“Group Buying” was an idea that first surfaced during the “dot com” boom and ultimately failed to build any momentum.  The idea is again gaining popularity in the era of social media where scalability can be introduced as aggregation cost diminish on applications such as Facebook and Twitter.

Ditch the gatekeeper, axe the marketers, lose the spam.

My first reaction is to find the most unsavory business transactions today and eliminate all the unnecessary middle men and their costs, gateways, noise pollution, and inefficiencies.

Why can’t there be one cell phone store where I can buy anything for any mobile device? Why do I have to pay to use my credit card and pay to not use my credit card? Why am I still treated like a terrorist precisely when I am doing everything that I can to avoid terrorists?

There are some glimmers on the horizon.

Applications such as SocialBuy, Groupon, and Living Social, use their social media platforms that offer vouchers for steep discounts on a variety of goods, once a minimum threshold of consumers is reached.  People have an economic incentive to promote products in their social network (on Facebook and Twitter) in order to reach those thresholds more rapidly and consistently.

Product Networks?

Suppose the group buying experience could aggregate packages of products.  Strategic products would then be aggregated as  ”A Network of Products” that together increase net value.  Yes, you heard me…a ‘combination of products’ with Twitter followers.  A zip car, a movie ticket, Segway rental, and a dinner coupon could be aggregated into an entertainment / shopping package.

This is not so strange.

Apple’s enduring success is very much a model of commercial social aggregation. Nobody can compete with an iPhone without also offering iTunes, iMovie, iPad, and all the social trappings of the iStore.  Perhaps Google, with its social commercial network can compete resulting in a duopoly.  Group buying can empower the smaller players and bust monopolies in an infinite array of combinations.

Why not air travel?

The door-to-door travel time and social cost to fly between two small cities, say, 500 miles apart using commercial airlines is greater than just driving. There is no other alternative, sans high-speed rail, and the economic result is that the two cities remain small with very little new commerce or diffusion of new ideas that air travel benefits a region.  People just don’t travel much between, say, Omaha NE and Cheyenne, WY.

Yet, small city pairs within 500 miles have strong extended family roots, migration patterns, and social network density.  It would be relatively easy to offer Group Buying on a 20-25 seat private airplane for less than the cost of driving; and in 1/10 the time!

The travel package could include ground transportation, shopping coupons, and maybe even a A zip car, a movie ticket, Segway rental, and a dinner coupon could be aggregated into an entertainment / shopping package.

Every small city economic development agency in the country should be in this business of building social networks and matching them with product networks between other small city pairs…

The same industries that are feeling the most pain from the new economic paradigm are also the ones who are most blinded to the opportunities that it also provides.   There is a new value proposition called: bridging “Local Social” and “Global Social”.

The two forces among us 

One is a social media culture enabled by the Internet to span the globe, cross all oceans, and reach nearly 20% of the population of the Earth.   People now have huge global network reach and therefore huge leverage over their worldview.  We call this Global Social.
The other is much older, much larger, and far more powerful. It is a social media culture that spans the neighborhood, unites communities, and organizes society.  This one reaches 100% of the people on Earth and is also being enabled by the Internet.  We call this Local Social.

Money happens because people happen, not the other way around

The great opportunity for the all modes of transportation, tourism, recreation, entertainment, lodging, and every “experience enterprise” from aviation to Whitewater Safari is to provide the fabric for “Global Social” to integrate with “Local Social”.
Unfortunately we are seeing much the opposite with the “unbundling of services” and ancillary pricing schemes in the commercial airline sector.  Airlines like Ryan Air will now charge a “check in fee”
Yes, that is a fee to pay the fee….and, if you refuse, they refuse boarding.    Instead, they should be packaging the fares with other services and selling the door-to-door cost.  
The more the industry trends toward ancillary pricing, the greater opportunity to polarize in the other direction. 

Think globally act locally…or is it think locally and act globally? 

Global Social and Local Social each have a different focus, different vetting mechanisms, different advantages and often disadvantages.  Each has different rules of engagement, different social expectations, and different long term / short term memory standards.  Each has a different cadence, stress valves, and damage control systems. The more you look at them, the more different they are.

They will diverge, then converge. 

