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The True Economy, The True Value

I am reading The New Capitalist Manifesto by Umair Haque in preparation for SIBOS 2011 where I will have an opportunity to join in a common conversation. I will be speaking on a panel called New Economies along with several other distinguished presenters (see Below).

New Economies = The Values

The most important thing about the discussion of new economies is the idea of Value.  It is essential that we define Value much more completely than just those things that can be articulated with money and shift to include all forms of Value in our entrepreneurship.  The Sun delivers value to the Earth. Parents deliver value to their children.  Communities deliver value to society.  A true accounting of all value is essential to the discussion of new economies.

The New Capitalist Manifesto is a hugely important book; Here are a few of my thoughts.

First; it provides a vital framework to begin accounting for what we call “True Value”; an accounting of real net value creation as opposed to borrowing, transferring, or destroying value that is not necessarily represented on a financial balance sheet.

Second; the new economy and emergent new accounting system will happen whether we like it or not.  There is little that people can actually do to avoid it. The new economy is a matter of survival – it will happen at the speed and drive of survival (hence “Capitalism”).   So make your choices now as these will define your future.

The third observation is that nobody is immune from the new economy.  The more one resists, the more it will persist.  The stronger that a country, corporation, or traditionalists hold to legacy ideas about linear value and forest-to-dump consumerism, the faster and more dramatic will be their demise.

So what does this have to do with Social Flights?

Social Flights is attempting to replace the horrific concrete wasteland of the command and control “Hub & Spoke” system with a Democracy.  Our premise is that people can self-organize around two points and efficiently share an airplane that flies directly between them from smaller airports.  In effect, we replace the infrastructure with cloud data to accomplish the same thing with a far superior customer experience, and therefor, greater true value.

Think about it; all of the world’s airlines are competing with each other in a race to the bottom around the Hub and Spoke system.  The two largest aircraft manufacturers are beating each other up around the strengths and limitations of the Hub and Spoke System. The whole system is limping along on razor thin margins. Yet, the vast majority of “true and complete” Value of travel is the human experience and the value of relationships, communities, and their actions together.  The only reason that Travel exists is being unceremoniously tossed out on the tarmac….

If you don’t listen to your customers, then at least listen to Umair Haque.

So, if you are a university, a corporation, government, or any institution dependent on physical infrastructure in order to match supply and demand while insulating yourself from competition, then you should be very concerned about the new economy.

New economies
Is money the only form of transaction value and wealth? What about social currencies? We will expose you to new thinking on new economies such as the trust economy, the intention economy, the relationship economy, the social economy and the ethical economy.

Already confirmed:

When The Customer, Supplier, And Competitor Are The Same

NPR ran a story today about how drug companies are not the only ones making money inventing new medicines for the market. A man in Massachusetts has brought three drugs to market almost on his own.

His process is the same as the big drug makers, but he farms out each aspect of the process to independent labs and specialists. When the drug starts to succeed in trials, he sells it to one of the big companies.

Who competes with whom?

This is an example of how human infrastructure can replace physical infrastructure.  The standard process for creating a new drug is to build a large building and fill it with smart people and expensive equipment and surround it with parking lots.  The cost can easily exceed 60 million just to bring a drug to trials – the man in Massachusetts can do it of less than 6 million.

Mitigation of risk, waste, and social burden

Not only are market victories less expensive, but so are market failures.  Hundreds of thousands of hours are saved in commute times and millions of miles stay off the freeways. “Independent Lab Specialists” are in fact, independent and don’t need to migrate from company to company chasing the next project.

As the article states, every step in the process for approving a drug is the same – without the unnecessary physical infrastructure. Sure, virtual work has been around a long time, the difference is when the corporate structure itself shifts to a series of small integrated corporations.

If virtualization can revolutionize the medical industry – it can revolutionize all industries.

Social Flights is attempting to revolutionize the Aviation industry in a similar way.  Large Hub Airports represent physical infrastructure through which people and airplanes are sorted and matched.  The majority of US commercial traffic passes through Hub Airports. Yet, the majority of passengers are forced to drive a substantial distance to reach a hub departure.  Then they fly to a place that they have no intention of going only to transfer to another plane that also is not going where they intend to go. Finally, they drive a substantial distance to get where they really want to go.

The congestion and physical footprint supporting large airports is substantial. The burden on both the local and distant communities served by the hub airport is severe.  Thousands of people and vast resources are deployed to support the infrastructure, not necessarily the value proposition to the passengers or the communities.

