Weightlessness is hot in Silicon Valley right now.
It’s a term used to describe a business that’s built on the back of existing infrastructure. The idea is that businesses like these can deliver substantial value, but are also agile, flexible, and have lower cost structures that stem from their lack of infrastructure expenses. Uber, built on cars it doesn’t own, and Airbnb, built on property it doesn’t own, are the best-known examples of weightless companies.
Customers have flocked to these companies, drawn by the almost impossible ratio of benefit to cost that they deliver. And investors have followed close behind, lured by these companies’ ability to conjure new streams of value from old, tired industries.
If all of this seems magical – too good to be true – that’s because it is.
The bottom line is that the industries that are being replaced (while laden with inefficiencies, monopolies and artificial barriers which prevent the smooth flow of value) still deliver both full(ish) working wages to millions of people and valuable protections to consumers. But weightless companies often don’t.
Let’s look at Uber, which has displaced the taxi industry in city after city.
While a medallion is a substantial part of the cost of operating a traditional taxi, so too is the insurance that those taxis are required to carry; it typically costs between five and ten thousand dollars a year. (In some markets Uber does have insurance for its drivers, but the liabilities they carry – and therefore the cost of their insurance – are typically significantly lower than those of traditional taxis.) More importantly, until Uber came along, taxi driving was a full-time job that often provided enough income to support an entire family.
But, as data from 2012 – 2013 (when Uber rates and earnings were higher) show, less than 20% of Uber drivers drove more than 34 hours a week (compared to 81% of taxi drivers). It seems unlikely that 34 hours a week or fewer of Uber income would be sufficient to support even a small household, and, in my admittedly informal survey of Uber drivers over the last few years, I’ve yet to speak to a driver that doesn’t have another job – if not two or three.
Uber has not conjured value for consumers and investors out of thin air. Instead, they’ve siphoned it from the workers and the companies that employed, served and supported those workers. And they’ve done it in order to deliver only modest benefits to consumers, compared to the major value they’ve delivered to a handful of owners and investors. In doing so, they’ve not only shrunk the workforce globally – they’ve also removed capital that those workers would have reinvested into the economy, which now sits unused on the ledgers of a small group of individuals. And Uber is just one of many companies that are doing the same thing across all parts of the economy around the world. Perhaps that’s why, despite groundbreaking innovations, overall growth, particularly in advanced economies, has ground to a halt over the past decade.
The overall impact of this is chilling, and it’s already being felt. But while it appears that the tide may be turning for some of these weightless companies, the question of how to compete against them without further damaging the economy is a pressing one for every company that actually owns and maintains its own infrastructure.
While the knee-jerk reaction is to compete against the same dimensions of cost, convenience and availability that these weightless companies are delivering, there are precious few circumstances under which corporations can pull that off. Instead, the cost and corner-cutting that large companies have to engage in to approximate the footprint of a weightless competitor end up requiring them to cut into the bone. And cuts that deep remove valuable expertise and differentiation from these companies, resulting in the commoditization of their output, which, in the end, makes them less competitive, not more.
Instead, large companies that have succeeded in battling weightless companies have made better use of their infrastructure.
Through coordination, curation and comprehensive experience design, they have turned their weight into an asset rather than an anchor.
Looking at companies like Zara or H&M, you can see that it’s the coordination between all parts of their supply chains that has led to their success. Clearly this coordination has been enabled by smart technology and systems, but it’s the cohesive culture of these organizations, and the people within them – all working from the same values, and toward the same goals – that has empowered them to accomplish it. If you applied smart technology and systems to a loose federation of independent contractors, you wouldn’t be able to achieve the same results; it’s the committed employees of these companies that are crucial to their success.
That being said, both Zara and H&M are beginning to be outpaced by Asos and Boohoo. In response, H&M is rethinking its supply chain to drive tighter coordination: establishing manufacturing in Europe rather than China; building more infrastructure, not less; creating more value rather than extracting it.
In a completely different category, the contrast between Classpass – another weightless, one-time Unicorn candidate – and Soulcycle has been instructive. Like Uber before it, Classpass is being forced to contend with disillusionment and dissatisfaction on both sides of its two-sided marketplace, leading to questions about the ongoing viability of its business model. On the other hand, Soulcycle, which has famously designed every aspect of its experience, and which refused to participate in the Classpass market, continues to enjoy growth, and has both national and international expansions in the works. Like Zara, Soulcycle has used its culture and its ownership of its own infrastructure to deliver an experience that’s left Classpass floundering in its wake.
Another common link between these and other examples of the success of large, infrastructure-based companies is that they’ve accomplished things that are difficult for both machines and independent players to achieve. They’ve leaned into their humanity and created true emotional businesses rather than just a set of functional benefits thinly hidden under a layer of emotional marketing.
Cast against the bleak landscape of increased stagnation and inequality that some weightless companies are helping to create, there’s at least some hope that other models for the future of our economy exist. Shedding infrastructure is simply unsustainable. Legacy companies and startups alike must think about how to make better use of their weight, because to devise business models that shrink and consolidate value rather than creating it is a zero-sum game. It might be seductive in the short term, but in the long term, no one wins.