BINGE-LIVING
Part III. Simplifying the Decision-Making Process of Skipping Town
Gaetano Crupi is the Co-founder and CEO of Cabin Technologies, the tech-enabled long-distance mobility company solving intercity travel. In this four-part series, he presents an overview of how technology will affect intercity transportation and how we live.
TL;DR Long-distance ground mobility allows for end-to-end control of the user experience and “1-Click” booking behavior. This reduction in cognitive decision-making cost coupled with the lower ticket and opportunity costs of large-format A-EV will lead to a seismic increase in regional travel frequency.
SERIES RECAP
In the previous two posts, I examined how large-format autonomous electric vehicles (A-EVs) significantly decrease both long-distance mobility ticket cost and your opportunity cost of travel time. These cost reductions will lead to both an increase in travel frequency and travel distances.
However, as we’ve seen with other technology disrupters, irreversibly changing consumer behavior means making purchasing decisions so easy that they become second nature.
THE WARES
Technological advances in hardware and software feed on each other.
Increases in memory and processing power allowed affordable personal computers in the home. User-centric, visual software made those personal computers usable to all household members. Increased bandwidth allowed information to be transmitted between all those computers followed by internet protocols that made all that information accessible. Smartphones put the internet in the palm of your hand and then… Uber, Lyft, Jump, Bird, etc. I agree with the notion that ‘software eats the world.’ However, I also believe that hardware makes more world to eat.
When technology is able to make something both less expensive and better, it changes human behavior. In the first two parts of this series, I covered how Large Format Autonomous Electric Vehicles (A-EV) would first lower the ticket cost and then the opportunity cost of travel, allowing for both more travel frequency and longer travel distances. This value shift is even more impactful for regional travel than other verticals because travel is a value-based decision. A-EV fundamentally changes the cost:quality curve of long-distance mobility. This shift is achieved equally through leaps in hardware and software.
However, the consumer relationship to long-distance mobility will largely be a software relationship; a digital behavior.
JUST ONE MORE
A few months ago I was in Miami with a colleague for a few meetings. I arrived late to meet her looking a little rough for our 9:30 appointment. The previous night wasn’t a bender, it was a binger. I got sucked into ‘The Umbrella Academy’ on Netflix and went to bed at four in the morning for no good reason after telling myself five consecutive times that the next episode would be the last.
Over 90% of Netflix subscribers have binge-watched a season of a show and the average binge lasts for 3 days. Time Magazine attributes the automatic “play next” feature as a contributing factor for our inability to turn off at 4 am on a Tuesday. “Just one more” I rationalized, knowing full well that I was lying to myself.
I was an early adopter of Netflix when it was a DVDs-in-the-mail business. At the time, the initial value prop for me was the catalogue. If I really wanted to watch a new release, I still went to Blockbuster to get it right away. However, the online cueing feature on Netflix, with all the obscure arthouse and foreign films, appealed to my pseudo-cinephile phase in my mid 20s. As soon as that red envelope arrived, I’d watch all the movies and send them back. A few days later, three more would arrive. On the surface, it seemed like I was waiting longer to watch movies, but the reality was that I was also watching an order of magnitude more content.
Speed is not the same as convenience (nor comfort).
Netflix’s subscription model versus rental-per-unit model lowered the marginal cost of watching more content. Mail delivery lowered my opportunity cost of going out of my way to Blockbuster (even though I didn’t realize it at the time). When streaming arrived, the opportunity cost went down to zero; so did Blockbuster.
Binge-watching is not a phenomenon reserved for video consumption. I would argue that online consumer behavior has been molded to a similar level of instantaneous consumption decisions across industries through a combination of lower prices (compared to retail) and lower opportunity cost (shopping, researching, delivery at the convenience of your home)
Beyond pricing and convenience, online businesses are also really good at removing friction by vertically integrating information. From your credit cards to your preferences and addresses, online companies have spent the last twenty years chipping away at the friction between “I Want” and “I Have.” A prime example of this change to consumption behavior is Amazon.