The Airlines need to understand that their customer is the community, their supplier is the community, and their competitor is the community.  If they lose track of any one of these pillars, the system will become ripe for disruption.

The Gamification of Air Travel

Commercial airlines continue to astonish the traveling public with an ever-increasing array of new ways to charge extra fees.  The newest scheme is to charge 5 dollars to have a customer service agent print your boarding pass.  You can get around this by using your own printer, or using a free kiosk – which undoubtedly will not be free for long.

Your schedule or theirs?

Meanwhile, the different prices that people pay for the same trip continues to fluctuate wildly. There are very few products whose price defies supply and demand or actually increases as it approaches it’s expiration date.

People who book 4-6 weeks in advance have the highest probability of getting the lowest fair – as long as the don’t buy the ticket on a weekend.  Buying a ticket on a Tuesday morning 4 weeks in advance can yield a 50% discount of the person who bought their ticket 2 weeks in advance on a Saturday afternoon.

Obviously, there must be some net average cost for a seat, per mile traveled with all services restored, so why can’t we save the drama and loss of productivity and use the average price? An “average revenue per seat mile” price is good enough for Wall Street Annual Report – why not the rest of us?. Another nagging question: why can’t I use frequent flier miles to buy lunch on the plane or carry extra suitcase?  What, they don’t accept their own currency…?!?!

Are You Gamed by FlyVille?

The airline industry has been gamified and people are hard wired to play along – of course they complain, but they also learn to behave in a manner that they perceive to be in their own best interest, but actually is in the Airline’s best interest.  Tacit collusion among airlines can now play out using frequent flier miles, copycat fares, and lowered customer expectations.  How much time do people spend playing this game?

This is also the environment where a competitor can emerge with a  “counter-game”.

Social Flights was launched a few months ago with a very simple data landscape; a means and manner in which people can meet to ride share on private aircraft.  Currently, the amount of time required for a social flights customer to execute a flight plan – that is, organize people in their community with shared flight intentions – may still be greater than the time and harassment of just going through the flow of the commercial airline abyss.   Over time, however, this will change.

Frequent Influence Miles

Suppose that Social Flights deployed frequent flier miles?  Suppose these could be awarded for organizing a social flight plan to a social network?  Suppose miles could be redeemed for discounts on hotels, car rentals, and ground services (think AAA)? Restaurants, entertainment and events routinely pay commissions to concierge referrals, why wouldn’t they also redeem Social Flights Flier Miles in the same manner?

What if Social Flights frequent flier miles could be earned and redeemed without actually flying, but by simply organizing communities until your perfect trip comes along?  What if a person with high Social Flights Frequent Flier Miles represented a better social influence predictor than say, a Klout score or Twitter follower count?  Would vendors want to know who these magical people are?  Will vendors compensate them for their influence in a community?  Wouldn’t the community then define the ads that get pitched?

What’s the end game? Let’s transform the industry together.  Seeking game designers to build the next generation of air travel

The Value Game Plays The Valley Game

(The following is a draft of the unveiling presentation for The Value Game at The Future of Money and Technology Summit in San Francisco on February 28th 2011)

Hello;

The Ingenesist Project is developing a new class of business methods that convert social value into financial value, and vice versa.  The premise is that when people cooperate to do useful things, they can also create an amazing amount of social value.

Historically, we have seen how each of the great eras of human civilization was derived from the prior era when the tools of that prior era became integrated.  Like when the wheel, wedge, and pulley integrated to become the printing press.  Great social transformation followed.

So it is that integration of tools that we are most interested in.

Today, we can see this drama playing out across the Globe as people integrate the tools that were created over the last 30 years. People are reorganizing and in doing so they are directly challenging the power of financial currency with equally powerful social currency.

So it is inevitable that a conversion factor between social currency and financial currency will arise.  And that, we believe, will mark the next economic era.

So we developed something called The Value Game that we believe will help build the social infrastructure for the creation, storage, and exchange of social value.

The Value Game is a new class of business methods designed to specifically create social value.  The rules of the Value Game are very simple.  The Game Starts and Ends with money but all of the new value created in the game is denominated in Social Currency.

A Value Game is created by assembling 3 or more communities around a single shared asset in such a way that their interaction with each other relative to the asset creates social value.  In this form, social value can then be more readily converted to a financial value.

To demonstrate this, we helped launch a new company called Social Flights.  The objectives of Social Flights are to aggregate a large fleet of Private Turbine powered Aircraft and deploy them to the Social Graph instead of the Hub and Spoke system used by the Commercial Airlines.

