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September 24, 2018

The economy of subscription services

“The software eats everything,” the material goods that enter into a flow of digitized bits, never return to be the same, act and transcend from the physical product to the intangible service.

Not willing to go into the obvious; remember the keen observation made by the TechCrunch reporter in which he referred to Uber, as the largest taxi company in the world, which does not own vehicles. Facebook, as the owner of the most popular content in the world, which does not create any content.

Alibaba, as the retailer with a higher valuation, which has no inventory and Airbnb, as the largest accommodation provider, which has no properties. Something interesting is happening.

About digital media, Netflix allows you to access the most extensive catalog of video stores in the world without the need to own the product, Spotify lets you listen to any music without the need to buy the disc.

Amazon Kindle opens the file of a library of 800,000 books without the need to own any of the books I read.

We assume it, something has already changed, belonging has lost the importance it had, and access is more important than ever, wanting we want it, and we want it already, why? Because we have in our hands a machine that we access between 100 and 200 times a day.

We want everything in real time and on demand without involving an effort beyond a couple of clicks in an application, it is a matter of time savings regarding technology productivity and organization, in which without realizing we have become demanding and addicted to technological services.

We started with the entertainment content more than 10 years ago, and today in the top 30 ranking of the World Economic Forum 2016 we find companies of health, food, consumables, logistics, banking, automotive, etc., in which one is repeated and again the same pattern in the business model; there is no “physical asset” in the value proposition, everything is based on software, functionality, and access.

Think ten years ago when you opened the hood of your car, and you cast an eye to the engine, there could be between 150 and 200 industrial physical components, some visible others invisible.

Imagine now on the first day that a Tesla buyer opens the hood of his vehicle and … will not find anything, if he opened the trunk, he would not find anything either, between 150 to 200 components have been passed to 2 turbines connected to the drive axles.

Not only are raw materials being dematerialized, but the tangible physical value is not going to make sense unless you connect it to intangible software services.
Your wheel will acquire a new life at the moment you join a smart chip, contributions connectivity and in itself generate data; the screws, the rubber, the steel of the rim will have another imperishable value that will force to minimize its physical cost to the minimum expression.

We can think that if we need less iron, the economy can be weakened (more wood as Groucho Marx said), but the data show the opposite – less is more – to generate a unit of GDP in 1870 4 kilograms of iron were needed, in 1930 the ratio of 1 to 1 was matched, in 1977 the kilo obtained $ 1.64, in the year 2000 it was quoted at $ 3.58.

That is, in 23 years dematerialization has doubled the value of GDP, in the future, we can even reverse the tendency we have to inflation in favor of the growth of deflation.

Think about how you buy food today and how we will consume it in the medium term, why can not you pay a daily subscription for seasonal foods without GMOs ?, in which the producer closest to your home will serve you the order using a service “Commodity” similar to the one Amazon Prime Now offers.

Of course, we will, there is already this digital process and will become “mainstream” in the same way that you consume music, since behind there is a technology that lowers cost, organizes logistics, maximizes production and offers a user experience exceptional.

The carrot will be the same (or even more natural), but the entire production chain will be different as soon as you convert it to bitstream.

In the “bypass” from the property that you buy to the access you subscribe to, many of the customs we have will change, but without realizing it, you are already doing it today.

We do not have to look to the future, nor think about 30-year forecasts about how we will develop individuals in society due to the impact of the technological career.

We understand that everyone in one way or another, today we have changed, the system in which we moved and changed without realizing at a dizzying speed, for years you have renounced your privacy using social networks.

More than 50% of the products that you used ten years ago in the physical purchase, you enjoy now in an immediate access mode, you renounced the rigidity of the property in favor of a fluid and flexible rental.

In your day-to-day context your identity has dematerialized, its weight has been volatilized, what used to be based on a concept of what I have or have as a synonym of “status quo” in a collective, is now based on the essence of what I am, how I can influence others and take me on the road to personal transcendence.

The pillars on which we were based in the classic concepts of privacy and private property, today everything is different, and in the future, it will be accentuated even more, both ideas are being dematerialized within a fluid and accessible environment.

Relations with customers will also change, today they have already changed, from the immediate and sporadic impact of the brand in the necessary purchase of the physical product to the long-term marriage in the subscription to the service.

Let us understand that the first four companies in the world in current market capitalization resolve the need for personal transcendence within the top of the Maslow pyramid of realization.

We have gone from active physical companies that were leaders 20 years ago, to the current platforms of self-transcendence, a more humanistic step that exceeds the practicality of acquiring products within a cycle of outdated consumption.

It seems that we come from decades in which we have based ourselves on an economy of scarcity, we have accumulated much clutter, according to our consumption habits, and now we are heading towards an economy of abundance, in which we seek the opposite; the scarcity of goods, getting rid of all the clutter we have accumulated in a previous time and embracing the advantages of access.

The old will recover a new life within an inevitable software process, and the original will be irremediably easy and fast to manufacture, we will see how the acquisition of handicrafts (that product that arouses an incalculable authenticity) will grow within a subsystem of subscriptions.

From the collection and belonging of the product, we will pass in a tangential way to the enjoyment of the microservices experience for all and all, in the end, we will gain time, we will save money, and well though, we will focus more on our transcendence of what I am and not on What I have, the doubt will be in how many can pay this structure of mini-subscriptions of service?

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