Whatcha Gonna Do With That Duck?: And Other Provocations, 2006-2012 (54 page)

What’s actually happening is this: we’re realizing that the Industrial Revolution is fading. The 80-year-long run that brought ever-increasing productivity (and, along with it, well-paying jobs for an ever-expanding middle class) is ending.

It’s one thing to read about the changes the Internet brought and it’s another to experience them. People who thought they had a valuable
skill or degree have discovered that being an anonymous middleman doesn’t guarantee job security. Individuals who were trained to comply and follow instructions have discovered that the deal is over … and it isn’t their fault, because they’ve always done what they were told.

This isn’t fair, of course. It’s not fair to train for years, to pay your dues, to invest in a house or a career and then suddenly see it fade.

For a while, politicians and organizations promised that things would get back to normal. Those promises aren’t enough, though, and it’s clear to many people that this might be the new normal. In fact, it
is
the new normal.

I regularly hear from people who say, “enough with this conceptual stuff, tell me how to get my factory moving, my day job replaced, my consistent paycheck restored …” There’s an idea that somehow, if we just do things with more effort or skill, we can go back to the
Brady Bunch
era and mass markets and mediocre products that pay off for years. It’s not an idea, though; it’s a myth.

Some people insist that if we focus on “business fundamentals” and get “back to basics,” all will return. Not so. The promise that you can get paid really well to do precisely what your boss instructs you to do is now a dream, no longer a reality.

It takes a long time for a generation to come around to significant revolutionary change. The newspaper business, the steel business, law firms, the car business, the record business, even computers … one by one, our industries are being turned upside down, and so quickly that it requires us to change faster than we’d like.

It’s unpleasant, it’s not fair, but it’s all we’ve got. The sooner we realize that the world has changed, the sooner we can accept it and make something of what we’ve got. Whining isn’t a scalable solution.

At the same time that our economic engines are faltering, something else is happening. Like all revolutions, it happens in fits and starts, without perfection, but it’s clearly happening.

The mass market is being replaced by multiple micro-markets and the long tail of choice.

Google is connecting buyers and sellers over vaster distances, more efficiently and more cheaply than ever before.

Manufacturing is more of a conceptual hurdle than a practical one.

The exchange of information creates ever more value, while commodity products are ever cheaper. It takes fewer employees to generate more value, make more noise, and affect more people.

Most of all is this: every individual, self-employed or with a boss, is now more in charge of her destiny than ever before. The notion of a company town or a stagnant industry with little choice is fading fast.

Right before your eyes, a fundamentally different economy, with different players and different ways to add value, is being built. What used to be an essential asset (for a person or for a company) is worth far less, while new attributes are both scarce and valuable.

Are there dislocations? There’s no doubt about it. Pain and uncertainty and risk, for sure.

The opportunity, though, is the biggest of our generation (or the last one, for that matter). The opportunity is there for anyone (with or without a job) smart enough to take it—to develop a best-in-class skill, to tell a story, to spread the word, to be in demand, to satisfy real needs, to run from the mediocre middle, and to change everything.

Note! Like all revolutions, this is an opportunity, not a solution, not a guarantee. It’s an opportunity to poke and experiment and fail and discover dead ends on the way to making a difference. The old economy offered a guarantee—time plus education plus obedience = stability. The new one, not so much. The new one offers a chance for you to take a chance and make an impact.

Note! If you’re looking for “how,” if you’re looking for a map, for a way to industrialize the new era, you’ve totally missed the point and you will end up disappointed. The nature of the last era was that repetition and management of results increased profits. The nature of this one is the opposite: if someone can tell you precisely what to do, it’s too late. Art and novelty and innovation cannot be reliably and successfully industrialized.

In 1924, Walt Disney wrote a letter to Ub Iwerks. Walt was already in Hollywood and he wanted his old friend Ubbe to leave Kansas City and come join him to build an animation studio. The last line of the letter said, “PS I wouldn’t live in KC now if you gave me the place—yep—you
bet—Hooray for Hollywood.” And, just above, in larger letters, he scrawled, “Don’t hesitate—Do it now.”

It’s not 1924, and this isn’t Hollywood, but it is a revolution, and there’s a spot for you (and your boss if you push) if you realize that you’re capable of making a difference. Or you could be frustrated. Up to you.

The media try to report on the world economy or the national economy, or even the economy in Detroit or LA. This subject is easy to talk about, statistically driven, and apparently important to everyone.

Alas, this report has virtually nothing to do with your day, your job, and your approach to the market. That’s because geography isn’t as important as it used to be, but more than that, it has to do with the fact that you don’t sell to everyone, and the economy is unevenly distributed.

If the unemployment rate in your industry doesn’t match the national numbers, the national numbers don’t matter so much.

At the largest Lexus dealer in New Jersey, they’re sold out of many models, with a waiting list. In some towns in Missouri, the unemployment rate is twice what it is in your town. In the tech industry, the rate you can charge for developing killer social apps on a tablet is high and going up.

Economics used to be stuck in town. Now, as markets and industries transcend location, useful economic stats describe the state of the people you’re working with and selling to.

If your segment is stuck, it might make sense to stick it out. It also might be worth thinking about the cost of moving to a different economy.

