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Illustration: Sarah Grillo/Axios

Everything is a service, these days. Here's investor Mikal Khoso:

Today you can rent living space flexibly based on your needs (AirBNB, Stoop), commute from that space without ever buying a car (Wheels, Uber, Lyft), rent clothes to fill your closet (Le Tote), rent specific appliances based on your needs (Joymode) and rent the furniture you fill your apartment with (Fernish).

Why it matters: There's a lot to be worried about in this brave new world where our entire lives are dominated by rentiers, even if investors like Khoso have managed to persuade themselves that everybody wins.

  • Companies in the rental business are worth untold billions, whether they're renting out software (Oracle, Salesforce, SAP, Slack) or goods and services (IBM, Uber, Lyft, Airbnb). The people who rent out the information-economy pipes (Comcast, Verizon, AT&T) are big enough to eat any media company for breakfast (NBC Universal, Yahoo, Time Warner). When Netflix pivoted from DVDs-by-mail to streaming, the one thing that stayed sacrosanct was its subscription-based business model.
  • The move to a rental economy has been good for consumers — so far. According to research by Austan Goolsbee and Peter Klenow, inflation in the digital world is much lower than inflation in the economy as a whole, with a difference of more than 1 percentage point per year.

What's next? Price hikes are certain in a digital economy where many companies are burning cash at an unsustainable rate.

  • Lyft alone lost $911 million in 2018; Uber lost twice as much.
  • The entire minotaur business model is based on buying a dominant position in a market and then exploiting that position. Once they have stopped growing and their markets mature, for instance, companies like Salesforce and Slack have astonishing latitude to raise their prices before their clients even think about switching.

Ownership is a hedge against rental price increases. That's true in the housing market, as economists Todd Sinai and Nicholas Souleles have shown. But it's true in other rental markets, too. Owning a car is a hedge against price hikes at Uber; owning your own computer server is a hedge against price hikes at AWS, and so forth. Renting might be cheaper, but it's also more uncertain.

  • Inflation isn't monolithic; it hits different people differently. (In 2014, apparently, it was hitting Republican billionaires quite hard.) In a world where prices on Amazon fluctuate by the second, the cognitive cost of inflation — the amount of time we spend thinking about how much things cost — can be substantial even when inflation itself is low.

The bottom line: A world of continuously variable price is unstable and uncertain, even when overall inflation is low.

Go deeper

5 hours ago - World

Defense Sec. Austin stresses U.S. commitment to Israel's security amid growing Iran tensions

Issei Kato/Reuters/Bloomberg via Getty Images

Secretary of Defense Lloyd Austin arrived for his first visit in Jerusalem amid nuclear talks in Vienna and growing tensions between Israel and Iran.

Why it matters: Austin met his counterpart Benny Gantz and will meet later with Prime Minister Netanyahu to discuss Iran and regional security issues.

"I was horrified": Leaders respond to footage of Black and Latino Army officer threatened at traffic stop

An Army officer is suing two Virginia police officers after he said they drew their guns and pepper-sprayed him during a traffic stop in December.

Why it matters: Footage of the incident has drawn widespread criticism from leaders and groups in the state. Caron Nazario, who is Black and Latino, is heard saying “I’m honestly afraid to get out," to which a police officer responds “Yeah, you should be," in a video from a body-worn camera.

Chauvin trial leaves cities, activists across America on edge

Illustration: Brendan Lynch/Axios

The impact of the Derek Chauvin trial is reverberating far beyond the walls of the downtown Minneapolis courtroom.

The state of play: With the trial set to enter its third week, activists across America are watching the proceedings unfold with heavy skepticism that what they perceive as justice will be served.