Nomics and Tails

Wikinomics by Don Tapscott & Anthony D. Williams values collaboration as one of the most useful resources in this age of online connectivity.

The book cites Wikipedia as one of the best sources of the world’s collected knowledge, it being the modern equivalent to the library of Alexandria. The best part of this central knowledge database is that anyone can add or update it at any point. If there are new revelations about a new solar systems by astronomers, anyone can instantly start an entry for the new planet or add new information to existing entries. Every little bit of knowledge a person has can be added. Imagine if everyone added their two cents to the change jar every time they had the opportunity, given a short period of time there would be a jackpot worth millions. The same idea happens with Wikipedia. Many people add their thoughts on any number of subjects they have information on to create an indexed version of all acquired human knowledge. It’s really impressive.

Wikinomics applies this type of collaboration to the work environment. Companies seeking solutions to their problems do not necessarily have the resources to develop their products into viable assets or have the money to retain a staff large enough to analyze their problems from all angles. This is where outsourcing can take place. Coarse’s law states that companies will contract people to do work if it is ultimately less expensive than keeping them on a retainer. For instance, if a company needs a graphic designer for three hours of work a year, it does not make sense for them to hire one and pay out a salary with benefits. If the company needs the designer for upwards of 45 hours a week in which the contractor charges $300 an hour, it would make sense to make that person part of the company and pay them a fixed salary. The law also states that companies will continue to grow until all economically necessary roles are filled. Wikinomics says with the competitive business of the internet, this might not be necessary. You could find a person that works for a less expensive rate. And if everyone knows what people are willing to pay for a service, its cost will find a reasonable equilibrium.

Companies have also started offering incentives for solving their problems. Companies provide all the information they have available on their quandary, and offer a cash reward for the idea they implement. This creates a bidding atmosphere where other people try to competitively come up with the best solution. Since this method is open to anyone with an interest, people with a variety of different talents and erudition look at the situation from more angles than any single company could ever afford to.

In The Long Tail by Chris Anderson, we find that many people have individual preferences that aren’t always met by the main stream market.  For example, there are many movies produced every year, but not all of them make it into every theater in the nation.  Larger cities tend to get more films because they have more potential to be seen per capita.  People in smaller cities may want to see Zombies from Outer Space VI, but it does not make sense economically for play that movie in a town of 400 people when only 2 of them have the desire to see people eaten alive by space mutants when the latest installment of Harry Potter will sell out the same theater every showing for 10 weeks.

With the internet, people can fulfill the desires of their crazy tastes.  Just like the movie theater example, it doesn’t make sense for a store to carry an item it may never sell.  The two people in town that want Zombies from Outer Space VI might not stop by their location or think to look for it.  With the internet, the location of a space zombies fan doesn’t matter.  A warehouse of zombie DVDs could be located in Des Moines with fans spread out across the world, as long as the warehouse has a web site, all of its fans will have a chance to get a copy.

I think this has created a wonderful assortment of services.  The movies I can’t find at the local Blockbusted are available through Netflix or Amazon.  The comic book I can’t find in the store can be purchased directly from the company, and I never have to go to a gallery show to find pieces  from my favorite artists.  Everything can be done through the internet, and distribution companies need not worry about having an overstock of purple cow dolls because the people that want the item can find it.

I think this long tail idea really works.  People’s tastes are becoming more unique and it is easier to find new items in your favorite genre.  iTunes has a wonderful selection of artists, old and new, and Amazon does a great job of recommending other items we would have not heard of if we were visiting Barnes and Noble.  I think that the low overhead of internet distribution, the deep discounts to be found on the net, the ever increasing ability to preview items on your computer coupled with a generation that grew up buying online will eventually drive traditional retailers out of business.  It will be impossible for retailers to stock items for each individual’s tastes (that and digital distribution may make a physical location irrelevant).  More individuals will want their tastes catered to and will turn to online retailers to satiate their desire for imported European techno CDs, because we all know that is what robots will listen to in the future.

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