get a guarantee where if my device doesn't work, I can get a replacement at no extra charge.

Bret said...

Clovis wrote: "...they'll still have the cost/benefit limitations human taxis have. "

I don't understand this comment. There's no driver which is the majority of the cost of a taxi.

It costs $0.50 per mile for the car (capital, gas, oil, maintenance, insurance...).

It costs about $2.50 per mile for a taxi in San Diego.

That factor of 5 makes a difference.

Clovis e Adri said...

Bret,

It does, so X will be greater in future than it is now. But you'll still pay the profit for someone else by using his cars, and at some point it'll be worth to have yours. That's my only point.

Bret said...

Yeah, but I pay profit to someone when I buy hamburger, but you don't see many people out herding their own cattle.

With robot-Uber I don't have to take the time to put gas and other fluids in the car, I don't have to take the time to set up maintenance appointments and drive the car (or get the car to drive itself) to the appointments.

Furthermore, I don't have to put it in a garage overnight and can reclaim all of that space for my living areas.

The point is that the robot-Uber company, with large volumes of vehicles, has a significant cost advantage for numerous activities like these, so they can make their profit and I can still enjoy a lower cost and/or enough extra convenience to justify a very slightly higher cost delta.

Clovis e Adri said...

Bret,

You may well be right. It depends a lot on which cost delta we'll have with that technology.

I 'd probably still want to own a car, but that's a subjective thing.

Hey Skipper said...

[Bret:] For transport, I think that one day cars will drive themselves (ubiquitously), and at that point, a driverless car version of Uber will evolve

I wouldn't bet against that, but it is amazing how much the Google car can't do.

And I think they are decades away from solving the 'driver out of the loop' problem. Even the most modern airliners have "what the hell is it doing now" moments. Almost none of them you hear about, because almost always the pilots are sufficiently engaged to stop it doing whatever it shouldn't be. Keep in mind that, in many regards, the aviation environment is simpler than the driving environment.

With the average age of the US car fleet at 12 years, even if cars were to become autonomous in a decade, I'll not likely live long enough to see them become prevalent.

In the meantime, the easy things — adaptive cruise control, predictive braking, and the automotive version of the Traffic Collision Avoidance System will make the accident rate plummet.

Should autonomous cars become a reality, most public transportation systems would be dead.

The problem with EBay as a rental facility is the transaction risk. If I rent, I can predict the cost.

All true. However, anytime individuals rent their own tools, recreational vehicles, designer clothes, they face transaction risk in reverse: what do I do if the power planer comes back trashed, or not at all? Further, if you bought the thing from EBay, then it is likely you can sell it on EBay for roughly what you paid for it. I'm pretty sure I can get nearly what I paid for that AC equipment. If so, I effectively rented it, the cost largely being shipping.

I don't understand this comment. There's no driver which is the majority of the cost of a taxi.

It costs $0.50 per mile for the car (capital, gas, oil, maintenance, insurance...).


You forgot the cost of a medallion.

Which dwarfs operating expenses and depreciation.

Bret said...

Clovis wrote: "I 'd probably still want to own a car, but that's a subjective thing."

Well, there is that. On the other hand, I'll have to say the allure of owning a car has worn off for me over the last few decades with the hassles outweighing the benefits.

Bret said...

Hey Skipper wrote: "I wouldn't bet against that, but it is amazing how much the Google car can't do."

That's now. I'm guessing it's a 50 to 100 year process.

Hey Skipper wrote: "...in many regards, the aviation environment is simpler than the driving environment. "

Except for the minor detail that automobile accidents tend to be a bit less catastrophic than jetliner crashes, so there's a little more room for a learning curve.

Also, an awful lot of car drivers are pretty poor at what they do, so the robot car has a pretty low bar to hurdle.

Hey Skipper wrote: "You forgot the cost of a medallion. "

The taxi per-mile cost is still a factor of 5 more than the private per-mile cost.

Clovis e Adri said...

Bret,

---
I'll have to say the allure of owning a car has worn off for me over the last few decades with the hassles outweighing the benefits.
---

Sorry but what are those hassles? To "put gas and other fluids in the car" and once in a while "to set up maintenance appointments" are all that trouble for you?

That's another subjective thing, but I think that's not so much of a problem.

Of course, it also depends on how much you use your car. My level of usage asks, even for my older car, only one yearly maintenance appointment. Fluids exchanges hardly ask for more than that too. Yeah, I do live relatively near the university, sometimes I go on foot, which takes 40 min, or bike (20 min).