Neither can be in focus at the same time – they can only be contrasted. Seeing the forest and the trees together effectively encrypts data, causes misinterpretation of important features, and loses track of causation. Ironically, clarity is most often achieved by old school face-to-face encounters.  That’s no secret.
Value is stored, shared, and exchanged by people in close proximity to each other and therefore a great amount of value can be created through the facilitation of strategic face-to-face encounters.  As simple as this may sound, nobody else is doing it because nobody else can.

The solution to any problem is entirely dependent on how the problem is defined. Likewise, redefining the problem, exposes huge opportunities for new solutions.

In Fact, a great deal of innovation arises not from a clever solution, but from a clever new definition of a problem.

For example, “build a better mouse trap” has entirely different outcome when one simply changes the definition of the word “trap”.

Manufacturing Problems.

Commercial Air Transportation, for example, was once lauded as a “Time Machine” because airplanes could carry a person into “a future”  that was otherwise impossible to emerge in, or to a “past” that would never have been witnessed by any other means.

However, solving this problem created many more problems such as runways, infrastructure, car parking, noise, oxygen, crashing, etc.  Diligently, we went about solving those problems as well.  Unfortunately, solving each of those problems created a host of new problems. Today we’re down to solving the 3.0 ounce of toothpaste rule and the flammable underwear problem.

At some point we need to ask if we are manufacturing problems with every new solution.  At what point is innovation taking us backwards? How prevalent is this human trait and does it have anything to do with the financial deficit?

Redefine the Problem

One of the greatest opportunities of Social Media (which is rarely cited by the experts) is the opportunity to redefine problems in the context of social media.  Using our airline example, we know that  commercial aviation arose from WWII as a response for bringing troops to static battle fields with such dynamic machines as the DC3. This worked great after the war too!

Today we still treat people as static and airplanes as dynamic.  Suppose we were to redefine the problem so that people are dynamic and the airplane is static?

Think about it, people go about their life with work, family, and friends.  Then they hop into a long aluminum tube, tie themselves down and sit there doing nothing.  After a few hours, they emerge from the tube to go about their life, work, family, and friends. The aluminum tube is static, not dynamic – it’s a time machine, remember?

The opportunity, therefore, is for people to self-aggregate using social media around locations, schedules, and events related to life, work, family, and friends.   The market could then supply the correct size aluminum tube to meet the need of the community. After all, wouldn’t it be easier to move one airplane to meet the ‘market of many’ rather than trying to move the ‘market of many’ to meet one airplane?

This may sound trivial now, but don’t underestimate the creativity of social entrepreneurs to build a better problem to solve.

The Next Economic Paradigm is a very simple idea yet the overwhelming majority of people have absolutely no idea what we’re talking about.  The strangest part of this work is the knowledge that eventually this will become completely obvious to everyone and the transformation, from beginning to end, will take a very short period of time.

My greatest curiosity is imagining when and how this moment will arrive.

I recently saw the latest Star Trek re-boot where an old Dr. Spock encountered the exiled young Space Propulsions Engineer named Montgomery Scott who had been convicted of attempting a mash-up between warp drive and atomic particle transporting with the commander’s pet schnauzer – where the term “mash-up” was implied to be quite literal.

Um,…the dog wags the tail.

The epiphany came when the older Spock suggested that Scotty’s approach was backward.  Instead of assuming that Space was stationary and the spacecraft was moving, Scotty should assume that the Space is moving and the spacecraft is stationary.

In one fell swoop, all the calculations finally made sense.  A good theory became practical.  All those nasty side effects – like bringing the schnauzer atoms back together – were no longer a problem.  Lo and behold, the Federation was saved.

Of course everyone knows what warp drive is and what transporters do, yet the science involved with their actual construction of these devices remains intensely complex.  The same can be said for our financial system. Everyone knows how to buy a can of tuna fish, but the actual formulation of that transaction is intensely complex.

We have developed a vast set of processes, techniques, and infrastructure around the basic idea that markets are dynamic.  Everyone knows that markets change and move and they behave in many strange ways in response to price inputs, scarcity, surplus, legislation and ideology.

Meanwhile, people are defined by what they consume – like red dots and blue dots on a political district chart, demographic data points, owner/renter, winner/loser, jobbed /not jobbed, young /old, first class/coach, etc.