The Shared Asset is the jet.  Player 1 is the traveler community.  Player 2 is the community of private aircraft operators. ,  Player 3 is the community of entrepreneurs at the flight destination.  The True Value Calculation compares the true door-to-door cost of using Social Flights versus other alternatives such as commercial airlines.

For example, flying between two smaller cities like Bellingham Washington and Vail, Colorado.  A Commercial flight would take close to 14 hours traveling through two hubs.  A fully utilized private flight would cost about twice as much but can make the flight in 3 hours.  So right off the bat, the True Value Calculation issues a par value between alternatives.  So if your time is worth less than, say, 70 dollars per hour, you are better off taking commercial airlines.  But if your time is worth more than 70 dollars per hour – for whatever reason – then you should take the private flight.

Now, a hotel in Vail may say – wow, here is a group of 10 people staying 5 days. They can divert advertising budget and issue a 100 dollar “discount coupon” to everyone in the group. Now the par value of the private flight is reduced to 60 dollars per hour. Next, Ski slopes, restaurants, bars, and services will deploy Coupons against the airplane lowering the par value toward closer to middle class incomes and certainly well within the business class of a commercial airline.

Things will get really interesting as people start gaming the game. The more demographic information that the traveler provides, the greater the likelihood that more and more vendors will issue them a discount coupon – which they can even resell on Craigslist.

In effect, why would someone let Facebook sell their information when people can sell it their selves?  Why would vendors pay for advertising when they can find the perfect customers directly?  Why would a manufacturer pay a retailer when the community can sell it for them?   Here we see a great deal of financial value can also be articulated in a Value Game.

Theoretically, we could build a Value Game around any shared asset from zip cars, public infrastructure, energy production, education, natural resources, even the totality of human knowledge, etc.

But for now, let me introduce Allen Howell, Chairman of Social Flights who will discuss how this new business method is developing in practice.

Social Flights should be very interesting to many of the people here because it integrates several of the hottest properties in the Valley; Travel, Coupons, Gaming, and Social Media.  Each of these communities have seen astonishing valuations lately so it will be interesting to see what happens when they, in fact, become integrated.

So please welcome Allen and I can take questions while he sets up.

Ideas Travel Where People Travel

Good ideas travel easily and far along trade routes.  Ideas like irrigation, Apples, grapes and wine spread along the Silk Road. The paper and writing spread new ideas leading to increased literacy, the scrapping of old philosophy and the creation of new social orders. The printing press then led the way for today’s mighty publishing Industry.  But don’t forget a simple fact, travel is the substrate of the next economic paradigm.

Ideas: A Chain with many Weak Links

Seth Godin wrote a wonderful article about the publishing industry called The Domino Effect.  He observes that:

1. The middlemen (bookstores) have too much power to limit shelf space.

2.Authors are separated from their readers and don’t have the data to contact them directly.

3. Pricing is based static, slow, and largely irrelevant of content or any form of supply and demand which is of little benefit to the reader or the author.

4. Ideas from books travel much farther and faster than the book itself which does not translate into book sales.

Mr. Godin’s point is that given how important books are, the Chain has many weak links between the author and the audience. Publishing is due for an extraordinary disruption and Seth is going to change it with The Domino Project.  But how many other industries suffer from the same weak-chain syndrome?

Travel: A Plane with many Weak Links

Well, if Books and Travel spreads ideas along the Silk Road, then they must have a lot of other things in common.  If we apply Seth’s observations to the commercial airlines:

1. We see that Airports and airlines have tremendous power to limit gates, times, and availability of routes.

2.  Airlines have no idea why they are carrying all those people around.

3. Pricing is static, segmented, slow, and has very little to do with the actual supply and demand for travel.

4. Travelers are transporting ideas which move faster and more broadly than the aircraft itself and which does not translate into more airline tickets sold.

Where ideas spread; value is created

What is so powerful about ideas?  Most innovation gurus discount raw “ideas” as the useless drivel of idle minds. “Show me the money, not the ideas”, they bark.  If ideas are not innovation, then what are they?  If Ideas are not valuable, then what are they?

The Travel Economy

Travel technologies and applications are being sold for incredible sums of money.  Every airline merger is big news and every geolocation application is huge business.  Travel data is a lightening rod for everything from pricing to privacy.  Social Media applications are getting that migration routes are an excellent marker for “value flow” and therefore, cash flow.  Airline Travel is still the most favored mode political disruption because the links in the economic chain are so weak.  Travel is serious business.