Were I to sell our second car and retain the money to spend on taxis when and if needed, it would certainly be reasonable from the economics side. But I really do not like to depend on others, and taxis in Brasilia sometimes can take a lot to show up. I prefer to spend more and have control of my comings and goings.

I think that would not change with self-driven taxis.

Bret said...

Clovis asks: "Sorry but what are those hassles?"

Driving, traffic tickets, parking, parking tickets, gas, fluids, flat tires, maintenance, washing outside, cleaning inside, parking lot dings in the door and body, car too hot when I get in, car too cold when I get in, can't see at sunrise/sunset because window has oily film, wrong type of car for errand (too small or possibly too big), etc.

It's not a big deal, but I'd prefer not to deal with those things.

Basically, I don't much like driving (4-wheels) anymore, but I suppose any self-driving car, owned or not, would solve that problem. (Though I admit I sometimes enjoy driving my wife's BMW 328i somewhat).

Hey Skipper said...

The taxi per-mile cost is still a factor of 5 more than the private per-mile cost.

[facepalm]

That is what makes Uber and Lyft so disruptive. Government created this huge, and hugely stupid, overhead cost. Then disintermediation comes along, and the the extortionate restrictive licensing becomes suddenly apparent.

Sorry but what are those hassles? To "put gas and other fluids in the car" and once in a while "to set up maintenance appointments" are all that trouble for you?

If we didn't have (until recently) several cars, then I would be paying less for a house. If I could have a car at a competitive O&M (actual plus, say 50%) cost only when I needed it, then I wouldn't be paying depreciation, almost all of which is time, not mileage based. Our newest car is 8 years old, has 53,000 miles, and has lost more than 60% of its purchase cost. We are at about .80 cents a mile just on depreciation alone.

That's a lot of money we could do something else with.

But I can't think of what I would want instead, and outside big cities, I don't see anything Uberlike ever having much of a presence.

(Plus, the real lesson here is to never buy a car new.)

[Bret:] Though I admit I sometimes enjoy driving my wife's BMW 328i somewhat.

Somewhat? Merely somewhat?

Sheesh.

Clovis e Adri said...

Bret,

Maybe you only need some holidays from driving. Or from routine. Or both.

Skipper,

---
If we didn't have (until recently) several cars, then I would be paying less for a house.
---
That's not much of an argument, for if you pay more for the house you also get more when selling it in future. IOW, your cars depreciate a lot with age, but your house with a big garage not so much.



[Bret:] Though I admit I sometimes enjoy driving my wife's BMW 328i somewhat.
[Skipper] Somewhat? Merely somewhat?

There is an aging thing going on here too, I guess.

I wonder, and you guys may be in a good position to tell me: do you only enjoy less things while getting old, or do you substitute the previous sources of joy for new ones?

erp said...

Clovis, the answer is obvious. Do you enjoy the same things you did at age 10, 15, 25 as you do now? Think about how 50 more years will change you, even if your faculties are still functioning.

We've been and done, had many houses, cars, trips, etc. and although material things were never really important, now they are totally irrelevant.

Source of joy is a new grandchild, a most gorgeous little creature whom I will meet a week from today when I visit her in San Francisco.

I second Bret's motion about driving and I never thought that would be the case. I've always loved to drive and have had quite a few speeding tickets to show for it, but now it's just annoying. Lately, I prefer driving on side roads off the highway even if there are traffic lights. At least there's something to see other than the back bumper of other cars.

Clovis e Adri said...

Erp,

I am not talking about kind, but quantity. I don't enjoy the same things as in the remote past, but I probably do enjoy more things now than when I was 15 years old. To drive is one of them, since I could not drive then.

Bret said...

Hey Skipper wrote: "Somewhat? Merely somewhat? Sheesh."

There's almost never an opportunity to really get the car into a situation where it's fun. There's just not any winding roads where I can go 90mph without a high likelihood of a speeding ticket.

Anything less than that, and ironically, it's so damn stable that it makes boring what would be challenging (and therefore fun-ish) in any other car.

erp said...

Clovis, the things we enjoy are highly personal, I'm only saying we change a great deal over our lifetime and so do our tastes.

If we won the 100 million dollar lottery, I'd be hard pressed to spend it other than setting up trust funds for my grandchildren, I'd probably give the rest to the burn units at Mass Gen'l and Brigham and Women's hospitals in Boston. I can't think of a thing I'd want to do that I can't do now, but have no desire to do.

Travel? Too much trouble. As much as I want to see my grandchildren, the trip looms largely uncomfortable. New toys? I can barely keep the ones I have working and have no desire to learn how to use new gizmos. Socializing? Tiring and repetitious? Reading? Haven't read anything really new or interesting in years and the editing is atrocious. I can spend all my time making corrections.

