The Tragedy of the Commons and the Doomsday of Bike Sharing | jyj4d, jigoslot, play zeus unleashed

In January 2013, Michelle Walker, the author of the best-selling book "Gray Rhino: How to Cope with a High-Probability Crisis," publicly proposed the concept of "grey rhino" for the first time at the Davos Global Forum, which refers to a potential crisis with high probability and huge impact - such as the gray rhinoceros that grows on the African grasslands. It is large, has weak eyesight, and seems bulky. Once you provoke it, its huge and strong body will definitely rush towards you with all its strength, bringing very serious consequences.

The "grey rhinoceros" seems far away, but it is actually all around us, but we have not noticed it yet or deliberately ignored it. Looking back on the past year of 2018, "grey rhinoceros" events such as private enterprise debt defaults, stock pledge liquidations, P2P explosions, and Bitcoin prices halved have begun to emerge in various fields.

The once-famous bicycle sharing field is no exception, and the "grey rhino" has quietly arrived. Recently, Ofo is running out of money and its deposits cannot be refunded, which has affected more than 12 million ordinary people. No one would have thought that shared bicycles, one of China's "four new inventions" that were once as famous as high-speed rail, mobile payment, and online shopping, have quickly turned into a farce in just two years, which is sad.

The failure of the “color revolution”

The evolutionary history of human beings is like a cycle of reincarnation. Europeans invented the bicycle, but China is the true "kingdom of bicycles." Photographer Wang Wenlan once described the flow of bicycles in Chinese cities in the 1980s and 1990s as the "Moving Great Wall" in "Bicycle Days", jokingly saying, "If you want to surprise people, the best way is to say you don't know how to ride a bicycle." The emergence of shared bicycles has brought the former "Bicycle Kingdom" back into the public eye.

In August 2014, ofo was established. In January 2015, Mobike was established. In May 2015, the first domestic shared bicycle ofo was launched on the campus of Peking University, officially kicking off the crazy development of the shared bicycle industry. Subsequently, catalyzed by the trend and capital, various shared bicycles sprung up one after another, staging a vigorous "color revolution" across the country. For a time, people joked that "the body colors of shared bicycles are almost out of use.

Public reports show that as of 2017, the cumulative number of shared bicycles in my country reached 23 million, covering more than 200 cities. At the same time, according to monitoring data from the E-Commerce Research Center, the financing amount in the shared bicycle field reached 25.8 billion yuan in 2017. The rapid launch of shared bicycles and the huge amount of capital financing are staggering.

What starts with madness must end with madness, and shared bicycles are no exception. In the second half of 2017, shared bicycles quickly fell to the edge of the cliff without much warning, and bankruptcies occurred one after another. Wukong Bicycle, Xiaoming Bicycle, Kuqi Bicycle, Xiaolan Bicycle, etc. announced their closure one after another. According to data from the Ministry of Transport, there were 77 shared bicycle companies in China in 2017, of which more than 20 went bankrupt or ceased operations, accounting for more than 25%.

In 2018, the external economic environment suddenly declined, and it became increasingly difficult to raise funds in the primary market. The death of shared bicycles continued to accelerate, and ofo, the darling of capital and the industry leader, could not escape the bad luck. At the end of 2018, it was revealed that ofo’s deposits were difficult to refund, but this was just the tip of the iceberg. Under the difficult situation of the capital chain, ofo frequently reports that its operations are stagnant, its front lines are shrinking, and its financing is insufficient. This star company is obviously entering a countdown to death in advance, and the doomsday is no longer far away.

The trend is always short-lived, and the bubble will always pass. After the failure of the "color revolution", the bicycles that can be seen everywhere are the only traces left. And these traces have turned into scrap copper and iron, tens of billions of funds have been deposited, and huge wealth has been dissipated out of thin air.

Common sense in economics - "The tragedy of the commons"

In 1968, British Professor Garrett Hardin published an article titled "The Tragedy of the Commons" in Science magazine, first proposing the theory of "The Tragedy of the Commons." The article said that the British feudal lords set aside a piece of uncultivated land in their territory as pasture (called "commons") and opened it to herders free of charge. This was originally a thing that benefited the people, but since grazing is free, every herdsman hopes to raise as many cattle and sheep as possible. As the number of cattle and sheep increased uncontrollably, the common pastures eventually became barren due to "overloading". Tragedy eventually occurred, with the pastures becoming barren and all cattle and sheep starving to death.

