Chris Anderson submitted a comment on my Friday post.  He quotes the offending passage from my blog and then expresses his displeasure.

"I guess we should be grateful that Penn is not offering up Chris Anderson’s "long tail" fallacy, the odd idea that because we have ceased to be a mass culture we are now an utterly particulated universe of ones."

Huh? "Universe of ones"? Are you confusing my book with "Bowling Alone"?

Grant, either you’ve never read my book or you’re willfully misrepresenting it. Which is it?

Chris, thanks for writing.  To answer your question: neither one.  Your options are confining and, if I may say, perhaps a little prosecutorial.   

In The Long Tail, you refer to

[the web as an] uncategorizable sea of a million destinations (page 2)

an infinite number of niche markets (p. 5)

the shattering of the mainstream into a zillion different cultural shards (p. 5)

infinite slots (p. 8)

an unlimited number of niche demi-elites (p. 35)

a million niches (p. 52)

interests splinter[ing] into narrower and narrower communities of affinity, going deeper and deeper into their chosen subject matter (p. 57)

When mass culture breaks apart, it doesn’t reform into a different mass. Instead, it turns into millions of micro-cultures, which coexist and interact in a baffling array of ways.  (p. 183)

You can see where I might get the impression that you’re committed to a universe of ones, at least in the long term.  The terms infinite and unlimited keep cropping up.  An "infinite number of niche markets" is a universe of ones.  And if this universe is not there in the first place, we will get there eventually, as interests "splinter into narrower and narrower communities of affinity."  You have posited a disaggregating dynamic.  Interests that are ever narrower must necessarily become a niche per consumer…and a universe of ones.

You will complain that I am cherry picking phrases.  (This would be a more robust defense, if you hadn’t used these terms so often and enthusiastically.)  But even if we ignore "unlimited" and "infinite" as artifacts of the rhetorical heat of the moment, we still have a problem.  The word to which you return repeatedly is "millions," and this is, I think, much too high.  Millions of niches is many too many. Even if you are not headed for a "universe of ones," you are positing a very particulated marketplace.  Our spectacularly fecund culture/commerce of ours will never parse that finely.

Happily, it’s an empirical question.  The natural laboratory of contemporary culture will do it’s work.  One of us will be proven right, the other wrong.  Let’s call it a bet.  If you’re right, I’ll look forward to buying you a case of good Merlot and toasting your success. 

But there is a larger problem with The Long Tail.  I didn’t see it the first time through but it came charging off the page as I went looking for proof of Friday’s post. 

The Long Tail a thoroughly partial book.  As I read through a second time, I was struck by what is missing.  You give plenty of attention to aggregators like Netflix, Amazon, iTunes, eBay, and Google and pretty much ignore the rest of capitalism!  You have taken on one of the most explosive developments in contemporary capitalism…only to offer a partial view and a single solution.  It’s as if you declined the larger intellectual challenge. 

Readers who doubt this argument may wish to examine the index and see if they can find brand names that are not aggregator related.  What is missing in The Long Tail is the work horse of capitalism, the corporation, and the extraordinary challenges that now confronts its innovation, strategy and marketing functions.   As virtually everyone knows, the corporate world is scrambling to deal with the speed with which taste and preference now fragment and change.  In turns out, The Long Tail pipe has pretty much a single answer for exploding markets: big (or bigger) pipes.

There are two problems with this answer.  First, there can only be a few aggregators in the world, and this limits the usefulness of this book for the rest of the world.  Second, bigger pipes isn’t, in the larger order of things, really the most interesting, ambitious or canny solution. What the "aggregator answer" ignores are the real challenges that exist as a single corporation learns how to be many things to many people, how it makes the boundary of the corporation more porous, letting the world in and innovation out, how it escapes the inevitable gravitational field created by the corporate culture, how it accomplishes some kind of continuity in the face of its external and increasing internal discontinuity.  The scope of this book is smaller than I realized, in its ambition, in its  accomplishment, and in its usefulness.

A case in point: At the culture camp here today in Toronto, we were wondering if a corporation like say P&G or Kraft might ever solve the problem of dynamic culture and commerce by becoming more like a Hollywood studio, a pool of capital, intelligence and decision making that draws continually on an external world in order to create the stream of innovation that now appears to be necessary for a corporation to survive.  This is of the many things The Long Tail might have explored. 

Listen, I have to get ready for tomorrow, let me close with this.  It seems to be that The Long Tail treats an astonishing problem, with a narrow, partial, and one might even say provincial response.  I rest my case. 

John Mackey, CEO of Whole Foods Market, Inc., has been going on line…to tout his own stock…under an assumed name…for 8 years.   Naturally, the SEC is investigating and one fears for what is left of Mr. Mackey’s credibility.

It was the "8 years" that brought me up short.  This means Mr. Mackey has been conversant with the internet for some time, much longer than most CEOs. 
And this means that Mr. Mackey had an extended opportunity to grasp the transparency of the internet…and never did.  Most of us get the notion that everything is eventually public online.  The digital world gives lots of shapeshifting opportunities (think Second Life, with its fake, borrowed, and stolen identities) but, finally, it’s almost entirely see-through.  There is no place to hide.  Eventually the truth will out. 

The ethics of Mr. Mackey’s digital masquerade are, well, troubling.  (Isn’t that we always call ethical issues: "troubling"?)  But there is a second ground on which to doubt Mr. Mackey’s "fitness for office."  Ethics aside, is this man technically qualified to be a CEO? 

Here’s the question I would be asking if I were on Wall Street: if this guy managed to participate on the internet, without ever grasping its fundamentals, what else does he not know about contemporary culture? 

It would be one thing if Mr. Mackey’s company made case hardened steel or CD containers.  Not grasping contemporary culture would be unsurprising and more or less forgivable.  But Mr. Mackey runs a company that runs a tide.  His company has come to prominence precisely because contemporary culture changed fundamentally the way it thinks about food, nutrition, cooking, health, wellness, and eating.

