By Dale P. Leier, founder and CEO of the Lethbridge Educational Institute for Entrepreneurial Research  – December 26, 2021

Aristotle once stated that “true wealth lies not in the ownership of property, but in the right to use it.” This means an individual does not need to own property to benefit from it; it is enough to have the right to use over a certain period of time.

We have all heard so often “the only constant is change” it is natural to dismiss this notion as just a bit of popular sentiment that sounds good yet means almost nothing.  This would be a mistake.  Not only has the technological change continued unabated since the Industrial Revolution, the rate at which change continues to accelerate.  Driven by the never-ending quest for efficiency, exclusivity, and profits, nurtured by advances in bandwidth, processing, AI, quantum research, genetics, materials and more, things are getting very interesting.  Between the Large Hadron Collider and the James Webb Deep Space Telescope launched yesterday, we may be able to finally connect the infinitely small with the infinitely large. 

More important than the technological growth itself and the potential for improving standards of living around the world is the change taking place in the hearts and minds of young people.   Where the children of the twentieth century were affected by two world wars, The Great Depression, Viet Nam, the Cold War and more, they naturally seized on the opportunity to acquire material wealth.  To the Baby Boomers, like their forefathers, owning things was akin to personal security.  While wealth, power and status have always travelled well together, the improvements the Industrial and Information Ages resulting in the growth and comfort benefiting to the Middle Class quickly became the new norm.  Instead of just having a family car, having a personal car became the norm.  Instead of owning a modest 3-bedroom house, having a 2 or 3 car garage, a boat, travel trailer, motorcycle and a place in the suburbs quickly became the new normal.  Owing things was what it was all about.

Of course, everything comes at a price.  Capitalism saw a rapid increase in the standards of living for millions of people, especially in Western society but the improvements were not universally shared.   Fast forward to the 21^st century and advances such as the Internet, mobile devices and cheap data made it possible to see what was going on around the planet on near real-time.   Growth in developing countries such as China, India, Russia and nearby areas of Eastern Europe, South America, Southeast Asia and African created unprecedented demand for raw materials.   Meanwhile, economic growth became associated with global warming, air and water pollution and seismic social shifts.

Rapid technological change and the sense of immediacy this enabled has resulting in environmentalism being manifested in our institutional policies and sociological perspectives.   Sustainability and social justice are rapidly displacing materialism for its own sake as concerns for the future of our spherical miracle are rising to prominence in a way that has never been experienced before.  Previously, wealth-enabled materialism was equated with security and survival.  With the global population shooting past 7.0 billion towards 10, 12 or even 14 billion by the end of 2100 is giving rise to the notion for the first time that perhaps infinite growth is not achievable.  Certainly, being confined to the planet Earth makes this a plausible point for debate. 

The point of this paper is not to debate the morality of materialism. As material beings, our survival is tightly tied to our ability to meet our material needs.  Rather, the discussion is how the concerns over global wealth disparity seems to have been exacerbated by a system that has worked so well up to now.

Over the centuries we have evolved from the Hunter-Gatherer society through the Agrarian economy and on to the Industrial Economy before landing on the Information Age.  By the end of the 20^th Century, we reached something referred to as the Service economy were results mattered more than the things it took to deliver them.  Looking ahead to what some see as the Experience Economy[1]  we see a further shift away from things to events as mattering most.   If life is anything it sure is one heck of an experience.   Activities such as immersive gaming and augmented reality serve to keep more people engaged than ever by allow the experience of sensations and perceptions that would otherwise be forever out of reach for most people.  

Today we have what might be seen as the roots for a Social Economy where the desire to own things is being further reduced over the desire to change things.   In this regard, concerns over climate change, economic and social inequity and individual sense of well-being are becoming the driving factors affecting what we do and how we go about doing it.   Demands for more clean energy and the removal of single use plastics are good barometers for the level of concerns shaping the values and actions of the newest generations. 

Once again, the merit of rising social consciousness and the potential impact on society is not being challenged.  Rather, this is simply and attempt to understand the changes taking place and anticipating where the changing attitudes towards material possessions may take us.   Not only is social change inevitable, its possibly more than just a necessary response relevant to our survival.   There are hints that change for its own sake may be essential for our progress.  Go figure.

The challenge here is that with no precedent for what we are experiencing, as this paradigm is shifting during a global pandemic, we are truly navigating blind.   What interesting times, indeed!   With all this certainty in mind, this paper is an attempt to remain relevant as everything around us remains in a state of flux.   First, a few observations that may prove helpful in preparing for the future:

[i]  There are more people renting homes than at any time in the last half century despite efforts to grow the numbers of homeowners.

[ii] Since 1906 the market for rental vehicles has been growing while leasing has been a very popular option for up almost 1/3 of the market.   

