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As far as I know, ‘What Would Google Do?’ by Jeff Jarvis is the first book to talk about VRM. When I started reading, I was excited. Jarvis was telling it like it is – clarifying and explaining the vast changes now under way.

His critique of old-style corporate mindsets is spot on. “Listen to the rhetoric of corporate value,” he writes. “Companies own customers, control distribution, make exclusive deals, lock out competitors, keep trade secrets.”

All these points of ownership and control are now exploding, he points out. The new rule is “Give the people control and we will use it. Don’t and you will lose us”. Value lies not so much in the product or service companies sell, but in the tools they provide for individuals to use, he explains.

This is not just semantics. It’s a real shift. It’s about providing individuals with platforms that enable them to build their own value; that “help users create products, businesses, communities and networks of their own”. These words – enable, help, build and create – are important. In this new world, the individual is no longer just a ‘consumer’ or a ‘customer’ of the corporation. He and she is an active, creative, equal partner in the process of wealth creation.

Fantastic stuff, and it’s really helpful to have it explained so clearly.

The more I read, however, the more concerned I got. What is the alternative to yesterday’s centralized, controlling business?

Well, it turns out that Jarvis has only one, one-size-fits-all answer. Here’s how he describes the rules of the new networked ‘link’ economy. “First, you must produce unique content … Second, you must open up so Google and the world can find your content … Third, when you get links and audience, it is up to you to exploit them, usually through advertising.”

Oh dear. Jarvis’ previous career was in ad-supported content publishing and guess what? Despite frantic, breathless huffing and puffing about how revolutionary and different the new world is, it turns out to be almost exactly the same as the old one – all about ad-supported content publishing. The only thing that’s different is that this time the ads are delivered a different way (via Google) and the content is (sometimes) produced by different people.

Jarvis then applies this vision basic one-size-fits-all vision to everything he touches.

For example, he cites the Cluetrain Manifesto countless times in the support of his arguments. But (Doc, please tell me if I’m wrong) I thought the whole point of the Cluetrain Manifesto was that if you are having a proper conversation both sides are in a much better position to navigate their way to value without advertising.

By the end of the book I was seething with irritation. Right now, there is a particular form of hype coming out of silicon valley – let’s call Hype 2.0 – that is singularly unhelpful. Jarvis’ hype gets three things wrong. They are intimately connected.

First, he has an ‘either/or’ attitude towards atoms versus bits. Time and again, he is sneeringly dismissive of the real world of material goods, and of services provided using material infrastructure. “Stuff is just so last century. Nobody wants to handle stuff any more,” he declares. “Many industries are saddled with slowness because they are trapped by atoms and complexity.” “Manufacturing is expensive, vulnerable to commodity pricing, labour-intensive, weighed down by gigantic benefit costs, and competitive. That’s the tyranny of atoms.” And so on.

Fact is, we are material beings living in a material world. I’m sure Jarvis would be the first to complain if he could only drink Googlejuice with his breakfast; if he couldn’t catch a plane to his next speaking engagement and sleep in a comfortable bed with nice cotton sheets in a safe, secure hotel afterwards; and if he didn’t have a boring old atoms-based computer to access the Internet.

This is not just about rhetoric. It’s about economics: the real opportunity in what’s going on right now is not the ‘either/or’ of atoms or bits but the ‘and’: how better use of information can help us strip away waste in material production and distribution, attack its complexities, improve its value and so on.

This links to the second flaw in Jarvis’ argument. For him, the new world is all about ‘content’. The opportunities individuals now have to create their own, new content. Opportunities to co-create content via communities. Opportunities to share content. Opportunties to search for and find the content you want.

These are all fantastic things. But they are less than half the story. They ignore other uses of information: for example, the critical role it plays in organisation and coordination.

There’s a saying in the boring old material supply chains that Jarvis dismisses as “so last century” that “uncertainty is the mother of inventory”. In other words, if you don’t have the right information about who wants what, when and where, then you are ‘saddled’ (to use Jarvis’s term) with guesswork and just-in-case operations.

In fact, without the right information about the who, what, when and where of demand everything you do – production, distribution, communication – has to fall back on wasteful guesswork and ‘just-in-case’. And at least half – probably much, much more – of the potential value of the web is its ability to help us deal with these ‘tyrannies’ of waste. What Jarvis misunderstands is that these are not “tyrannies of atoms” as he calls them – they are tyrannies of poor information.

This leads to his third flaw. In his obsession with ‘content’ and cool new things that involve content such as communities and co-creation, Jarvis misses the point of VRM.

Wave 1 of the information revolution resulted in an explosion of ‘top down’ flows of information: cable, satellite, publishing on the web, etc. These were the first fruits of digitalisation.

Wave 2 made sideways or peer-to-peer information sharing possible. And thanks to Google, it gave us new tools to help us navigate our way through the tidal wave of top down, published content to find what we wanted. Wave 2 is very ‘content’-focused. It’s what Jarvis focuses on.

It’s Wave 3 however, where the real fruits of the information revolution finally pass into the hands of individuals. Under Wave 3 individuals will be able to build their own databases – to manage information on their own terms for their own purposes – and to use this information to articulate their own needs, preferences, priorities and so on to the marketplace. Wave 3 reverses commerce from ‘top down’ to ‘bottom up’ and right side up. Yes, this third wave has important content elements (as with atoms and bits, it’s not either/or) but it’s just as much about personal analytics, organisation, coordination and logistics.

The next economic revolution lies exactly in the three bits Jarvis overlooks: the importance of the connection between atoms and bits, the fact the web is not just about content and advertising, and that it is not just about peer-to-peer information sharing – it’s  also enabling personal information management and volunteered personal information.

