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Why the ‘Market’ Metaphor has Failed Us
One of the weird aspects of living in our times is this: The future is proving to us day by day that it has already arrived. While the past hasn’t completely left the stage, yet. So, who’s the star?
No matter where you look, you’ll find this struggle in between the old and the new. Whether it is the book industry (paper -> pdf/epub), the music industry (vinyl -> mp3) or TV (schedules vs. on-demand) – they are all caught in the middle.
Now, one can argue that at any given moment in history we have this rift. Which is correct. But it leaves out the factor of technology. Technology is what’s making all of these changes possible as they are marching into our homes and onto our digital devices.
Every day I look into the papers, er… I mean Twitter, I read that this and that company has been funded by such such, many million dollars involved. Another “startup”, another brightly burning, but soon fallen star.
And as those companies are raining in and out of existence on the backdrop of an uncertain present (not to mention future, even) I am estranged by the language surrounding them.
They talk about “need & supply”, “marketing strategies”, “rate of returns”, etc.
We’re talking about companies here that are relatively new and carry out their daily business on an infrastructure which (mostly) didn’t exist even ten years ago. Yet, the way we conceptualize their economic agency is almost exclusively through vocabulary that is at least 100 years old. If we look at Adam Smith who is often considered the founder of the term “free market” and the general concept behind it, he lived and died 200 years before our time!
But let’s not get hung up on words. You can call a computer a TV if you like. The wording is of no importance. What is important, though – is that when we apply ancient vocabulary we apply an ancient conception, as well. In our example with calling a computer a television, you’d be looking for channels, a remote control, programming schedules, etc. or trying to describe the function of the computer in these terms which will result in a lot of roundabout explanations and inappropriate parallels.
The same thing is happening with the “Internet Economy” (the whole thing might just be a contradiction in terms, by the way).
We built this City…
What many people forget today, and hereby I mean both traditionalists trying to “regulate” the e-conomy and hipster intellectuals fighting against the latter, is that the Internet is built on the burial grounds of the counter-culture.
“In the 1960s and early ’70s, the first generation of hackers emerged in university computer-science departments. They transformed mainframes into virtual personal computers, using a technique called time sharing that provided widespread access to computers. Then in the late ’70s, the second generation invented and manufactured the personal computer. These nonacademic hackers were hard-core counterculture types – like Steve Jobs, a Beatle-haired hippie who had dropped out of Reed College, and Steve Wozniak, a Hewlett-Packard engineer. Before their success with Apple, both Steves developed and sold “blue boxes,” outlaw devices for making free telephone calls. Their contemporary and early collaborator, Lee Felsenstein, who designed the first portable computer, known as the Osborne 1, was a New Left radical who wrote for the renowned underground paper the Berkeley Barb.” (source)
Now, ironically, a lot of these ex-hippies or counter-cultural heroes actually made a lot of money very quickly and “grew out” of their anti-establishment culture by becoming their own establishment. We all know Steve Jobs, but there are many others, i.e. Mitch Kapor who used to be a teacher of transcendental meditation and then became famous for developing the “Lotus 1-2-3” software.
Having grown up in the 80ies and 90ies, I always found this very curious. How could people who used to be long-haired hippies wallowing in the mud at Woodstock came to wear suits and aftershave and sit in artificially cooled conference rooms?
The baby boomers were rebelling against their parents generation’s values like neverending industrialized progress and perfection.
And yet, this is where many of them ended up, eventually. (If they didn’t get hung up on drugs and “acid rock”, in the meantime)
If the Internet is largely the invention of the 60ies counter-culture, the great tenor of today is to describe online economy in the same way the parents of the counter-culture did.
Again, we’re speaking about “markets”, “supply & demand” and so on and so forth. One might argue that the hippies eventually found out that while their parents were “square” they knew how to make money, and their tools worked. So their counter-culturism caved in to the promises of wealth, social status and sheer greed.
Am I suggesting that their whole generation “sold out” ? Maybe.
But when the prophetic bards of a whole generation, yes, Bob Dylan is going to China and agrees not to sing his standard repertoire against repression and government control, what does it look like?
An Alternative Alternative
Now, let’s take a look at how we can cognize internet business in a way which is actually congruent with its counter-cultural foundation without falling prey to either economist or counter-culture language.
1. Networks instead of Markets
The market is a limited concept which mostly refers to a geographical area “the European market” or the “Chinese market”, etc. This is the first reason it does not apply to an Internet business which operates globally and beyond nation-state borders. The second reason is that a market implies a scarcity of goods. If we talk about digital goods or services online, the opposite is the case: abundance.
2. Abundance & Need instead of “Supply & Demand”
Supply is based, again, on scarcity. Demand is an interesting concept, because it can be manipulated by advertising. One of the great examples of this can be found in the Facebook phenomenon: It claims to be about “connecting people.” But isn’t it even more about advertising? In other words: How much can you artificially inflate demands for products which nobody really needs? As long as you earn more than you spend on ads, it makes sense. But what if people grow up? What if they find out one day that neither is there are scarcity or a real need for what you offer?
In other words: The “supply & demand” concept is just a bunch of abstractions of people’s actions, neatly packaged into formulas of success and business strategies. But if you don’t watch out, you’ll compute statistics and demographics all day long while completely ignoring the actual people behind them.
Therefore, I like to look at business online not as supply & demand but abundance and need. This has a lot of implications. Here are two: Since there is an abundance, I don’t have to be worried about what the competition does. There is enough for everybody. Secondly, if I’m catering to a real need of people (instead of a “demand on steroids”) I’ll have no problems convincing people that they need what I’m offering. In fact, they already want it, without advertising. Which means, again – I don’t have to worry about funding ridiculous advertising campaigns and can focus my time and efforts on the quality of my actual product/service.
3. Sustainability instead of Expansion
In traditional business you have a lot of costs for rents, paying employees, delivery of goods and advertising. Therefore you constantly have to find investors and sources for financing, which means: expansion.
If you stop to expand you’ll start to die.
But if you’re doing business online, you don’t necessarily need any of those things mentioned above. Which means, you don’t have to keep pushing for more money all the time. You can focus on the need of the customers/clients and your own, of course. Then, as time goes by, you can grow naturally and sustainably.
Also, this has environmental implications (less offices, less waste) but the most important point here is that in this way you can actually focus on increasing the quality instead of being forced to quantify your efforts.
I know there’s a lot more to be said about it. But our time and attention-spans are all over-taxed, already. So I’ll leave it at that for now.
Or, maybe one last thing:
If you want to do business online, you can. You don’t have to be an economist. In fact, I believe it helps if you aren’t. Secondly, not being afraid to fail is important, even though it can’t be helped sometimes. In the beginning you’ll be worried to death that you might starve and keep toying with stuff like pay-per-click advertising in order to keep your visitor levels above the water line. But once you’re settled and you’ve found a real need to cater to, all of this will begin to settle and you can continue focusing on what really matters: the relationship between your customer/client and the product/service.
If you’ve found this helpful, please share this article with your friends. This blog is not supported by any kind of paid traffic or advertising, so if you’d like these ideas to spread, (or not), it’s up to you.
Thanks for reading.
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