And that is just the way it is … and the only way it can be.

Now suppose Dr. Spock was to beam down and suggest that markets are static and people are dynamic.  Imagine everyone staring at the can of tuna just sitting there, lonely, dusty and static, doing absolutely nothing except being a can of tuna on a stationary shelf, in an inanimate “market”.

The epiphany is that human knowledge assets are completely and irrevocably tangible in every way, shape, and form. Humans allocate and trade social capital, creative capital, and intellectual capital with each other in infinite ways, sometimes resulting in a can of tuna in a market.

All knowledge assets are tangible in the right exchange system.

I wonder what they will call it?

When you go into a store to buy anything, the rational person will always compare the quality of the object against the price of the object versus any alternative products or markets.

When you buy a home, the property is characterized by descriptions for “quality” (construction, neighborhood, schools) and a series of  ”quantities” (number of bedrooms, square footage, price)

When you cross the road, you look both directions in order to assess the quantity and the quality of the traffic that may or may not kill you.  Are the traffic slow moving pedestrians or are they fast moving trucks?

When a bank makes a loan, they “quantify”  all of your valuable things like your home, cars, 401K, and personal income and they use the credit score to measure the quality of your finances (debts, credit pulls, past history, bankruptcies, etc).

Supply and demand cannot, absolutely cannot, be determined by any other means other than by measurements of quantity and quality.

In fact, economics is the science of incentives where the fundamental graph is the supply and demand curve.  Both supply and demand behave according to inputs of quality and quantity, specifically price and availability.  Supply and demand for anything absolutely cannot be determined by any other means than by coordinates of quantity and quality.

Investors manage risk.

Risk is an asset, if it weren’t, insurance companies would not exist.  There are three things that an investor must know in order to manage risk.  1.  They MUST be able to identify their exposure to peril.  2.  They MUST be able to estimate the probability that the peril will or will not impact them.  3.  They MUST be able to determine the cost of the consequences in the event that the peril happens.

Again, within the definition of risk – to which ALL INVESTMENT RESPOND, are the characteristics of an asset; what is the quantity (1) and (3) and what is the quality (2) of the peril.  If the investor does not CLEARLY SEE these three positions, they will not invest. Period.

This is what drives successful markets and what kills unsuccessful markets.

To ignore the fact that all rational human behavior, intentions, decisions, reactions, conversations, relationships, education, ideology and every other state of human consciousness in a market, corporation, community, family, or social network ARE NOT characterized in the form of a quantity and a quality, is frankly, ignorant to ones market, irresponsible to one’s community, and incompetent to one’s profession.

Yet so many people do not see themselves as an asset.  Maybe someone should give people permission.

In yesterday’s Conversational Currency, our good friend and provocative thinker, Dan Robles, shares some powerful insights as to how Social Media can be used to allow people in large urban areas to share the cost of big-ticket items they don’t need regularly, specifically cars.  The ZipCar company he cites is a great illustration of how this can work.  Now, let’s stretch our minds a bit and put that concept into a private aviation setting.  Aircraft used on the ZipCar model really is using Social Power by the Hour.

Social Media Power By The Hour

Making human knowledge and intentions tangible in a market place opens up the possibility of a whole new class of business plans.  We call this Social Power by the Hour.

A Social Trifecta

1. Obviously, Social Media is powerful.

2. Fractional ownership or rental of assets is an emerging trend in our environmentally, geographically, and monetarily constrained economy.

3.Vendor Relationship Management (Doc Searles) promises to change the shape of traditional advertising in the future.

What if we combined all three?

ZipCar is an excellent example of the fractional membership for automobile transportation. There are many advantages but also huge drawbacks. $7.00 per hour is a lot to add to a casual lunch at a sidewalk café or any social experience.   Then there are all the lost options like the one-way-trip, guaranteed availability, all those rules and regulations.  So, it’s pay now or pay later.

Social memberships

What if your friends in the social network also had ZipCar memberships and the scheduling were interchangeable?  Suppose you could find a ZipCar anywhere and park one anywhere?