It all started because of the discovery problem.

Too many things to choose from, and more every day. No efficient
way to alert the world about your service, your music, your book. How about giving it away to help the idea spread?

The simplest old-school examples are radio (songs to hear for free, in the hope that someone will buy them) and Oprah’s show (give away all the secrets in your book in the hope that many people will buy).

There’s a line out the door of people eager to spread their ideas, because in a crowded marketplace, being ignored is the same as failing.

Most people, most of the time, don’t buy things if there’s a free substitute available. A hundred million people hear a pop song on the radio, and less than 1% will buy a copy. Millions will walk by a painting in a museum, but very few have prints, posters, or even inexpensive original art in their homes. (In the former case, the purchased music is better—in quality and convenience—than the free version. In the latter case, the print is merely more accessible, but the math is the same—lots of visits, not a lot of conversion.)

We don’t hesitate to ask a consultant or doctor or writer for free advice, but often hesitate when it involves a payment. (“Oh, I’m not asking for consulting, I just wanted you to answer a question …”) And yes, I’m told that some people cut their own hair instead of paying someone a few bucks to do it.

None of this is news. Two things have changed, though:

1. As more commercial activity involves digital goods (websites, ebooks, music, etc.), the temptation to spread the idea for free (to aid discovery) is actually economically possible—if you believe that the free spread will lead to more revenue in the long run. The cost of a single copy is zero, so you can choose to set the digital item loose without bankrupting yourself.
   
2. A culture of free digital consumption has evolved and is being adopted by a huge segment of the most coveted consumers (teenagers, the educated, the upper-middle class).
   

The bet a creator makes, then, is that when she gives away something for free, it will be discovered, attract attention, spread, and then, as we
saw with radio in 1969, lead to some portion of the masses actually buying something.

What’s easy to overlook is that a
leap
is necessary for the last step to occur. As we’ve made it easier for ideas to spread digitally, we’ve amplified the gap between free and paid. It turns out that there’s a huge cohort that’s just not going to pay for anything if they can possibly avoid it.

Radio thirty years ago was simple: everyone hears it for free and a few buy it.

For a time, one could use
free
to promote an idea and to have leverage to turn that attention into paid sales of a similar item (either because free went away or because the similar item offered convenience or souvenir value).

I think that might be changing. As the free-only cohort grows, people start to feel foolish when they pay for something when the free substitute is easily available and perhaps more convenient.

Think about that—buying things now makes some people feel foolish. Few felt foolish buying a Creedence Clearwater Revival album in the 1970s. They felt good about it, not stupid.

This new default to free means that people with something to sell are going to have to push ever harder to invent things that can’t possibly have a free substitute. Patronage, live events, membership, the benefits of connection—all of these things are outside the scope we used to associate with the creative business model, but that’s changing, fast.

Lady Gaga’s music is basically free. It’s the concerts that cost money. McKinsey’s consulting philosophy is free in the library; it’s the bespoke work that costs money. Watching a movie on Netflix is free—once you pay to belong. Playing golf at the local public course is pretty cheap; it’s membership in the fancy club that costs money.

There’s a growing disconnect between making something worthwhile and getting paid for it. The digital artifact is heading toward free faster and faster, and the inevitable leap to a paid version of the same item is going to get more difficult.

Creators don’t have to like it, but free culture is here and it’s getting more pervasive. The brutal economics of discovery combined with no marginal cost create a relentless path toward free, which deepens the gap. Going forward, many things that can be free, will be.

[Worth a side note to talk about the “should.” Some commentators have argued quite forcibly that things shouldn’t be free, that creators should always be paid, that 47% of our economy is based on intellectual property.

Of course, free has
always
been part of the equation. These commentators, the ones arguing in interviews or in blog posts, are already sharing their ideas for free. The best-selling book of all time has no copyright and has been shared freely for thousands of years. Musicians gladly show up to play for virtually free on
American Bandstand
or
The Tonight Show
.

Most ideas have never been something one could monetize. The inventor of the knock-knock joke, for example, and the two college kids who coined Six Degrees of Kevin Bacon have put ideas into the idea stream, and they spread without much thought for cash compensation.

I’m certainly not arguing that content
should
be free—it’s clear that the argument on either side isn’t absolute. My argument is that the line for using free as a discovery tool is shifting, and the best (and perhaps only) way to monetize in the future is for the idea to be encased in something that could never realistically be free. Products and services with a marginal cost of more than zero, for example.

Should consumers be willing to pay for great content? You bet. In fact, paying for content is a great way to ensure that more of it gets made.

Does the game theory of the market make it likely that those in search of discovery will accelerate the use of free to get attention? Of course.

Creators have trained the most coveted, biggest-spending, and
intelligent portion of the market to expect that many digital items will be free. Now it’s up to us to wrap those items in such a way that they’re worth paying for again.]

Most of us are happily obsessed with the economy of money. We earn it and we spend it and we generally pay attention to what things cost.

Certainly, salespeople and marketers are truly focused on the price of things, on commissions and shelving allowances and net margin and the cost of goods sold.

With all of this easily measured activity, it’s easy to overlook the fast-growing and ever more important economy based around attention.