Social coordination can unlock new markets

In 2018, business-travel spending exceeded $1.4 trillion — and the pandemic erased almost all of it. Switching to video meetings saved Amazon alone $1 billion in 2020. And the smart money says it’s not all coming back: Bill Gates says business travel will shrink by 50%; Delta predicts 20%.

Less business travel makes business sense.

The puzzle

Why did it take a pandemic for companies to realize they were overspending on flights? This was a non-trivial expense — traditional economics suggests that if a firm could have optimized it, they would have. In fact, the opposite happened — they were so committed to flying, they spent more to justify their behavior. Companies spent millions in carbon offsets to make up for their behavior; in 2018 the market for voluntary offsets came close to $300M. Amazon pledged $10M.

Enter social coordination

Basically, companies needed to move to video meetings all at the same time. If just one company had done it solo, they’d have felt they were at a disadvantage. Cutting employee travel would’ve meant their people missed important conferences. Saying no to in-person sales or fundraising calls would’ve felt like a slight to the client. Switching to video was not something one company could do by itself — it needed to be a coordinated leap.

2020 and social coordination

This isn’t the only example of a behavior shift requiring social coordination. Pre-pandemic, asking to work remotely required some nerve; now it’s an accepted practice. In dating, hook-up culture didn’t prioritize open conversations; now talking freely about intimacy is more normal. Restaurants needed collective demand to actually build outdoor patios, or they would’ve been squashed (often by homeowners protecting neighborhood parking spots).

The implications?

Norms are changing. People now work out differently, cook differently, even make friends, and find lovers in new ways. Social coordination opens up new markets by inspiring new customer demand. In 2021, we’ll need to ask the question: How has social coordination changed the game — or, more appropriately, changed the norm?

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Kristen Berman

Thinking about Irrationality. Behavioral Scientist. Co-founder of Irrational Labs and Common Cents Lab.