[iii] Since the 1960’s the growth rate in the number of people with a Drivers Licence has been steadily declining.  

The personal transportation fleet will transition to more, expensive, self-driving electric vehicles.  This, as increasing carbon taxes will increase the expense of operating petroleum fueled vehicles.  Combining these changes with increasing growth in the information-services-experience economy, where more people are working from home, and personal vehicle ownership may be expected to decline as the costs increasingly outweigh the benefits.  

The new generations coming along already have a different way of looking at things then earlier generations too.  They often see ownership not as an asset but as a liability.   A car is just something to eat money, much as a boat or an airplane.  Or even a house.  Freedom to the new generation is getting an Uber rather than getting into a car they own and the costs that come with a generic experience.

 As the cost of shifting to electric vehicles rises, and the shortage of charging stations continues for decades, while the proliferation of self-driving cars grows, the advantages of pay-per-trip is going to become substantial.   If a person needs a long-distance vehicle for highway travel it will be easier to just rent something.  Just like a motorhome or any other infrequently used, expensive asset.

There is also a parallel taking place in the housing market.  Owning a home is nice because as an asset owner you are really renting from yourself every time you make a mortgage payment.  This is a great form of forced savings but there are downsides to ownership:  Maintenance, repairs, carrying costs, etc.     Given the frequency with which people are required to relocate, buying, and selling a home ends up costing a large portion of an owner’s accumulated equity.   Then too there are the added risks associated with market fluctuations when moving isn’t always planned.  Depending on the reasons for moving – such as a loss of employment – there is the risk of selling at depressed prices.  Similarly, if moving to another city where there are more employment opportunities, there is the risk of buying in at the top of the market.    Most homeowners don’t go into ownership so they can gamble with their families’ life savings and yet that ends up being the case quite often.   The appeal of ownership is slowing fading with each passing generation. 

What if we look at loyalty from a point of view that moves closer to the fractional ownership or time share models with a twist:   Whenever a person rents an apartment, a vehicle, or takes an Uber, they accumulate tokens.   Instead of acquiring equity in an asset, they acquire equity in an asset pool.  Not only is the risk diversified but they give up maintenance and other ownership costs.  Asset managers can negotiate volume discounts on everything from energy to insurance.  Also, professional asset managers can employ risk-mitigation strategies such as hedging the bond market through buying, selling, and exercising options.

Due to the high level of spend on high ticket items such as transportation and housing, John Q. Citizen can accumulate enough tokens throughout his life to eventually acquire a fully paid-up retirement property somewhere. Or a classic collector vehicle or houseboat.  Or… he can trade his tokens and acquire a business.   The only difference between the scenario I have laid out above, and the way the world current works, is equity transferability without tax implications so long as he doesn’t sell his tokens.   The best part is AaaS can be deployed alongside the existing system of ownership.  

This model works only if it makes people’s lives better.  It must reduce costs, stresses and uncertainty while ultimately benefiting financially more than conventional asset ownership models.  Likely over the course of a coupe decades it will become very difficult to directly compare the two experiences.   The one undefinable risk is how future governments might view things, especially in non-democratic situations.  Then again, there is no waying with assurance as to what the future holds in any given scenario. 

While there is clearly visioning going on here, the advent of smart contracts and the risks of personal physical asset ownership rising under increasingly uncertain future indicate the concept of virtual asset ownership isn’t so much an “if” scenario, as it is a “when” scenario.   The FRACTION8 platform of shared asset ownership could be just the start of making this revolution practical…  at least for the next 80 years or so.   As for the next 580 years, all bets on what the world will look like are off anyway.  The key will be the governance structure as confidence in the administration, oversight and reporting will either make, or break, the success of this alternative solution.    

PERX Points, which are accumulated based on expenditures with program sponsors, never expire and have a market-derived value that enables portable wealth anywhere to and from anywhere in the world.   PERX and FRACTION8 together ensures that all bases are covered when it comes to rewarding participants.  

If what they say is true, that the Devil is in the details, then the model being proposed here has the potential to become little more than a hellish mess.  On the other hand, if successfully executed, the model could become the closest thing to heaven on earth as we are ever likely to realize.  Imagine acquiring credit for your housing and transportation expenditures that never expire, are transferrable, and have relatively little service fees.   Supposedly other loyalty programs on the market are designed to appeal with benefits accruing from a myriad of consumer purchase activities.   The reality though is the details land these programs firmly in the Hades camp.

Using Airmiles or Aeroplan as two coalition loyalty program examples, they do very little to encourage long term participation.  For one thing, the rate of points accumulation from thousands of small purchases, the continually shifting redemption values, and points expiration dates, makes these programs relatively unappealing.   Let’s look at the how the interoperability between FRACTION8 and PERX provides more advantages and less disadvantages compared to other programs.

