Pop!Tech Chris Anderson

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Posted by: peder on Jun 22, 2007

What happens when material things become free? Long Tail author and Wired magazine editor Chris Anderson examines new models of wealth distribution and claims we’re moving from economies of scarcity to an age of abundance.

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♪ POP!TECH ♪
BRINGS TOGETHER
THE WORLD'S LEADING THINKERS
TO SHARE INSPIRATION AND IDEAS
IGNITING CHANGE
HUMAN POTENTIAL
THIS IS PART
OF THEIR ONGOING
CONVERSATION
POP! TECH
POP! CAST
Presented by Lexus Hybrid Drive
Gives More to the Driver, Takes Less From the World
Chris Anderson POP!TECH 2006
My dangerous idea is that I'm not going to give my long tale talk.
Instead, I'm going to give a talk I've never given before.
So, wish me luck. [audience applause]
And I'd like to talk about a guy who had his own dangerous idea.
He asked, "What happens when things are free?"
This is Carver Mead. He is a Cal Tech professor,
and he was one of the first people to really internalize the lessons of Moore's Law.
And what he realized was Moore's Law meant that transistors,
the elements of semiconductors, were going to get cheaper and cheaper.
As semiconductors got cheaper and cheaper, the individual transistors,
which were once expensive, were essentially going to be free.
And he asked the question, "What happens when transistors get free?"
And the answer is that you should waste them.
"Waste is Good"
The traditional method of computing was that you need to be extremely,
extremely careful, and prudent in your use of this scarce computing resource.
And he said, "Well, if it were free and like air, and you could use as much of it as you want,
what would you do?"
So he preached the gospel of the economics of VLSI
--Very Large Scale Integration--
which was the beginnings of the--sort of the new semiconductor era,
and the guy who listened and understood what question he was asking,
and actually thought about what you might do with free transistors,
was Alan Kay, who was at Xerox PARC.
And Alan realized that one thing you could do was something wasteful on a screen.
So the old model of computing was that the processor was so expensive,
that transistors were so pricey, that you had to use them for the algorithm itself.
That they must be used to run the code, to process the information to produce the answer.
And you had to be very discriminating about who got to use the computers,
you had to be discriminating about how they used the computers,
and you had to be very discriminating in the way in which the computers interacted with this person
because the processing must be used for the computational task itself.
And so you ended up with command lines.
like icons, and animation, and mice, and eye candy?
What would that do?"
That is very scarey thinking when transistors cost a lot of money,
but when you get more and more of them every year, you can start to waste them.
And that created this. And that created the personal computer revolution,
and that expanded the computing world from a small--
a small group of elite, to all of us.
And we found things to do with computers that the small group of elite
never would have thought of themselves,
because they wasted transistors to make computers easy to use,
to make computers beautiful, to make computers fun,
and they completely changed the way we thought about computers.
They thought about abundance, not scarcity.
Another thing that's becoming free, is storage.
The old model of storage was that you have to be careful about what you store,
you have to delete things, you need to be discriminating.
And there was a business in web mail, and you may remember,
I think you got 2 megabytes on HotMail.
And then Google looked at the economics of abundance and they said,
"You know what? Storage is going to become cheap faster than people can use it.
So we're going to give people gigabytes. And then 2 gigabytes."
And this is actually a screen from their site at the moment.
This number right there, that's actually increments as you go,
as you sit there, as you watch, you get more and more storage faster than you can use it.
And then you think about, "What was this 'Your Mailbox is Full' thing?"
[audience laughing] "Where did that come from?"
And it came from scarcity thinking.
Google thought different because they looked at what 'Free' could enable,
and they managed to revolutionize what was previously
a pretty mature business of web mail.
The television industry, and video industry, is one all about scarcity.
They have limited channels, there are limited hours in the day,
Prime Time is only so long, and they're extremely discriminating
about what gets out.
When I say discriminating, I don't mean they necessarily apply a high quality bar,
they need [audience laughing]
they need to put things on those scarce channels
that will have very broad appeal,
and so you fall back on formulas.
You fall back on lowest common denominator.
You fall back on a somewhat low-brow interpretation of what should be on television,
and it's a very narrow definition as well.