Now, enter the Vendor of goods and service. What if the Vendor were to subsidize the cost of the ZipCar to bring 4 people into the restaurant, club, or event?  What if amusement parks, zoos and art exhibitions helped pay for full car-loads of friends to drive themselves to events?

The Vetting Mechanism:

What if the real social value of the ZipCar could be compared to car ownership for each intended trip?  How would this influence your decision to drive, plan, or combine events into your user experience?  What if Vendors could influence that cost to drive incentives?

Power By The Hour Game

The Above schematic is What I’ll Call the Social Media Power by the Hour Game. Everyone is part of the same social network and can talk to each other.  Each Box represents a player that can influence the cost of the power by the hour. The True Value Calculator keeps score by comparing each transaction value to the equivalent car-ownership or public transportation value.

Set your filters and wait for the proposition…

Instead of scheduling, everyone (including passengers, vendors, social network) start by setting a bunch of filters that represent their approximate intentions.  The system compares the intentions with ZipCar locations and compares it to the True Value Calculator.  When a suitable transaction is in play, all the players are notified.

Once the game starts and enough people play, statistically, there should be ZipCars distributed proportionally around the city and all vendors will be managing their marketing campaign with 100% ROI on their impressions.  The system will become a self optimizing money game.

A fully convertible currency

At first, this may seem like an application to sell ZipCar memberships, but actually, it is selling odds and entrepreneurs are placing bets.  The ZipCar is simply a mechanical device that converts social currency into money.

A few Scenarios:

Scenario 1: When a vendor notices a group of friends going to the mall, they can pay for part of the ZipCar with a lunch coupon.

Scenario 2: Amusement park or event promoter can see when a family has no plans and can offer a free ZipCar to them

Scenario 3:  The bigger your social network, the cheaper it becomes for you to drive a car

Scenario 4: Vendors can bid for the ZipCar audience with Packages of discounts, coupons and also earn impressions and trust.

Scenario 5: Friends can see what other friends are doing and can jump in the same ZipCar

Scenario 6: ZipCars can be parked densely at events since you will not necessarily leave in the same car that you came in.

Scenario 7: As soon as you park, the zip car becomes available for someone else.  As soon as you need one, there is a high probability one is parked close by.

Scenario 6: ZipCar options can be traded like currency to buy things on, say, Craigslist

And many many many more……..

End result: The bigger your social network, the cheaper your Power By the Hour.  The bigger the social network, the more effective WOM marketing becomes.  The bigger the social network, the more options are available to users.   The greater the social network, the more SOCIAL VALUE a ZipCar membership will have in comparison to independent car ownership. The bigger the social network, the more social currency can trade hands as the Dollar fails.

One of the misconceptions in airline traffic markets that continues to confound carriers is a carry-over from the highway traffic engineering profession.  The “water flow theory” states that traffic is like water, if you dam up one thoroughfare, traffic will spill over into neighboring streets.  This is not actually what happens with human behavior, yet the theory persists.

So commercial carriers still think that if they constrain supply, demand will increase and people will pay more.  It is equally wrong to assume that  constraints in the commercial aviation industry will translate into a proportional spillover into private aviation.  This is likely not going to be the case either.

Furthermore, the absence of a commercial aviation presence does not automatically translate into a growth opportunity for private aviation any more than the absence of a automobile thoroughfare leads to a growth opportunity for motorcycles.

Instead, we look to the economic growth engines as found in dynamic communities surrounding New York City, San Francisco, Nashville, Austin, Los Angeles, and greater Boston areas.  Each is socially integrated by a combination of social capital, creative capital, and intellectual capital developed independent of a commercial aviation hub, not necessarily as a result of it.

Our suspicion is that the relationship between Private Aviation services and its potential market is tied closer to the organic integration of diverse communities rather than random flows of traffic responding to commercial aviation problems.

The argument that traffic will be diverted from Commercial Aviation to Private Aviation is still valid but for reasons that we may not expect.  Private aviation is perfectly scaled to strategically bring into contact social, creative, and intellectual capital assets from diverse communities such as NYC, Nashville, Austin, etc.  This is a subtle but profound difference.

Likewise, the highest value economic benefit does not come from random interactions; rather, it comes from highly targeted and strategic combinations of factors that produce economic growth – then they are allowed to interact randomly to induce innovation.

