Oh, and while I’m talking up Google forms, I probably ought to report back the result of my one-question survey. With a sample size of 110, the result was 76% in favor of an Amazon.com product page and 24% for Paypal.
Tim and I had a fun Google Chat back in March about a concept for a book called “Too Big to Succeed.” The window for a book on this theme to become a blockbuster is almost closed, so I figure it’s time to stop hoarding the idea and make it a blog post.
The phrase “too big to succeed” has already infected the cultural lexicon this year. A quick sweep of Google shows it being applied to the banking industry, the auto industry, Twitter, big Pharma, China, and Washington, among other things.
It’s a good phrase, springing up (as best as I can tell) in response to an even-more-popular recent construct: “too big to fail.”
The concept of an entity or industry being “too big to succeed” deserves an extended riff. Do industries just have to congeal into tiny networks of giant institutions over time? And if so, does that tendency pretty much force the massive flameouts and market inefficiencies we’ve seen all over the economy recently?
I don’t think this does have to happen, and therein lies the thesis of the book.
I think the era where every industry has to become an oligopoly is nearing an end. I don’t think the shift towards mass institutions was a natural, inexorable network characteristic. If we look at the tape, I think we’ll see that the oligopoly era was a network distortion produced by our industrial-age regulatory framework. And it’s time to leave these things to a quiet rest.
In industry after industry, I think we’ve got an opportunity to shift our policies towards supporting nimble, durable markets that mimic real networks: diverse collections of nodes with a few particularly well-connected hubs. Let’s look at a few examples:
The news industry
Over the past century, the news business went right past oligopoly into monopoly and got stuck there. Today, most of the journalism produced in every American city is an accidental byproduct of a giant, dying media conglomerate. As with all these other oligopolistic industries, the news titans are clamoring for a bailout, asking the government to prop them up and regulate away their competition.
But we can imagine a system of better, more sustainable journalism built on a robust network of independent newsrooms threaded throughout every neighborhood. Networks of editors could package this work for diverse sets of overlapping communities. In places like the Bay Area and Seattle, we’re seeing the beginnings of this new model, but to thrive, it will require at least as much regulatory support as the big dogs got when they were buying their presses back in the day.
The medical industry
This was what got Tim and I started. Today, most health care is provided by big, unwieldy hospitals. They tend to cluster in these giant office parks, often far away from the inner city, where they’re needed most. You walk in and have to navigate a maze of rooms, bouncing back and forth between receptionists and nurses and physician’s assistants and doctors.
But the vast majority of medical care people need on a daily basis doesn’t require a hospital to provide. As Tim said in our chat (punctuation mine), “There should be as many clinics as there are coffee shops, pharmacies, or copy stores. Universities do this (at least Penn does). We have a student health center; they have walk-in and appt hours, you pay a fee and it’s free. They see you and administer standard care, run tests, give physicals and vaccines and such, and then refer you to the hospital or a specialist if it’s more serious. You HAVE to go to the clinic if you’re in Philly and it’s not an emergency. And in part b/c it’s a tailored operation, geared towards younger people, it’s tremendously efficient.”
The food industry
I just saw Food, Inc., yesterday, which might be what got me off on this riff again. If you read Fast Food Nation or The Omnivore’s Dilemma, you know that Eric Schlosser and Michael Pollan both identify monoculture (i.e. oligopoly and monopoly) as the primary villain in our awful global food situation. The last century saw food production shift from the local farmer to the multinational factory conglomerate. That shift is ruining our health, our environment, international diplomacy, and perhaps worst of all, our food. Meanwhile, the unbelievably obese food lobby has taken control of our government, writing intrusive laws to ensure its survival even as it crumbles under its own weight.
The movie industry
At this point, Hollywood basically exists to churn out quarterly blockbusters that each aim to repeat the formula for one blunt, universal emotion: love (“The Proposal”!), fear (“Saw XI”!), excitement (“Transformers!”), humor (“17 Again”!), etc. Nuance is lost, and art suffers. Like the food titans, the news kingpins, the health care lobbyists and others before them, the movie moguls are descending on Washington to seek protection as the twin forces of distribution implosion and supply explosion shred their profits.
But when my nephew is cooking up mindboggling special effects on his laptop, who needs Hollywood? The industry’s product is unsustainable. You can’t flog the formula forever. Let a universe of independent artists flourish, and overhaul the laws to help them make their magic.
We can lay this pattern onto the energy industry, the publishing industry, banking (of course), transportation, post-secondary education, you name it. If I were editing this book, I’d make that the first third, in fact: spend the preface and first chapter making the overall argument, then spend a few chapters exploring how it plays out in all these different industries. Follow up this part with a chapter laying out the history — how this screwed-up oligopoly system took root in the first place. Trace it back to the industrial age and beyond.
The middle third of the book (I’m taking this straight from the gChat) could be about the rules of a new, more natural network system. The role of big companies in this ecosystem, what differentiates successful lean businesses from unsustainable niche businesses, how a network of microbusinesses can collaborate and compete effectively.
The last third might address how society generally would benefit, and how it would have to evolve to support this. This is where you explore the policy piece — how our laws have to change. It’s also where you talk about the Richard Florida stuff — our evolving understanding of how properly organized urban environments should function — and how this shift facilitates that.
Of course, as I said, I think the moment for this book is almost gone. From last September to this past January, we had a brief interlude of just transcendent possibility. Monumental shifts in our society seemed graspable. People talked about spending a trillion dollars over just a few years to fundamentally remake our economy, and we actually passed a stimulus package that got closer than anybody imagined.
