The Organ Grinder’s Monkey

Wired’s lastest issue is all about “free”, specifically, FREE, the book by editor Chris Anderson (coming out in 2009) that is bound to get more than a few economists’ knickers in a twist.

I highly recommend that anyone who plans on doing business in the next decade or so go read the article, paying special attention to the scenarios (in gray boxes) and other supplementary resources they’ve decorated the article with (including the video - it’s just a few minutes long and worth the click.)

In the video, Chris Anderson notes:

“The difference between one penny and free is the difference between having to make a conscious decision to purchase a product and to just do it.”

And while that seems to be a subtle difference, when you actually think about it it’s actually quite a significant gap. Crossing that gap requires a decision. And anytime your customer has to make a decision, the answer could always be “no.” Take that decision away, and the answer is almost always “yes.” Now, if the cost of production, distribution and materials is essentially nil, why risk “no” when you could virtually guarantee “yes” by eating that almost non-existent cost?¹

A few quotes from the article:

From the consumer’s perspective, though, there is a huge difference between cheap and free. Give a product away and it can go viral. Charge a single cent for it and you’re in an entirely different business, one of clawing and scratching for every customer. The psychology of “free” is powerful indeed, as any marketer will tell you.

[snip]

Surely economics has something to say about that?

It does. The word is externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we’ve always known about but have only recently been able to measure properly. The “attention economy” and “reputation economy” are too fuzzy to merit an academic department, but there’s something real at the heart of both. Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.

There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.

In short, it’s very possible that free will be the basis of trade and commerce for the foreseeable future. And yet, as Anderson points out, all of the biggest vendors of free services - Yahoo, Google, etc - are filthy rich and increasingly raking it in hand over fist. So yes, it’s possible to get rich on free.

But you have to embrace it, rather than fearing and avoiding it, or trying to take it on in baby steps. The first response will simply keep you in the realm of the buying decision (i.e. trying to work around “no”). The second will simply ensure you’re left slugging it out for customers and memespace as those who embrace free wholeheartedly get all the buzz (and all the crowd momentum).

1. In most cases, it’s greed, ego, habit and confusion, in that order. Greed operates at the “Even a penny is better than nothing” level, which is patently untrue anymore. Also, any time you hear any argument against free that includes the term “stakeholder value,” you’re probably looking at greed and, not insignificantly, the primary stakeholder the speaker probably has in mind. Ego is concerned with the “appearance” of giving things away equated with lack of quality, and the “I don’t have to give it away, because I’m so good” argument…again, neither are relevant here. Habit is just that - business as usual making it hard to envision business as it’s becoming and hard to get out of the rut of the way it’s always been done. And confusion is simply a matter of doing what you’ve always done, because it’s easier than figuring out how to make the new ways work. [↩]

Tags: Business, Changing the World, Conversation Economy, Society and Culture by Soni Pitts
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Kevin Kelly has a great new essay out on his blog The Technicum, called Better Than Free. In it, he discusses how the cost of things that can be copied - which is pretty much anything tangible - is quickly approaching free. And yet, he says, it is still possible to make a living, and in some instances a fortune, in this giveaway economy.

How is this possible? As Kelly puts it:

When copies are super abundant, they become worthless.
When copies are super abundant, stuff which can’t be copied becomes scarce and valuable.

When copies are free, you need to sell things which can not be copied.

So, what can’t be copied? Kelly suggests that in the land of FREE, making a living becomes less about the thing, and more about the qualities of that thing, particularly what he calls “generative values.”

These generative values are concepts like Immediacy, Personalization, Interpretation, Authenticity, Accessibility, Embodiment, Patronage and Findability. These and similar qualities surround the free core with a layer of value for which people are willing to pay sometimes great sums of money.

For example, Kelly has this to say about Accessibility:

Ownership often sucks. You have to keep your things tidy, up-to-date, and in the case of digital material, backed up. And in this mobile world, you have to carry it along with you. Many people, me included, will be happy to have others tend our “possessions” by subscribing to them…The fact that most of this material will be available free, if we want to tend it, back it up, keep adding to it, and organize it, will be less and less appealing as time goes on.

