REAL ESTATE INDUSTRY 13
The near zero marginal cost society and the real estate industry
Name:
Date:
Institutional Affiliation:
Running Head: REAL ESTATE INDUSTRY 1
The near zero marginal cost society and the real estate industry
In the eyes of many experts, the third industrial revolution is now firmly set. Most people are realizing that things are changing in the economic and financial worlds. Capitalism, which has for a long time been the dominant economic system in the world, is now slowly being replaced by a technology driven marginal cost society. Capitalism has had a long run, and after a few decades, the new system is already evident in the way people live and organize their lives and activities. The new economic system is attractive because it offers people the chance to handle such problems as sustainability challenges, income inequality and the creation of a democratic global economy.
The third industrial revolution continues to affect life, but this does not mean that capitalism is completely dead. Instead, in most parts of the world, things have developed into a sort of hybrid economic game, where the older capitalism continues to affect and influence the newer third industrial revolution, and the newer system also changes capitalism indifferent ways. While capitalism, which has been in play for several decades now, is in decline, the third industrial revolution, being driven by the near zero marginal cost society, is still anecdotal in nature, with experts saying it will take several more decades for it to firmly set in (Rifkin, 2015).
Understanding capitalism and the near zero marginal cost society
In light of the claims made above, it is important to understand what exactly this near zero marginal cost society is, and how it is affected by capitalism. To do this, it is important to understand what capitalism is. Capitalism has been relatively short compared to other economic systems of the past, but it has had perhaps the biggest impact of them all. Ironically, it is the success of capitalism that is now leading to its downfall (Rifkin, 2015).
Capitalism basically means all the aspects of human life are brought to a global marketplace where they can be exchanged for one another as goods. Looking back, almost all aspects of human life have been involved in the capitalistic way of life, from food to social interaction and relationships. According to the father of capitalism, Adam Smith, capitalism works much like gravity. Gravity is guided by the laws of nature, which suggest that for every action, there must be an equal and opposite reaction. In capitalism, supply and demand will lead to a balance that eventually has prices set at an acceptable level for everyone. When the demand for prices goes up, then the prices will go up, but if they rise too high, then demand falls and this forces the prices to be caped or dropped. Another effect of capitalism is that once a product is created, it almost always opens up m ...
Basic Civil Engineering first year Notes- Chapter 4 Building.pptx
REAL ESTATE INDUSTRY13The near zero marginal c.docx
1. REAL ESTATE INDUSTRY 13
The near zero marginal cost society and the real estate industry
Name:
Date:
Institutional Affiliation:
Running Head: REAL ESTATE INDUSTRY 1
The near zero marginal cost society and the real estate industry
In the eyes of many experts, the third industrial revolution is
now firmly set. Most people are realizing that things are
changing in the economic and financial worlds. Capitalism,
which has for a long time been the dominant economic system
in the world, is now slowly being replaced by a technology
driven marginal cost society. Capitalism has had a long run,
and after a few decades, the new system is already evident in
the way people live and organize their lives and activities. The
new economic system is attractive because it offers people the
chance to handle such problems as sustainability challenges,
income inequality and the creation of a democratic global
economy.
The third industrial revolution continues to affect life, but this
does not mean that capitalism is completely dead. Instead, in
2. most parts of the world, things have developed into a sort of
hybrid economic game, where the older capitalism continues to
affect and influence the newer third industrial revolution, and
the newer system also changes capitalism indifferent ways.
While capitalism, which has been in play for several decades
now, is in decline, the third industrial revolution, being driven
by the near zero marginal cost society, is still anecdotal in
nature, with experts saying it will take several more decades for
it to firmly set in (Rifkin, 2015).
Understanding capitalism and the near zero marginal cost
society
In light of the claims made above, it is important to understand
what exactly this near zero marginal cost society is, and how it
is affected by capitalism. To do this, it is important to
understand what capitalism is. Capitalism has been relatively
short compared to other economic systems of the past, but it has
had perhaps the biggest impact of them all. Ironically, it is the
success of capitalism that is now leading to its downfall
(Rifkin, 2015).
