Use this link to access the audio from the lecture - https://soundcloud.com/trinitycollege/uber-and-beyond

1. TOMORROW 3.0
THE NEW MATCHING
ECONOMY
Michael Munger
Director, PPE Program
Duke University
“No one claimed that any of their
possessions was their own, but
they shared everything they had.”
Acts 4, v. 32.

2. MARC ANDREESSEN
SOFTWARE IS EATING
THE WORLD—WSJ, 11-11
More and more major businesses and industries are being
run on software and delivered as online services—from
movies to agriculture to national defense. Many of the
winners are Silicon Valley-style entrepreneurial technology
companies that are invading and overturning established
industry structures. Over the next 10 years, I expect many
more industries to be disrupted by software, with new
world-beating Silicon Valley companies doing the
disruption in more cases than not.
Six decades into the computer revolution, four decades
since the invention of the microprocessor, and two
decades into the rise of the modern Internet, all of the
technology required to transform industries through
software finally works and can be widely delivered at
global scale.

3. WHY DO WE EXCHANGE THINGS?

4. BUY, RENT, BORROW, DO WITHOUT?
•Consider a widget
• A owns it, and will take any price greater than $1.
• B wants it, and will pay any price less than $5.
• What might keep this transaction from occurring?

5. SELLING REDUCTIONS IN TRANSACTIONS COSTS
Let transactions costs be $7. No transactions, and in fact
A and B have never met and have never considered
exchanging.
But an entrepreneur, E, has a piece of software that
reduces transactions costs by $6, down to $1.
A transaction is now possible: B pays $4, E receives $1,
$1 is lost to transactions costs, and A receives $2. A is
better off, B is better off, and E is better off, by $1.
And the world is wealthier and more prosperous.

6. THE DIFFERENCE:
ONCE WE OWNED, NOW WE SHARE,
BECAUSE SOFTWARE EATS THE WORLD
• Why own things?
• What you actually want is the stream of services that come from an item.
• But if you had access to that stream of services, why would you own?
• When I fly somewhere in the US, I rent a car. I don’t buy a car.
• But I buy a laptop, and carry it with me. Why don’t I rent a laptop, at the airport?
• “Gold” Software: No employees, except the guy who parks the car and the guy who
checks IDs.
• “Laptopia”: Different levels of quality, I rent one at my destination airport. Just scan
my credit card, and my laptop comes down the chute. No employees, except the
ones who put the laptop into the barcoded bin

8. SPINLISTER

9. COMMODITIZE?

10. UBER• You need a ride
• I have a car, and some time
• It would be difficult for us to find each other,
negotiate a price, have you trust that I won’t attack
you, have me trust you that you won’t just rob me.
And we would have to have some way for me to get
paid, and for you to pay, that is convenient and
prevents us from stealing each other’s identity
• Entrepreneur could start a taxi company
(production), selling service directly.
• Or could write a piece of software that helps A find B,
and reduces the transactions cost of having them
exchange

16. 650,000 listings
500,000 people per day
57,000 cities
192 countries

19. THREE ECONOMIC REVOLUTIONS
(YES, A LITTLE GRANDIOSE, PROBABLY WRONG)
•Neolithic (production)
•Industrial (production)
•Sharing/Trans Costs (exchange)

20. NEOLITHIC 10,000 BCE
• shift from hunting & gathering to fixed agriculture
• Net reduction in nutrition, increase in disease on average
• Huge increase in population
• led to permanent settlements, specialization, cities, and
complex language
• Numbers, accounting systems, taxation (stationary bandit)
instead of plunder (roving bandit)
• Trade and exchange

21. NEOLITHIC 10,000 BCESpecialization: A new kind of exchange
Band of 100 nomads—a fiddle, and a guy with a needle. Everyone fights.
City of 10,000—Trained professional musicians, and people who make clothes, shoes, belts
specifically. They do nothing except those things, and are supported by people who specialize in
agriculture, husbandry, and security.
Hesiod: Scarcity is the cause of “sharing” (division of labor). He lived in Ascra, which he described in
Works and Days as a "sorry place … bad in winter, hard in summer, never good." But the point is
that extreme scarcity required cooperation, and specialization grew out of necessity. (750 BCE)
Xenophon: “In small towns the same man makes couches, doors, ploughs and tables, and often he
even builds houses, and still he is thankful if only he can find enough work to support himself. And
it is impossible for a man of many trades to do all of them well. In large cities, however, because
many make demands on each trade, one alone is enough to support a man, and often less than
one: for instance one man makes shoes for men, another for women, there are places even where
one man earns a living just by mending shoes, another by cutting them out, another just by sewing
the uppers together, while there is another who performs none of these operations but assembles
the parts, Of necessity, he who pursues a very specialised task will do it best. (Education of Cyrus, 370
BCE)

22. INDUSTRIAL
• Gigantic increase in labor productivity, wages for labor
• Two causes:
1. Division of labor (not artisanal specialization, in fact it kills artisanal production!)
2. Accumulation of capital (100 guys with sticks, 10 with shovels, 1 with steam
shovel, and still a net increase in productivity) caused increase in wages
Costs of products fell rapidly. Clothing, machines, consumer goods all now available
even to the poor.
OTOH, destruction of civil institutions, child labor, pollution, destruction of
environment.
Like Neolithic, not an immediate improvement in average quality of life

23. INDUSTRIAL
• Gigantic increase in labor productivity, wages for labor
But truly enormous “loss” of jobs, at the same time. Which country lost the most jobs in
manufacturing between 1995 and 2010?

24. 3. TRANSACTIONS COSTS
Something entirely new: multiply the number of mutually beneficial
voluntary exchanges by using existing resources, capacity, and
commodity much, much more efficiently.
Combination of three things:
• Stuff/Labor that is less than fully employed at highest opp cost
value
• Platform to reduce costs of exchange: Access, organize, connect,
handle transaction
• Mechanism for outsourcing trust

25. MIDDLEMAN REVOLUTION:
WHAT IS BEING SOLD IS THE REDUCTION
IN TRANSACTIONS COST OF EXCHANGE
NOT PRODUCTS OR SERVICES
BUT THE USE OF A PRODUCT, OR ACCESS TO A
SERVICE THAT ALREADY EXISTS

26. A CAUTION: TREES, AND SABOTS

27. A PRICE TAG HIGH
ENOUGH THAT
MAKES IT WORTH
SHARING OR GETTING
A POWER DRILL HAS
CRITICAL MASS
HUGE IDLE TIME BUT
NOT EXPENSIVE
ENOUGH

28. "by the end of this decade, power and
influence will shift largely to those
people with the best reputations and
trust networks, from people with money
and nominal power"
Craig Newmark

30. Trust is the key
"transaction cost" :
Will Bitcoin Be the Path
to Anonymity, or
Commitment?