JUST “1-CLICK”
Amazon has contracted my perceived distance between “Want” and “Have” to the point that my decision-making process is often imperceptible; it’s almost instinctual. I forget I order things. The box shows up, I open it, and I’m pleasantly surprised — ‘Oh, yeah! I did order that.” This change to my consumption behavior did not happen overnight. The history of Amazon is a history of chipping away at decision-making cost. How did they change my behavior to the point that I just buy stuff as soon as I want something?
DECREASING COST
Amazon has always pursued aggressive pricing. Its entire business model revolves around two advantages versus traditional brick and mortar retailers (1) inventory and (2) lower overhead. Online retailers don’t have sales associates, storefronts, seasonal display changes, etc. They can sell the same product for a lower price with the same profit. Online retailers can also keep centralized inventory. That means they can have more SKUs and lower levels of excess inventory for each of those SKUs.
All this means that from my perspective as a consumer, I believe that they have anything I want AND that all those things will be at the lowest competitive price. Amazon doesn’t always have the lowest price. They are constantly optimizing their pricing models to extract the most value. Regardless, they have conditioned me to expect the lowest price without thinking about it (or researching price).
DECREASING OPPORTUNITY COST
There is still one structural advantage to brick-and-mortar retailers: I can go get something now and Amazon has to ship. Amazon’s roadmap is to take that advantage away. From Amazon Prime Now to their new grocery store concepts to drones, Amazon won the cognitive cost battle and now they want to win the cognitive convenience war.
Amazon has spent the last two decades trying to eliminate shipping fees and shipping time from our purchasing decision. One of the turning points of my Amazon behavior was when they took away shipping friction, first with free shipping in 2002 and then with Prime in 2005. Once I had the sunk-cost of a shipping membership, my order frequency exploded. Every time Amazon figures out a more convenient way to get me something (figures out a way to decrease my opportunity cost) I increase my purchase frequency.
A key observation here is that opportunity cost is not the same as delivery time. Getting in your car and going to Walmart to pick up a roll of toilet paper takes less time. Having to get into your car to get a roll of toilet paper instead of waiting for it to arrive at your door wastes your time.
DECREASING DECISION-MAKING COST
So far we’ve covered how Amazon’s model decreases cost (or creates the perception of lowest price) as well as decreases opportunity cost. When I want something, I have been conditioned to know where to go that will (a) have what I want, (b) at the best price, and (c) with no effort on my part to get it. Note that most of my cognitive consumption process has already happened before I type “amazon.com” into my browser. The key piece to this cognitive conditioning is how Amazon architected check-out, or “buy” decisions.
On September 28, 1999 Amazon patented “1-Click” checkout. By keeping my addresses, credit cards and other preferences, they contracted the checkout flow to one button. Whenever I wanted something, I only had to click one button. The mental cost of making a decision was a simple click. Anything I wanted was 1 click away. Etc. etc.
1-Click Checkout did not single-handedly decrease cognitive load. The majority of my decisions happened before I even got to the site. The conditioning of thinking that clicking one button would get me what I wanted is powerful.
I would argue that this digital decision behavior is the real magic of Amazon. The prior two innovations around cost and opportunity cost were accessible prior to the internet. If you remember the Sears catalogue or L.L. Bean catalogue, they benefited from centralized inventory management and could have pursued a zero retail footprint strategy. They also delivered through the mail and could’ve innovated around shipping. What they didn’t have is the internet — they didn’t have instantaneous information flow.
Digital consumer experiences have uniquely decreased cognitive cost by vertically integrating information. Amazon reduced information time to zero with 1-Click Checkout and has been trying to mold the physical world to match that level of instantaneous consumption. This 1-click mentality has transformed purchasing intent into purchasing decisions.
In the digital age, the distance between “want” and “buy” has never been shorter. You can even argue that the digital age is transforming “wants” into “needs.” Can you imagine living without next-day delivery?
TAKE A COGNITIVE LOAD OFF
Below is a breakdown of System 1 versus System 2 decision-making. Digital decisions have become so truncated, they are effortless, gut decisions. I want, I buy. Online businesses have transformed purchasing from a System 2 decision into a fast, System 1 decision.
What does this have to do with long-distance mobility?