Capitalism basically means all the aspects of human life are
brought to a global marketplace where they can be exchanged
for one another as goods. Looking back, almost all aspects of
human life have been involved in the capitalistic way of life,
from food to social interaction and relationships. According to
the father of capitalism, Adam Smith, capitalism works much
like gravity. Gravity is guided by the laws of nature, which
suggest that for every action, there must be an equal and
opposite reaction. In capitalism, supply and demand will lead to
a balance that eventually has prices set at an acceptable level
for everyone. When the demand for prices goes up, then the
prices will go up, but if they rise too high, then demand falls
and this forces the prices to be caped or dropped. Another effect
of capitalism is that once a product is created, it almost always
opens up markets for other products. Producers will always look
to develop cheaper products produced with cheaper
technologies. These cheaper products will free up resources for
3. the consumer, which will then enable them to afford other
things (Rifkin, 2015).
Suppose this system of producers coming up with cheaper, more
effective goods and technologies goes on. A situation arises
where there is extreme productivity, as competition leads to
better and better technologies. This results in every new
produced unit being so cheap that it comes at near zero marginal
cost. The cost of producing every new unit becomes so low that
it becomes essentially free. Capitalism is based on the fact that
profit is marginal, and with marginal cost now being near zero,
then capitalism will be dead, ironically because it worked so
well (Rifkin, 2015). Today, people are already able to produce
their own content using cell phones, or write their own content
in blogs and websites, providing them to the consumer at a low
cost, or even for free, and these are just some of the simplest
examples of the near zero marginal cost society (Rifkin, 2014).
Think about companies like Uber, AirBnB, YouTube and
Facebook and how they are disrupting the traditional transport
communications and housing industries. These are some of the
most common examples of the near zero marginal cost society.
Global warming
But the world today and the shift away from capitalism is driven
by more than just economics. There is a complex interaction and
interchange between the effects of free trade capitalism and
climate change. Some experts believe it is the exploits of free
trade that have resulted in the adverse effects of climate change,
and the fact that many of the steps taken to correct the situation
have failed do much in the past (Klein, 2014). The perfect
example of this in action is the globalization wars of the past
century. According to many, these were driven by the free trade
system and international laws. The intentions were good, but the
results were negative, especially as far as green initiatives were
concerned (Klein, 2014). Initiatives that were expected to lower
or reduce the effect of global warming were being rejected
based on international trade agreements between various
countries. In fact, the world’s biggest and most respected
4. bodies, like the world trade union, were seen as being at the
center of such rejections (Klein, 2014). Globalization wars have
also included the biggest countries in the world, countries that,
on one hand, continued to fight each other’s climate change
initiatives, yet are often seen at the forefront of international
trade summits (Klein, 2014).
In the information age, more people are now learning about the
adverse effects of capitalism, especially its relation to global
warming. In some ways, even governments seem to be
responding to this, as seen by the signing of the climate change
agreement in Paris in 2015 (Harvey, 2015). Even then, more
people are realizing that if they do not take matters into their
own hands, then the planet might be headed to peril.
The global climate change-capitalism debate has also been
influenced by some of the biggest scandals in the past few years
by the world’s largest corporations. Scandals like those from
WorldCom, Enron, the BP oil spill and now the dieselgate
scandal are seen by many people as the pursuit of profits, one
that is promoted by free trade capitalism, being seen as more
important as the state of the planet (Eurotax, 2015). People are
seizing power back, looking to live a life for themselves and for
the future of the planet too (Seretny & Seretny, 2012). It is a
combination of factors, including the fact that trust in science
and research has generally waned (Peel, 2005). People are now
prone to a more precautionary approach than ever, especially
with the gift of hindsight (Ahteensu, 2007). The marginal cost
society has emerged from the effectiveness of its predecessor,
but a lot of what drives it, and people into its hands are the
failures and negative effects of capitalism.
The real estate industry
The real estate industry has, like most other industries, been
affected by the growth of the near zero marginal cost society.
Businesses have always been looking or new technologies and
ways through which they can increase productivity and reduce
the cost of production and the distribution of their goods and
services. The general push for these is the need to lower prices,
5. to attract customers and to increase the profit and market share.
What many companies did not anticipate is the fact that the near
zero marginal cost society would have such a huge impact on
their fields, lowing the cost of production while making energy,
physical goods and services basically free. The marginal cost
society has especially had a huge impact on the information
sector. For instance, most people now share music through file
sharing systems and such online streaming sites as YouTube.
