Big Think Interview with Chris Anderson
A conversation with the Editor-in-Chief of Wired Magazine and author of The Long Tail and Free: The Future of a Radical Price.
You can see the 36 min video here.
The full transcript is also available. Some extracts and quotes (red highlights by me)
What happened with the Internet is that it took computers and storage and bandwidth, silicone chips, spinning metal platters, and fiber optics and put them together. It turns out that Moore’s law falls in price 50 percent every 18 months. Storage and bandwidth fall in price every 14 and 12 months, each by 50 percent and they’re accelerating their race to zero even faster than Moore’s law. You put all three together and you have this general rule that anything you do on the internet, whatever it costs today, it will cost half as much a year from now. This has relatively profound consequences. First, it makes zero – It makes free not really a marketing gimmick but kind of an inevitable price. Not to say that everything is going to be free. The greatest misunderstanding of free is that everything’s going to be free.
At the same time, they have iTunes, a very successful way to sell music. In that case, what they’re selling is convenience, not music.
On “infinities” (see also Peter Hinssen’s Innotribe Keynote on “exploring the limits.”
I think the most profound thing about turning products into digital products from my prospective is that price becomes arbitrary. In the traditional world, there’s a pretty strong correlation between the cost of a product to make and the price you can charge for it. You charge something that’s slightly above the cost and the more competition there is, the less you can charge. It tends to drive prices down to the marginal cost. In digital products where the marginal cost is zero, the price can be anywhere from zero to infinity.
On “Cloud Computing”:
We talk about lowering the barriers to entry but you also want to lower the barriers to exit so that people don’t feel like they’re risking everything.
Open ID and open apps are two examples. I think we’re seeing these two battles play out and although Jonathon is absolutely right, that this is a risk, I perhaps have more confidence in the power of the marketplace to sort this out. I think that the one thing we’re sure about in this era is that we have choice, lots and lots of choice. If Facebook gets it wrong or if Twitter gets it wrong, there are a thousand other companies in the wings just waiting to get it righter. Knowing that, I believe –and so true for Google the elephant in the room on this– I think knowing that their hold on the consumer is not permanent, it’s not cast in stone and is only permitted as long as they serve the consumer better than the obvious alternatives, I believe, will keep them doing the right thing.
I can only hope that the regulators move slowly because I don’t think the answers are clear and any answer we give today will be wrong tomorrow. I mean, today, isn’t it sort of absurd the fuss we made over Microsoft, now, in retrospect? Now Microsoft looks like the underdog right? We were so worried about their monologist abuse of the desktop. I mean, desktop, when was the last time you even saw your desktop?
About “going after small or big business (the next 1B$ business):
That model distributed innovation. Letting the community sort of invent products, try them out at small scale, figure out the bugs, whether there is real demand, and then use the big company’s power to scale them up to mass markets. That feels about right.
See also my yesterday’s blog post about Failure is NOT an Option.
On “what upcoming technology will disrupt the industry ?”
The simple answer to your question is the most disruptive thing I can see right now is the fact that you and I are carrying GPS chips in our pocket. If you have an iPhone in your pocket or any other smart phone, you’ve got a GPS chip. Now we’re not doing much with them right now but we have, for the first time in history, the capacity to link our physical world, the world we live in, to the virtual world.
I think GPS and the internet combined is a game changer. Now I’ll add just one thing on top of that. The fact that your phone is not just GPS and internet connection, but also other sensors, accelerometers, it has proximity sensors, light sensors, things like that. It could have other sensors. You know, we’ll see what we do with that. To what extent could that be used for health care? To what extent can that be used for, sort of, environmental monitoring? I don’t know but we now have nodes. We have smart nodes in people’s pockets, in their hands, spread all around the world, connected to each other and the internet that know where they are. I think that’s a big deal.
Anderson is also mentioning a company called 37Signals. Ever heard of them ?
37signals is a different approach in that they are relatively lean and targeted. They are not trying to become Microsoft. They know who they are. They were kind of born on the web and, as a result, the products sort of feel organically web centric.
And finally, on “Small is the new big”
Lower transaction cost was the advantage of the firm. Now we’re in an era where it’s completely reversed. Now big companies have bureaucracy. They have red tape. They have long procedures. They have certain profit requirements. The transaction costs are actually higher inside the walls of a big company than they are outside.
Bill Joy famously said that the smarter people in the world for any given project don’t work for you. That’s a problem if you can only work with people that work with you. I mean, why are you working with this guy? Is he the best person in world?
No, he’s the closest person in the world. Now it’s incredible easy to find the best person in the world and to get them to work with you. The internet has provided a sort of global lowering of transaction and so we can now, it’s often more efficient to look outside your company and, you know, I’m joking on some level. The idea of finding the right person via Elance versus your internal HR is actually often easier to go outside and get things done. What that’s done is that it’s said we have a diseconomy of scale with big companies. The bigger they are, the harder it is to get things done. Small companies are nimble. They’re focused. The cost base is lower. They don’t need big markets so they can target more narrow opportunities.
Open source software, hosted solutions, all this cloud stuff, those will lower the cost of starting a company. The internet has lowered the barrier of reaching products. These global markets of talent have lowered the cost of finding people the right people to work on your project. All of it is really creating an army of competitors to the large company model. Large companies are still great at mass but there is a long tail. And large companies are bad at the long tail. Small companies are perfect for the long tail. And we’re not going to see a battle between the two.