Going, Going, Gone! e-commerce Erases More Than Paper Money

Imagine a meeting of Major League Baseball team owners as they collaborate to improve their financial results. You're in the room. A scrawl of operating statistics covers several flip charts. Alternatives ranging from increasing ticket prices to cutting fan perks are discussed. But at the end of the 10-hour meeting, one option prevails: beginning next season, the pitcher’s mound in every stadium will be moved a modest six inches closer to home plate.

Great excitement follows. Owners can take the results to the bank, and players and fans won’t even notice! How? The executives figure that the shorter distance will make it possible to play a full game in just under three hours, down from the current average of three and a half. They reason that six fewer inches of throwing distance cuts the decision time for a hitter to swing, resulting in more strikeouts. More strikeouts mean less playing time, and less playing time means shorter operating hours for stadiums. (There were about 33,000 strikeouts in 2008.)

Eyes light up as numbers are eagerly keyed into pro-forma spreadsheets on flickering laptop screens. The thirty-minute per game reduction will save millions of dollars of operating expenses for every team. Lower labor and utility costs! Faster fixed charge coverage for expensive stadiums! The savings will drop right to the bottom line!

If you think the boundary-changing idea sounds preposterous, think again. This principle behind this imaginary gambit isn’t fantasy in e-commerce. The difference is that the boundaries are abstract and the money is real—to those receiving it. Want proof? This year, banks are projected to earn $38.5 billion in overdraft charges by shifting a long-assumed boundary called “I accept the charges.” How? According to a recent editorial in The Washington Post (Overdrawn and Uninformed, 9/22/09): “. . . from time to time, you may have found yourself inadvertently making a debit card purchase that exceeds your remaining funds. Alas, the way you may have found out about the overdraft was a notice from your bank, days later, informing you that you owe a $30 service fee. The bank just automatically floated you a small loan and charged you for it without giving you a chance to accept or reject the offer.”

Missed the boundary change? Don’t worry. Thirty-eight and one-half billion dollars in 2009 overdraft fees suggests you’re not alone. The bank extracts money through a silent, virtual ka-ching, with binary 1’s and 0’s flowing to complete the seamless transaction, absent the faces of Jackson and Hamilton. And that’s just the point. Customers don’t attempt to intervene because the experience fails to excite the same area of the brain that real money does—a phenomena that author Jonah Lehrer describes in his book How We Decide. A small transaction-boundary shift yields a $38.5 billion reward—a sensational feat that now has the attention of Congress.

Elsewhere in e-commerce, changing abstract boundaries also keeps fiscal 1’s and 0’s moving from payer to vendor. Ever receive a charge on your credit-card statement for a "trial offer" you didn’t really want? It’s probably because you didn’t remember to “opt out” after you “opted in.” Where, exactly, was boundary for the transaction? It's clear as mud.

Opt in/opt out. It’s today’s tool of choice for e-commerce boundary changers. Remember Facebook's Beacon Debacle, in which a man purchased a diamond ring (for his wife?) from overstock.com, and 720 Facebook friends were informed about the transaction? As Christopher Caldwell wrote in The New York Times (“Intimate Shopping,” 12/23/07), “Facebook designed Beacon so that members would be able to “opt out” by clicking a pop-up window. But these windows were hard to see and disappeared very fast. If you weren’t quick on the draw, your purchases were broadcast to the world, or at least to your network . . . Privacy advocates urged that Beacon be made an “opt in” program, which members would have to explicitly consent to join . . . Facebook agreed to this approach. The Beacon fiasco gives a good outline of what future conflicts over the Internet will look like. Whether a system is opt-in or opt-out has enormous influence on how people use it.” No joke. And on how much revenue can be generated, as well.

Of course, boundary changing has as much to do with our (presumably) private information sold to others as with the flow of money. Did you “accept” the data-collection cookie that resides on your hard drive? Better check the Terms of Use. “Increasingly, there are no limits technologically as to what a company can do in terms of collecting information . . . and then selling it as a commodity to other providers,” said Representative Edward Markey in August, 2008.

These examples prove that dollars can be taken and lost in the blurry zone between asking for specific approval to complete a transaction, and simply assuming assent for things that formerly required it. Whether it’s baseball or banking, with scalability, a little boundary shift goes a long, long, way.