The “New Value” Integration:

Every industry with weak links between production and end use are candidates for disruption in the great integration. Any idea that can strengthen the link in the chain between origin and the destination of an idea is a product of the great integration.  The Social Value creation process and astonishing opportunity will happen at the weak links between origin and destination of any product or service.

***

(Editors note: The above post is #2 in a series [1][2][3][4][5] introducing The Value Game to a new class of business methods.  The first real world application is Social Flights; a collaborative production / consumption game being deployed to the market.  If this works, the new business method class will be generalized throughout the economy to catalyze the convertibility of social currency.  Please join us at The Future of Money and Technology Summit in San Francisco on february 28th 2011 where we will unveil the work to the technology community)

Who Needs Anti-Social Travel?

I recently returned from a trip from Seattle to Nashville. I am involved in launching a new airline applying The Social Value Game to a legacy industry.  The objective of this venture is to match a fleet of 15,000 private jets to social media networks for efficient door-to-door travel. The start-up is largely founded on the premise that a dismal travel experience is a dismal social experience.

Here is how my trip from Seattle to Nashville went using Commercial Airlines:

11:00 I get in my car and leave home for a 1:00 Boarding
11:45 Drive 25 miles through heavy traffic and bad weather, arrive at self-park car lot near Airport.  I get into a cold shuttle bus.
12:00 Arrive at Airport Security and strip down to last layers of clothing
12:15 leave airport security after long line after harassment over 3 oz of toothpaste remaining in a 6 oz tube and a telephoto lens that obviously resembled a printer cartridge.
12:30 Arrive at gate. Airline took my baggage away because it did not fit in the “Impossible box” and charged $25.00 baggage fee. (95% of all carry on bags would never fit in the “Impossible Box” so why me?)
1:00 Flight was full.  Poked, bumped, cramped, body complies to shape of existing space
1:30 departure was late. Connection in Salt Lake City was tight
3:30 Lands in Salt Lake city, late. No attempt to release tight connections first
3:50 Exit aircraft with 10 minutes to use restroom, grab sandwich, and run 1/2 mile to the next gate
4:20 Board flight to Nashville. Crowded. Window seat. Poked, bumped, cramped, body complies to shape of existing space
4:30 Flight leaves. 30 minutes into flight, I drop my Ipod under seats. Absolutely impossible to recover until airplane lands. No music, sucks.
8:00 Airplane arrives at Nashville (10:00pm Local time). Baggage claim took forever
9:00 (11:00 local): Finally get into rental car
10:40 arrive at hotel near location
11:00 (1:00 local) set alarm for 7 am local (5:00 am Seattle time) head hits pillow
5:00 am wake up sore, tired, and feeling oppressed.

Total Travel Time 12 hours one way and 24 hours RT door to door.

One complete day of productivity wasted. One day of life squandered. Zero time spent with my family or friends. Zero personal time to enjoy or reflect. Zero moments feeling secure, healthy, or self-worthy. 24 hours of confrontation with my surroundings. Zero moments of inspiration. Zero opportunities to be exposed to new ideas. Zero interesting people to learn from. Zero trees, flowers, sunshine, or fresh air. Zero fresh food; no fruit, vegetables, or raw nuts. Zero memories – except bad. No laughter, no friendship, no community. No exercise except running in fear.

The opportunity of the next economic paradigm is the ability to articulate the social value on all of these things – the ability to predict into the future the True Value of all the things that are squandered by an anti-social experience.  That is the essence of The Ingenesist Project.

Who Needs Anti-Social Travel?

With a private airplane, I could leave my home at 11:00 for a 11:30 departure at a small local airfield 6 miles from my house. The flight would have been about 4 hours long and I would arrive at my destination for dinner reservations with my colleagues. The flight would cost less than 1400 dollars round trip and I could return a full day earlier (eliminating 2 nights) than the the commercial flight for the same set of meeting objectives.

If a person’s time is worth 50 dollars per hour, the difference between 10 hours of flight time is 500 dollars off of a 1000 dollar ticket. The commercial flight costs ($300), including parking ($100), airport taxes($50), extra airline fees (50 dollars), car rental ($300), 2 extra hotel night ($400) for a total of 1200 dollars (I have the receipts to prove it).

So if 10 hours of your life is less than 200 dollars, then fly commercial. If your time, family, community – your life – is worth more than 20 dollars per hour, then you should consider taking America’s newest airline.

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