Two of the more interesting Internet-driven companies these days are Airbnb and Uber. They call themselves part of the “sharing economy.” But let’s take a look at the word “share.” From the MacMillan dictionary, share is “to allow someone to have something you own.” Is that what’s happening here?

Not really. The products and services offered by companies in the sharing economy aren’t free.

There is a small unit of demand in the form of a single room or a single car ride, and there’s a small unit of availability in the form of a room in a house, an apartment, an empty cab, or even someone with a car going in the same direction. They are matched, a value is being transferred, and there’s also a financial transaction representative of that value. That’s really micro supply-and-demand management.

Previously such small units of supply and demand were never taken advantage of, let alone optimized, unless they were aggregated. Now Internet connectivity and computational power can dynamically and efficiently track, match, and transact such small units.

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