But we’re seeing that ambition melt quickly. We’re on the verge of historic health reform legislation, sure, but now we’re choking on a price tag of $1 trillion over 10 years, regardless of how much it saves us over the long term. Our chance to achieve forceful climate change legislation is dimming by the day. And our September lust to reform the banking industry has molded over into a desire to, er, re-form the banking industry, in much the same shape as it was in 2001 or so.
There was a window where a big, Gladwellian book selling this notion of industrial transformation — not as some sort of hippie anti-corporatism but as a breakthrough business idea — might have made some traction. But I think that window’s almost shut. So this book is, for now, a blog post.
But, it turns out, the problem with television is sports:
The broadband business is doing fine, as costs are coming down. Cable executives do worry that if costs rise as they expect because of surging online video use, they will need to find some way to get prices going up the way they are used to in their video business.
The bigger question is what happens to the video business. By all accounts, Web video is not currently having any effect on the businesses of the cable companies. Market share is moving among cable, satellite and telephone companies, but the overall number of people subscribing to some sort of pay TV service is rising. (The government’s switch to digital over-the-air broadcasts is providing a small stimulus to cable companies.) However, if you remember, it took several years before music labels started to feel any pain from downloads…
The wedge that breaks all this may well be sports. ESPN alone already accounts for nearly $3 of every monthly cable bill, industry executives say. With all these new sports networks pushing up cable rates, at some point people who aren’t sports fans might start turning in volume to Internet services like Netflix. We’re not there yet, but looking at the industry in the last quarter, you can see the pressures building.
Fascinating (and quick!) look at cable companies’ businesses. [Everything in bold is my emphasis.]
Do you know what was great? The Hanseatic League. Do you think we could bring that back, twenty-first century style?:
This diffuse, fractured world will be run more by cities and city-states than countries. Once, Venice and Bruges formed an axis that spurred commercial expansion across Eurasia. Today, just 40 city-regions account for two thirds of the world economy and 90 percent of its innovation. The mighty Hanseatic League, a constellation of well-armed North and Baltic Sea trading hubs in the late Middle Ages, will be reborn as cities such as Hamburg and Dubai form commercial alliances and operate “free zones” across Africa like the ones Dubai Ports World is building. Add in sovereign wealth funds and private military contractors, and you have the agile geopolitical units of a neomedieval world. Even during this global financial crisis, multinational corporations heavily populate the list of the world’s largest economic entities; the commercial diplomacy of emerging-market firms such as China’s Haier and Mexico’s Cemex has already turned North-South relations inside out faster than the nonaligned movement ever did.
Wait — ninety percent of what, exactly? Innovation units?
Farhad Manjoo tries to figure out why nobody’s solved the riddle of streaming movies on the internet:
When I called people in the industry this week, I found that many in the movie business understand that online distribution is the future of media. But everything in Hollywood is governed by a byzantine set of contractual relationships between many different kinds of companies
One interesting SXSW session from yesterday was Zappos.com CEO Tony Hsieh’s keynote on what makes his company tick. Among his most arresting lines was this (in paraphrase): Contrary to popular belief, the most important goal for us is not customer service. It’s culture. Hsieh proceeded to outline an exhaustive strategy for enforcing a fairly specific corporate culture, including the creation of an annual “Culture Book,” which features statements from Zappos employees characterizing the culture of the company.
Hsieh’s presentation was striking because it seemed to cut firmly against the grain of the current prevailing attitude towards corporate culture. We hear a lot nowadays that the best CEOs work hard to produce a sort of rigorous autonomy among their employees. Google, of course, famously permits its employees to spend a day a week merely following their own curiosity in the pursuit of work. The Obama campaign was praised for replicating the organizing structure of a good jazz group — a legion of micro-maestros, all empowered to excel at their own strategies in their many focused domains.
The Zappos of Hsieh’s description, on the other hand, is in some sense a very top-down, command-and-control environment. Prospective employees are carefully screened for conformance to a preordained culture, and anyone hired can be severed for failing to conform to that culture. One of Hsieh’s “10 commandments of Zappos” (how often do you hear “ten commandments” these days in companies?) — “build a positive team and family spirit” — is about eradicating the division between work and life, according to the company’s recruiting manager. “Employees work together, play together, break bread together and come to think of each other as members of an extended family,” she says. I.e., Zappos aims to encompass the entirety of its employees’ lives. This runs counter to, say, Best Buy’s much-praised embrace of allowing its employees unprecedented flexibility in scheduling and telecommuting.
Of course I’m simplifying. The “commandments” ostensibly allow room for plenty of employee autonomy. “Be adventurous, creative and open-minded” is on the list. Which reminds me of trying to come up with funny post-song banter for a cappella concerts in college. At some point, after even our lamest ideas had stopped trickling out, someone would croak out an exhausted, “Be funny!” And we’d all laugh. Because, of course, you can’t command humor into existence. Can you command creativity? And can you really make jazz when all your musicians were pre-screened for favoring the same improvisations and flourishes?
Also notable was the warm reaction Hsieh’s sessions got. Aside from some jokes about the cultish picture he was painting, and some grumbling about his sort of flat presentation style, the Twitterverse was surprisingly (I thought) aglow about what Hsieh was saying.
Is the dynamic changing? Is top-down the new bottom-up? What’s the right balance between Zappos’ approach and Google’s, or Best Buy’s?
Later, also: Robin got at some similar questions in his post about Apple, the iPhone, secrecy and transparency.