Knowledge is shared for free on Facebook and sites like
Wikipedia and through free e-books. Students are enrolled in
free, online courses, being taught by some of the world’s top
experts, essentially receiving college level information for free.
The impact of the near zero marginal cost society has been
obvious on the information sector, but not many expected it to
affect other, more ‘physical’ brick and mortar industries like it
has. New technologies have been created that enable customers
to share physical products and services at very low cost (Rifkin,
2014).
Sharing economy and real estate
More people seem to be transferring elements of their economic
lives from capitalism markets to the near zero marginal cost
society in many ways. One of the trends that this has brought up
is the sharing economy, or the economy of collaborative
commons. Instances of people sharing their homes, vehicles and
even clothes are on the rise. It is estimated that in the US,
almost 40 percent of people are living in a sharing economy.
Hundreds of thousands of people today share vehicles,
eliminating a huge percentage of the need for personal vehicles
(Rifkin, 2015).
In the real estate industry, the emergence of the sharing
economy has been a huge disruption. There are millions of
people sharing their homes with travellers, using online
platforms like AirBnB and couchsurfing. According to official
statistics, there were about 416,000 people who stayed in houses
or apartments while travelling that were not their own between
6. 2012 and 2013. The cost of this in terms of loss of revenue on
the hotel industry was about a million room nights lost.
Exchange value, as dictated by the capitalistic way of life, is
now being replaced by shareable value. Capitalism still exists in
many ways in the real estate industry, but nobody can claim that
it is the only, or even the dominant, system or controller of
economic life (Rifkin, 2015).
Apart from the sharing of accommodation in the real estate
industry, another new trend that has slowly come up as a result
of the sharing economy is that of co-working. Co-working is
driven by attitudes towards work rapidly changing,
technological advancements and a growing popularity of the
sharing economy. Many people now have or are looking for
more options on how, where and when to work. Working from
home, telecommuting and especially the idea of sharing
workspaces has been on the rise in the recent past.
Co-working is not a new concept. In the past few years,
enabling technology has been a big driving force behind its
growth in popularity. Technology has made it easier to
communicate, disseminate information and increase control of
individual’s lives. In the past, the cool worker image was the
coffee shop entrepreneur, migrating from their home to the
nearest coffee shop. Today, the new breed of workers
recognizes the need for creative and functional workspaces, and
is going out of their way to achieve this through co-working.
There is a growing consensus that economic growth is driven by
innovative minds, nationally and globally (Jarrett et. al., 2015).
It is because of this perhaps that funding for startups has
generally increased. With such huge sources of seed capital
available especially for tech startups, the inclination towards
leveraging this enabling technology to set up co-working spaces
has been huge. For instance, in New York alone, about 3.3
billion dollars went into funding startups, an increase of about
33 percent from the previous year (Green, 2014).
Co-working has revolutionized the commercial real estate
industry. The workforce is evolving, and this places it in direct
7. conflict with the traditional office structures, creating a gap in
demand that co-working spaces are continually filling. The
startup cannot rent out the traditional office space since they
might not have the manpower or capital. They, however, require
scalable space, and the only option for this would be to have co-
working spaces. The problem is that not many landlords have
recognized the need for this. Larger companies, traditionally
requiring huge commercial real estate are also slowly reducing
their footprint, in order to lower operational costs while
maintaining a productive workforce.
Understanding co-working
There are three general categories of co-working; creative,
entrepreneurial and executive. Executive co-working seems to
be the most established of the three. In the past, those in
commercial real estate were more concerned with the
maximization of office space and the different floors that could
be turned over and rented by many people. Companies that saw
the growth of the co-working trend in executive office spaces
are now benefitting. One of the examples of this is Regus,
which is a Luxemburg based agency. They were one of the first
to start the co-working trend as far back as 1989. As of 2014,
they had over 40 co-working executive spaces in the city alone,
with more locations in the pipeline (Green, 2014). The very fact
that a Luxemburg based company is providing executive real
estate solutions in New York is testament to the huge growth of
the real estate industry.
The fastest growing of the co-working sectors is the
entrepreneurial one. Demand and supply is rising in this sector,
with many real estate agents no offering more than just the
typical packages that include classes, lectures, networking and
business services. Operators serving the entrepreneurial real
estate industry are only just realizing that hosting events and
lectures is one of the easiest ways to raise revenue.
