Financial analyst Barbara Gray discusses her recent research report The New Era of Economic Abundance and predicts how the sharing economy can disrupt incumbent business models.
Adam: Okay. Hi everybody. And I have the pleasure of talking with Barbara Gray who is an analyst with Brady Capital Research Incorporated and the website bradycap.com. Wonderful to have you on this podcast. Well, I’d love to dig into the details about what you’ve done with this fantastic research about the on-demand economy –
Barbara: Hey, Adam. It’s great to be here.
Adam: The sharing economy and the New Era of Abundance, a specific report you’ve obviously poured a lot of time and effort into. But before we jump into that report, I’d like to find out a little bit about how you got to where you are today.
Barbara: Sure. Okay. Just as background, I’m an equity analyst by training. And I’ve spent over two decades analyzing a wide range of companies and sectors. And specifically, I launched Brady Capital Research back in 2011 to focus on researching companies that are actually making a positive difference in the world.
Adam: So specifically, you’ve talked about in your report about this New Era of Abundance. How have companies like Uber and Airbnb defined the traditional economics in achieving this accelerated value creation?
Barbara: So. I’m an analyst. An analyst, you basically want to look for what’s going to happen in the future. And what I realized when I started looking at Airbnb is that these companies are defined by traditional economic principles of scarcity. And this doesn’t usually happen. And I sort of figured out, you know, how has Airbnb been able to get to a valuation of 25.5 billion? How has Uber been able to get to a valuation of 51 billion? And these companies are less than a decade old. And the reason is because basically they’ve been operating in this New Era of Economic Abundance.
And so I looked at sort of supply and demand and what’s happening. And if you look at supply, there’s a book called The Long Tail by Chris Anderson and what’s happening is these companies are building a long tail supply. So their inventory growth isn’t limited by traditional time or capital constraints because they’re accessing what I call long tail of latent or underutilized physical and human capital.
And on the demand side, these companies create what I call “the blue ocean of demand” and this refers to the book Blue Ocean Strategy. And their revenue growth isn’t constrained by existing demand because they’re accessing new blue ocean market demand which expands the total addressable market beyond traditional categories. So, you put these two economic principles together and it’s incredibly powerful.
Adam: So one might say well all the big opportunities have now been eaten up. I don’t believe in that statement. So for those who might be thinking well, I’ve missed the boat, what would you say are some of the most attractive opportunities for entrepreneurs and investors right now? Are they the same, same? Or are they specific niche or vertical industries that are ready for disruption?
Barbara: Well first, in order to look at that, what you have to do is you know – the question is how do you classify these companies? What I think is – normally, you categorize companies by industry, by sector or people are calling them the Airbnb of X or the Uber of Y. But in the report, we actually go sort of to the hard evidence and we looked at what’s really driving the economic characteristics of these companies. And it’s the source of their value origination and that’s the long tail. So in the report, we actually distinguished between sharing companies which are about the sharing of assets, goods and expertise and then purely on-demand companies which are really just about convenience. And then, within each of those categories, we came up with 10 different verticals.
So you have to ask – the first part of the question is – you have to then look at what the different verticals are. And then based on our research, we actually figured out which verticals are the most attractive. And the most attractive that we found are the corporate asset sharing vertical. And those are companies that allow companies to really efficiently use and make use of underutilized or latent or vacant corporate assets. And I think that’s a huge growth area. And the way they do that is they bundle, unbundle these assets in terms of time, space and use.
Then the other area that I think is a huge growth area is professional services. Those are companies like HourlyNerd or the education services companies. And what they’re doing is they’re creating a long tail in people that have expertise. So those are sort of the two big areas that we see for growth. So that’s where – if I was an investor or if I was an entrepreneur, that’s where I’ll be putting my time and my money.
Adam: Yeah. We’re seeing the same as far as the types of marketplaces that are building on our platform. So I definitely agree with that. How could leaders prepare for this new era of economic abundance then?
Barbara: I think we have to do – and I can go back to my days as an analyst. So back in January 2008, I was working as a sell-side equity analyst and I was covering a company called Yellow Pages. And that was a company that was in Canada. It was the largest directory, Yellow Pages, directory page company. And I was actually one of the first analysts to downgrade it to a sell and that was because I saw increased structural decline risk because I saw that all these online disruptors were leading to a threat of change in the competitive landscape. And you know, that was the case because five years later, the stock trade down to the pennies and they filed to restructure.
And so having that in mind, with that framework, I’m looking at what’s happening now. And back then, that was about the democratization of content. Now we’re seeing the democratization of physical and human capital. So whereas last decade it was about disrupting traditional telecom and media companies, this time, I think these companies are going to disrupt a wide range of sectors. Almost every sector I think could be disrupted by this. And so I think the question that leaders have to do is they have to first, they have to familiarize themselves with the new era of economic abundance and realize how these companies are creating value by building long tails, by creating blue oceans. And then look at their own competitive position and come up with a strategy in terms of thinking about how can they leverage their own physical assets, their own customer capital or their own physical capital, their employees themselves to really create and access these new value creator.
I hope you found this interview insightful. If you would like to learn more about the Sharing/On-Demand Economy from an economic perspective, please click here to download a complimentary copy of my in-depth research report “The New Era of Economic Abundance”.