These exponential times

Faster innovation. More churn? But no egalitarian paradise.

1.  A plummeting Coasean floor means we can do more things outside of traditional organizations like businesses.

Here’s a question that I try not to ask in earshot of my bosses.  Instead of employing me on a salary, why don’t my firm put out a tender for every piece of work I deliver?  In an open market, with other people competing to perform broken down chunks of my job, my company could end up paying less.  Reassuringly for me, Ronald Coase explained why in The Nature of the Firm in 1937.  It is because of the additional transaction costs that my firm would incur – in particular of finding a contractor and enforcing a contract for every piece of work I currently undertake. We can describe these kinds of costs as the cost of cooperating.   Companies exist in order to manage these cooperation costs.  They do things like employ managers and pay for HR departments  – and create, for the most part, hierarchical organizational structures – because, for the activities that they’re engaged in, this is a more effective way of directing a workforce than an open market.  But of course this management has a cost, much of it fixed.  Firms exist, therefore, when the costs of employing and directing staff to undertake a particular activity are less than the potential gain from that activity.

But what if those cooperation costs exceed the potential gain of an activity?  Continue reading These exponential times

Liberals shouldn’t slam Facebook

TV rots your brain

Every Christmas I like to have an argument with my mum, usually about technology, and usually conducted like an irregular serial – picked up several times over the course of the holiday.  In previous years my Christmas technology arguments have been about kitchen appliances; can you believe we still don’t have a microwave or a dishwasher?  Next Christmas it has got to finally be about the pitiful size of our TV, a debate that was this time sidelined by 2009’s topic: social networking.

In a car ride to visit grandma, mum passes this article by Julia Neuberger over to the back seat. (Her producing articles from the Guardian, often snipped out and left on my bed, is a feature of our arguments.)  Essentially Baroness Neuberger had summarised what my mum thinks:  that social networking is making us less social by wrapping us in a virtual world and isolating us from ‘real’ relationships.

This is of course bunk. Continue reading Liberals shouldn’t slam Facebook

I’m a better person because of Facebook (we all are)

DebateAP2202_468x355Pretty much anybody I meet I try to friend on Facebook.  I’m friends with my dad, I’m friends with some kids I used to teach, my colleagues, my uni friends, school friends, some people I’ve only ever met once, and I’m sure I’m friends with some people I don’t actually like.

Let me quickly say this is not a post about how you should use Facebook.  There are legitimate conversations to be had about how we should interact with each other online.  But you miss the point if you debate things like how many friends you ‘should’ have on Facebook (what portion of your social graph you should friend).  The internet is almost defined by the fact that we are able to use the tools that emerge in – often unexpected – ways that most suit us. Continue reading I’m a better person because of Facebook (we all are)

A little (Blairite?) optimism about the internet.

Peasants Revolt 1381
Richard II diffuses the 1381 Peasants’ Revolt at Smithfield

The tools that are (really only just) becoming available on the internet have the potential to place the interests of the many, probably for the first time in our history (since the early Medieval period, since…forever?) , on an equal footing with the special interests of the few.

Continue reading A little (Blairite?) optimism about the internet.

Missing the point about Twitter

I think the guys at Pear Analytics, as reported by the BBC here, are missing the point about Twitter.

The whole bloody point of this social web business is that there is zero cost to tweet or post or comment.  So it is almost impossible to pass-along no value.  Even if only my mum is interested that ‘I’m eating a sandwich’ then I have passed on a tiny bit of value at zero cost.

Moreover, it is exactly their categorization of this kind of message as ‘pointless babble’ that show they miss the point.

We are in an age of zero cost, peer to peer and mass communication.  It is not the role of anybody to describe conversation as pointless babble.  That’s an old media mindset.  There aren’t gatekeepers any more.  I’ll define what I think is pointless thank you very much.

It is very difficult to separately categorize ‘self-promotion’ from ‘conversation’ or even ‘pointless babble’.  Anybody in the business of self-promotion is increasingly required to engage in conversation.

And far more importantly:  Aggregate the pointless babble of hundreds of thousands of people and it’s no longer pointless babble.

Head to Head: Should music be free? Part 2

This is another from my work blog.head to head

Does the music itself have value, or is monetization through gigs & merchandise enough?

Cont’d from Should music be free? Part 1 where Oli and Jacob discussed the musician Trent Reznor’s pioneering efforts online to make music pay.  And Oli told Jacob he may have got the wrong end of the stick.

Oli:  Why shouldn’t people pay to own or play a record (and yes, ‘pay’ here could include Spotify style ad-supported models, I mean it in a wide sense where musicians are being reimbursed for people listening to their recorded music)?  I believe musicians should be able to monetize the actual music.

Some people are claiming that music should be free, that digital piracy is absolutely fine because Artists can and should make money out of just gigs and merchandise.  This is a position held by a fair number of technology utopians but I believe is disconnected from how most people feel.  Most people see value in music and are quite happy to buy a song from the artist.  The current problems have been to do with cost and ease of purchase/use, not with the actual concept of paying for music.