Entrepreneurial co-working providers recognize the importance
of both location and the service they provide. Their services
involve the new sharing aspects as well as elements of the
8. traditional real estate like landlord-tenant relationships, leasing,
marketing and various operations (Green, 2014). The creative
market is small, with co-working spaces generally catering to
individuals and a small surrounding community. Most of these
creative co-working spaces are normally informal arrangements.
Depending on tradition, culture, demand and enabling
technologies/funding, the availability of co-working spaces vary
from one city to another. However, they have changed the
traditional real estate trends such as tenants having their credit
checked, long term commitments or needing large down
payments to get in. this makes them attractive to startups. Even
then, there are various methods through which prospective
tenants are vetted.
Going into the future, co-working and the sharing economy will
continue to shape the real estate industry in many ways. In a
classic example of how capitalism and the near zero marginal
cost society are still intertwined, one of the biggest issues
facing co-working is the fact that it is a very vulnerable
business model. It is low margin, and removes many of the
sources of revenue that traditional real estate offered. Most co-
working service providers do not own the buildings they work
in, meaning the service is very risky. There are some aspects of
the business that still have not escaped the hold of the
traditional business model. For instance, with lease agreements
depending on the nature of the overall market, sometimes
landlords might increase rent when the lease ends. This might
leave a business that was thriving barely able to survive
(Schneider, 2016).
Going into the future, another rend that will affect both
companies that offer co-working spaces and the landlords is the
need to improve the quality of service. As it firmly sets in,
competition will not be on the basis of space per-se, but on the
basis of quality of service. Companies will focus on other
factors that enhance the quality of the co-working experience,
giving it an edge over, say, working at home, the traditional
office or even the coffee shop. Already, there are companies
9. planning such expansive service offerings as health clubs, spas,
dry cleaning and many such options.
Technology has always had a strange relationship with real
estate. Currently, the capitalistic past and the near zero
marginal cost society are still embroiled in a struggle, often
leading to sharing or a hybrid system. For instance, many
commercial real estate or office managers will lease out extra
office space depending on the fluctuation of their needs (PWC,
2015).
Conclusion
The effects of the near zero marginal cost society on real estate
do not just exist in the economic bubble, though. There are
other social implications of embracing such change. For
instance, Airbnb, one of the most famous symbols of the sharing
economy in the real estate industry, continues to face various
challenges as it grows. One would think that the growth of
AirBnB listings, which allows locals to rent out their homes to
tourists, would be a good thing. However, as the listings grow,
city authorities are becoming warier and looking to rein the
service in. The disruption in the real estate industry because of
this is unconventional, but is a problem nonetheless. In cities
big and small, authorities are worried about the huge influx of
tourists. For instance, in Paris, the listings grew from 20,000 in
2014 to 40,000 in 2016. Officials in the city are worried that the
city is becoming deserted, and is now only being filled with
tourists, enabled by such services as AirBnB (Slee, 2015).
The startups rocky relationship with authorities in its origin city
of San Francisco is also testament to the general trend where
clash between the old economic system and the new sharing
economy is being shaped by policy and law enforcement. This is
something that has been a huge problem to the Uber taxi
platform. In San Francisco, a new rule in February 2015 called
for Airbnb hosts to register with the city. Over a year later, and
with only a small percentage having done so, the city started
shifting responsibility to the company, fining it 1000 dollars for
every new listing that the company could find. There are similar
10. laws and restrictions in New York and Chicago (Slee, 2015).
Airbnb has taken the city to court, presetting itself as a free
speech business, not responsible for what happens on the
ground. This could be related to the spate of discrimination and
abuse that some hosts might have subjected current or
prospective tenants to. Whether this is just the best legal
strategy or what the business truly believes itself to be remains
to be seen. Two things are clear though; the traditional real
estate industry as we know it has changed, perhaps forever.
Secondly, capitalism, while in declining, still has considerable
power and influence, and until people find a middle ground,
especially in industries where there are social implications like
real estate, it will not be smooth sailing.
References
Ahteensu, M. (2007). Rationale for Taking Precautions:
Normative Choices and Commitments in the Implementation of
the Precautionary Principle . University of Kent.
Eurotax. (2015). Dieselgate: What it Means for the Automotive
Industry. Eurotax.
