Internet economics and the death of average

snowflake individuality


There are two articles that intrigued me today. The first is by Ben Thompson on the death of average. Nate Silver launched his new site a few days ago, and his is just the latest in a growing number of personality driven sites and blogs, including Erza Klein and Vox, Andrew Sullivan and his eponymous blog, Bill Simmons of Grantland, and countless other famous bloggers who have made a name for themselves by either collecting compelling content and/or writing them.

This shift in the news industry is not accidental. If anything, it is emblematic of the changes working through the economy today, the most important of which may be the falling cost of access to high quality items, particularly those that can be delivered through a screen. This natural friction of time and space that once existed in the market allowed many middle-of-the-road propositions to exist. The Wisconsin State Journal can make a decent profit reporting on the state and the Midwest region, and so can the Straits Times in Singapore. The Internet, however, has effectively collapsed those natural barriers. If I want to read about the effects of technology on culture, I can freely and easily turn to better such pieces on Medium, or The Verge, or The Guardian, or The New Yorker.

No longer are our options limited by time and place. Why would we offer our time to the merely average when we can have the very best/very good at little to no additional cost? The implication of this pattern of consumption is that it is dominated by the tall skinny part of the power curve occupied by the best of the best in a zero sum game of attention (arguably it is not yet a zero sum game – the more time we save sweeping and mopping and washing dishes and working, the more time we have for something that aren’t those things, so it isn’t a zero sum game until we are no longer “working” or sleeping, but let’s say that’s a long time away).

The challenge of Internet economics is to recognize that the message is quite different from its medium. The news is different from the newspaper. The music is quite different from the CD. The business is quite different from its once-physical form. And when the equivalent of the cable bundle falls away, what happens, then, to those who occupied the middle of the bell curve?

More broadly – and this is the central challenge to society presented by the Internet – what then of the millions of others in all the other industries touched by the Internet who are perfectly average and thus, in an age where the best is only a click away, are simply not needed?

This is the angst that fills those in the news business, and society broadly. The reality of the Internet is that there is no more bell curve; power laws dominate, and the challenge of our time is figuring out what to do with a population distribution that is fundamentally misaligned with Internet economics.

We argue the flip side. We point at the long tail – rewards may go disproportionately to super performers to the left of the power curve, but there is room for everyone else to find their place on the long tail. And so we move on from Smith’s mercantilism, to Schumpeter’s innovative corporatism, to an age of Coasean growth:

“Without realizing it, the hundreds of entrepreneurs, startup studios and accelerators, 4-hour-work-weekers and lifestyle designers around the world, experimenting with novel business structures and attention mining technologies i.e. social media, are collectively triggering the age of Coasian growth.”

“Coasean growth is fundamentally not measured in aggregate terms at all. It is measured in individual terms. An individual’s income and productivity may both actually decline, with net growth in a Coasean sense… the fundamental scarce resource that Coasian growth discovers and colonizes is neither space, nor time. It is perspective.”

I couldn’t find anything further on this 2011 article by Venkatesh Rao, but I can guess at what Coasean growth may entail. The transaction costs of time and space falls away in the digital economy as platforms proliferate to offer more and more timely and relevant propositions to consumers, such that we move increasingly towards a frictionless society, to the point of literally having anything you want, at anytime and anywhere. Uber is just a first step and almost low-tech way of advancing towards a time when you have some kind of a vehicle or transportation pod waiting for you right as you step out to go somewhere. Right as you step out, as in, within the 250 milliseconds that constitute “now”. 3D printing and drone delivery are similarly first steps and still light years short of giving you a T-rex shaped mug for your coffee right now.

What can one possibly offer in a new economy where time and space becomes irrelevant, short of being part of the company that takes you anywhere, or the company that gives you anything? It isn’t too different from what we have right now. We compete on perspective: we like A’s take on a bacon egg sandwich better than B’s; we like C’s take on a white t-shirt better than D’s. Everything is objectively good, and perhaps equivalent in production cost, and probably zero in marginal cost. But everything else is a function of subjective preferences in the long tail.

To say we’re witnessing the death of average is perhaps misleading. To be able to become a subjective best in any field seems to leave room for many to thrive. Still, it demands all to foist and tout their uniqueness to the world, and I am already tuning out.


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