Flight Plan

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Solving for X: Once the FAA clears the way for the Eclipse 500, Iacobucci will get to see how good his models really are.

 

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The reams of data produced by the VOC have already coalesced into a thick sheaf of battle plans framing best- to worst-case scenarios. And having run the scenarios so relentlessly for so long, Iacobucci is now utterly sanguine about his prospects. When I ask over dinner for the dozenth time about DayJet's presumptive break-even number, he flat out admits there isn't one. "Within the realm of all realistic possibilities--at least 25% of our projected demand to 125% demand--we maintain profitability." Even at 25%? "Sure," Iacobucci replies, "it just takes longer, and takes more [airports], and the margin is much lower. But this isn't going to be what the venture capitalists call the 'walking dead.' If it's a hit, it's going to be a hit pretty quickly."

"We'll see more companies integrate modeling," says former Microsoft CFO Mike Brown. "This is just like the Internet: One day no one had heard of it, the next day we were all using it."

I'm not the only one who has trouble wrapping his head around the numbers, or lack thereof. Iacobucci tells the story of one analyst asked to crunch the numbers ahead of an investment. "He asked a direct question: 'All I want to know is, what formula do I put into this cell to tell me how you come up with a revenue number?'" Iacobucci says. "I told him, 'There ain't no formula to put in that cell! It can't be done! We'll sit you down with our modelers, who will explain the range of numbers we came up with, but they can't be encapsulated in a spreadsheet.'" The would-be investors passed.

Not everyone is so put out by the math involved. Esther Dyson, the veteran technologist and venture capitalist, now runs an annual conference called "Flight School," in which DayJet has played a starring role. "I have no doubt it will work," she says, referring to the software, "and I have no doubt they will spend time refining it and that there will be glitches here and there. But I do think Ed knows how to design very highly available systems"--a reference to his days building operating systems--"and that's exactly what they're doing."

Mike Brown, who did ante up and today sits on DayJet's board, is convinced that businesses big and small will increasingly turn to modeling as a way of developing--or troubleshooting--their business plans, mapping out strategies and market expectations that go far, far beyond spreadsheets and PowerPoint decks. "We'll see more and more companies integrate modeling into the heart of their business. This is just like the Internet: One day no one had heard of it, the next day we were all using it."

Since Iacobucci sees himself as being in the operating-systems business, he has no intention of giving that system away. (He learned that lesson the hard way at IBM.) He doesn't want to build what he calls "horizontal" software that gets shared, e.g., Web 2.0 and Windows, the two great platforms for which every programmer in Silicon Valley seems to be writing widgets these days. Where everyone else in the business sees limitless opportunities in snap-together applications, Iacobucci sees a playing field so flat as to have no barriers to entry at all, and he doesn't like it.

According to Dyson, DayJet's competitors have so far pooh-poohed its software, assuming they'll be able to buy their own off the shelf at some point. Eclipse Aviation's Vern Raburn hopes Iacobucci might be persuaded to license his tools, because Raburn's own business model depends upon air taxis' taking off. Iacobucci says that isn't going to happen. "There's a shift away from building another platform toward building highly integrated, vertical, special-purpose, high-performance systems," he argues. Iacobucci envisions more companies like his own, in which the competitive advantage resides in custom-built, deeply proprietary, real-world operating systems that don't just streamline accounting, but become the central nervous systems of entirely new, scalable businesses. He's looking to build barriers to entry out of brainpower--so much of it that rivals can never catch up. ("It's like in Dr. Strangelove," Sawhill quips. "'Our German scientists are better than their German scientists.'")

Iacobucci points to Google as an example of what a vertical system can accomplish. While everyone raves about free services on Google, the largely invisible supercomputers in Google's data centers are themselves invisibly tackling a variation on the traveling-salesman problem: How do you solve millions of searches in parallel at any given second? "When you get into mesh computing," the name for Google's technique, "that's what it's all about: managing the complexity," Iacobucci insists.

But no company has ever built a business model around complexity from the ground up--until DayJet. Thumbing his nose at the prevailing ethos in software circles of "the wisdom of crowds," let alone that "IT doesn't matter," Iacobucci has set out to first invent and then dominate a market he might have otherwise just sold software to. "When we built generic software at IBM and Citrix, the other side would always reverse-engineer it," he says. "The only thing the customer sees here is an incredible service. This is 'software as a service.'"

Greg Lindsay is an editor-at-large at Advertising Age. Book rights to his Fast Company piece "Rise of Aerotropolis" (July/August 2006) were recently purchased by Farrar, Straus and Giroux.