The "tragedy of the commons" is also called the disaster of public resources. In public pastures, each additional sheep means a corresponding increase in income for herdsmen, but they do not need to bear any cost of grazing. As a rational person, the best choice must be to domesticate enough sheep within one's ability. When everyone does this, public resources are overused, and eventually no one can enjoy the "free lunch" anymore.

How to solve the "tragedy of the commons"? So far no universal solution exists. There are generally two solutions or measures. One is to define property rights, let private individuals be responsible for the management, operation and maintenance of public pastures, and levy fees on herders corresponding to the number of sheep; the other is for the government to intervene in the management of public pastures, and the government imposes corresponding restrictions on the number of sheep grazing by each household to maintain the self-circulation of the pastures.

Private capital is profit-seeking, and many public goods with welfare properties, such as public bicycles, buses, subways, parks, etc., often have characteristics such as low profit margins and long profit cycles. It is difficult to meet the requirements of private capital for profit and time, making the first solution of defining property rights and private management and operation unfeasible. Therefore, the providers of public goods are generally government departments, and the national finance or local finance ultimately pays the bill.

The "trap" that is difficult to overcome with shared bicycles

The "tragedy of the commons" is prone to occur in the field of public goods, and in essence, shared bicycles are a "public good"uo;. Looking back at economic theory, public goods usually have two basic characteristics, one is low or no charge, and the other is non-exclusive. Non-excludability means that a certain public good cannot artificially exclude others from using it. For example, a park bench can be used by everyone and is not exclusive. Shared bicycles also have the above characteristics. First, the fees are low, with a single ride charge of 1 yuan; second, they are not non-exclusive. After paying, the user only obtains the right to use the bicycle for a certain period of time, rather than ownership. Therefore, after the bicycle is delivered, it cannot prevent others from continuing to use it.

The nature of shared bicycles as a public good, the low usage fees, and the lack of supervision in the use and delivery of bicycles make the cost of encroachment and damage to bicycles extremely low, making it easy for the "tragedy of the commons" to occur. Public pastures can easily be swallowed up by overgrazing. Similarly, shared bicycles are similar to public pastures, and users are similar to sheep. Shared bicycles can also be easily overused, damaged, and run into operational difficulties.

Human nature is rational, greedy and selfish. After paying for a shared bicycle, the first choice must be to make it as convenient as possible for themselves. Behaviors such as not caring for the bicycle, parking the bicycle at will, or even taking it as one's own are common. The wear and tear of bicycles continues to be allowed as time goes by. Soon, the phenomenon of broken bicycles appears on a large scale, and the "tragedy of the commons" becomes more and more serious.

Before the first half of 2017, there was no such obvious "tragedy of the commons" in shared bicycles. A very important factor was that the supply of the entire market was constantly expanding. Major shared bicycle manufacturers were competing to staking their claim and launched large-scale bicycle launches in major cities across the country. As we enter 2018, due to the depletion of funds caused by the capital winter, many manufacturers have no money to continue putting bicycles on the market. Due to factors such as encroachment, damage, and natural depreciation, the number of available bicycles on the market has dropped rapidly. The contradiction of the "tragedy of the commons" has become increasingly prominent.

Therefore, it seems inevitable that problems will arise in the shared bicycle model, because it violates the basic common sense of economics and the basic laws of market economic development, and ignores the weaknesses of human nature such as greed and selfishness. In the absence of effective supervision, it is destined to be stranded in the quagmire of the "tragedy of the commons." It can be said that the collapse of shared bicycles is the most vivid case of the "tragedy of the commons" in today's business practice.

Three specific reasons that overwhelm shared bicycles

Looking at the essence through the phenomenon, the core of the collapse of shared bicycles lies in the three fundamental reasons that are inevitably derived from the "tragedy of the commons", rather than Vote Right (one-vote veto power), the founder Dai Wei is too young, and the competition for shared bicycles is more than fierce and other factors that the public likes to hear.

First, the profit model is unclear.

During the heyday of shared bicycles, someone carefully calculated that a bicycle could pay back its capital within three months, and then enter the net profit stage. It seemed perfect, but now it seems that the calculation at that time was too ideal.