This same objective is the mantra for Brand managers, Social Media Gurus, Economic Development Agencies, Technical Conferences Organizers, Recreation Industries, and Innovation enterprises, in fact, the ideal private aviation customers.

The degree to which the private Aviation Industry can enable strategic high-value interactions is the degree to which the ‘interaction market’ will flow to the lift services that they provide.

Aviation supports a role in society that is analogous to the Internet itself. While the hard work gets done at the points on the ground, Aviation provides the diversity of ideas that can congregate.

Sure, Twitter, Facebook, and Linked in are great for broadcasting across the globe, but nothing can happen until the rubber meets the tarmac. Emerging trends in the Last Mile of Social Media portend opportunities for Private Aviation.

The following video describes how the components of the next economic paradigm must act locally, but share globally. For anyone wondering what to do next or where the great opportunities are, think about building out the Last mile of Social Media.

In my 19 January article, I argued that automobiles are economically more efficient than buses because they allow for more options in the quality of interactions that a passenger can choose as opposed to a scheduled service route alternative.

On the Contrary

In this article, I will argue the opposite point that people isolated in cars decreases the quantity of interactions that can often expose opportunities and more options.  Therefore, by eliminating these random interactions, the communities that support their social needs are in fact weakened.

Ironically, the point of contradicting myself is to validate the strengths and uncover the weaknesses of a business strategy for the Private Aviation Community.

For example:

We can validate that idea that highly-optioned, point-to-point travel is a key advantage of Private Aviation.  We also notice the curious absence of  the “community” of our clients in our calculus.   The assumption is that community is static whereas aviation is dynamic.

The paradigm shift is that aviation is static and community is dynamic

Jane Jacobs wrote extensively on the three following pillars of community:

1. Communities provide the resources that families cannot provide for themselves.

2. Communities consist of convenient and responsive commercial transactions.

3. Communities capture the speaking relationships among neighbors, acquaintances, and friends.

Strategy Revisions:

The strategic opportunity for Private Aviation is to look deep into communities that we serve.  What resources can Private Aviation provide that families cannot provide for themselves? How can Private Aviation make all commercial transactions more convenient and responsive? Finally, how can Private Aviation empower the speaking relationships among neighbors, acquaintances, and friends?

Expanding the market for Private Aviation may be as simple as expanding the definition of Aviation Community far beyond where the competition is contracting theirs.

The commercial aviation industry in the United States, as a whole, experienced a net loss in revenue in 2008. The key metric to watch is the Revenue Per Mile (RPM) since the predictable behavior of the commercial airlines, individually and as an industry, will largely be in response to RPM.

Revenue Per Mile may be impacted by internal efficiency, modernization, and technological change. However, RPM may also be influenced by shifting cost back to the passenger in the form of lost amenities.

For the purpose of this analysis, we’ll call that shift a social cost denominated as a social currency. For example, charging extra for that oversized bag does not move from the loss to profit column of the accounting statement; rather, it is simply shifted to a social burden column which will manifest in social media as a future public relations nightmare, a poor review in a social network, loss of loyalty and goodwill, or learned travel behaviors such as denying the carrier of extra revenue by not carrying that extra bag.

At first, social costs will act as a liability against the offending carrier (such as the five hour tarmac tours). Over time, as tacit collusion among the carriers unfolds, the social currency liability shifts to the industry as a whole where the aggregate decision is to simply not travel, to bundle travel events, gang travel legs, or choose alternate modes of transportation.

Few people realize that Social Media itself is a competitor to commercial air travel.  Today, groups of people can integrate and coordinate more tightly, ultimately reducing the need to travel or organizing their travel more efficiently.  Meanwhile, business travelers are adopting a host of technologies that keeps them informed and connected virtually.

The commercial airline response to financial strain may, in fact, lead passengers to alternate modes of transportation; physical and virtual.

While commercial and private aviation is reacting to RPM denominated in dollars, the customers are responding to a social currency.  Private aviation has accurately identified the burdens imposed by the commercial airlines industry to distinguish itself as a viable alternative.  Now, the challenge is to express this as a social currency denominated asset prior to converting back to dollars denominated ticket price, not after.