One thing people hate to waste is time. That’s a foundation of what has come to be called “the experience economy,” a term that came from the book by Jim Gilmore and Joseph Pine.
Another foundation is that wasting time equates to wasting other resources — by producing more stuff than we need. When he thinks What the Future, Gilmore hopes we can incentivize waste reduction by charging for time, not goods.
Matt Carmichael: You published “The Experience Economy” in 1999. What did that phrase mean then?
Jim Gilmore: We coined a term and gave a voice to what was happening but did not yet have a term. The big argument in the book is that experiences are a distinct economic offering that you can put a price tag on. That has long been established in terms of movies and sporting events and going to a concert. But when you put a price tag on spending time, that was different. Time is the currency of experiences. There is the time we’ll save, by making something easier or more convenient — that’s the direction services are going in. But then there’s time well spent — by making something more engaging and thus memorable.
Carmichael: What’s changed during the pandemic?
Gilmore: Every “time enterprise” faces the same No. 1 competitor, namely the smartphone. People will leave you and spend time elsewhere. With the tap of the screen, they’re gone. What we see now is a second competitor, which is basically staying home. You’re competing with “Why go at all?” For free economies to remain prosperous, we have to shift to experiences, but we’ve sort of slid backward since the pandemic. 2016 was the first year where Americans spent more money in restaurants and bars than they did at grocery stores. That is a milestone event that more money was spent on food service and dining experiences than on commodities. We’ve since snapped back to commodities and goods.
Carmichael: Will we get back to “normal” in time?
Gilmore: We think the economy will not bounce back in aggregate until people start paying for time again.
Carmichael: Do you think that COVID-19 will accelerate a shift to virtual experiences?
Gilmore: Man, I hope not. I thought before all this happened that the digital life was intruding on the physical realm. I suspect in some cases we’ll see a move more to virtual, like in medicine. But I also think we’ll see a hunger for time well spent in non-digital, non-virtual realms.
Carmichael: Can there be a trade-off between experiences and “stuff”?
Gilmore: Many goods are merely props for the time you spend. The flat screen is the sporting event you watch. As Peter Drucker once said, your customers are always buying something other than what you think you’re selling to them. My wife and I want to get a fire pit. Why? Because we want to spend time around the fire.
Carmichael: And how can that lead to less waste?
Gilmore: Let’s assume less waste is desirable by most people. One way to get that is mass customization versus mass production. For the experience economy, we have a metric we call customer sacrifice versus satisfaction. Satisfaction is meeting expectations. You expect something, did you get it? OK, I’m satisfied. Sacrifice, we define as the gap between what people settle for versus what they want. So mass customization, which is the ability to produce individualized output efficiently, can reduce sacrifice. It is a way of only using the resources necessary. And selfishly, companies will save money.
Carmichael: It’s about indirect benefits?
Gilmore: It reduces having extra inventory. Any item that goes on sale, means that at full price, nobody wanted it. It’s, “Can we pay you enough money for you to take something you really don’t want?” That’s just wasteful. Just responding to actual orders is without a doubt the least wasteful process.
Carmichael: Let’s talk more about this idea of time as a waste-reducer and how that can apply to physical waste, too.
Gilmore: Most clothes in the closet are never or rarely worn. If you have a monthly subscription to your clothes, you’re charging for time: for wardrobe management. Or think about printers. If my printer breaks, I go to Staples. Do I have any confidence that spending more money is going to make it last any longer? No. So I buy an even cheaper model the next time by some throwaway, disposable company, whereas if I was paying an annual fee for my printing and all my equipment, then it would behoove them to actually use less resources.
Carmichael: How do we tie this all together?
Gilmore: If you can customize, you can charge people for time. I told Ford when the book came out: “Look, the day will come when you’ll make more money producing fewer cars because if you can charge only for the time people drive, then you only have to build the fewest cars necessary to move people around. You’ll make more money.”
Carmichael: So we need to charge for time, not stuff?
Gilmore: Yes, we have to move away from charging for physical things and services, because it’s inherently wasteful, versus charging for time, which is what people most value. People use goods, most of which they have to purchase. And they contract for services because they want to enjoy their time. Well, let’s charge for that time. In the process, companies make more money by using less resources of the Earth. I tell people: Customize, charge for time and get rid of the production of extra stuff. As a means of differentiating and growing your business, you happen to get less waste almost as a byproduct.