And then another company realized that channels could be free,
and that anybody could get on-line, and you didn't have to discriminate
and the marketplace could sort it out,
and later you'll meet one person who is exactly what's enabled
when you think of band width, and channels, as being free.
And to get expanded even further, there is now something called 3D printing.
And what 3D printing does is it takes bits, like a CAD-CAM drawing,
and turns them into atoms.
It does it by taking the information from the screen,
and using a laser to trace the resin or powder,
and out of this bath comes an actual object.
What's interesting about that is that now complexity is free as well.
In a manufacturing world, 3 gears cost 3 times to make as one gear.
In a 3D printing world, this object cost no more to make than a block of plastic.
A plastic toy costs the same as a Timex watch made by the same technique.
Now, for the first time in history, complexity is free as well.
And what beautiful, extravagant, unnecessarily complex things
will we make now because we can?
What's going to be the Mac-OS of physical objects?
So you now can realize that there's two ways to see the world.
You can see the world the way we've traditionally seen it
through scarcity, through limits, limited shelf space, limited screens,
limited stations. And then you can also see the world through
this new lens of abundance.
For 100 years, the channels by which we get content and products out to the world
have been limited. And we have been forced to be extremely prudent
in the way we use them. We've been discriminating,
and we've only let the tiniest fraction of everything out there
get out, because they're the only ones that pass the economic test
of scarce distribution mechanisms.
But now we have--over the last 10 years, we've had the rise of new marketplaces
that have infinite shelf space.
This is an example that I actually use in my book.
Wal-Mart--you may think of Wal-Mart as being a marketplace of abundance,
but it's a mile wide and an inch deep.
They have about 5 of every kind of product you might imagine,
but there are 500 or 5,000.
This is a--the example on the right is from Amazon.
KitchenAide makes mixers, and in most stores you can buy it in one of three colors.
You can buy it in white, and then usually the store will have an exclusive:
Cobalt Bule or Red, and that's all the variety you get.
But they make it in 57 different kind of colors
and it's just a pull down menu on Amazon.
And it always turns out that every year, there's one color that nobody expected
that's going to be in the Top 10.
At the beginning of the year the stores bid on who's going to get the hot colors,
and last year, one of the hot colors was tangerine.
No one knows why, no one expected it,
and it only became visible because customers were able to choose all the options
and they weren't forced to choose the ones that only made sense
in the shelf space of Wal-Mart or another retailer.
Blockbuster Video is a classic example of the economics of scarcity.
Not only do they have limited shelf space, but they have to have a physical copy
of each DVD that they're going to rent,
and that's why you see this week's releases stacked 100 high.
But, of course, on NetFlix you have infinite shelf space, and
the number of copies--one copy doesn't force out another,
and as a result, rather than just the blockbusters at Blockbuster,
you can have sub-genres that don't make any sense in the traditional
way of distributing films--either theaters or rental stores.
These are the independent sub-genres.
As it turns out, one of the most popular is the Indie gay and lesbian.
That's not pornography by the way, that's just gay and lesbian themes.
They don't make sense on the shelves at Blockbuster.
Their assumption was, the market wasn't big enough
to justify the high economic cost of traditional retail.
NetFlix didn't have to apply that test, and NetFlix found that in fact there was a huge demand
for these genres that hadn't been tapped before.
There was a latent demand for niche products out there
that was assumed to be essentially zero,
but when you can test it in a marketplace where shelf space is free
you discover that it's much, much larger than you actually thought.
Two weeks ago Tower Records went into liquidation.
The end of an era.
It's a scarcity model of music distribution, distributing plastic discs on shelves
with limited shelf space.
And what drove it out of business, of course, was
the fact that the consumers are flocking to an abundant marketplace.
i-Tunes has more than 3 million tracks.
The peer-to-peer networks have 9 million tracks.
There's probably 25 million tracks out there in vinyl, or in live shows,
or remixes that are soon going to be available.
Meanwhile the standard record store might only have between 50,000 and 60,000 tracks.
Extraordinary abundance on-line.
The audience is flocking to choice and variety and more,
and that's what's enabled when you have digital files
which operate by the economics of abundance.
[audience laughing] That's television as we've know it for the last 50 years.
And this is television as we know it today.
That's "Lonely Girl 15."
She is one of the first YouTube stars.
No one had to green light her project.
