Science fiction, that wondrous branch of literature created by Jules Verne and H.G. Wells, dates back to the Victorian Era, and has long been an intellectual playground of what-ifs. The changing local and global economies have shaped our current society, and impacted business processes, dealings and its progress. They have empowered the social economy, which includes non-profits, charities, social enterprises, cooperatives, and corporations to leave an everlasting impact on society.
Here are a few examples:
For decades, restaurant owners have feared that increasing wages would lead to fewer jobs as a consequence of increased menu prices resulting in fewer customers. But last year, a former Wall Street trader and now owner of the restaurant Bar Marco, Bobby Fry solved this problem of the restaurant industry. This is what he did:
- Banished tips
- Started to pay his employees $35,000 as base salary, along with paid vacation, company shares and health benefits
- Increased his average menu price by a few dollars
But how is that possible? He changed his menu to include dishes that utilized ingredients of lower cost, but are priced high due to difficult cooking methods. He managed to reduce his food costs by 5%.
Uber and Lyft and Airbnb
Uber, Lyft, and Airbnb are perhaps the most popular social economics that provide on-demand transportation services. They have created opportunities, jobs, and passive incomes for people around the world who have otherwise be unemployed or have limited income. I know of many families where one member works out of the home and have spare bedrooms that they rent out making upwards of $900 per month of extra income. My last Lyft driver is an unemployed high tech worker in Silicon Valley who goes on a couple interviews a week. With his Lyft income, he is able to make rent every month.
A form of alternative finance, crowd funding helps fund projects by raising contributions from numerous people. With the increasing inflation and economical changes, not everyone has the resources to fund their breakthrough ideas. So, in this way, people who don’t have the financial investment, can still turn their ideas into reality. On the other hand, it is also a platform for those who have the resources to contribute to the entrepreneurship spirit of our country by funding startups and ideas and creating jobs and wealth.
In the book, Wikinomics: How Mass Collaboration Changes Everything, written by Don Tapscott and Anthony D. Williams, published in 2006, the authors identify and explore how some of the successful companies, have used open source resources and mass collaboration for their success. The term has since become popular. The term comprises of the following core concepts:
- Openness towards external ideas and resources
- Peering or peer development, such as the development of Linux
- Sharing products, scientific knowledge and bandwidth
- Acting globally by ignoring physical and geographical boundaries at all levels
The above explains a few of the many examples of the impact of social economy. BMW and Mercedes are looking to shift their entire business model towards “rent and not own” or “pay per use.” Solar power is being shared and sold among the community members. This type of connection among people builds trust, which is why we are experiencing this global shift towards collaboration for solving societal problems. Collaborative and economical disruptions have also led the way to the age old barter economy. The previous year, Greece reverted back to the barter economy when the average citizens bartered for their daily needs, due to closure of the country’s banks for three weeks.
Social economy touches the fundamental human nature, that is social connection and sharing. It’s the most powerful element of our life and this is just the beginning.