There is a huge backlash going on right now in the realm of traditional business against this economy of free. This is most memorably embodied in the litigious flounderings of the music recording industry, who have adopted what can only be perceived as insane business model of suing their customer. To those industries, all this brouhaha appears to be a simple attempt to “protect their interests.” To everyone else, however, it is seen for what it really is: the death throes of a creature who’s to stupid to realize it’s already dead.

Here’s the important take-away from this discussion: Your product is worthless.

Not worthless as in devoid of value, mind you. But worthless in that somewhere, somehow, someone who cares enough can get it for free. And the more people who bother to do so, the more free versions there are. After a while (and usually this happens very, very quickly if your product is even remotely desirable) there are enough free versions on the market that getting one of those is even easier than going to your site or store and simply paying for it.

It’s pointless to fight this. It will only cost you more time, more money and more energy than you have to spare, and in the end you can only hope to accomplish one of two undesirable alternatives:

You could lose, in which case you’ll find yourself right back where you started and all that time, money and effort might as well have been dropped into a black hole for all the effect it will have.

Or you could win, and in doing so make your product harder to get and more expensive than everyone else’s and permeated by such negative public opinion that only those who have no other choice will buy it (and then complain about having to do so prolifically and vociferously to anyone who’ll listen). And as soon as any other reasonable choice presents itself, you can bet that what few customers you do retain will scatter like rats fleeing a burning building.

Your only real option, therefore, is to accept that your product is, in and of itself, a commodity of little or no monetary value and learn to leverage with qualities and values that people are willing to pay for. The downside is that this is all still pretty new, so only a few people have figured out how to make it work for them. The upside is that this is all still pretty new, so the field’s still wide open and there’s lots of room for innovation, creativity and fun.

So go play. I can’t wait to see what you come up with.

Tags: Business, Changing the World, Society and Culture by Soni Pitts
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My client hasn’t come through with the raw materials of this week’s Project of Doom, so I have time to blog something that I encountered last night that I feel is incredibly important for anyone who’s interested in doing business in the 21st century to understand.

Uh, Toto? I Don’t Think We’re In Kansas Anymore

It was one of those serendipitous moments you find so often on the net these days. Last night while I was doing my evening blog rounds, I came upon one of the most clear explanations of why and how the internet is shaping our culture. Immediately afterward, I stumbled upon what I feel to be an incredible example of this concept in action.

Elizabeth Bear, a speculative fiction novelist, clearly and succinctly sums up the immensity of how and why the internet is changing the way we interact with people by riffing off of a blog post she found that was talking about the story behind a video of a Guitar Hero gaming session.

In this video, the song being “played” is John Coulton’s Code Monkey. For my less cyber-geeky friends, John Coulton is a musician who writes and performs these really cool, weird and funky songs and then distributes them through his website, most of it for free and under some version of a Creative Commons license (meaning, among other things, that people can use the music for mashups like creating a Guitar Hero song out of them). In doing so, he is now able to support himself as a popular, well-loved and successful full-time musician.

Because of his musical themes (geeky, humorous, weird), his talent (solidly A-list good) and his successful business model (making a living by giving away free music?!!?!?!OMGWTFBBQ!!!), Coulton has become something of an internet celebrity. This is a key point.

In her post, Bear points to the blog Corrugated Media, where she found the video in this post from blogger Patrick Kovacich:

I managed to track down the creator of this custom track, Andy Sage,who gets lots of points from me not only for his selection in music, but for how he went about this process. He secured permission from Coulton before posting the track, despite the source materials being freely available in a remix contest, and all of Coulton’s music being under a license he was not breaking. Sage was under no legal obligation to contact Coulton and make sure he was cool with this, but he did so anyway, and that is the kind of attitude that makes this sort of license and culture really work. Tying this back to why I think this story is so cool is the fact that he was ABLE to contact Jonathan to do so. Try doing that with Bono.