She didn't have to get her foot in the door of a studio.
She didn't need permission. No one focus grouped it.
They just did it.
And as of 3 weeks ago, she had an audience that was equivalent to some network TV shows.
She is a--it turned out that she was actually a project by some independent film makers.
They made it in their apartment. They did it because they could.
That is what an abundant market allows.
It allows anything to get out there and for the marketplace to sort it out.
It doesn't have to pass somebody's predetermined test
of what's going to be popular or not.
The audience will decide.
So this is how it maps to the long tail.
The red part here--this is the curve of any marketplace
where you rank the products or the people or the content in order,
and you get some that are very popular--those are the blockbusters,
and then a long tail of minority tastes,
none of which are terribly popular, but there are so many of them.
The red part is the world of the 20th Century
This is the world seen through scarce marketplaces,
of scarce shelf space, of scarce screens and stations, and channels.
And as a result, it's like seeing the world through the wrong end of the telescope.
We've been able to see the tiniest fraction of the true diversity and culture
and variety out there, because we are only seeing the stuff that passed that economic test
of the scarce marketplace. To get on the shelf of Wal-Mart
the product needs to turn, or sell 1.5 to 2 times a week
in the average store.The vast majority of everything doesn't pass that test.
And even things that do pass that test don't pass it for very long
and they fall off the shelf space as sales decline.
But that is--Wal-Mart is America's largest retailer,
and that is the way that most of America sees
the world of products and culture.
And that is the left part of the of the long tail.
But now in these new marketplaces--the iTunes, the Netflixes
the e-Bays, and even the Google, and the blogosphere--
that is the long tail. Everything gets out there, and now for the first time
we can measure the latent demand for everything else that didn't
pass the test. And we're finding out that it's not just a big market,
but the fastest growing one of all, and far richer
in terms of what's in it, and what it makes us, as a culture
as we go down it, than we've ever seen before.
This is the long tail of media.
The old way of measuring media and entertainment products
was in terms of popularity: Viewers, audience, subscribers, things like that.
But there's a new way of measuring impact in an abundant marketplace,
and that's based on attention and reputation.
Based on incoming links. So rather than just ranking them by the subscribers,
assuming they're all equal, instead you measuring incoming links
because incoming links are word of mouth. They're word of mouth embodied
in the form of hyperlinks.
And that's what you can now measure. That's what Google measures
when they decide who's going to rank high on the results.
They don't make any decisions about the content.
They don't look at the traffic. They don't do any semantic anaylsis.
They just measure what the marketplace thinks in terms of incoming links.
So the things that come up highest on your results are the ones
that have the highest authority, and that authority comes from measuring
what other people thought of that.
This is the rankings of the world's media sites--
world sites in general by Technorati
And Technorati, again, ranks by incoming links.
It's a very different way of looking at the world.
First you see that it is in fact a long tail,
that a small number are very popular, and then there's a long tail of things that are less popular.
Let's go down: The first one's the New York Times. No surprise there.
CNN, Washington Post, AP, BBC, San Francisco Chronicle, The Guardian, Umurry,
us--this is, by the way, the on-line measurement.
I recognize we wouldn't be here by traditional metrics.
The Boston Globe, Times UK, and these 4 punks and their band manager--Boing Boing.
That's Mark, David, John, Cory, and Shenny.
They're bloggers. They live--they're scattered around the world.
They blog part time, possibly in their pajamas.
They have more influence than Forbes, Time, [audience laughing], Fox News,
Business Week, PBS, NPR. This is Pete Rojas.
He runs Engadget, it's a gadgets blog, and he has more influence than
MSNBC, MTV, CBS News.
This is Frank Warren. He runs Post Secret.
People send him postcards with secrets on them and he posts them.
[audience laughing] He has more influence [laughing]
than CBS News, CNN Money, the Telegraph in the UK, the Canadian Broadcasting Company,
Sydney Morning Herald, the San Jose Mercury News.
And this is Marcus who runs the Daily Kos, a political blog.
And he has more influence than the Chicago Tribune, Reuters,
the International Herald Tribune, the Wall Street Journal, the Economist,
the Financial Times, ESPN.
And this is Arianna Huffington who runs the Huffington Post.
And she has more influence than the Post Gazette, PR Newswire, and so on.