Volunteering and my small anonymous private charities make me happy.

Harry Eagar said...

Old news. The drumbeats for the rental economy have been heard -- even, or especially in the NYT -- for decades.

For tools, the argument may work. Tool rental, or purchase and resale, are hardly disruptive.

But I quarrel with the idea that you can 'rent a Prada bag.' You can rent a bag, and it might be Prada, but it's is mighty hard to be sure. (I spent several weeks two years ago researching this.)

Another issue (for some): eBay is the world's largest fencing operation.

If it isn't Alibaba. Do a search for 'Alibaba' and 'fake gold coins.' The results are enlightening.

Hey Skipper said...

[Clovis:] [House cost is not much] of an argument, for if you pay more for the house you also get more when selling it in future. IOW, your cars depreciate a lot with age, but your house with a big garage not so much.

Good point. More correctly, presuming I sell for the same amount as I paid, then the cost differential with respect to a smaller house comes from a) interest costs due to a higher loan amount; b) heating & cooling; c) repairs; d) higher selling costs because of the real estate agency cartel in the US.

Over any reasonable period, those costs, particularly with the currently low US interest rates (my loan is at 2.85%) aren't particularly large.

I wonder, and you guys may be in a good position to tell me: do you only enjoy less things while getting old, or do you substitute the previous sources of joy for new ones?

I enjoy driving, especially high performance cars, as much as I ever did. I absolutely love convoluted and empty freeway onramps: they are a license to use a BMW the way it was meant to be used.

Part of it is due to the fact I don't drive that much. I only commute to work a couple times a month, at most, at 22 miles each way. What had been "my" car, and now is the man-child's, was only getting about 4,000 miles per year.

Clovis e Adri said...

Erp,

I admit I did my question (on aging and joy) with a bit of mischievous intent, like making fun of people who no longer enjoy driving BMWs, so it breaks my heart that you provided such a honest answer.

I enjoy travelling so much that I doubt I won't like it anymore one day. And I say so both for physical and intelectual kinds of travelling. I picture myself making trips and hikings and reading lots of books in my final days.

Yet many things can happen that may forbid so. Who knows what my health (physical and financial) will allow.

Anyway, I hope you keep up with those things that make you happy.

erp said...

Thank you Clovis, I will keep up with things that me happy even if at an age 50 minus my own, you can't imagine what they might be ... and I've been driving for twice the number of years you've been on the earth and have had my fill drivers who don't know how to drive and other drivers in little tinker-toy cars driving in cruise control in the left lane with their smug attitude of righteousness.

Annoying Old Guy said...

I would say a large part of it is time accelerates as you age, because you become busy with so many things. This means the opportunity costs of even fun activities increases.

Bret said...

Hey Skipper wrote: "I absolutely love convoluted and empty freeway onramps: they are a license to use a BMW the way it was meant to be used."

Yes indeed. That's where the BMW is fun - doing 90 on the clover leaf or flooring it at the light at the beginning and seeing just how fast the car can do the 1/4 mile (really fast!). Plus it's hard and pointless to put a speed trap there so the odds of a ticket are vanishingly small.

Unfortunately, for me, there's only one on-ramp each way.

Clovis e Adri said...

Erp,

---
[...] and I've been driving for twice the number of years you've been on the earth [...]
---
I don't think you've been driving for 66 years, but I understand your point.

But probably a good part of that time it was your husband driving with you on the passenger seat, so maybe you do not have so many miles in your CV as you imply. (Yeah, it is a provocation :-)

erp said...

Clovis, I'm 80 and have been driving since I'm 15, so I think that's close enough to 66 for a cigar, don't you?

I've had my own car since 18 and when I was in college drove all over the greater NY area with friends even before I met my husband. I learned to drive in NYC traffic and have driven in traffic from end of the country to the other several times, all over Canada and Mexico, ditto England, Scotland, France and Spain (particularly trying because their street signs don’t always match the map).

When we travel, we each do 100 mile stints. Routine driving and errands is 50-50 and now my husband doesn't like to drive at night -- the lights bother him -- so I pick up. When we need to follow directions, he needs to drive because he has no sense of direction and I need to navigate.

Also, I had three kids who needed to be ferried hither and yon during their school days, so I assure you I have lots and lots of miles under my belt - probably considerably more than my husband.

BTW - I didn't realize you were so sexist assuming my husband drove me around. I used to love to drive and he was always indifferent and only drove to get where he was going.

Clovis e Adri said...

Erp,

Ok, you win. I am convinced will have more miles than I'll ever have too.

Now, driving from age 15? Was that legal back then?

erp said...

Clovis: No.