Bear goes on to say:

The reason that works, of course, is because the celebrities (loosely so termed) that one knows on the internet are suddenly real people. They’re not constructs anymore. Jonathan Coulton isn’t a construct to me, the way Bono (to use the example quoted above) is. Jonathan Coulton is some guy on the internets, whose work I really like. Tom Smith used to be a construct to me: I only knew his work through recordings, and I was a big fan. And yanno, then I met him online and at Penguicon, and now he’s just some super-talented guy I know, who is also funny. Wil Wheaton is the classic example of this: I keep forgetting he’s also a talented actor, because I think of him as one of the best bloggers on my daily information rounds.

And you know what? I like that. I don’t want to be a construct. I want to be some guy you know on the internets who tells stories. Who possibly you pay to tell you stories, much the same way I have friends I pay for web hosting or web design or massages. Because it’s their professional skill…

I think we may be looking at the end of reputation by fame, and the birth of a different kind of reputation. Because while there are people who want that mystique, that megastar distance, that princess in a tower thing… there’s also a lot of people who want to be able to drop Jonathan Coulton an email and say, “Hey, can I remix “Code Monkey?”

And eventually, we may be looking at a system where the President is some guy I know, who I pay to run the country.

Of course, we’re probably at least half a generation away from having the President on our Buddy list (although, unlike some of the other commenters on this post, I actually feel it to be a real possibility). But the rest of it absolutely exists in the here and now. And you’re a part of it, whether you like it or not. Your customers, your colleagues, your competitors, your enemies and your friends and so on have an immediate, real connection to you - or, at least they should, if you’re doing it right. (And as far as the current generation is concerned, not only should you be this open and approachable, they pretty much assume that anyone that isn’t is probably hiding something, or perhaps just terminally socially retarded.)

And this is where most businesses are still getting it wrong, wrong, wrong. They want to do the hip, Web 2.0 stuff - corporate blogs, interactive sites, Facebook marketing, YouTube, etc - because they can obviously see that it’s a vital part of the current cultural conversation. And that’s good.

But they screw it up because they completely fail to grasp the whole concept of “open and approachable.” The idea scares the crap out of them, and sends their legal department into convulsive fits. So they put up blogs that are basically just another channel for press releases other corporate-speak blather that’s been prescreened, filtered, sterilized and legal-department-approved to within an inch of its life. The put up Facebook profiles that are about as “real” as a paint-by-number edition of a counterfeit Warhol. They set up interactive and viral sites that are only marginally less engaging than watching C-SPAN on mute and basically constitute nothing more than interactive advertisements (fun for the whole family!!!).

And what gets past all this firewalling, legal redacting and corporate distancing bears the same relation to open conversation as the Third Reich did to concerned community involvement.

Getting It Right, The Live Demo

Immediately after I read Elizabeth Bear’s post, I landed on another blog where an example of “getting it right” materialized in the comments section of a post on the merits of various writing software programs that was so perfect, it was almost like it was orchestrated for the sole purpose of demonstrating this concept.

You can read the post here, but what I’m talking about happens further down in the comments section. At one point, a reader discusses her own experience with a software product called Scrivener, a Mac writing application that many writers use and love. Unfortunately, she had some issues with an upgrade that resulted in having problems reading older files, which she eventually resolved but remains frustrated about.

A few comments down comes this reply:

Thank you for your praise of Scrivener! Glad you are finding it so useful and I hope you are able to have a long and satisfying relationship with her.

Kristine - I’ve never received an e-mail from you about your problems and I don’t think you have posted these problems on the forum. It’s very difficult for me to solve problems I don’t know exist! E-mail me at support @ literatureandlatte dot com and I’m sure we can get to the bottom of your problem.

Thanks again and all the best,
Keith
(Scrivener developer)

Yep, that’s the guy who wrote the program, just dropping by a conversation about his product and inviting a user to email him directly with their problem.