This isn’t a single trend.  It’s a wave of many waves.  If one were a Whole Foods investor (and very modestly, I am) one would like to think that somewhere at headquarters there was a big board in which all of these little waves were being tracked.  It would be nice to think that command central had a clue. 

Yesterday, Mr. Mackey said he would stop blogging.  Great, so when does he start paying attention?

References

Kesmodel, David.  2007.  Whole Foods Sets Probe as CEO Apologizes.  The Wall Street Journal.  July 18, 2007.

McCracken, Grant.  2007.  The Artisanal Trend.  This Blog Sits at the Intersection of Anthropology and Economics.  here. 

Sometimes, culture is better the less you spend on it. 

Not in Canada.

Christopher Hume says,

We have been on a spending spree… And the figures are impressive by Toronto standards: the Art Gallery of Ontario, $254 million; the Royal Ontario Museum, $270 million; the National Ballet School of Canada, $106 million; the Royal Conservatory of Music, $110 million; the Ontario College of Art & Design, $40 million; the Gardiner Museum of Ceramic Art, $20 million; the Four Seasons Centre for the Performing Arts, $175 million, plus the other projects in the work. All in, we’ve spent about $975 million on the cultural infrastructure.

Now this is roughly what it cost to make Pirates of the Caribbean I, II and III, but, as Hume says, in Canada, it’s a lot of money. 

But $975 million is not the real cost.  No, the real cost is much higher   This is because when we fund culture this way, we actually diminish it.  The opportunity cost is, in other words, phenomenal.  I reckon this cost is roughly equal to the Pirates, Spiderman, and Oceans trilogies combined, but then I’m a trained professional working in the controlled circumstances of a New England laboratory.  (Don’t try these calculations at home.)

Sure, it sounds paradoxical.  Spending more gets you less?  Funding culture dismantles culture?  But dynamism teaches us, that cultures are like marketplaces, the less you intercede the more they flourish, the more you intercede, the less they do. 

Let’s take three of the big cultural inventions of the last 30 years: Punk, hip hop, alternative.  All of these were invented in the US.  (Evidence for my controversial first choice: The Stooges, VU, New York Dolls, your Honor!)  All were invented without the benefit of state subvention.  Together, expressed in music and in film, they pretty much underwrote the America’s continued, if wobbly, ascendancy in an emerging global culture. 

I’m not saying that Canada could have established it’s own cultural ascendancy, if only the state had spent less.  I am saying spending more virtually guaranteed its present obscurity on the world stage. (And before someone writes in to complain about all the great music coming out of Montreal, let me point out this was made without state subvention too.)

Armies fight the last war.  States embrace the last idea.  There was a time when the model of state sponsorship worked.  My travels in Europe might as well have been a tour of opera houses, each more glorious than the last,  extravagant evidence that cities and states tied their identities to the musical accomplishment of local sons and daughters. (The Paris house, I was interested to note, was funded by private subscription.)

But that model passed.  Culture changed.  Cultural changed itself. Creative technologies got cheap.  Training distributed.  Creative communities decentralized.  Barriers to participation fell.  A wish to participate rose.  A willingness to defer to elite judgment disappeared.  Hierarchy died, the world flattened.  We might say that the culture funded by the state created a world that no longer needed the state.  To persevere in this funding is to discourage the cultural trend that makes funding unnecessary (could this be the bureaucrat’s secret motive)? 

Call it the Yankee revelation: however much you spend, you can’t buy yourself a World Series win.  Canada can try to fund a culture to call its own, but there are no guarantees.  The fact of the matter is that these cultures happen, if they happen, when the state  gets out of the way, when it cedes control.  The new idea is to turn culture over to people working in their spare time, off grant, off license, without control or supervision. This is where culture comes from now. 

References

Cowen, Tyler.  2002.   Creative Destruction.  How Globalization is Changing the World’s Cultures. New York: Princeton University Press. here.

Hume, Christopher.  2007.  What’s our role on the world’s culture stage?  The Star.  June 04, 2007.  here.

Postrel, Virginia. 1998.  The Future and Its Enemies: The Growing Conflict Over Creativity, Enterprise, and Progress.  New York: Free Press. here. 

Virginia Postrel has a great post today on Dove’s "real beauty" campaign (pictured).  In her clear eyed way, she takes issue with the notion that we should consider everyone beautiful.  She insists that it is more accurate, more sensible to see that differences of beauty exist and that these differences confer relative advantage in the world. 

I think this is right, and that it has the corrective effect Postrel intends.  Some heart felt notions about the world render us incapable of thinking about it clearly.  This is bad for many reasons, and especially because it frustrates our efforts to understand the operation (and interaction) of factors anthropological and economic. Advantage and a certain social capital is apportioned according to relative beauty, and culture decides, to some extent, what this beauty is.   

On the other hand, I think that we may be seeing a general shift here. If we are rethinking beauty, I think this might be because we are rethinking value.  Our culture is changing. 

There are three propositions at work in the world of beauty:

1. beauty contest

The old fashioned one, the beauty contest notion, says that beauty is distributed with almost perfect clarity.  Relative beauty makes for a single, steep, zero sum hierarchy.  There may be some points of contestation, but generally speaking, we could line up all the women (and men) in the world, from the most beautiful to the least.

2. many kinds of beauty

The second proposition says there are "many kinds of beauty."  In this case, we suppose that there many dimensions of beauty and that each of these may be used to fashion a different hierarchy.  If it’s all about elegance, then one hierarchy results.  If it’s all about voluptuousness, another.  And so on.

I think in the real world we oscillate between these propositions. Ideally, we think of beauty as something absolute.  Practically, we are hard pressed to show why Penelope Cruz should be considered more beautiful than, say, Aishwarya Rai or Audrey Hepburn.  We end up saying things like "well, it depends, you see, there are different kinds of beauty."

There is a strong form of proposition 2.  In this case, we all agree on a universe of beautiful women and then we organize this universe into different hierarchies according to the dimension in hand.  Cate Blanchett takes one contest.  Oprah takes another.  Angelina Jolie, a third. 

