Mar 10, 2019

The precarious rental economy

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

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3:30 a.m. ET: 1,203,923 — Total deaths: 64,795 — Total recoveries: 247,273Map.
  2. U.S.: Total confirmed cases as of 3:30 a.m. ET: 312,237 — Total deaths: 8,502 — Total recoveries: 14,997Map.
  3. Public health latest: CDC launches national trackers and recommends face coverings in public. Federal government will cover costs of COVID-19 treatment for uninsured. The virus is hitting poor, minority communities harder and upending childbirth.
  4. 2020 latest: "We have no contingency plan," Trump said on the 2020 Republican National Convention. "We're having the convention at the end of August."
  5. Business updates: Restaurants step up for health care workers. Employees are pressuring companies to provide protections during coronavirus.
  6. Oil latest: Monday meeting among oil-producing countries to discuss supply curbs is reportedly being delayed amid tensions between Saudi Arabia and Russia.
  7. Education update: Many college-age students won't get coronavirus relief checks.
  8. 1 🏀 thing: The WNBA postpones start of training camps and season.
  9. What should I do? Pets, moving and personal health. Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  10. Other resources: CDC on how to avoid the virus, what to do if you get it.

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World coronavirus updates: Confirmed cases top 1.2 million

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens and confirmed plus presumptive cases from the CDC

The number of novel coronavirus cases surpassed 1.2 million worldwide Saturday night, as Spain overtook Italy as the country with the most infections outside the U.S.

The big picture: About half the planet's population is now on lockdown and the global death toll was nearing 64,800, by Sunday morning, per Johns Hopkins data.

Go deeperArrowUpdated 50 mins ago - Health

U.S. coronavirus updates: Death toll surpasses 8,500

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios

Recorded deaths from the novel coronavirus surpassed 8,500 in the U.S. early Sunday, per Johns Hopkins data. The death toll in the U.S. has risen over 1,000 every day for the past four days, since April 1.

The big picture: President Trump said Saturday America's is facing its "toughest" time "between this week and next week." Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said U.S. deaths are expected to continue to rise during this period.

Go deeperArrowUpdated 1 hour ago - Health