The current cognitive decision-making cost of regional travel is enormous because there is no vertical integration of information. It is a System 2 decision process, deliberate and serial. Your taxi company does not communicate with your airline or hotel or the airport. Making all these choices and comparisons is slow and effort-filled. Imagine if Amazon’s check-out flow bounced you from Amazon to UPS back to Amazon then to Paypal and each time you had to input information. You would be making System 2 decisions and buying less stuff.
People already have trouble rationalizing opportunity cost in System 2 decisions. Imagine the trouble they have rationalizing the cost of rationalizing costs. Decision fatigue is real. Over the last two decades various studies have demonstrated how making simple choices depletes the brain of cognitive function. Below is a summary from Scientific American:
“Why is making a determination so taxing? Evidence implicates two important components: commitment and tradeoff resolution. The first is predicated on the notion that committing to a given course requires switching from a state of deliberation to one of implementation. In other words, you have to make a transition from thinking about options to actually following through on a decision. This switch, according to Vohs, requires executive resources. In a parallel investigation, Yale University professor Nathan Novemsky and his colleagues suggest that the mere act of resolving tradeoffs may be depleting. For example, in one study, the scientists show that people who had to rate the attractiveness of different options were much less depleted than those who had to actually make choices between the very same options.”
There is a largely held belief that humans don’t make good choices beyond 7 alternatives (plus or minus 2). Recent research suggests that this is closer to 3–4 versus 5–9. Sheena Iyengar in “The Art of Choosing” demonstrates that when people have too many choices, they choose nothing at all. People are also happier with their decision when they choose from a limited number of choices. Hotel Tonight only shows a few choices at a time for a reason.
Going back to our Netflix example, the “Play Next” feature eliminates choices, making it very easy (too easy) to keep watching. In direct contrast, when you have to select something to watch on Netflix from scratch, you spend 15 minutes looking and then give up — an example of decision fatigue that leads to abandonment.
Above is a recent example of my decision process to go to Dallas. I venture that it was unconsciously exhausting to book the trip (one of the reasons I procrastinated to purchase the tickets and book a hotel to the last minute — which cost me money). Making regional travel decision requires an enormous amount of decisions even though it is a commodity!
HARDWARE AS SOFTWARE
Let’s take the example of urban mobility. When Uber originally launched with what is now called Uber Black, the cost was higher than a taxi BUT the convenience was much higher. Uber Black reduced the opportunity cost of having your own car because you could get one without having to waste time hoping to find a taxi. However, prior to Uber, you could’ve called a variety of car services. The reduction in cognitive decision-cost was the innovation. The app already had all your payment information AND location information. They made urban transportation a “1-click” consumption behavior.
When UberX (and Lyft) launched, ride-sharing crossed the cost threshold by using untapped car supply to offer “cheaper than taxi” service. Once cost, opportunity cost and decision-making cognitive cost were all reduced, frequency exploded. I want to re-emphasize that decreasing total cognitive cost includes all three: (1) decreasing perception of price as well as (2) opportunity cost as well as (3) decision-making cost.
Uber and Lyft currently have an asset-light model by “renting” vehicles and operating through “contractors,” but the service you are purchasing is getting into an automobile and moving from point A to point B. This is a transportation product. Your relationship with these services is not a hardware relationship like the one you might have with your Toyota. It is a digital relationship. Digital relationships are fast and easy.
You also have a digital relationship with Amazon. When you think of buying something you go to a website and click buttons. Behind those zeros and ones is a massive logistics company operating in the physical world to bring you what you want complete with trucks, airplanes and robots.
Large format autonomous vehicles will transform long-distance mobility into a digital relationship. These vehicles and cabins will be hardware marvels, a testament to human ingenuity: enormous, electric, autonomous, moving rooms that provide incredible comfort and productivity at prices we have never imagined.
When you want to go somewhere, you won’t think about all that technology. You’ll open an app on your phone and click buttons.
GROUND WINS 1-CLICK DESTINATION CHECKOUT
Everything I’ve covered so far is not new — it’s the power of the Information Age. We have transitioned our decision-making from the physical world into the digital world even when the experiences, services or goods remain in the physical world. There has even been a retranslation from the digital world back to the physical world. Square and Clover have taken all the wonderful optimizations of online checkout flows and translated them back to the physical world.
