Seminars About Long-term Thinking

The power law is the shape of our age

You know something is up when an audience member is taking cell phone photos of the presenter’s slides for instant transmittal to a business partner.

Chris Anderson does have killer slides, full of exuberant detail, defining the exact shape of the still emerging opportunity space for finding and selling formerly infindable and unsellable items of every imaginable description. The 25 million music tracks in the world. All the TV ever broadcast. Every single amateur video. All that is old, arcane, micro-niche, against-the-grain, undefinable, or remote is suddenly as accessible as the top of the pops.

“The power law is the shape of our age,” Anderson asserted, showing the classic ski-jump curve of popularity— a few things sell in vast quantity, while a great many things sell in small quantity. It’s the natural product of variety, inequality, and network effect sifting, which amplifies the inequality.

“Everything is measurable now,” said Anderson, comparing charts of sales over time of a hit music album with a niche album. The hit declined steeply, the niche album kept its legs. The “long tail” of innumerable tiny-sellers is populated by old hits as well as new and old niche items. That’s the time dimension. For the first time in history, archives have a business model. Old stuff is more profitable because the acquisition cost is lower and customer satisfaction is higher. Infinite-inventory Netflix occupies the sweet spot for movie distribution, while Blockbuster is saddled with the tyranny of the new.

Anderson explained that we are leaving an age where distribution was ruled by channel scarcity— 3 TV networks, only so many movie theater screens, limited shelf space for books. “Those scarcity effects make a bottleneck that distorts the market and distorts our culture. Infinite shelf space changes everything.” Books are freed up by print-on-demand (already a large and profitable service at Amazon), movies freed by cheap DVDs, old broadcast TV by classics collections, new videos by Google Videos and You Tube online. Even the newest game machines are now designed to be able to emulate their earlier incarnations, so you can play the original “Super Mario Bros.” if so inclined— and many are.

“I’m an editor of a Conde-Nast magazine [Wired] AND I’m a blogger,” said Anderson. In other words, he works both in the fading world of “pre-filters” and the emerging world of “post-filters.” Pre-filtering is ruled by editors, A&R guys (”artist and repertoire,” the talent-finders in the music biz), studio execs, and capital-B Buyers. Post-filtering is driven by readers, recommenders, word of mouth, and buyers.

Will Hearst joined Anderson on the stage and noted that social networking software has automated word of mouth, and that’s what has “unchoked the long tail of sheer obscure quantity in the vast backlog of old movies, for example.” Anderson agreed, “The marketing power of customer recommendations is the main driver for Netflix, and it is zero-cost marketing.”

“By democratizing the tools of distribution, we’re seeing a Renaissance in culture. We’re starting to find out just how rich our society is in terms of creativity,” Anderson said. But isn’t there a danger, he was asked from the audience, of our culture falling apart with all this super-empowered diversity? Anderson agreed that we collect strongly and narrowly around our passions now, rather than just weakly and widely around broadcast hits, but the net gain of overall creativity is the main effect, and a positive one.

Questions remain, though. “Digital rights is the elephant in the room of freeing the long tail.” Clearing copyright on old material is a profoundly wedged process at present, with no solution in sight. Will Hearst fretted that we may be becoming an “opinionocracy,” swayed by TV bloviators and online bloggers, losing the grounding of objective reporting. Anderson observed that maybe the two-party system is a pre-long-tail scarcity effect that suppresses the diversity we’re now embracing. Much of how we run our culture has yet to catch up with the long tail.

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