Brian Lamm who runs Gizmoto, a gadget blog.
This is Glen Reynolds, a University of Tennessee, a law professor
who blogs in between classes at Instapundit.
And this is Michele Mulkin, another political blogger, and so it goes.
The red lines are bloggers.
The blue lines are mainstream media.
The red lines are typically one person blogging part time.
The mainstream media are institutions with thousands of employees.
That's what changes in a marketplace where anybody can get out there.
And word of mouth and reputation sorts out what's good and what's not,
not some guy in a suit, like me, ahead of time.
So I think about this now as if I'm a Conde Nast editor,
and I think about how this applies to our business.
And I realize that we live in the economy of scarcity.
Our pages are scarce, expensive, our content is expensive.
Shipping, production, printing: all very expensive.
I have to be incredibly discriminating.
I have to try to have a perfect Fabrege Egg of a product.
Polished. I control the horizontal; I control the vertical.
I have to guess at what people want, and one story displaces another,
so I have to be really careful about what I let into our pages.
That's a scarcity model.
But on July 11, we bought our web site back.
You may ask why we didn't have a web site before, and that's a long story.
We'll save that for afterwards.
But now we do, and now I have to figure out what our policy is going to be on the web site.
And the web site is an abundant marketplace. You have infinite shelf space.
Google has 2 trillion--2-1/2 trillion results for blog.
This is--in the world of abundance, there's room for everything.
That one page doesn't displace another.
That the bad doesn't drive out the good. In fact the marketplace
can just figure out what's good and what's bad.
And this really changes my thinking.
Whatever standards--I've spent 5 years now setting standards as to what
a Wired story should be, and now I'm going to throw it all out the window.
Because those standards were based on having to be extremely discriminating
because our pages were scarce.
The new standards, basically are, in an abundant economy,
is that we'll let the marketplace decide what our standards should be.
We have a sensibility and we have a world view and we have certain responsibilities,
but the standards are going to be much broader, and the range of what we do
is going to be much broader. And this is a radical change in the company
because, in a sense, I'm changing the rules.
And I'm changing the rules because the economics have changed on me.
So, if we're--if the magazine is a Fabrege Egg, then the web site is going to be scrambled egg.
[audience laughing] We'll see what that means.
This is one of our table of contents, new redesign, not yet finished.
And this is what I guess people are going to want.
These are the stories that I approved, I predicted would be popular,
I rank them in order of what--the popularity I think they're going to have,
and we mortalize this in dead trees and we ship them to 650,000 people.
That's me guessing.
And this is Digg. Digg is a web site where anybody can post stories
and then the community votes on them.
This is prefiltering.
This is me filtering, deciding what gets in and guessing at what's going to be popular
in what order ahead of time.
And this is post filtering. It all gets out there
and you measure what's successful and what's not.
Why couldn't our home page be run like Digg?
Rather than me guessing at what should be at what level in the hierachy,
why not let the readers vote and dynamically change over time?
Why guess if you can measure?
In my scarcity model as a magazine editor, I have to say "No" to almost everything.
My job is to say "No." I try to do it nicely, but that's my job.
On the web site, my job is to say "Yes."
What do you want to do? Fine. Do it.
I don't have to guess, and I don't have to predict, and I don't have to even
check that it's going to be good, because if it's not good it won't get traction
and it will fall off the bottom. If it is good, it will get traction and it will rise to the top.
And I don't have to be the gatekeeper anymore
because we now have a way, a marketplace, that can do this after the fact
based on what the audience really wants rather than our guess work.
So when we think about this, this applies across the board.
As we go from company to company and we talk about the changing marketplace,
as their economics switch to an abundant economics,
they have to change their thinking as well. So the old model
of releasing products and services and content is that you need
to have a Business Case. And so we've all done it,
we write our ROI memos and we get the CFO to sign off on them.
This is why I think it's going to be a good business.
And after that Return On Investment memo is signed off the project gets green lighted.
The new model is, of course, you just do it
and we'll figure it out. I costs so little to do things, you don't have to have
a Business Case up front. I realize that sounds very 1990's
dot com bubbly, but it's true.
If the costs are low--. The problem with the dot com bubble thing
is the costs weren't low. That you had the roof top parties
and the huge staffs. But it is now so easy to launch things for so cheap
that we don't need a Business Plan. It's not throwing away money.
