Competing With Data & Analytics
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In just a few years, the sharing (or access or gig) economy is already casting a shadow over numerous industries. But while the “sharing” aspect is emphasized, data and analytics is critical to making the sharing actually work.
Yes, the basic idea of sharing is appealing and feels right. We’ve heard it promoted since we were toddlers with toys or cookies. As adults, the idea still resonates — why squander our unused resources that someone else can use (and give us money for!), if only we knew how to connect with a person who needs them? Not only are there potential monetary benefits, the idea of reduced waste (of time, natural resources, etc.) is enticing.
Travel and transportation are classic examples of this sharing approach, if the word “classic” can apply to anything so new. We can subsidize our costs for cars and homes by renting excess capacity; others get access to cars and homes at lower costs; platform companies match the people who have with the people who need.
Modern information and communication technologies make it cheap and easy to quickly make these matches. Everyone carries devices that let him or her connect with anyone.
But, wait — would you really want to connect with just anyone?
Probably not. Instead, in the sharing economy, “the secret sauce is trust and reputation.”
Without data, sharing would be a single-stage game. Each player would maximize only his or her value in each transaction. When renting out your house, why not exaggerate the view or amenities if it got you a higher price? When giving someone a ride, who cares if the seats are muddy? When renting someone else’s house, why bother taking care of anything? When riding in someone else’s car, why not smoke if you want to? As each player myopically maximizes his or her own value, the other player may bear the brunt of the consequences. Sharing, then, falls apart quickly.
Data, however, turns a single-stage game into a repeated, multi-stage game. When games transition from single-stage to repeated, suddenly players have consequences for how they play each round. The exaggerated view and amenities get reported for future prospective renters to see. The trashed house goes down on a nefarious renter’s permanent record.