Where This Meets That
I completed my MBA in December 2009. By the end of that 2-year curriculum, as hoped, I had attained a better understanding of various business paradigms, management philosophies, and organizational concepts than I began with.
What I lacked after completing the degree, however, was a good sense of industrial prescience, an understanding of where business is going. Fortunately, I took a few instructors up on their recommended outside readings. Chris Anderson’s The Long Tail was one of those readings that was particularly enriching. In fact, as far as providing vision for the market trends of the 21st century, I found The Long Tail more insightful than all my MBA coursework combined.
In The Long Tail, Anderson provides a thoughtful, compelling study on the countless ways that modern technology has changed the marketplace in every industry over only the past decade or two. Through this lens, we can begin to see an entirely new vision of free market economics that, in many ways, has never been possible before.
Anderson distinguishes between the primary market characteristics of the 20th and 21st centuries, describing the former as the century of “hits”, driven by market limitations (i.e., shelf space, floor space, bandwidth), and the latter as a century of “niches”.
He observes that the general marketplace of the last century was driven by formulaically pursuing market “hits”; for example, the “bestselling book”, the “radio hit”, or the “blockbuster movie”. The reason for this was because bookstores and music stores had limited shelf space, while movie theaters had limited screens (and on, through most industries).
The advent of the Internet, along with many other technological developments since the late 20th century, however, gave consumers unprecedented market access. Whereas the past century fundamentally limited choices offered to consumers, the new century gives consumers nearly unlimited access to a truly global marketplace and conversely gives niche markets access to a global consumer base.
The resultant shift changed common rules of thumb in business. A primary example is the Pareto Principle, or the “80-20 rule”, which states that roughly 80% of a company’s revenues are generated by only 20% of that company’s business. That means the vast majority (roughly 80%) of a company’s business generates only a meager 20% of its revenues. This latter ratio comprises “the long tail”, as the graph below demonstrates.
This revolution has allowed some goods, primarily media thus far, to literally dissolve into thin air. Our above examples of books, music, and movies no longer require shelves or physical storage at all. As a result, the long tail has grown longer; storage expenses are greatly reduced, and therefore versatile businesses can afford to greatly increase their wares. The lower the carrying costs associated with items, the longer those items can be carried and the more items can be offered.
In theory, as juggernauts like Amazon and E-Bay have sought to exploit, the long tail can stretch forever and, as such, can create entirely new markets of its own.
Anderson is quick to point out that this new paradigm of “democratization” is not limited to books, music, and movies, but can be applied to every corner of human culture. The long tail democratizes, or makes accessible to nearly everyone, incredible resources for self-empowerment.
Just as the democratization of publishing can allow virtually anyone to publish their own writings or artwork (Le Blah-Blah-Blogue, for example) by cutting traditional publishers out of the loop entirely, it can also allow anyone with anything to say to say it. And across a global audience, odds are, there will be a match between a producer of something, regardless of how useful or specialized, and a consumer looking for just such a thing.
Take, for example, a problem with my television. I’ve read through the manual backwards and forwards and can’t find any solution. Before the internet-enhanced long tail, I might have to navigate a tedious helpline to make a service call or, worse, pay a repairman to come take a look. Now, I can simply Google some keywords describing my problem, and I instantly find any and all simple solutions published by anyone who has ever shared my problem. My time and money are saved.
The same goes for oil changes, belly button piercing, or open-heart surgery – oh, all right, so perhaps there are limits to the wisdom that can come from the long tail. But the principle is key: if you ever wanted to know or do something, you pretty much can.
By removing vetting processes of traditionalist decision-makers in fields from music to science, an entire world of possibilities opens up to the entire world. Anderson’s book is a most fascinating introduction to the possibilities that exist for all of us should we ever decide to partake.