The weak form of proposition 2 says that there are many, many dimensions, and that it is possible to use them to give most women a claim to relative beauty.  This expands the universe of women with a claim to beauty, and it expands the number and the kind of dimensions that may be used to find them so.  I hope this is not demeaning, but I find that women who sell cosmetics in drug stores often fall into this category.  Quite often, they have a feature or two that are remarkable, and they are otherwise unexceptional.  Hippie beauty seemed to turn on this principal as well.

3. every woman is beautiful

The third proposition says that every woman is beautiful.  I think this is a question of using evaluative dimension in new ways or adding evaluative dimensions if necessary.  The defining phrase here is "every woman is beautiful in her own way." And I think this says that if there is no evaluation dimension, we will make one up.  Finally, if this doesn’t work, the proposition resorts to the notion that all women are beautiful because they are women.  The attack on  zero sum hierarchy is absolute and complete. 

I like the inclusiveness of this proposition 3.  It’s now up to all of us (and especially every male) to discover the beauty in a female companion, and this is an interesting, generous and generative way to proceed.  But I agree with Postrel.  The notion that "everyone is beautiful" violates the law of non-vacuous contrast according to which no assertion may refer to everything in its universe of discourse. More simply: if everyone is beautiful, how can anyone be beautiful?  If it isn’t relative, it isn’t real.

the death of zero sum 

But here’s the thing.  Zero sum is dying in our culture.  The notion that there is one single hierarchy of any kind is now in question.  No one knows this better than Virginia Postrel, whose pioneering work on dynamism helps us understand why this should be so.  Ours is a splintering culture.  Some of our new social species, punks and hippies say, arose precisely to take issue with conventional notions of beauty, and these groups leave in their wake new evaluative standards. 

The death of zero sum is especially evident on the internet where it turns out crowds matter more than elites.  The new media emerge and they create a multiplication of value, a new superfluidity of admiration. This may be because people are prepared to "pay themselves" in admiration they do not deserve…but if it works, it works.  There is nothing in the anthropological rule book that says that a culture may not make every individual an arbiter of his or her own value.  (And indeed the American psychological and therapeutic communities have been insisting on this approach to self esteem for some time.) 

Of course, we have all by this time seen enough delusional American Idol contestants to know how tragic the outcome of this cultural approach can sometimes be.  Still, it is possible for a culture to equip individuals with the right of self invention and self evaluation, and that is precisely what our culture has done, from the avant garde artist who perseveres with the conviction that some day that the world will see what he sees to the lonely entrepreneur who insists on her vision of the world in the face of an overwhelming indifference from the rest of world.  Our culture of creativity depends upon the destruction of zero sum evaluation.  And the more dynamic we become, the more surely we will and must move away from absolute hierarchies. 

As a Canadian coming south to Chicago in the 1970s, this struck me forcibly.  Americans were much more demanding of effort and accomplishment than my Canadians friends, but they were also much more prepared to expand the competitive domain to give everyone, or almost everyone, a place to play.  Being the best at something was important, but it was ok if you were merely taking gold at an obscure bowling tournament in the rural Midwest (which I am proud to say I did on several occasions.  Kidding.)  And that’s when I came to understand the penalty of being good at nothing at all in America.  I sometimes wonder if this is the unexamined motive of self destructive behavior (drug abuse, etc.).  In Canada it’s ok to be unexceptional.  In the US, God save you if this is so. 

America has always been relatively generous in supplying extra competitive domains and evaluative dimensions with which individuals could pursue the self esteem and social capital that success makes available.  And this was true before the advent of the plenitude and dynamism made possible by the new expressive domains (zines, blogs, home made music, transmedia, self made movies) that emerged in the 1990s.   But again Postrel knows this perfect well. 

The death of zero sum and the expansion of social capital has potentially explosive consequences for our culture. Elizabethan England makes this case quite well.   The likes of Shakespeare, Bacon, Sydney, Raleigh, Elizabeth herself made the world vibrate with new ideas.  There are lots of ways to explain this explosive cultural moment, but I wonder whether it was largely because Elizabethans had access to a sudden superfluidity of status.  There were new ways and new dimensions for claiming rank.  The (relative) decline of a zero sum social hierarchy had the effect of flooding the world with novelty.  Ours is a new Elizabethan age.

summing up

Here’s my argument.  The Dove campaign for real beauty and new ideas of beauty may be seen as a reflection of a larger culture shift.  In every domain of taste, we are seeing a willingness to expand the tools of judgment and the size of the winner’s circle.  Zero sum is dying as the logic of our evaluative activities.  As a result, our culture is entering a new multiplication of capital and creativity.  This is not to say that zero sum is dead in all sectors of our world.  It is just subject to new cultural forces here and there that blunt its prevalence and power.   

References

Postrel, Virginia.  2007.  The Truth About Beauty.  The Atlantic Monthly.  March. here. 
[this link is good for 3 days beginning February 13, 2007]

Postrel, Virginia. 2007.  Beauty is.  Dynamist Blog.  February 13, 2007.  here.

for the Dove campaign for real beauty, go here.   

Note:

I promise to get back to the pet post tomorrow. 

The music industry is trapped.  The more it enforces copyright, the more piracy it provokes. 

The long term picture is grim.  Digital sales from the likes of iTunes do not compensate for lost hard copy sales.  (Unless people are buying less music, this means that piracy continues to grow.)   For many younger consumers, piracy is the way you get music.

The industry is mobilizing to respond. According to Victoria Shannon reporting from Midem in Cannes,

…at least one of the four major record companies could move toward the sale of unrestricted digital files in the MP3 format within months.

But this raises a problem: how to capture value.  The industry hopes that MP3 format will woo the consumer back to purchase, but the pirates might actually see it as the white flag of surrender, an invitation to board the industry and strip it clean. 

Here’s a thought.  What if the music industry came up with a new pricing scheme?  What if the music industry started charging fewer people more?