In the digital space we feel unconstrained by the physical world. We want the same seamless digital experience in the real world and have grown impatient with forms, lines, waiting, etc. This is all possible because of the vertical integration of information.
The internet revolution was an impatience revolution.
When Tom and I decided to tackle long-distance mobility in order to expand people’s living radius, we began examining fixed-track (Hyperloop) and air (eVTOL, electric airplanes) technology. We choose ground transportation not only because we thought we could reach a superior cost-to-quality ratio but also because ground transportation allowed us to (3) vertically integrate information by owning the entire experience and (4) have destination flexibility (I will cover destination flexibility in the last part of the series).
Ground transportation allows complete control of passenger information because unlike air or train, ground transportation can cover the last mile. Ground mobility doesn’t require a many-to-one-to-many bottleneck model. Ground transportation can control end-to-end experience and therefore streamline all information transfer.
If air and track-based models added ground, they could also vertically integrate information (if TSA played along). If United Airlines had an autonomous car fleet, they could integrate the last mile into their service. They would have all your account information and current location in order to send you a car to bring you to the airport. Maybe they check your bags into the trunk and scan your face and bags for Pre-Check. They could offer “1-click” destination consumption.
This is an important distinction: A-EV is not the innovation that allows 1-click destination consumption. A-EV ground vehicles allow for 1-click destination consumption because there is no hand-off of the customer between different services (taxi, airport, hotel, etc.) and therefore can vertically stack information to offer a seamless customer experience and contracted purchasing flow.
HIGH FREQUENCY DESTINATION CONSUMPTION
In the first part of this series I covered how large format A-EV will reduce the cost of intercity mobility. In the second part I covered how these moving rooms would also reduce the opportunity cost of long-distance transportation. We have now covered how ground mobility allows for complete control of the user experience and therefore the vertical integration of information and reduction of decision-making cost.
When Amazon was able to decrease these three costs, they became what they are today — responsible for 50% of online sales. When Netflix was able to decrease these three costs, they made binge-watching a common behavior.
Software will be as important to long-distance mobility as hardware and operations because the guest relationship will be primarily with an app.
Imagine you are bored on a Thursday night and instead of checking HBO Now you open your Cabin app on your phone and start scrolling through destinations. They have all your information and preferences and you are already primed to understand the value (low cost) and that you wouldn’t lose any productive time traveling (low opportunity cost). If you want to go practically anywhere in a 500 mile radius, all you need to do is click a button.
You’ve been to Tahoe three times already this year and just went to Palm Springs last weekend. You’ve never been to Ojai. You click “purchase” and put your phone away. The following evening you are finishing dinner with your friends and get a notification that your cabin will be departing in 30 minutes. You forgot you were traveling! You scramble out of the restaurant while apologizing to your friends. You board directly into your cabin five minutes before departure. We are on the cusp of binge-living.
UP NEXT
So far in the series, we have covered the supply-side effects of large-format A-EVs on long-distance mobility. Lower ticket costs, opportunity costs and decision-making costs all point to an increase in travel frequency. What about the demand-side of the equation?
Do people want to travel that often? If people do start “binge-living,” how will companies transition from meeting transportation needs to satisfying expanding destination demand? In the final part on the series we will review the impact of the experience economy on destination consumption.
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Sources: Emerald Iguana Inn, Time, CNN, Vox, Venture Beat, Tech Times, Krome Photos, Scientific American, Psychology Today, Smashing, UX Collective, IB, Ameet Ranadive, Cognitive costs of decision-making strategies: A resource demand decomposition analysis with a cognitive architecture, Fox News Image, Square Terminal Image
ABOUT GAETANO CRUPI: Obsessed with building teams and organizations, Gaetano currently serves as the CEO of Cabin. Previously, Gaetano was the COO of Betable and founder of Machina Pictures. Gaetano was nominated for a Grammy in 2013 for his work with Foster the People and also produced Beyonce’s “Move Your Body” video for Michelle Obama’s “Let’s Move!”project. Before becoming a producer, Gaetano was a consumer and retail investment banker at Goldman Sachs in New York. Gaetano is an alumni of Wharton and the Stanford Graduate School of Business. Having grown up in Brazil, Venezuela, Canada and United States, Gaetano speaks three languages fluently, and lives to explore.