In case you don’t see the significance, this is the equivalent of the head engineer at Ford dropping by your online rant about an ongoing engine problem and saying, “Hey, you gotta tell us about this stuff. Drop me a line and I get some guys on it immediately.” Just thinking about how unlikely that is given our current corporate reality, immediately following an example of it actually happening in a completely different (and increasingly more real) zone of reality, gives you some idea of the paradigm shift that has already occurred between the current generation of internet users and the people who are going to represent the next generation of business-as-usual.

It’s like a massive fault line abruptly shifted and suddenly, “the way it’s always been done” is standing on one side of a rift staring at “the way things are going to be done” across an unnavigable crevasse of cultural change. For most old-school businesses, there’s no safe or sane way to get from one side to the other - the gap is simply too large. But short of the entire web shutting down while leaving only uni-directional media like tv and radio alive, we’re not liable to go back.

The key question here is, which side of the fault is your business on?

Tags: Business, Changing the World, Society and Culture by Soni Pitts
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The collapse of Ginko Financial, a virtual investment bank inside the online world Second Life, has people wondering just what is the difference between real and not real. The verdict? Not much. Why should you care? Because what happens now may change the nature of business in the future.

[Read more →]

Tags: Business, Changing the World, Society and Culture by Soni Pitts
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If you’ve been paying any attention to the greener side of the web this last week or so, you’ll have heard about Greenpeace’s promotion to name a humpback whale to draw attention to the plight of these mammoth sea mammals.

The organization put out a call for submissions, and wound up with a roster full of ethnically diverse, spiritually meaningful, symbolic and beautiful names like Shanti (peace), Aurora (dawn), and Aiko (little love).

And, of course, Mister Splashy Pants.

I never had a doubt in my mind which name would get the most votes. The only question as far as I was concerned was whether or not Greenpeace would “unbend” and allow such a goofy name to win. Turns out, they did. And that’s very, very important, for a very big reason:

Because if we give him the chance, Mr. Splashy Pants could very well return the favor and save all our butts in return.

[Read more →]

Tags: Changing the World, Society and Culture by Soni Pitts
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Think your business can’t go virtual? Meet Dr. Parkinson.

Dr. Parkinson is a practicing physician in Williamsburg, Brooklyn. But you can’t visit his office, because he doesn’t have one. He services a patient list of 18-40 year old folks in Brooklyn and Manhattan mostly via IM, emails and phone calls. And for those times when only face-to-face will do, he comes to your home or office. He has a snazzy website with lots of easy-to-understand instructions about how his practice works and how to become a patient, and a page of real-life examples of what that looks like in practice. And yes, he also has a blog.

Here’s how it works. Think you may have broken your wrist when your dog tripped you in the park? No problem. Call Dr. Parkinson and he’ll set you up with a nearby radiologist for X-rays, and while you’re doing that, he’ll be setting up a visit with a local orthopedist to get it set. A few hours later, you’re at home getting signatures drawn on your new cast.

No paying out the nose to sit all day in the ER. No getting stuck with whoever is on call, regardless of how much they charge or how competent (or incompetent) they are. Just efficient, personalized care stripped clean of all the excruciating inefficiencies that the medical system is renowned for. And simple phone call is all it takes to gets the ball rolling.

Dr. Parkinson is saving himself a lot of money and trouble. He has no rent, no payroll, no regular commute. And there’s no waiting room full of tired, ill people getting angrier by the minute because he’s running late.

And he’s dedicated to saving his patients money, as well. Patients pay a set fee of $500/yearly for two face-to-face visits, plus unlimited calls, emails and IMs. (Additional visits and other activities are set at reasonable a la cart fees that patients are informed about ahead of time; he even has a discounted fee list for uninsured patients). And since most basic stuff like diagnosing a common cold or prescribing treatment for a sprained ankle can be handled over the phone or through IM, patients aren’t out the expensive office visit every time they need to talk to the doctor.

He maintains a database of specialists, pharmacies, and other members of the medical field in his area, which he uses to ensure that his patients have the cheapest, fastest and best care he can line up. He negotiates fees with other care specialists for his patients and makes sure that if they need meds, they get the cheapest prescription available. He’ll even consult with them to help them get the best health insurance they can afford and that covers everything they need, without any of the pricey, extraneous do-dads they don’t.