I remember as a kid being impressed with how little I had to pay for my favorite "album."  I remember sitting there staring at the cover and thinking, "wow, I can actually own this!" 

Now that I have taught at a business school, I know what this is.  This is the failure of an industry fully to capture the value it is creating.  In point of fact, I would have happily paid the industry 4 times what I did for that album.

The notion here is that every artist has a deeply passionate core constituency.  For this constituency, the artist creates value like crazy.  The fan is not only willing to pay the full sticker price but to pay more than the full sticker price.  And this passionate engagement makes up for all those unpaid MP3 in circulation, which may now be regarded as loss leaders.  Some of them will end up in the hands of a would-be fan who will, it is hoped, convert to core constituency status.  Think of it as a "user pay" model.  Lots of people benefit, but only the real users pay. 

The fact that I taught at business school doesn’t mean that I can run the numbers.  But I think the calculation would look something like this.  My generation listened to lots of artists, followed  some subset of artists, and committed to a mere handful, 6 or 7, say.  This model of music consumption looks a lot like a peak.  The pricing model proposed here supposed that I will pay more for those 6 or 7.  Whether this throws off enough funds to sustain the industry, to pay, in other words, for all the other artists and the rest of the landscape, is an open question.

Younger generations of consumers exhibit a different pattern, less a peak, more a mesa.  Kids, that is to say, tend to consume more music, listening to more genre sand more artists, following more artists, and committing, finally, to more than 6 or 7.  Or so I think.  I may be that 6 or 7 is the core loyalty number.  But if this distribution is "flatter," with more artists but less loyalty, my pricing model has a problem. 

What I am assuming here is that the motive for and the nature of purchase would change.  The consumer will pay more, but he or she wants to know that proportionally more is going to the artist.  Consumers have still not forgiven the industry the digital transition.  CDs cost less to make but the industry didn’t charge the consumer less or pay the artist more.  It kept the difference.   (A penny of this difference could have funded a beautiful or at least effective jewel case. Instead, we got a piece of crap that breaks almost immediately.)  I think it’s probably true that some part of the piracy problem can be put at the door of industry bad behavior.

The purchase decision becomes in effect a reward system.  I am not paying money to buy a copy of A Night in San Francisco from Van Morrison, say.  This is available online for free.  I pay for this music in order to thank and support the artist.   I am a little bit more like a patron, and a lot less like a consumer.  We are all Medici now.  Actually, the Medici model works twice.  My "purchase" supports Van Morrison’s work and makes his music available free to a larger public. This is the public art model, I think.  Every "core fan" plays benefactor to every non-core listener.

We know that the fixed price is a historical invention that installed itself relatively late in the Western markets.  But certainly we have seen the reemergence of variable pricing.  This has not always gone well.  The CEO of the Coca-Cola Company proposed variable pricing for Coke vending machines (the machines were to charge more on hot days) and he was made to pay for this act of temerity with his career.  But it is surely contrary to the vaunted rationality of the marketplace that we should cling to pricing conventions merely because they are habitual. 

Every business school appears to believe in a Platonic cave concept of capitalism.  There is a perfect original of industry and organization there in the cave, and all the real world industries and organizations are so many shadows.  These real world industries and organizations differ from one another only because of the accidents of history and the irrationalities of the world outside the cave.  Actually, all industry and each organization is formally the same.  (This is why b-schools insist on one-size fits all instruction, treating industry-specific courses as so many trade schools.)

The music industry has followed suit.  It has never made much of its difference from other industry.  By and large, it sells music the way the Gap sells clothes the way Detroit sells cars. But it is now an industry in crisis and perhaps this is inducement enough to rethink the business model and reach out to its consumers as patrons. If we don’t treat them as patrons, they can be relied upon to act as pirates. 

References

Shannon, Victoria.  2007.  Record Labels Contemplate Unrestricted Digital Music.  New York Times.  January 23, 2007. here. 

LaRacuente, Nicholas.  2007.  Free Culture Labs.  Free Culture Blog: voices fo the student movement for free culture. here.

Last night, around 9:30, American Idol hit 42 million viewers.  This means that 40% of the homes in the US tuned in. 

What are the compelling questions for anthropology?  THIS is the compelling question for anthropology.  How can this many people be interested in what is nothing more complicated (or strictly speaking, more interesting) than a talent show. 

A talent show! Growing up in Vancouver, I sometimes saw a talent contest held every Wednesday night at the Showboat down on Kitsilano beach (pictured here in its newest, grandest manifestation, complete with the Vancouver Firefighter’s band).   Kids would twirl batons.  Someone would attempt an aria.  A lunatic would roll down from a local bar and try ill advised standup.  It was impossible to tell who won these contests.  Canadians are much too polite actually to signal a preference.  Not that it mattered.  There were only 7 people watching. 

Forty-two million viewers!  When did talent contests get this big?  How did this lowly form of entertainment commandeer the TV schedule?  It is not so difficult to answer these questions with the benefit of hindsight.  But imagine what it was like when, some years ago, the phone rang at Coke’s Atlanta headquarters, and someone on the marketing team was asked  whether Coke would like to sponsor a new show, now merely a twinkle in a producer’s eye. 

Tell me again what it is, again. 

Well, the show travels America and invites people to try out…and become the next American idol.

The next what?

Idol.

What, like an Easter Island idol?

No, you know, like a really big star. 

But when you find them they’re total nobodies? 

Right.

Don’t you have to be Clive Davis to do this?

Well, actually, it’s a competition.  The nation will vote.

So it’s a talent contest.

Well, yes and no.

I thought talent contests died in the 1950s.  On the west coast.  Kitsilano showboat, wasn’t it?  The spring of 1959?

Well, yes, but this is brand new.  Completely different.

Precisely  the same, but completely different?

Exactly!