The real potential of VRM and buyer-centricity will be unleashed when we bring these three elements together, as we would bring chemicals together to create an explosive reaction.

Alan Mitchell

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If the cost of producing product variations falls, it’s likely that the supply of product variation will increase (as long as falling costs in one area are not counterbalanced by rising costs in other areas, such as distribution).

If the cost of both product variation and distribution falls, successful supply of product variation is likely to increase, as long as buyers can navigate their way to, and through, this increased variation.

The first of these trends – reduced cost of product variation – has been in evidence for some time. Witness the growing array of different types of motor vehicle, for example.

But the second two – distribution and navigation (information about products and distribution) – are currently being turned inside out and upside down by the Internet. If your product is 100% digital, the cost of storing and distributing it is trending rapidly towards zero. And thanks to the likes of Google, recommendation engines and so on, buyers can find and access an ever increasing range of offerings at very low cost. Result: we have a choice explosion.

This is the basic thesis behind a new hit business book The Long Tail. Unfortunately, in reality, it’s a complete muddle. Author Chris Anderson has conjured up a theory of everything from a theory of a few things, and in doing so he misses the real significance of what is happening.

The few bits where Anderson is right relate to the world of digital entertainment content. As the costs of finding and accessing music, videos and so on collapse, people are increasingly exploring ‘the long tail’ of non-blockbuster hits to find stuff they really like. Great stuff. Fantastic!

But as Anderson has to admit (before going on to claim that there are long tails everywhere and that they will define 21^st economics) is that this only really applies to 100% pure digital products and services. As soon as you are start dealing with atoms rather than bits (and that includes any service requiring the presence of a human being), the costs of distribution intervene to make the supply of endless variety much more costly.

Astonishingly, Anderson also completely ignores the unique and defining feature of the markets and products he is talking about: they are all about novelty and variation. We don’t want to sit down and watch the same movie every night, read the same book or listen to exactly the same music track every day. The joy of these product areas lies in the discovery and experience of new things. Value comes from the endless supply of novelty, which is why the ‘back list’ (or long tail) of content grows longer every day.

However, the same logic of novelty does not apply to baked beans, coffee, beds, motor cars, or DVD players. It may be nice to have some variety here, but the value these products offer doesn’t lie in their novelty. It lies in other aspects of their functionality. That’s why the ‘long tail’ is so much shorter in these categories.

Anderson also completely ignores those markets and product categories where a key dynamic is towards standardisation – because compatibility and interoperability are key to value delivery. These markets, where ‘the standard’ is the platform for everything, tend to be ‘winner take all’ markets: the opposite of ‘long tails’.

So the long tail is a theory of the 21^st century economy so long as you set aside any product or service involving material, tangible atoms or people-based service, where novelty is not the key to value, and where standards and interoperability are not critical. (In the case of music and video, we are in the midst of new standards wars for the devices upon which the long tail of digital content is to be played.)

The sad thing is that amidst all this muddle, Anderson touches on, and then slides away from, what really is new and important for the 21^st century economy. He has some very good chapters on the limits imposed by traditional fixed location shops on choice and the exercise of choice; and on how the Internet is enabling us to access and use information for the purposes of value navigation (finding the stuff that is valuable to us); and on the economic benefits of producing to signals of demand rather relyong on today’s predominantly push models. On-demand models eliminate huge amounts of waste in the form of potential demand not met, overproduction, and other mismatches of supply to demand (the wrong inventory being in the wrong place, for example).

But these have nothing to do with the long tail. What they have a lot to do with, however, is the one decisive shift that Anderson circles around but never pinpoints: the way the power of information is being placed into the hands of individuals. This has two aspects.

1) Increasingly, individuals have the easy-to-access and easy-to-use comprehensive, trustworthy, information that they need to navigate towards the value they want. This is in contrast to the deliberately limited information that retailers make available in store, and the deliberately biased information that producers provide about their products.

2) Parallel to this increasing access to genuinely useful information (rather than information provided by third parties as a means to their own ends), is individuals’ growing ability to ‘input’ their own information into the process: their own signals of demand, desires, specifications and so on.

This is a tectonic shift at the very heart of our economy, because it reverses the order in which things are done and the power relations which define this order.

Yesterday, the economically critical tasks of matching and connecting – matching supply to demand, and connecting buyers to sellers – was organised around physical production and distribution and it was organised by producers and distributors. It placed power in the hands of the supplier.

Today, thanks to many of the things Anderson talks about, the economically critical tasks of matching and connecting are happening first in the sphere of information, and only then in the sphere of production and distribution. New first-port-of-call services are increasingly connecting information from and about buyers with information about products and services before the processes of distribution and production kick in. (See the BCCF white paper on Added Value Buying Services www.rightsideup.net/AVBS.htm).

This new sequence of events – information first, not afterwards – is not only amazingly more efficient, it also involves a power shift, because the critical actor here is not the producer or distributor but the lead information user: the buyer. The decisive element is not the existence of ‘a long tail’ but the dynamics and process of supply organised around units of demand (individuals), rather than individuals being organised around units of supply (products and shops).

In his book, Anderson criticises today’s Hollywood style ‘hit culture’. “Setting out to make a hit is not exactly the same as setting out to make a good movie,” he writes. There are things you do and you don’t do in the quest to draw in millions of paying viewers, he points out. You have lots of thrills and spills. A happy ending. And so on.

The same goes for writing books. Setting out to write a hit business book is not the same as setting out to write a good one. The Long Tail has some fascinating facts and figures, which are used to back a bold claim, which is surrounded by loads of breathless hyperbole. All so exciting. Anderson has written a hit.

Alan Mitchell

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