By going virtual, Dr. Parkinson is not only saving himself and his patients a lot of time, money and inconvenience, he’s also providing a better standard of care for them and a better standard of living for himself. Neither he nor his patients have to “sit and soak” in a stifling office full of contagious, grumpy people and their bored, hyperactive and/or effusively germ-shedding children. Patients don’t have to take time off of work or pay a babysitter to get basic care (although they would still have to do so for visits to outside specialists). He is ensured of a steady base pay that won’t fluctuate unpredictably, plus additional fees for additional visits. And, since the majority of his work can be done virtually, he is able to spend as much time as he needs with each person.

I seriously want this man to be my doctor. Unfortunately, I live several states away, so I’ll have to wait until someone around here gets wise to the world and follows Dr. Parkinson’s lead. In the meantime, I wanted to introduce you to Dr. Parkinson so that you could see that the number of careers that can’t be improved by going virtual, targeting a niche and doing everything you can to beat the expectations of your clients is getting smaller every day.

So, if you were putting off moving your business online because you think it can’t be done, perhaps it’s just that it can’t be done online the way you’re currently doing it. Time to rethink your approach.

Oh, and if you’re a doctor in Asheville, send me a ping when you’re ready to go virtual.

Tags: Business, Changing the World by Soni Pitts
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Sometimes, the best marketing strategy of all is simply to do the right thing at the top of your lungs.

From her site, fagbug.com (warning: music - click speaker icon above Rock You icon to toggle):

“On the 11th annual National Day of Silence (April 18, 2007), Erin Davies was victim to a hate crime. Because of sporting a rainbow sticker on her VW Beetle, Erin’s car was vandalized, left with the words “fAg” and “u r gay” placed on the hood and driver side of her car. Despite initial shock and embarrassment, Erin has decided to embrace what happened and film a documentary about her 58-day cross country tour around the US and Canada in her car known worldwide as the fagbug.”

Today, Erin is touring in her bug, has met with people from across the country, has received official sponsorship from VW and on the 1 year anniversary of the vandalism plans to paint Fagbug to match her rainbow stickers.

Along the way she has been welcomed, harassed, stared at, talked to and asked by various parties to stay and to leave. Her car has been repeatedly re-vandalized and repaired, and she has received both threats and support. This is a woman whose bravery should make us all look a little harder at ourselves, especially when we choose not to step up and say something when it needs to be said. And it’s a lesson in just how far you can go if you commit to doing something that’s really important to you and accept the help of others along the way.

Tags: Changing the World, Conversation Economy, Society and Culture by Soni Pitts
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Back in September, Wil Wheaton’s Sept. 12th Geek in Review column at the Suicide Girls website did a good job of describing the effect of the meteor of the Conversation Economy on the fragile Jurassic habitat of Business As Usual:

There is a communications revolution happening right now. It crosses generations, and it scares the absolute shit out of a lot of people who benefit from ignorance and the control of information…Communication empowers people, and an empowered people are very, very scary to the powerful upper class who hope that we’ll just go away, right after we buy a lot of crap from them that we don’t need. And holy shit are they scared right now. The revolution may not be televised, but it’s being blogged, YouTubed, MySpaced, Facebooked, Dugg and Netscaped.

I would have blogged about it then, but I didn’t have the blog up and running yet (you’ll probably be seeing a lot of this in the near future - I have a whole folder of “to blog” links I’ve been squirreling away over the past few months). But the passage of a few months has done absolutely nothing to dull the fatal sharpness and ninja-like accuracy of his point.

Mature Content Alert: Although Wil’s column is safe for work, the Suicide Girls is a punk/goth/alt softcore “pin-up” site, and as such there will likely be adult advertising, topics, verbiage, etc., on the same page as his column. Might want to save this one for when you get home.

Tags: Business, Changing the World, Conversation Economy, Social Media, Society and Culture by Soni Pitts
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