Every hour of every day, someone asks the Coca-Cola Company (TCCC) whether it wishes to participate in yet another invention of the greatest thing since sliced bread.  Most of the time, the TCCC says "no."  But not in this case.  In this case, TCCC said yes.  And the payoff was sensationally large.  Last night, 42 million people looked at branded cups.  Today, Thursday, January 18, 2007,  TCCC sold thousands upon thousands of gallons more.

Talk about dodging a bullet.  What if TCCC has said "no" to American Idol?  What if someone trusted their gut and their gut was wrong? 

So here’s the marketing problem.  What system of divination would have helped the TCCC make this decision?  What would have constituted "due diligence" in this case?

In a perfect world, TCCC marketing executive would have engaged a marketing appliance, a system of marketing intelligence that would have delivered, speedily and accurately, an answer to the following questions:

what is this?

This is really the most interesting question.  The marketer is asking, in effect, "tell me what I am looking at here?  Is this something or nothing.  If it’s something, what is it."

where does it come from?

Here the marketer asks for a historical answer to judge the trajectory of the trend.  The answer would be something like, this is a variation on the "talent contest."  Like spelling bees, the talent contest was an enthusiasm of rural America.  It fell from fashion in the 1950s with new technologies (transistor, radios, 45s, stereos), the emergence of powerful music labels and stars, (and a particularly awful aria at the Kitsilano showboat in 1959).  By a general cultural consensus, it was decided that the expert trumped the amateur. The possibility of renewal came in the 1970s when  Punk music and a culture of participation, as documented by Henry Jenkins, demonstrated a new willingness for non experts to take part.  {and so on.  None of this has good ethnographic or quantitative foundation.  As usual, I’m just guessing.)

does it have legs

We believe that the new talent contest has momentum, that it will enter the mainstream in 18 months, and pass from it in 2.5 years. 

for whom

here are the segments

in what numbers

here are the numbers

by what arch

here are the probable angles of the ascent, the most likely peak, these are the probable angles of the descent

what will it cost us

here’s what we think costs would be

what should we pay

here’s the return

In sum, what we need is a marketing appliance that draws on a deep knowledge of culture and commerce. 

The corporation is now called upon to make difficult decisions of the American Idol kind.  Maybe something is a good idea.  Maybe it’s a totally bad idea.  But the profit to be made (or lost) is so great, it is surely wrong to be guessing on opportunities and outcomes.

All of this is wishful thinking until the analyst begins to say, "what a second, are you telling me they are making their way in a dynamic marketplace without a way finding system?  Do you mean to tell me they don’t engage a decision making GPS?  You are asking me to invest in a company flying by the seat of its pants?  How about a little due diligence?"

Yeah, what he said.  How about a little due diligence here?

It is 2010.  You’re in San Diego, visiting a friend.  He takes you to a hip little eatery.  The neighborhood is filled with auto repair yards and unbranded coffee…but not for long.  The condos are coming. 

There’s a guy in his 50s sitting at the table in the corner.  He is dressed casually, contrarily, anti-conventionally, but there is no concealing the fact that he’s got money.  (Why is it that wealth always shows through, shines through?  You’d think money would buy advice, wardrobe, camouflage, concealment, but, no.  You can always tell.)   

Your first guess is that the guy is a trust fund baby.  But there’s no hint of self reproach, so that can’t be it.  Hmm.  Well, maybe he made his fortune in a conventional way, patio furniture, say, and then went bourgeois bohemian.  No, the small signal of wealth aside, this guy is vastly more bohemian than bourgeois. This is no interloper.  This guy fits in.

When there is a lull in the conversation, you ask your friend.  He looks over, and says,

Oh, that’s Tom.  He invested in Sarah McLachlan early.  Made a bundle.  Ran it up.  Good choices.  Worth a fortune. 

This spring, President Bush signed into law a tax code change that will make it easier to sell intellectual property as stock.  One of the people to seize this opportunity is Terry McBride, CEO of Nettwerk Music Group. 

Once we have access to [the full range of] intellectual property, we’re going to offer shares in individual artists and take in equity investments.  Eventually, a major band could be its own public company.  (from Howe, below)

A stock market for music.  McBride’s model says that "even a band selling 100,000 units a year becomes profitable." 

Is this what the future looks like?  Is this where music and popular culture heading?  We know that the existing business model is busted on two sides.

First, there is the problem of plenitude.  The producers of music are now apparently infinite.  The tastes of the consumer are fragmenting spectacularly.  The technologies for distribution are changing at light speed.  The old model looked like a Mississippi delta with all the music running back up stream, from the few to the many in the hinterland.  This is over.  The new world of music looks a lot more like a telephone exchange of the 1940s, with the remaining studios now obliged to play harried operator (bright lipstick, hair net, smoking theatrically) desperately taking calls and stabbing at a match.  Plug and play, feverishly.

Second, digital rights management continues to put the industry at risk.  Sunday, the New York Times leveled its guns at DRM (Randall Stross, below).  I was thinking that the problem with DRM is not that it protects the property of the music makers, but that it insults the consumer with barriers and inconvenience.  And as I was thinking this, I just happened to be struggling to open a new CD and the hinge on the jewel case snapped off, as it often does.  Insulting the consumer, let’s just call it a music industry specialty.

So the existing model is at risk.  And this is precisely why the Nettwerk model, let’s call it, has a chance.  (Actually, there are several experiments in the area, including Dimensional Associates, Ingenious Media and even Warner Brothers’ Cordless.)   The world of culture has always had minority plays that succeeded at the margin without ever putting the mainstream at risk.  But McBride’s innovation could work.  This could be the future. 

But how would I know?  Asking an anthropologist whether a market can work is like asking a TV weather man to describe the science of a cyclone.  "Well, I know the wind goes really fast.  In a circle."  [Spin finger in tight spiral to "demonstrate."]  No, this is a job for Pip and Dave at Coburn Ventures.  (And I hope they have a go.)

An anthropologist can comment on the cultural implications.  The interface between musician and industry is not very mediated.  The talent spotter, the A&R guy, might be a real fan of the music, but every successive link to the studio runs abruptly away from the music. It’s not mediation, really.  It’s more like a series of damage control chambers, designed to keep the artist out and the money in. (And we thought it was fans committing the piracy.) 

