A frictionless economy? How taking friction out puts more friction in

blur II.jpg

I take a frictionless economy to be a place in which transaction costs, channel constraints, information uncertainties, and production inefficiencies are reduced as much as possible. (With apologies to my economics readers. I will be sure to get some of these details wrong, but bear with me.)

So Amazon makes for a frictionless economy to the extent that it removes costs incurred getting books into bookstores and out again. If there were ever a channel more inefficient than book distribution, it would be hard to imagine. With hundreds of thousands of titles in print, the chances are good that our local book store won’t have the book we want and will have books we don’t. The result is lost sales on the one hand, remainder copies, on the other. In that miraculous moment when we do find the book we want, we pay a price inflated to cover the inefficiencies of the system. Enter Amazon: all books all the time, with disintermediated delivery direct to our door.

But there are two problems that will make the friction worse. First, consumer taste and preference is fragmenting. This makes matching production against consumption more difficult. The simplicities of mass production have disappeared. Second, consumer taste and preference is changing more quickly. This means that the producer has a smaller “window” in the marketplace. Arrive too early and the offering is merely strange. Arrive too late and it is simply dull. In sum, the producer must now make more product offerings and “drop” them into the market with newly astute timing.

It turns out, the marketplace has succeeded pretty well in responding to the first problem. It now produces a profusion of products. This is the work of many, smaller players playing the niche, and the discovery that “economies of scale” are possible even for an assembly line producing variations on a theme. “Mass” manufacture now produces microvariation without much difficulty. (See Baldwin and Clark, and Kostelanetz, below.)

But it is not so good at the second. Even with better marketing intelligence from the likes of McKinsey, Roper, Faith Popcorn and the cool hunters, the failure rate is still astonishing. Very large and wealthy corporations continue to make things we don’t want and to fail to make things we do. At this writing, the Gap, with the help of Sarah Jessica Parker, is undertaking a new move to more fashionable clothing. We will see if they get this right. Their last attempt to do so ended very badly. (See Gladwell, and Postrel below.)

This is a necessary problem. Producer dynamism will never catch consumer dynamism because the more it responds, the more it creates. Consumers live in an information, stimulus, opportunity rich environment. The more choice we give them, the more difference they will cultivate. Taste and preference now runs like a wave the producer cannot catch because it’s best efforts drive the wave beyond its grasp. In sum, now to return to the economist’s turn of phrase, capitalism creates its own friction. However much friction it removes from production, the more friction in creates in the market to which it must respond.

I have no idea how economists think about this problem, but I do know that it makes for an interesting problem for anthropology and the anthropologist. It means that there is a steady pressure for differentiation going on in a culture that is already almost impossibly rich in differentiation. Change that used to come from the outside now comes from within. Capitalism was once a grumpy, clueless aunt, prepared to change only when this change was forced upon it. Now it is one of the chief agents of that change. The fact that it will never catch it up does not mean that it will not get a great deal faster. By taking friction out, it will help put friction in.

It’s a thrilling prospect and one that makes the head spin. When we get this “friction” out, when corporations detect and respond to shift in consumer taste and preference in something closer to real time, what will our culture look like? How will anyone, economists, anthropologists, corporations, keep up? What happens when social life and the marketplace changes before our eyes? Life will become a blur. On second thought, I guess it’s that already.


Baldwin, Carliss Y, and Kim B Clark. 2000. Design rules the power of modularity. Cambridge, Mass: MIT Press.

Gladwell, Malcolm. 1997. The Coolhunt. The New Yorker. March 17, 1997: 78-88.

Kostelanetz, Richard. 1968. Beyond left & right: Radical thought for our times. New York: Morrow.

Postrel, Virginia I. 2003. The substance of style: how the rise of aesthetic value is remaking commerce, culture, and consciousness. New York: HarperCollins.

3 thoughts on “A frictionless economy? How taking friction out puts more friction in

  1. patrick

    It think you may be putting the cart before the horse. How exactly does one observe changes in consumer preferences? Only through changes in their buying patterns. And a shift to a new product can only happen if there is a new product to shift to. So if 100 companies make a hundred different products, but consumers want only 10 of them, this seems like a big jump in friction. But I suspect that it’s not an increase as much as a shift. In the past, consumers simply made do with the closest substitute to their ideal good, so every consumer experienced an inefficiency (a friction) when buying and consuming a less-than-ideal good. Today, some of that inefficiency has been shifted to producers, and the result is more observable “friction.” But who’s to say which is more inefficient: the unwanted product of dozens of producers or the less-than-ideal consumption of hundreds of millions of consumers.

  2. Anonymous

    I’m not entirely sure whether this is the same point as Patrick makes, but you’d expect consumer behaviour to change in response to lower friction. Lower friction decreases the costs of providing variety – effectively shifting the supply curve for variety out to the right. This creates a new equilibrium point with greater observed demand for variety (though without consumer preferences having changed).

    There is also greater (observed) friction. But that shouldn’t be seen as a problem. The new equilibrium is better than the last, with the lower supply curve.

  3. patrick


    I’m not sure if your analysis is appropriate in this case. Those supply and demand curves live in a space of complete markets, but what Grant seems to be talking about above is an explosion of incomplete markets. There are good being produced and left unsold. This is, essentially, due to lack of complete information (another bane of traditional market analysis): producers don’t know what sort of demand curve their products are facing until its too late. And by the time they adjust, fashion has already changed. The adjustment process doesn’t have time to complete, and so we never settle at a complete market equilibrium.

Comments are closed.