Over the past decade, the sharing economy was supposed to transform how we live, travel and function. The sharing economy was built on the premise that multiple people could share unused or under-utilized assets. If you had a car that you did not use for 90% of the time, why not let someone else use it while it is idle? If you have a home and are going away for a few months, why not let someone else use it, so you make some money on the side, and by the way, find someone at your destination willing to do the same for you.
The sharing economy was designed by companies attempting to change how we live and incenting us to share our assets. It was not due to the shifting habits of consumers, and consequently, it worked in a few cases and failed in others. Systemic industry transformation happens when capital infusion follows societal trends, never the other way around. And societal trends emerge as a result of breakthrough innovation, natural or human-made circumstances, or significant lifestyle shifts.
Today we are at the cusp of a trend, percolating for a while, and catalyzed by the deadly coronavirus. We are entering The Isolation Economy. Since social change is leading the way, this transformation will result in a lasting business model for companies who innovate and build products and services to enable our lifestyle transformation.
The Isolation Economy is based on the principle that people will travel less to complete everyday activities. Instead, they will be able to complete them just as effectively from their homes. This transformation is already upon us. Going to the office is being replaced by working from home. Driving to Safeway is replaced by home delivery. Going to the gym is replaced by streaming fitness as Peloton sales surge and innovations like Mirror come into vogue. Going to the movies or visiting the mall is increasingly a thing of the past. Schools and universities will encourage more online learning, just as doctor visits will move towards telemedicine.
We don’t even need to leave our home to buy a new home; we use Zillow and DocuSign for most of the tasks involved, including viewing properties with 3D virtual tours. And a push of a button on your Nespresso machine coupled with a click on Zoom replaces your daily ritual of meeting people over a $4 espresso.
In the Isolation Economy, you don’t go out for things; they come to you, a concept that has been in the making for years. Coronavirus has not created this way of life; it has just made us aware of how we can continue to thrive even as we increasingly seclude ourselves from our neighbors. The forced isolation has taught us how to be productive and entertained. It has taught us how to make it work in large and small cities and around the world.
Many of the lifestyle changes we are making now will become permanent. At some point, we will resume travel and go to the movie theater and participate in crowded sporting events, and of course, return to our offices. We just won’t do it at the same rate and intensity as before because we have learned that we don’t have to. Consequently, the Isolation Economy stands to alter the very fabric of the business landscape, the social landscape, the way we interact, the way we collaborate, the way we create value, the way we manage our time and the way we manage relationships.
We all need to connect
The need to be connected socially is one of the most basic human needs. Social isolation, or the lack of contact between an individual and society, often leads to mental health issues, increased aggressiveness towards people we are unfamiliar with, negative self-esteem, loneliness and fear.
Fortunately, we are living in a time when technology allows us to remain in constant touch with family, friends, and colleagues and even help us create new social circles and bonds across younger and older generations. Studies of older adults who use technology to stay connected show they have better health and well being and lower depression. The costs of staying connected are zero. We don’t pay any more for mobile plans or internet service as we remain isolated, we just use them more to keep in touch with people.
Although physically inaccessible, people are finding ways to feel increasingly connected. Your six-inch, sixteen-inch, and sixty-inch screens are equally accessible, and you can pick any one of them for a task. You never have to feel alone. For any activity, you can join your friends or connect with a local, national, or even a global community.
The Isolation Economy does not leave us in a state of perpetual solitude. Families and businesses are getting creative in staying connected through cyber coffee meets or virtual happy hours with friends. While isolation will prevent the irreplaceable warm embrace from a loved one, technology will allow us to stay close in many other ways.
A New Breed of Winners
The last thing people want to do right now is share. You don’t want to share your transportation, you don’t want to share your personal space, you don’t want to share your home with strangers, you don’t want to share your dog walker (who you probably won’t need because you are at home all day) and you don’t want to share a conference room.
And consequently, everything changes. Companies will soon find that their real estate needs are different because many of them were just as productive without paying for expensive office space. And after you return to a smaller office, how you design it will change. Will you still have open offices or desk sharing? Homes will trend in the opposite direction, getting larger and more conducive to the increased number of hours and the increased number of tasks conducted there.
Businesses, universities and other organizations that provide services at their location will rethink how to offer many of the same services at your location. Innovation always follows landmark shifts, and this one will be no different.
The early winners of the Isolation Economy are clear. While Uber, Airbnb and WeWork were the poster children for the sharing economy, companies like Zoom, Peloton and Netflix epitomize the Isolation Economy. Venture funds that invested in the sharing economy will now pivot to investing in new ventures that support The Isolation Economy.
The same technology created to support a mobile workforce will now support an immobile workforce. Companies already riding the changing trends will continue to prosper. These will be related to delivery, home productivity and home entertainment, remote services, technology providers, 5G companies, security companies, or any other business that provides value to an increasingly static consumer.
Companies in the Isolation Economy will be profitable because there is a receptive customer base who will pay for the right set of products and services. Unlike the sharing economy, the Isolation Economy winners will not have to spend billions on marketing and demand creation. We will not see examples like WeWork, a company in shambles, or Uber, though used by millions, remains a company searching for a profit. The business model of the Isolation Economy will be sustainable because it starts with existing demand, which is followed by companies and capital designed to create offerings that fulfill it.
Our way of life is transforming, and the next generation of business winners will be the ones who help us facilitate the change.