But what about Tom?  What if there were a Tom on the scene?  Now, the creative recruitment and the capital decision are being made by the same person.  And Tom doesn’t need to make a fortune, so he doesn’t need to find the next bright light, the next Beyonce, say.  He just has to make his numbers, and these can be as small as 100,000 units.   Even these numbers can make Tom a very rich man.  He doesn’t have to make a fortune to make his fortune. 

Tom doesn’t have to communicate his decision up the ladder so he is freed of miscommunication or committee cowardice.  He is not obliged to use a shot gun strategy, funding many artists to find the one who can pay for all the failures.   He can risk more because he is risking less.

Tom’s world scales beautifully.  If his choices are bad for the year or even the decade, he lives more simply.  He doesn’t have a payroll, to speak of, or fixed costs.  Well, he can always sell the place in Panama.  Best of all, he doesn’t have to force the issue.  He doesn’t have to manipulate taste or hand out payola.  He just has to read taste well. 

I think fans will like Tom as much as they now dislike Warner Brothers.  The latter always took a big because it was going to keep a big chunk.  Tom has a smaller foot print.  In a sense, he is merely charging less to do what the studio does:  spotting talent and funding it.  (And that may be what the consumer is now telling the studio when they help themselves to intellectual property: it shouldn’t have to cost that much.)   

Tom helps to solve the plenitude problem even as he helps exacerbate it.  He is prepared to take risks that the studio can’t afford, because he trusts his taste in a way a studio never can.  And I believe that when he begins to make money, he will have to pour some of this back into the creative community (art, film, not just music) because he will need to augment the social capital that allows him to book talent in the first place.  (In anthropology, this is called the "big man" model of reciprocity.)  What he cannot do is the studio thing: take the money and run. 

With many Toms in place, capitalism can no longer bend the world back into the mainstream.  Recently, capitalism has made a habit of making money for the center by selling culture from the margin.  Profits are used to fund the corporation, and the downtown towers, private jets, and stadium boxes thereof.   Profits are used to fund senior manager’s pay packages and the gated suburbs that rise from them.  Thus does capitalism sell one, alternative, culture to fund another, middle class, culture.  Thus does capitalism take out profit and  difference.  Tom’s capitalism will fund difference.   (I don’t believe this will ever be "long tail difference," but it will be much less chunky than it is now.)    

So where will Tom come from?  Some Toms will be naturally occurring and self invented.  And this is as it should be.  But some Toms will have to be brought along, in the same way, for the same reason, that any creative talent must be brought along.  Someone will have to play selector and banker to Tom so that he can play selector and banker to artists.   

And so who is that?  It won’t be the conventional b-schools.  It won’t be HBS. And it won’t be the big corporation as professional training ground.  It’s won’t be UBS or UPS.  It’s going to have to be a new kind of b-school, or perhaps one of those new fangled d-schools.  And when someone decides to create one of these schools, they should call me.   Oh and Russell Davies.  Yes, and Pip, Virginia and Steve, Cheryl and Craig, Tom, Carol, Peter, Jens, Auto, Leora, John, Tim, Marc, Daniel, Jaynie… Never mind, give us  the money and we will build you a business school that creates graduates who create businesses that create cultures.   No gentrification required.

References

Howe, Jeff.  2006.  No Suit Required: Terry McBride has a maverick approach to music management: Take care of the fans and the bands, and the business will take care of itself.  Wired.  September (Issue 14.09). here. 

McCracken, Grant.  2006.  Flock and Flow.  Bloomington: Indiana University Press.

Stross, Randall.  Want an iPhone?  Beware the iHandcuffs.  New York Times.  January 14, 2007.  here.

On this point, economists and anthropologist agree: we divide labor to specialize, and when we specialize, good things happen.  For the economist, the division of labor creates wealth.  For the anthropologist, it creates society. 

The anthropologist studies the hunter and gatherer where the division of labor is rudimentary.  Roughly: men hunt and women gather.  Otherwise, labor is not much differentiated.  Durkheim called this mechanical solidarity: a condition in which everyone knows and does pretty much what everyone else knows and does. 

It is precisely when labor is divided more finally that more complicated social worlds begin to emerge.  With the division of labor comes the accumulation of value, differentiation of social groups, distinctions of status, emergence of hierarchies, and the multiplication of difference.  Now each person, group or class does not necessary share what it knows and does.  People and groups become relatively mysterious to one another.  (I sometimes wonder if our use of the term mystery owes anything to the fact medieval guilds were so called.  Probably not.)

The economist picks up the story well down the evolutionary path where we find the division of labor becoming ever more intense. By doing a smaller part of a larger process, each worker becomes more efficient, more productive, and eventually more prosperous.  In Adam Smith’s famous example, the man who insists on making a pin by his own solitary effort will likely make no more than one pin a day.  Those who consent to take up one of the 18 tasks necessary to make a pin can participate in the manufacture of 48,000 pins a day. 

The contemporary corporation has an ambiguous relation to the division of labor.  It wouldn’t likely exist unless labor were well divided.  But it is often tempted to see how much of the division of labor can be contained within its walls.  Every so often, people  like Hamel and Prahalad must remind the corporation about its "core competences." The corporation downsizes, (and then of course secretly begins to sneak in competencies so that the cycle will have to repeat itself).

So much for the preliminaries.  Here’s what’s bugging me.  The division of labor is one of the ways the corporation makes itself more intelligent, opportunistic, and successful.  But this is not indefinitely true. With every additional division of labor, the corporation must become better at communicating between laborers.  In the 20th century, this was a difficult problem but not an intractable one.  Business theorists and business schools improved our ability to signal successfully across the corporate system. It was possible (often only just) for marketers, designers, operations, human relations, senior management, the street, the lab, the agency, and the consumer to stay in touch.   

