Wasted Assets - August 2008

Recently, I saw a reference to a book entitled The High Cost of Free Parking by Donald Shoup.  I bought the book, which is lengthy, and started reading it.  One observation that prompted me to think about how we waste assets was his statement that cars are parked 95% of the time.  I thought about that comment, along with several other observations:

• Most people who work in dedicated offices are not in those offices most of the time.  They either travel, attending meetings outside the office or in another part of their office building, go to a cafeteria or restaurant for lunch, or are away on vacation or for holidays.  Yet we give them exclusive right to use that office when they are employed in a particular position.
• Most of our household possessions are similarly unused most of the time.  We buy expensive athletic equipment that occupies space in closets or unused rooms.  In fact, many people use only a few of their rooms in their home most of the time, and many people have homes they use only a portion of the time, and the very wealthy have multiple homes, each one of which is in use only at certain times.
• Much of our public utility capacity is built for peak or near-peak load, and is underutilized the rest of the time.

The challenges in addressing this wastage are to figure out why it exists and what workable solutions exist for it. Interestingly enough, the use of the Internet for both voice and data communications is an improvement on telecommunications that both reduces wastage and improves redundancy.  Historically, both voice and data were carried over dedicated lines intact from origin to destination.  The Internet introduced the idea of breaking apart voice and data transmission into packets which could travel over multiple paths and be re-assembled at the destination.  In essence, the Internet created a far more efficient use of resources than the traditional dedicated land-line.

• For each of the wastage areas I describe above, there are emerging solutions:
• For automobiles, there have always been public transportation, taxi, bicycle, pedestrian, and rental car alternatives.  However, a company called ZipCar  has introduced a new solution: a car that can be rented for a short trip, left in a parking lot, and picked up by another person for another flexible, short-duration rental, thereby keeping it continually in use.
  For office space, Cisco, among other companies, has introduced broad-based hoteling for the vast majority of its headquarters employees, and other companies, like Pitney Bowes, have used hoteling for contractors, field employees, and temporary workers.  Hoteling means that someone coming to the office occupies the first available office, not the same office every day.  Technology enables this to be non-disruptive, and the hoteling approach enables a business to provide space for a population that is far less than its total population on any given day.
• For other possessions, like athletic equipment, there are used equipment firms, and there are some rental facilities, but what is lacking is a ZipCar-like alternative which allows that equipment to be used for only a few hours for a very low price.

We need to think differently about assets.  We need to be less focused on owning and more focused on using.  We also need to recognize that a used asset may have enough value that we do not need to buy something new.  Finally, we need to dispose of what we do not need so that others can use it while it still has value.

Our society has a lot of capacity to reduce the cost of living by defining our needs more precisely.  I grew up in a working-class household in which my parents were experts at finding used items, re-using materials for other purposes, and taking something seemingly without value and finding a way to give it value.

The golf clubs I used when I was growing up were bought at a Salvation Army store and were so old that they had wooden shafts.  My first suit was given to me by a cousin who had torn a pant leg on the trousers.  My mother got the trouser re-woven and I wore the suit for years.  My parents used torn tee-shirts as cleaning rags, and used body lotions as mosquito repellants.  Vinegar was used to absorb cigarette smoke because we could not afford more expensive air cleaning systems at our home.

Today, the media is highlighting how desperate the lives of many people are, and they are right.  But we could do these individuals a great deal of good by giving them access to necessary goods and services in a less expensive way.  For many goods and services, this is a far better alternative than moving production and service operations offshore to create a lower-cost version of a new product.