It's not guessing. When you guess and you guess wrong, you throw away money.
If you don't have to guess but you measure, and you invest money where things get traction the most,
that's actually a smart way to use, and it will figure it out.
In the scarcity model, it's basically this:
"Everything is forbidden unless it is permitted."
That's me saying "No."
In the abundant model,
"Everything is permitted unless it is forbidden."
I'm not going to ask my employees to ask permission.
I'm going to let them do what they want, on whatever subjects they want.
I'm--you know--I hope I never have to forbid anything.
Again, there is room for a much broader distribution
of tastes and interests and approaches to what we do.
In the scarcity model, we have to, again, guess.
You know--the Hollywood studio executives, the record labels,
the television executives, the book editors--all of us are guessing,
and that's a form of paternalism.
In the abundance model, we say the audience knows better than we do
what they want and we stop guessing.
In the scarcity model, it's very Top-down,
We decide what the policy is going to be, what the missions are
and what the standards are, and then we propogate that
through the ranks of our employees and into our products.
In the abundance model, it's very Bottoms-up.
My new policy is that I will do anything the interns think I should do.
[audience laughing] So the interns just told me to do a press conference in Second Life
[audience chuckling] which I did.
I don't know whether it was a good idea or not.
It was surreal. I kind of had fun.
There were 50 other Avatars there.
I got to sign my book in Second Life with the little sort of book signing circle
widget that they built. I don't have any intuitive feel
for whether that's a good use of my time. But my interns thought it was a good use of my time,
and that's good enough for me because I don't have a monopoly on information
and I can't pretend to be omnicient.
Instead, I recognize that we have--that we have a pyramid structure
and the youngest people, and the most of them are the ones who are out there
and have different views. And now, because it's so cheap to let them do what they want to do,
I'm going to listen to their advice, and take their guidance on what we do going forward.
And I'll bet all of our most interesting--I'll bet many of our most interesting blogs
are going to be the ones that I never could of guessed,
never would have suspected would be popular.
But because they are driven by somebody's passions,
who are not constrained by my narrow view of what a Wired blog should be,
I think you're going to find a much broader range, and possibly the most successful ones.
And finally, Command and Control.
That is the 20th Century way of corporate management.
And, to use the phrase of my friend Kevin Kelly,
I think the 21st Century management model is going to be "Out of Control."
Of letting everything happen, and then dynamically responding and measuring
to what the audience thinks, to what actually can be determined
once products get out there, and then amplifying the good
and supressing the bad.
So I'm going to show you one last thing, which is a video made
by my friend, Peter Hirschberg from Technorati,
that maps us back to my world.
♪ Time Ticking Music ♫
No one would have believed in the closing years of the 20th Century,
that our most popular media were being watched in a new way
by a force that was quietly gathering strength.
With blind confidence we considered them our own,
our audience, our subscribers, our cuddly couch potatoes.
With infinite complacency we blithely segmented and sold them to advertisers.
We learned to shape their habits....mold their desires....
and give them the illusion of infinite choice.
Yet from their side of the screen, with envious eyes,
they studied us. And bit by bit they learned....
and linked....and drew their plans against us....
wielding weapons we, ourselves, provided.
And then.....early in the 21st Century
came the great unraveling.
We offered free choice, but all they heard was "free."
We devised more powerful, more complete, more feature-rich software,
but they preferred to grow their own.
They pounced and they blogged....and they blew the house down.
The world we knew was forever disintermediated....
whatever that means.
They have tasted power, and there are a lot more of them than there are of us.
High inside our glass towers, our greatest minds prepare
to respond. "Well, uh, can't we just start blogging back at them?"
"Well, yeah...but where's the money in that?"
[heavy sounds of dooms-day] Day of the LongTail
[audience laughing and applauding] The audience is up to something.
[audience applauding] Thank you.
Presented by Lexus Hybrid Drive
Gives More to the Driver, Takes Less From the World
The preceding video is licensed under the Creative Commons Non-Commercial ShareAlike 2.5 License
For details please visit http://creativecommons.org/licenses/by-sa/2.5/
Pop! Tech - For more Pop!Casts, information on Pop!Tech or to learn how to participate, visit www.poptech.org

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