Whatever its difficulties, the idea of divided labor was above reproach.  Yes, we could see it had costs.   Many of the corporation’s best ideas died in committee.  Response times were slowed.  Process overwhelmed objective.  (This is one of the reasons that we had to be urged to "manage by objectives.")  But by and large, the division of labor was seen to be worth it. 

The first inkling that we would have to rethink this equation came perhaps in the 1990s.  There emerged a world the corporation had never seen before.  An entire industry came up in about 5 years.  We are now accustomed by this rate of change.  We yawned by YouTube went from nothing to $1.6 billion of value in no time at all.  But in those days, this was troubling data.  It was not as if we had no prior warning.  It’s just that we were actually now going to have to heed these  warnings.  The advice of gurus like McLuhan and Toffler was no longer merely "fun reading" filled with "whacky propositions."  It was now installing itself as a formidable reality.

One of the things that began to dawn on us is that the corporation might now be living in a world in which it was no longer able to communicate successfully across its many divisions.  Darn it!  For the first time in its career, the corporation was having to contend with the fact that more division of labor might actually diminish the efficiency of the corporation.  Thus came the call for flatter organizations.  Horizontal differences were being removed from the organization.  Thus came the call for leaner organizations.  Vertical ones were being removed as well. 

That was the idea anyhow. The reality was something else again.  Many corporations found themselves badly gummed up.  The private sector was now beginning to look like the public sector, a place full of lumbering inefficiencies, people who didn’t quite get it, communications knots and lacuna that preventing the accustomed, the necessary swiftness of the corporation.

The corporation’s new inefficiency was complicated by diaspora of talent, a virtual Pakistan in the making, where certain people began to abandon the corporation for consulting, and those who remained where often tortured by the new regime of inefficiency.  The latte hadn’t signed up for this.  Many had joined the corporation to add exoskeletal powers to their own.  Now, they might as well be the captives of a Museum where everything grinds fine and slow, when they ground at all.

What do we do?  One thing we can do is to begin rethinking the hallowed notion of a division of labor.

References

Durkheim, Emile. 1893.  The Division of Labor in Society.  New York: The Free Press. 

Hamel, Gary and C.K. Prahalad. 1990. The Core Competence of the Corporation. Harvard Business Review. 68. 3. May-June. pp. 79-93.

Smith, Adam.  1776.  An Inquiry and Causes of the Wealth of Nations.  Volume 1, Book 1, Chapter 1, Section 4.  See the Liberty Fund edition on line here.

Acknowledgments

Thanks for allposters.com or the poster of knots here. 

Several weeks ago, a bolt of excitement ran through the scientific community.  There was now direct proof of the existence of "dark matter." 

Several decades ago it was recognized that galaxies rotate much faster than their mass, stricktly speaking, allows.  Theorists suggested that something must keep these galaxies from flying apart.  They called this something "dark matter."

I am beginning to wonder if marketers and social scientists should posit a "dark matter" of our own.

There are, at least, two forces at work in the contemporary world.  One is fragmentation.  Every social group (i.e., nation, culture, ethnic, subcultural) is fragmenting into smaller groups.  Every organization is "baggier" than it used to be, containing a looser assembly of elements themselves more numerous and more heterogeneous in nature than before.  Indeed, even small units (neighborhoods, familities and selves) feel the effects of fragmentation. 

The other force is change.  This comes faster and goes further.  What used to take a century can now happen in a decade.  What used to take a decade can now happen in a year or two.  (Let’s mark YouTube as exhibit "A."  This organization went from nothing to $1.6 billion of value in a couple of years.) 

Between the two of them, fragmentation and change put the very system of contemporary life in question.   In the first decade of the 21st century, "system" is too generous a word.  There is no overarching architecture.  But things do seem to work together, the center does somehow hold.  We might not have a system but we are still systematic-ish.  So is this good for the duration?  Is there a point at which things cease to sync?  At what point do fragmentation and change accumulate until a wheel comes off?

This is no liberal cry.  I am not making an argument about "the world we have lost," life before the "cash nexus," or the effects of alienation, anomie, or bowling alone.  The sociologists and one or two economists have made a good living telling us the sky is falling, and I dearly hope that I have not just signed on as one of them. 

But I am growing impatient with the Panglossian argument that says that we are sustained by the invisible hand of  "emergent properties" or the "wisdom of crowds." I used to buy this, and I might sign up again some day.  But as an anthropologist, I do "look down" every so often to see to what sustains contemporary world.  I am always relieved to see that we are not "treading air" but usually I am hard pressed to see what holds us up.

Is there dark matter there.  What am I missing?

References

Anonymous.  2006. Galactic crash sheds light on mysterious dark matter: researchers.  Anatara News.  here. 

Those of us who loiter at the intersection of economics and anthropology have many good qualities…except for the loitering part. 

One of these is that we understand some of the dynamics that drive culture and commerce.  This gives us a leg up when it comes to investing, and THIS gives us an opportunity to turn our active curiosity into cash, cash, cash!  (As long as the academy continues to do a dreadful job understanding contemporary culture, we must find our own funding.)

Of course, we have to get better at reading and understanding the dynamics of culture and commerce, but as we do, we pull away from our chief competitor, the Wall Street analyst.

Pip Coburn offered a thought in this direction yesterday in his weekend newsletter:

We look to invest in situations involving monumental change. We look for situations where the pace of money coming into "the machine" to out of  "the machine" will be materially altered. The underlying premise is that monumental change may lead to an immediate alterations of inherent value. If we are able to have clarity and conviction regarding the monumental change, we will be able to make money since Wall Street is poor at assessing monumental change but rather lives in a space of considering that change happens only incrementally. (reproduced by kind permission of Pip Coburn)

Pip’s newsletter is on restricted circulation, but see his recent book for a general statement of his view.

References

Coburn, Pip.  2006.  The Change Function.  New York: Portfolio.  at Amazon here.

Conflict of investment declaration

I am a "change fellow" at Coburn Ventures. 

