Towards a 21st Century Exchange
Part 3: Hotel Proprietary

By David Skinner, President Holiday Group

On August 25, 1991, a profound event occurred, but if not for the techno-geeks among us it might have passed unnoticed. And while seemingly insignificant at the time, it set in motion newfound forces that have since transformed the way we live in and share the world.

On that day, without fanfare or PR—merely an announcement to industry colleagues—a new software operating system was born. One that has since spread, evolved, and served. It now runs computer systems around the world for governments and businesses alike. It is a reliable workhorse behind much of the Internet. And more surprising, it can be found under the hoods of luxury automobiles, in tiny cell phones—even inside our TIVOs! This amazing software program is called Linux.

Few among us can recall the inventor’s name, Linus Torvalds, a Finnish software engineer by trade, soft spoken and low keyed by choice. Even fewer foresaw the significance of what Torvalds was about to do. Breaking with traditional norms of invention, defying precepts of private property, and redefining the space between an individual and his community, he offered his software for free—without patents, copyrights, or personal reservations. He invited all to access, to innovate and to share. He built and distributed Linux not for profit’s sake, but for goodness’ sake.

Eighteen years later, the concept of open source for goodness’ sake has come to play a major role in our lives. It is credited for much of the growth of the Internet, peer-to-peer networks, computing standards, collaborative innovation, and now Web 2.0 and social networking. This sense of “for goodness sake” has quietly been molding and reshaping our culture. And to think that it almost went unnoticed!

For the timeshare industry—more specifically the exchange companies—the growing acceptance of open source and it’s principles of universality and for goodness’ sake represents a clear and formidable threat to their closed and proprietary networks. The stage is set for a classic Greek tragedy, the dilemma of choice; the choice between the inevitable and the unknowable.

The Case of Big Blue

Don Tapscott, best-selling author of Wikinomics, tells the story of IBM’s encounter and showdown with Linux in the mid 1990s. “Big Blue—the company that became huge by building and selling proprietary everything. For decades it created software that only worked on IBM computers. Tough luck if you wanted to port it to another vendor’s hardware. IBM called it ‘account control.’ Detractors called it ‘hotel proprietary.’ That is, you can check out any time you like but you can never leave.”

Tapscott writes, “By December 1998 IBM knew that Linux adoption was growing quickly. The company was formally considering Linux strategies. IBM strategist Joel Cawley recalls, ‘At the time we had great concerns.’”

In the end, wrote Tapscott, “IBM not only accepted open source software products and processes but also its philosophy, which is to spur quality and fast growth rather than just profit based on proprietary ownership of intellectual property. Just as important, IBM has gained experience and knowledge in a vital new model of value creation. A company that was proprietary, insular, and vertically integrated fifteen years ago now partners extensively with the open source community and is considered a positive force for collaboration and openness.

“In the words of Joel Cawley, who looks back on IBM’s nearly ten-year experience with open source software and says, ‘Having gone through the journey, we are comfortable with open source and all the things connected to it. We see open source as part of the kit bag of strategy now. We understand that if you don’t do it your competitors will. And then where will you be?’”

This Is Our Industrial Revolution

In many ways the conditions in the mid-90s in which IBM found itself are like those faced by our exchange companies today—caught between the growing demands of a new age of openness, connectivity, and transparency on the one hand, and on the other shaken by the dilemma of choice.

Options are few, but examples are many, both of the successful and of the stubborn. Insurance, securities, travel, real estate, the music industry—all faced the imperative to change and all succeeded. They re-invented, re-engineered, then re-emerged as the same companies serving the same customers, but now cut from different cloth. And as Big Blue came to realize, change, while it may be inevitable, it need not be unprofitable.

The stubborn examples are well known: autos, newspapers, America-On-Line. Yes, AOL, too, the early darling of the Web that fell victim to its own internal flaw (a “closed system”) and even more amazingly, did so in the midst of a greater open network, the Internet.

In case you haven’t yet “gotten it,” this is our generation’s Industrial Revolution; only we must harness information not steam. The age of centralized controls, exclusive territories, and closed systems are gone. And good riddance.

The Tipping Point

If a universal timeshare exchange system were indeed possible, for it to emerge, as discussed in Part 1 of this series, the essential elements must be present, the conditions right One element, perhaps fundamental to all, is open source and the principles it uprises; inclusion, innovation, collaboration and socialization. By its nature, open source attracts collaborative innovation and improvement. By definition, it exists in the public arena for the benefit of all. By its presence, the conditions for an open exchange system to emerge are right.

The same conditions that Malcolm Gladwell details in his book, Tipping Point. He describes how seemingly small events at just the right moment can precipitate huge social and economic phenomena, how “ideas and products and messages and behaviors spread like viruses do.”

Conditions ripe for some college kid, like a Shawn Fanning of Napster (Part 1), or a gifted disgruntled timeshare owner, to come along. Using open source programming, he slaps together an old Web search engine to a desktop chat program; offers it online as “free to own and free to use,” and thus a timeshare exchange is born. Sure it’d be homemade, a little clunky at first, but it would have the necessary functionality and scalability for thousands of timeshare owners to find each other and begin to haggle and barter—which makes a market. Other programmers join in making their improvements and building more advanced processes, all made possible by open source. As the word spreads the numbers swell until the membership roles reach critical mass, the “tipping point”.

At some point the exchange companies; indeed the whole timeshare industry must face the dilemma of choice, between the inevitable and the unknowable. Will they follow the path of Big Blue and embrace the new order? Will they chose partnering over partitioning, contribution over control? Will they choose as did IBM “to spur quality and fast growth rather than just profit based on proprietary ownership”? Will they choose for “goodness’ sake”?

Change Is Possible

As Gladwell concludes in his book: “What must underlie successful epidemics, in the end, is a bedrock belief that change is possible, that people can radically transform their behavior or beliefs in the face of the right kind of impetus. Tipping Points are a reaffirmation of the potential for change and the power of intelligent action. Look at the world around you. It may seem like an immovable, implacable place. It is not. With the slightest push; just in the right place; it can be tipped.”

In the end, it is in everyone’s interest to have healthy, open exchange companies contributing their part to a universal system.

In Part 4 of our series, we’ll look specifically at the vital role the exchange companies can provide to a 21st Century Exchange.

David Skinner is founder and CEO of the Holiday Equity. The company was started in 1992 to fill a vital need in the timeshare industry. It serves as a financing and sales bridge between resort sales and the resale market. He has spent his professional life in real estate brokerage, investment banking and securities, and as an entrepreneur. These qualities came together to form the basis of which Holiday is built upon.

David has three adult children, is married and resides in Puerto Vallarta, Mexico, from where he commutes to Seattle, Holiday’s home base. He can be emailed at dskinner@holidaygroup.com.

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