Green, R. (2014). Collaborate or Compete: How Do Landlords
Respond to the Rise in Coworking? Cornell Real Estate Review,
52- 59.
Harvey, F. (2015, December 14). Paris climate change
agreement: the world's greatest diplomatic success. Retrieved
November 14, 2016, from The Guardian:
https://www.theguardian.com/environment/2015/dec/13/paris-
climate-deal-cop-diplomacy-developing-united-nations
Jarrett, M. H., Chandler, C. G., Hagen, E., & Sharrin, A. (2015).
Prosecuting Intellectual Property Crimes. Office of Legal
Education Executive Office for United States Attorneys.
11. Klein, N. (2014). This changes everything: capitalism vs. the
climate. New York: Simon & Schuster.
Peel, J. (2005). the Precautionary Principle in Practice. Sydney:
The Federation Press.
PWC. (2015). Emerging Trends in Real Estate. Washington,
DC: Urban Land Institute.
Rifkin, J. (2014, May 15). Say goodbye to capitalism as we
know it. Retrieved from market Watch:
http://www.marketwatch.com/story/say-goodbye-to-capitalism-
as-we-know-it-2014-05-15
Rifkin, J. (2015). The Zero Marginal Cost Society: The Internet
of Things, the Collaborative Commons, and the Eclipse of
Capitalism. New York: Palgrave Macmillan.
Schneider, A. (2016, january 12). The Future of Coworking.
Retrieved from The Huffington Post:
http://www.huffingtonpost.com/amanda-schneider/the-future-of-
coworking_b_8950140.html
Seretny, M., & Seretny, A. (2012). Sustainable Marketing -A
New Era in the Responsible Marketing Development.
Foundations of Management, 63-76.
Slee, T. (2015, July 11). Airbnb Is Facing an Existential
Expansion Problem. Retrieved November 14, 2016, from
harverd Business Review: https://hbr.org/2016/07/airbnb-is-
facing-an-existential-expansion-problem
For this assignment you should select the lubricant industry
(focus on BP Castrol). The goal of the research paper is to
develop a well-reasoned and analytically supported response to
the following questions:
· If Jeremy Rifkin is correct in predicting the impact of a third
industrial revolution, how will the selected industry be impacted
by the transition to a “near zero marginal cost society”?
· If Naomi Klein is correct that the need to address climate
12. change “changes everything”, how will the selected industry be
impacted by a warming planet, on the one hand, since a certain
amount of warming is inevitable, and by efforts to mitigate the
impacts of climate change and reduce the release of greenhouse
gases, on the other?
The final paper should be a minimum of 3000 words (10-12
pages, double-spaced, in 12-point font). It should include a title
page, a brief introduction, final versions of the Industry
Analysis and Individual Analysis sections submitted earlier, and
a brief conclusion identifying the main implications of the
research and questions or issues that, from your perspective,
merit further consideration.
Papers must include a title page, brief introduction, the body of
the paper, and a brief conclusion. Papers should be double-
spaced and a minimum of 3000 words. The body of the paper
may address the two main themes in separate sections, divided
into an "Industry Analysis" section and an "Individual Analysis"
section. However, you also reorganize the material so as to
present it in the way that best supports their argument and
conclusions. You are encouraged to use headings and
subheadings to organize your paper. You must support your
analysis by citing relevant and reliable sources. In-text citations
should be in the APA style. The appended list of references,
properly formatted, should include at least fifteen books,
journal articles, magazine articles, newspaper reports, company
reports, or publications by think tanks, nongovernmental
organizations, government agencies, or intergovernmental or
transnational institutions.
In general, good final papers will draw on the material covered
in the course, material covered in other courses, academic
research, and other relevant sources of information. They will
clearly articulate the challenges facing companies in the
selected industry as they respond to potentially transformative
changes in the global economy, as a result of both technological
innovation and the potential impacts of climate change. Good
papers will explore how these changes are likely to impact the
13. social and political context in which businesses operate, and
what changes companies in the industry may need to make in
response. Finally, good papers will reflect on these changes
might impact directly on you and on your future personal and
work-related choices, career direction, or social and political
identity. Good research papers will also, and of course, clearly
document their sources of information using the APA style and
will be well organized and of appropriate length; written in
clear English that is generally free of errors; and demonstrate an
understanding of the conventions of academic writing.