FRACTION8

This is an asset sharing program where the average individual holds a pecuniary interest in such things as a motorhome, houseboat, or other desirable vehicle.  This model borrows features from the fractional ownership programs of Warren Buffet’s NetJets (https://www.netjets.com/en-us/) and a dozen other imitators that have since appeared.   Starting in 1964 and purchased by Berkshire Hathaway in 1998, it has proven to be of enduring value and continues to grow year over year.  It applies only to executive aircraft generally used by corporations and extremely high net-worth individuals.   The program extends the model to assets more likely used by the average citizen on an intermittent basis.  Beginning with recreational vehicles such as motorhomes, travel trailers and fifth wheels, there is no obvious reason why the platform cannot be extended to include other vehicles from motorcycles to exotic cars.  In fact, this can be easily applied to other assets including real estate, commercial equipment or even museum quality artifacts.   

The name FRACTION8 is derived from the notion that ownership of the asset is divided into eight portions – just like the early dollar and its pieces-of-eight.   For example, a Class C motorhome with a value of $160,000 with a base investment of $25,000 each gives each of the participating partners 6 weeks of use per year for a total of 48 weeks.   The remaining 4 weeks would be reserved for maintenance, repairs and repositioning from one location to another.  The $200,000 received from the 8 investors would leave $40,000 in a reserve fund for the purpose of paying sales taxes and contingencies. 

Each time one of the partners exercises one of their 6 weeks of use, they pay fees to cover wear and tear, depreciation, insurance, repairs, cleaning, roadside assistance, and storage.  Should one of the partners elect not to use any of their weeks, the unit is made available for rental to non-partners at a much higher rate than a partner’s rate.   Net revenues after operating costs are deducted are either returned to the partner or held on their behalf to offset their future use.   In the even they should choose to transfer their 1/8 share to another party, any accumulated cash can be dispersed along with proceeds of the sale or remain in trust against future acquisitions or services. There may be other options such as one person buy 2 shares for a total ¼ ownership.  Or, 2 people could chose to split a share resulting in a 1/16^th ownership.   

Proof of fractional ownership is enshrined in Blockchain-based Smart Contracts.  Not only are these legally recognized by the laws of Canada and the USA, it becomes possible to quickly and smoothly transfer proof of ownership.  Oversite and virtual custody services will be handled by Vancouver-based Endeavor Trust. 

As suggested about the possibility of adding other vehicle types to the program such as watercraft will eventually find their way into the mix.   It is also conceivable that other asset classes could be added such as vacation properties, residential buildings or any other asset that makes commercial sense.  The program is really limited only to finding enough participants to cover the acquisition cost and a willingness to cover the ownership cost.  There’s probably no reason for NetJets to worry – at least not just yet anyway.   Enterprise Rent-a-Car, on the other hand, might have reason to be a little nervous.  As for Uber the writing is clearly on the wall as fully self-driving cars become widely available and legally accepted.

PERX POINTS

The idea of having a loyalty program associated with an asset sharing program is summed up in one word: viability.   By rewarding asset users, whether fractional owners or not, helps to promote awareness of these programs.   The larger the user base, the larger the fleet sizes and the more economical it becomes to operate both programs.  Allowing loyal customers to ultimately exchange their PERX points for fractional ownership of an asset they have demonstrated an interest helps bridge the gap between users and owners.  

The other benefit of PERX is it forms the basis for our marketing program.   For example, when participating partners such as RV Resorts, RV Dealers and RV Owners generate revenue through our platform, points are acquired by vendors and transferred to renters.  Meanwhile, when renters acquire enough PERX to earn a free rental or a free stay, the RV Facility or RV Dealer can accept those points in lieu of cash payment.   Vendors can use those PERX they have received to reward loyal renters.   In fact, by using Blockchain-based Stable Coins, PERX points effectively become an alternative form of currency allowing frictionless transactions between owners and users.   Unlike other programs, PERX collectors fully own their points and thus are independently tradeable.  It might well be in Armatrix’s interests to set up a trading platform, facilitating purchases and sales while providing liquidity and underlying value. 

[1] The term “Experience Economy” was first used in a 1998 article by Joseph Pine II and James Gilmore describing the next economy in which life-changing experience-driven memories become the goal, followed by a book of the same name.    

[i] https://www.washingtonpost.com/news/wonk/wp/2015/06/24/how-renting-became-the-new-homeownership/

https://www.pewresearch.org/fact-tank/2017/07/19/more-u-s-households-are-renting-than-at-any-point-in-50-years/

[ii] https://en.wikipedia.org/wiki/Vehicle_leasing

[iii] https://hedgescompany.com/blog/2018/10/number-of-licensed-drivers-usa/