Jacob: Completely agree that music has a value.   I’d be cautious of one point:  ‘musicians should be able to monetize [it]’ – I’m not sure how far ‘shoulds’ get you in economics…

Artists need to monetize music however they can.  And I don’t think making money out of gigs and merchandise is a consolation prize for them.

I think you’re right that the Nine Inch Nails innovation is exactly what we need to see.  I also agree that the concept of paying for music is probably accepted and that it’s issues around ease of purchase (and also ideas around ‘fair value’ – the feeling that we’ve been ripped off for so long) that are really the important ones.

Oli: Fair point on the sloppy usage of ‘should’. What I intended to convey was that I believe people are actually okay with the concept of paying for recorded music and most people do not expect it to be free. If I am correct in this, then musicians should be in a position where they can charge money for it and people will want to pay for it. I didn’t intend ‘should’ to convey that there was some ‘God-given’ right, or that there was any moral cause here.

I still disagree about gigs & merchandise.   I think we may be going across purposes here because I’m not saying that these aren’t important revenue streams, I am merely rejecting the notion put forward by some people that all recorded music should be free and that gigs & merch are an entirely satisfactory alternative revenue stream.

This is hugely insulting to these individuals who have worked to produce the music, they are effectively being told that all that work is worthless and they must now do further work before they should be recompensed.  I can’t understand how it could be argued making money off merchandise is okay, but making money off recorded music is not. If someone were to come along and start producing perfect replicas of the bands merchandise at a lower cost, stealing their customers, how does the band now make money? Purely through gigs? If we would protect the band and make producing these cheaper replicas illegal, why is this different from recorded music?

I currently cannot see the feasibility of any system where bands are not recompensed for recorded work.  Ultimately I won’t be surprised if the mechanism for payment gets hidden (e.g. a subscription/tax is hidden somewhere, song plays are tracked and artists are then recompensed out of a pot based on this) but there has to be some system whereby artists get paid for recorded music.

Head to Head: Should music be free? Part 1

Head to Head imageThis is from my work blog

…the first post in an occasional series called ‘Head to Head’, in which Promise employees publish email conversations they are having on topical issues.   The first debate comes from Oli and Jacob, who worked together out of our Dubai office in 2008, building Promise’s largest and longest running online community to date.

On their days off in Dubai they would debate all things interesting about the impact of the new era of mushrooming diversity, globalization and mediated communication – particularly in relation to the geeky world of the web.

Jacob thinks Oli is an unfailing cynic, hyper-critical of anything that smells like a fad or a bandwagon.  Oli thinks Jacob is way too optimistic and doesn’t want to hear him talk about ‘web 3.0’ or Twitter ever again.

They were arguing so much that Jacob was sent to our Washington, DC office.  These informal  posts are cut and pasted pretty much directly from their continuing email conversations…

Oli kicked off the debate with a link about  Trent Reznor of Nine Inch Nails releasing an iPhone App and generally being pretty innovative online:  building communities and pioneering ‘a new, fan-centered business model that radically breaks with the practices of the struggling music industry’.

Jacob: The way to make money as an artist is to build a massively engaged community online.  Monetize through concerts, (+ merchandising I suppose).  Love it.  I like his point about starting where the fans are.  Starting from the point that we expect a lot of that stuff to be free now.   I like it as another way to monetize eyeballs without relying on advertising.  The attention economy is not dead.

Oli: Yeah although I’m cautious you may have gotten the wrong end of the stick. Reznor doesn’t believe music should be free but he’s being pragmatic in a world where you are often competing against free.  He‘s done a lot of innovative stuff  selling his records.

His collaborative album with Saul Williams was released as a free MP3 or for $5 you could get it in a variety of higher quality formats including lossless.  Ghosts I-IV was available as a partial free download, a complete free stream as well as several paid editions at various price points. At the top end was a limited edition $300 CD/Vinyl/Blu-Ray deluxe pack with footage, original multi-track audio files, signed photography book etc. So he is doing what he can to actually retain the value in the music but unlike the record companies he’s starting from the premise that you need to show people the value in the product, not just demand that there is value in it.

A lot of things work well for him because he’s an established artist, but I like the fact that unlike the cynical Radiohead gimmick etc. he is actually looking into new business models that other artists could replicate (e.g. the Saul Williams case).

Jacob: Absolutely.  Not saying music should free.  Monetizing gigs and merchandise is still monetizing the music.   As you and he say it’s about being pragmatic and starting from where people are now (in terms of their attitude to music consumption), rather than moaning that people aren’t where you want them to be.  Paul Carr in No use crying over spilt ink is on a similar theme in relation to newspapers.

I think the new business model is the most interesting point.  It’s a different kind of community to what we do.  But, you’re right – he knows how to engage people.  The point of his new business model is to convert that engagement into revenue.

TBC shortly…