(1) Overestimating the number of bicycle rides. Cycling is cyclical throughout the year. In spring and autumn, there are many cyclists due to cool weather, while in summer and winter, there are fewer cyclists due to overheating or coldness. In China, the length of summer and winter is much longer than that of spring and autumn. On average, the number of bicycle rides per dayAt least half the previous forecast. The Beijing Municipal Transportation Commission once revealed that the total number of shared bicycles in Beijing has been controlled at around 1.9 million, but the idle rate of bicycles in some areas is as high as 50%. This shows that the number of bicycle rides is not as high as previously imagined.

(2) Overestimating the integrity rate of bicycles and underestimating the loss rate. Under the "tragedy of the commons", the rate of bicycle loss will be much higher than previously estimated. After most people pay a small portion of the usage fee, their instinctive reaction is to maximize their utility as much as possible. They damage the car body at will, park the car at will, put small advertisements on the car, put QR codes on the car to defraud, etc. The number of bad cars will only increase. At the same time, due to the increase in broken vehicles, maintenance costs are much higher than previously estimated. Maintenance expenses continue to occur in large quantities, becoming an unbearable burden for shared bicycles.

Faced with the difficulty of making profit from shared bicycles, industry experts have also given many suggestions, but they are like "castles in the air" and are basically unfeasible.

(1) The proposal to increase the single-use fee for bicycles is obviously difficult to achieve. Didi can raise prices unscrupulously because their reference coordinate is taxis, while the reference coordinate for shared bicycles is buses or subways, leaving little room for increased charges for shared bicycles. Once the price increases, many users will immediately "vote with their feet" and may not choose to travel by bicycle. They may simply walk more or choose to take a one-stop bus.

(2) It is proposed to earn more advertising revenue on the car body, which is also difficult to achieve. Because the car body is narrow, most people cannot see the small advertisements, and the quality is low. At the same time, it is exposed to wind, sun and rain, and the maintenance cost is also high. Most well-known companies will not choose to place advertisements on shared bicycles. The ones who place advertisements are often small companies, which greatly limits the possibility of charging high advertising fees for shared bicycles.

(3) It is proposed to do something about the deposit and extract the income from the deposit. Legally speaking, the deposit income belongs to the customer, and misappropriation of the deposit is illegal and is not legally feasible; from a practical point of view, the deposit income is only a drop in the bucket for the huge investment and maintenance costs, and is far from covering the huge cost of shared bicycles. In the long run, for any enterprise, the income generated by itself and derived from the main business is the safest and most lasting. Similarly, for shared bicycles, the income generated from users' direct use of bicycles is the most important.

The second is the vicious cycle of the asset-heavy model.

Bicycle sharing has the characteristics of large investment in public goods. Large investment means that tens of thousands of bicycles need to be invested in major cities in the early stage. In the middle and later stages, a steady stream of bicycles will need to be put in to replace broken ones or to further seize the remaining market. Therefore, from a financial point of view, all vehicles are fixed assets of the shared bicycle company. The faster it expands and the more it invests, the heavier the fixed assets will be. Eventually, a large amount of funds will be deposited in these assets. Funds are reflected in the number of bicycle assets. With the rapid depreciation of bicycles, funds are also lost rapidly. Therefore, shared bicycles require continuous follow-up financing to alleviate the "hungry" of funds.

The initiators of the Internet economy and the sharing economy should have been operating with light assets. Although shared bicycles are called sharing, they are firmly following the path of a traditional industry company. In essence, they are not much different from a bicycle manufacturer. If the company must be classifiedIf so, shared bicycles can be directly classified into the manufacturing industry. This is also the essential difference between shared bicycles and other sharing models such as Didi and Airbnb. Bike sharing is a hands-on approach, while Didi and Airbnb are asset-light operations and position themselves as platforms that integrate external assets and resources. As long as the platform is established, you can make money without spending such a high amount of manpower, material and financial resources on the investment and subsequent maintenance of assets.

The third is the limitation of national quality.

