Tuesday, January 15, 2008

Long Tail Economics

In the 1980's and 90's news columnists and political-economics activists focused on the threat to Mom&Pop stores ( the archetypical Jim and Betty's Hardware Store) that Wal-Mart was posing. No doubt, the rise of Wal-Mart and the big box stores did lead to the disappearance of small or individually owned stores in suburban or small town USA.

The activists may have had hearts of gold, wanting Jim and Betty's Hardware Store to survive, and along with it the community spaces that usually formed ad hoc in these old and less formulaic establishments. But that's not what people wanted. The big box stores sold the generic stuff at the cheapest prices. For poor or middle class people, that formula is going to almost always win.

Now, there has been another revolution, maybe more fundamental than the rise of big box stores. The key is the breaking of the generic+cheapest formula, by subtracting the generic and "most popular" items. It is called Long Tail Economics, named after the "long tail" of the graph at the top of this post.

Imagine a brick and mortar book or video store, such as your town's big Border's Bookstore. This store stocks the 160,000 most popular books. Great for them, and for all of us living within driving distance that want one of those books. Here is where sellers with no store on Earth, such as Amazon.com or Netflix.com, crush that reality. They make more money selling millions of copies of the least popular titles on Earth.

Society is not going back to shopping at Jim and Betty's Hardware Store, they are closed. We will still need big bags of Dorito's, 2 liter Coca-Cola's, screwdrivers and office supplies -so the Costco's and Wal-Mart's are needed on a weekly basis. What is needed on a permanent basis is access to the almost bottomless pit of obscure micro-industries, spin-off C-grade rip-offs of subculture cult favorites, and ancient goods such as stone tools.

Thank god we have internet online commerce, without which we would only have stores with Doritos, Coca-Cola, and office supplies.

Who are the people selling in the new paradigm? Here are two excellent examples:

Very Scary Carnival is an artist who I've known since 1982. She has sold art in various media for decades, and now has lots of fun stuff at Zazzle.com.

Another grand example of hyper-obscurity is my tiny presence on iTunes as a music artist. Click here to be taken to my place in the store. To have a listen to different music by me for free go here.

Some have thought that the paradigmatic decline of big-box Doritos outlets would be the local food co-op. While living in Olympia, I saw the local co-op, with its under-caffeinated staff selling nothing useful. The photo to the left is about all they had. I'll take Doritos, specialized FOSS capable electronics, and obscure art over that any day.

Robert Putnam's book Better Together has as title of one chapter: Craigslist.org: Is Virtual Community Real?. The case study marks the online phenomenon as positive in many ways, but fails to fully qualify it as building social capital. This is mostly due to the Putnam social capital thesis demanding a high degree of corporeal associativity (basically you need to hang out with the group on a frequent basis). Here is where the revolution flips: asynchronous associativity provided by ambivalent machines performing algorithms. The associations are not just about about long tail economics (customers that bought this also bought that), rather every social domain, especially politics, are being supported in this asynchronous virtual world. Of course the old fashioned form of meeting people in real time is always in fashion, but to say it is a higher form of social capital is academically arbitrary and out of sync with the trajectory of folk empowerment. This localism stance socially and civically disables anyone who strictly obeys the orthodoxy.

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