New Economy vs. Old Economy – where the future is going

Yesterday I posted an article about AirBnB focusing on how it’s upsetting entrenched businesses, neighbors, and has attracted the attention of the NYC AG. I had intended on having a much longer discussion but ended up going down the rabbit hole with that topic. I was influenced to do that article by an article in CS Monitor about the growing backlash against the sharing economy. That article did discuss AirBnB, Uber, and a few other sites. I suggest reading it.

While that article focused on the sharing economy, there’s quite a few other companies that are causing problems for entrenched businesses because of the way they’ve structured their businesses. One of the most prominent companies doing this is Tesla Motors. Tesla has upset a just about every single car dealer in the US. Why? Well, as an attempt to encourage growth of multiple types of car companies the US and many states forced a separation between car dealerships and the manufacturer of the cars. This has worked extremely well for car manufacturers because they are able to push cars to the dealers and the dealers can get them for a discounted price and then sell them to their customers. The US is pretty unique in this approach – it’s why there’s those megadealers all over the place. Tesla is more closely modeling their distribution network off of Toyota where they build a customer for life and build to order. Toyota in Japan is so flexible they can meet an order and have it delivered within a week. Tesla has decided to have “showrooms” where people can look at the car try it out, but they can’t buy it. They have to order it online. Car dealerships are pushing for legislation and suing Tesla over this. I believe that Tesla’s model will work for many consumers but not all. It should be interesting to see how this plays out.

Another area that’s interesting is, which has turned watching your friend play a video game into the next big thing that ESPN already missed out on. For those unaware, Twitch allows people to stream themselves playing video games and interact with their viewers directly by reading chat and talking to the chat or typing back to the viewers. Through this, games like League of Legends, StarCraft, DOTA, Street Fighter, and first person shooters has turned into a $20 million dollar industry just for tournaments. It’s replacing how people watch “TV” and engage with the people that are watching. These tournaments are pulling 200,000 viewers on just about any given weekend with several thousand in person to watch the event. Each game type has their own celebrities, heroes and villains. It’s still early, but it is going to pull people away from cable and from watching ESPN. I would not be surprised if ESPN began to show some of these events. It might take a few more years, but it’s going to happen.

Finally, the other interesting area where the new economy is threatening the old economy is the Silk Road. The Silk Road was an online blackmarket that used Bit Coins as it’s only accepted currency. It was wildly successful before its owner was recently arrested with approximately $80 million in BitCoin or about 5% of the total currency in circulation. This is the cut that this person made, which means it’s likely that hundreds of millions of dollars flowed through the site selling drugs and other material. With it’s collapse this market is likely to follow a similar path as the music pirating industry. Effectively there will be more security, less people will know what the Silk Road’s replacement is (I heard about Silk Road about 6 months ago) and it might be more dangerous to use. From all reports Silk Road was relatively safe to buy drugs from as the drugs were simply mailed to the user and it cut out the distribution channel where a bulk of the violence occurs.

I think that these types of business models will likely continue to flourish, it’s likely that we’ll see a lot of new types of business models that build upon this. I’m interested in seeing what’s going to happen.

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