Remember “video-conferencing,” the technology once promoted as a substitute for business travel? Grainy video screens and telephone-quality audio proved to be a hard-sell, never displacing more than a tiny fraction of face-to-face contact. But now, thanks to the low cost of bandwidth and dramatic improvements in both hardware and software, it’s back in a form so superior that the companies marketing it have rightly given it a new name: “telepresence.” Indeed, the non-profit Carbon Disclosure Project has released a report by Verdantix, a London-based research firm, arguing that the new technology will lead to profound changes – most notably in dramatic reductions in transportation-related carbon emissions.
Is Verdantix right? It’s certainly plausible. History is full of examples of products for which demand proved to be highly elastic with respect to price and quality. (Don’t be lazy here; think of your own examples). We can imagine other factors, though, that are helping to drive substitution of virtual travel for the real thing.
For one thing, the short-term effect of the recession on top of the long-term effect of globalization has put enormous pressure on big corporations to hold down costs. One consequence: all but the most elite business travelers have lost access to first-class airline seats and Four Seasons hotel rooms. And since we would bet that a very substantial portion of corporate travel was never absolutely, positively necessary, simply taking the fun out of getting away from the office has opened employees’ minds to the experience of transacting business in a new way.
That doesn’t mean huge-screen, high definition video, ultra-reliable Internet connections and a host of marketers scenting the prospect of hefty sales hasn’t made a difference. But it does highlight the reality that business decisions are generally made by people whose interests sometimes diverge from those of the owners. (Hint to econ majors: see principal-agent problem). And that, on occasion, their interests can be realigned by circumstance.