The prosperity of shared bicycles is closely related to the stage of economic development and the quality of the population. With a high level of economic development and high quality of the population, the human losses and maintenance costs of bicycles will be much lower, and the "tragedy of the commons" phenomenon will be greatly alleviated. At present, the overall quality of our country's citizens is still at a climbing stage, and it is far from meeting the requirements for shared bicycles without any supervision and penalties. The quality of residents in core cities such as Beijing, Shanghai, Guangzhou and Shenzhen is relatively high, and the relative number of broken cars is much lower than that of other domestic cities. This shows that the quality of regional residents is closely related to the number of broken cars. There was once an article that said, "Bike sharing is really a good mirror for the nation." It may be a bit exaggerated, but at least it allows us to see how far we are from civilization.

Where to survive in the cold winter?

In 2018, the "capital winter" that has been called for many years finally arrived, which caught people off guard. Ofo, the leader in shared bicycles, finally failed to hold on, and became increasingly unable to survive in the "cold winter". The run it faced was more serious than a bank run. The former was a real funding crisis, and most of the funds had already been deposited on those little yellow cars and dissipated in piles of scrap copper and iron. The latter was just a maturity mismatch.

In 2019, the venture capital industry is expected to enter an "extreme cold" collectively. Therefore, it is obviously not feasible for shared bicycles to support themselves by relying on the development idea of ​​"rolling out more bikes - attracting more users - generating good sales - and obtaining more financing", and transformation is imminent.

In my opinion, in the cold winter, if shared bicycles want to avoid the trap of the "tragedy of the commons" and survive safely, there are only three ways to go.

First, the “small fish” must be selectively eaten by the “big fish”, and the shared bicycle industry must return to an oligopoly competition pattern through mergers, acquisitions and reorganization.

After monopoly, increase charges and control costs to continuously improve profitability and achieve self-development. For shared bicycle brands that are currently experiencing operational problems, don’t even try to struggle. They should either merge and form alliances with industry leaders as soon as possible to seek common development, or liquidate as soon as possible, cut losses and exit the market quickly.

The second is to refine operations and reduce barbaric and nationwide disorderly expansion.

The quality of Chinese people varies greatly, and large, medium and small cities vary greatly. As far as shared bicycles are concerned, only certain big cities may be profitable target markets. Therefore, implementing refined operations in some major cities and serving this group of people well may be the best strategy for shared bicycles in the past two or three years.According to public reports, at the end of 2018, Beijing Mobike’s bicycle operation area shrank from the Sixth Ring Road to the Fifth Ring Road, indicating that Mobike has realized this in its operations. In the future, it will be imperative for shared bicycle companies to shrink their cities and other measures.

Third, the entire industry works hand in hand with government departments to jointly strengthen supervision and penalties for damaged shared bicycles.

Comparing shared bicycles to the mirror of human nature seems a bit too much, because the characteristics of low supervision and low penalties of shared bicycles have artificially constructed a moral trap to lure the public to jump in, but human nature cannot withstand the test, and shared bicycles are wrong in that they test human nature.

Under the cover of the nest, there are completed eggs. The solution to the current problem is to reduce fearless competition, join forces, and work with government departments to strengthen supervision and penalties for damage to shared bicycles, punish evil and promote good, make lawbreakers pay corresponding costs, and shape and improve the overall business environment of the industry. Shared taxi rides such as Didi and shared rental Airbnb will not easily cause a "tragedy of the commons" similar to shared bicycles. In addition to not having heavy assets and clear profits, a very important reason is that they are better than shared bicycles in terms of management and supervision. They can impose stricter management and behavioral constraints on users. Once items are damaged, users can be required to make corresponding compensation, making the cost of item misappropriation and damage very high.

In the past two years or so, the development of shared bicycles has benefited not only from the praise of government officials, economists and the general public, but also from the fueling of capital. Looking through the list of investment institutions behind shared bicycles, all of them are industry leaders. But why does everyone turn a blind eye to such a simple common sense - the "tragedy of the commons"? Is it ignorance, selective neglect, or overconfidence? The answer is unknown.

Through this tragedy of shared bicycles, one thing reminds us that we should never ignore the objective laws of economic development and the basic theories of economics. Many entrepreneurial failures are likely to be based on the most basic and simple logic.

In the flashy entrepreneurial wave. Isn’t it wisdom to return to real business logic and common sense?

[Source: Titanium Media Author: He Nanye]