Behavioral change deals

Patrick Boucousis posted a great comment last month, which stimulated this posting, so thanks for his insightful comments. Patrick said “Many of the new Apps will enable and in fact require fundamental behavioral change in how people work. The business (read investment) potential of these Apps won't be THAT obvious up front ... just like Facebook wasn't before it was invented.”

So, at the risk of being too much of a hardware guy, and so 90s, or is it 00s ... I still don’t get the value of Facebook even though it is invented ;-) Actually was it invented, or something else?

Fundamental change is the stuff than Venture dreams are made of--think telecom deregulation and the optical communications bubble that resulted. Or for that matter, the crazy idea of a husband and wife from Stanford who built the first Cisco router.

Behavioral change can also be a great value creator, but beware that fundamental change in how people behave is hard to predict and very difficult to influence--being creatures of habit we don’t change that readily and it's not a problem money can solve (see earlier posting on throwing $ to try and create a market).

The fundamental change of shopping on the Internet, which some of us adopted very rapidly (because we hate shopping and love the ability of the Internet to give us access to all information needed to make an educated purchase at the best price, without a sales person getting in the way) took a lot longer for mass market adoption that I would ever have thought. Remember that first wave of Webvan? Safeway came in a few years later (with the Webvan assets) and slowly built out a small niche in online groceries. I believe part of the problem here is that a lot of people, really enjoy the shopping experience--it's social, and interactive in a way that the Internet isn’t ... yet.

Mobile payments are another area that's experiencing the 3rd or 4th re-try. This should be a great space, but there are a lot of the same issues that seem to come up every time we think this area is set to explode. Security is my biggest, simply because no one is incented to fix the problem, no one wants to own the problem, and no one wants to admit there is a problem. But beyond that, just the behavioral change is tricky. It works with a Starbucks card giving you a virtual bar code on your phone (and United letting you fly with one too, but don’t forget to charge your phone….). It's definitely quicker, you can order and pay in 3 seconds, instead of the 5 seconds it takes to pull out your credit card … maybe this matters? The phone company has been the other big problem, with customer service about as good as the IRS ... they aren’t well equipped to handle a bunch of micro-payments, and the additional customer service it requires.

The other classic behavioral change question is Cleantech--whether it's remembering to turn off the light, or pay >10x for a CFL (compact fluorescent light) that is five times more efficient, or get used to an electric car that needs to be recharged every 200 miles.

Suddenly something that was cheap and abundant is now getting expensive and politically important. A lot of money has been bet on various forms of clean energy in a way that for me is reminiscent of the telco bubble, albeit with far more resilient market pull. Will the auto industry shift to battery replacement at the gas station? Will someone invent capacitance gel that can exchange vast amounts of energy quickly like we do currently with gasoline? Will people adjust to change their cars at home each night, and perhaps at work during the day use them to feed energy into the grid?

Something that sobers me when thinking about these changes: I am told that its easy to drive to and from work and charge the car each night – and electric vehicles have promising specs to meet that simple need – so it just takes a small change to accommodate – right? But, I am told by others, that if you run the A/C or heat in an electric car, you may only get 30-40 miles ... so perhaps not such an easy accommodation after all. It's funny, because having grown up in Australia there was little A/C available and I’ve never really adjusted to it or broken from just winding down the window when its hot, or wearing a sweater when its cold :-)