Yahoo is hiring academic economists and other reseachers, we learned today.

This development is driven by a couple of things.  As a newcomer, Google stole a march on incumbent Yahoo and Yahoo would like it back.  Google has data miners, but it appears often to act as if it can win and sustain advantage with great technology alone.  If Yahoo could add new user sensitivity, this might help close the gap. 

Second, Yahoo has staggering amounts of data that can be used in house and sold to others.  In July, there were 482 million unique visitors, each of whom, over the course of the month, spent around 4 hours viewing around 240 pages.  This generates data like crazy: over 12 terabytes a day. 

It’s a little like the old story from the Dole pineapple plantations of in 20th century Hawaii.  Dole would can the pineapples and pour the juice into the ocean.  Finally, someone said, "You know, I think you could sell that stuff."  In this case, of course, the "juice" doesn’t just make the corporation richer, it makes it smarter.

In fact, this should work like a virtuous circle.  Orphan data get a home.  Academics get grist for the mill.  Yahoo gets more consumer centric.  More consumers join Yahoo and spend more time there.  More data is generated. The cycle begins again. 

But why these academics? Economists have formidable powers of pattern recognition to be sure. And they are good at working with just this kind of data.  By why proceed is if the numeric measures were the only ones available to us? Economists too often act as if they have taken a vow of noncontact, that they cannot engage people unless their existence has been registered at a distance, and they cannot know about these people unless data have been metriculated out of the real world into the realm of the number. 

Well, if we are dealing with the census data for a couple of years ago, these are all practices well advised.  But that 12 terabytes that Yahoo will collect today is from people who are not only alive, and in fact probably still on line.  If we think we see a pattern, there is no reason why, with the appropriate permissions, Yahoo could not poll players and convene focus groups on line. Indeed, there is no reason why the economist could not make contact with a living, breathing, blogging individual and determine the "whys" that make the "whats" make sense.

The trouble of course is that economists don’t ask because they have the suspicion they already know.  The actor is self-interested, rational, and advantage seeking. But come on.  Reason not the need, as Lear is made to say, or our lives are "cheap as beasts."  If this were the only motive at work in the human communities, markets and cultures would be simpler, flatter, more predictable and less "exuberant" than they prove so persistently to be. 

We can discover these other motives, extracting them from those terabytes of data, but not if the Yahoo economists think them away. 

My conclusion (and I think you saw it coming; it is, after all, self interested) is that all that the mountain of Yahoo data is a task, a trek for economists and anthropologists working together.  Take us along as sherpa if you have to.  But  take us along. 

References

Delaney, Kevin J.  2006.  Hoping to overtake its rivals, Yahoo stocks up on academics.  Wall Street Journal.  August 25, 2006.

Yesterday, Sumner Redstone fired the most bankable star in popular culture.  Now we have dust up on our hands. 

Cruise’s lawyer, Bert Fields, called Redstone’s decision "petulant and puerile" and suggests that Redstone may have "lost it completely." Redstone noted, well, yes, petulantly, that Viacom shares were up yesterday and that proved "the street approves of what I did."

The relationship between Hollywood and Wall Street has always been an uneasy one.  The latter is drawn to the Hollywood for the glamor, the celebrity, and of course the parties.  Hollywood is grateful for the money, but it is loathe to surrender creative control or suffer any sort of interference.

This is the way Cameron Crowe put it several years ago.

You have more and more people coming into the tent with the creative guys. You have marketing and concept testers, advertising people. What you find gets the high numbers is easily appealing subjects: a baby, a big, broad joke, a high concept. Everything is tested. The effect is to lessen the gamble, but in fact you destroy a writer’s confidence and creativity once so many people are invited into the tent.

References

Edelstein, David.  2006.  M. Narcissus Shyamalan.  New York Magazine.  here.

Marr, Merissa and Kate Kelly.  2006.  For Hedge Funds, Backing Cruise Could Prove to Be a Risky Business.  Wall Street Journal.  August 24, 2006

McCracken, Grant. 2006.  Mr. Redstone, get off the couch.  This Blog Sits at the Intersection of Economics and Anthropology.  August 23, 2006

Weinraub, Bernard. 1997. Hollywood learns small is beautiful. New York Times. February 25, 1997.

Henry Jenkins has just published Convergence Culture. 

This book will create a seismic  event in the social sciences, where Jenkins’ name is widely known and much admired.

We must hope the book will be read and embraced in marketing and branding circles where it has the potential to change the way we think and what we do. 

I cannot recommend this book too highly.

Jenkins’s book is published by New York University Press.  You may order it from Amazon.com here.

Conflict of interest declaration: Henry Jenkins is the head of the Department with which I am associated at MIT.  I don’t believe this influences my recommendation, but full disclosure is called for. 

Post script:

I am still on vacation!

The brand is an elephant and we are all blind men.  The designers have one idea of what a brand is.  The Jungians another.  The marketing managers, b-school professors, advertising creatives, account planners…everyone has a formal model, and a working one.

There is an anthropological view, and Rob Walker captured it most precisely yesterday in the New York Times. 

[A brand is] a process of attaching an idea to a product. Decades ago that idea might have been strictly utilitarian: trustworthy, effective, a bargain. Over time, the ideas attached to products have become more elaborate, ambitious and even emotional. This is why, for example, current branding campaigns for beer or fast food often seem to be making some sort of statement about the nature of contemporary manhood. If a product is successfully tied to an idea, branding persuades people — consciously or not — to consume the idea by consuming the product. Even companies like Apple and Nike, while celebrated for the tangible attributes of their products, work hard to associate themselves with abstract notions of nonconformity or achievement. A potent brand becomes a form of identity in shorthand.

If brands are ideas, then branding is a process of meaning manufacture and management.  That’s our job.  How to get meanings into brands, that people might extract this meaning for purposes of identity construction.

References.

Walker, Rob.  2006.  The Brand Underground.  New York Times, July 30, 2006 and here. 

Announcement

I am on vacation this week.