Reading 10/2/07

Mostly uninteresting today (guaranteed to engender no comments) but this piece called Financial Models for Underachievers: Two Years of the Real Numbers of a Startup might be entertaining.

When first putting together our financial model, we looked online to calibrate spending assumptions. So many people have blown venture capital, we thought, there must be a manual somewhere on how to do it,

I thought of riffing off of it and writing ten ways designers blow the bucks but alas, it’s too late in the day. You’ve been granted a reprieve. Remind me in the event you want to reschedule your execution later.

The redux of The amorality of Web 2.0 is maybe, that if cheap kills, free is murder. Consider the context of pivotal moments in history, we’re living in one now:

We should marvel, but people alive at such times usually don’t. Every few centuries, the steady march of change meets a discontinuity, and history hinges on that moment. We look back on those pivotal eras and wonder what it would have been like to be alive then. You and I are alive at this moment.


[Snipped appreciably]

And so all the things that Web 2.0 represents – participation, collectivism, virtual communities, amateurism – become unarguably good things, things to be nurtured and applauded, emblems of progress toward a more enlightened state. But is it really so? Is there a counterargument to be made? Might, on balance, the practical effect of Web 2.0 on society and culture be bad, not good? To see Web 2.0 as a moral force is to turn a deaf ear to such questions.

Say it isn’t so. I thought the new connectivity was a good thing. Turns out it may be a real killer, consider his idea of scary economics:

The Internet is changing the economics of creative work – or, to put it more broadly, the economics of culture – and it’s doing it in a way that may well restrict rather than expand our choices. Wikipedia might be a pale shadow of the Britannica, but because it’s created by amateurs rather than professionals, it’s free. And free trumps quality all the time. So what happens to those poor saps who write encyclopedias for a living? They wither and die. The same thing happens when blogs and other free on-line content go up against old-fashioned newspapers and magazines. Of course the mainstream media sees the blogosphere as a competitor. It is a competitor. And, given the economics of the competition, it may well turn out to be a superior competitor. The layoffs we’ve recently seen at major newspapers may just be the beginning, and those layoffs should be cause not for self-satisfied snickering but for despair. Implicit in the ecstatic visions of Web 2.0 is the hegemony of the amateur. I for one can’t imagine anything more frightening.

Uh oh. I always knew free wasn’t good. You have to charge something if only to minimize the riff raff but didn’t really think about how free can siphon resources, killing veritable founts. Another piece from Journalism.org concurs (but they would) with a frightening comparative. What would news look like if stories were covered based on popularity?

If someday we have a world without journalists, or at least without editors, what would the news agenda look like? How would citizens make up a front page differently than professional news people? If a new crop of user-news sites—and measures of user activity on mainstream news sites—are any indication, the news agenda will be more diverse, more transitory, and often draw on a very different and perhaps controversial list of sources, according to a new study.

Still, there’s nothing like reality to totally gum up all the theorizing. This argument on the paradox of traditional media is Why Big Newspapers Applaud Some Declines in Circulation

As the newspaper industry bemoans falling circulation, major papers around the country have a surprising attitude toward a lot of potential readers: Don’t bother.

The big American newspapers sell about 10 percent fewer copies than they did in 2000, and while the migration of readers to the Web is usually blamed for that decline, much of it has been intentional. Driven by marketing and delivery costs and pressure from advertisers, many papers have decided certain readers are not worth the expense involved in finding, serving and keeping them.

“It’s a rational business decision of newspapers focusing on quality circulation rather than quantity, shedding the subscribers who cost more and generate less revenue,” said Colby Atwood, president of Borrell Associates, a media research firm.

That rational business decision is being driven in part by advertisers, who have changed their own attitudes toward circulation.

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11 comments

  1. Carmel Dolcine says:

    I for one would be fascinated to read your Top Ten (Or Maybe Fifty) Ways Designers Blow The Bucks.

    And I would also like you to mention what your thoughts are regarding bootstrapping (or self-financing) vs. private equity financing for new companies owned and operated by young or new designers.

    Great blog. All the best.

  2. Eric H says:

    Free trumps quality every time? I guess that author has never heard of private schools — they’re all the rage in India despite the availability of free public schools. Also, most people reading this (well, those who have televisions) probably have cable despite the existence of free over-the-air stations.

    Sometimes the free good is so bad that its total cost — including the time spent acquiring or enjoying it — is negative.

  3. Lisa Bloodgood says:

    I think there needs to be a balance and there probably is, at least in general. Right now I don’t have the funds for cable; I don’t even know if I want it except for about 5 channels. I found plenty to watch on the free networks, stuff that isn’t just drivel. My stepkids go to public school because I neither have the funds to send them to a private school nor do I know if there is one here that’s better than public. Yet I spend extra $ for organic and health foods and extra time sewing clothes nicely. I do also subscribe to some magazines. I often like the hard copy better than something online and I’ll often print something online that I want to keep/use/compare with something else/etc.

  4. Grace says:

    My boss told about several technology blogs I should read. (I did not share with him that I have a blog of my own.)

    Anyway, I don’t always agree with Rob Enderle, but he is always interesting and thoughtful. Take his post about “The Cult of the Amateur”, Andrew Keen’s book about how Web 2.0 is killing our culture and economy. http://www.itbusinessedge.com/blogs/rob/?p=142

    While Enderle thinks that Keen has some valid points, he suggests that businesses are reacting in the wrong way. That is, when there is so much free and amateur content of questionable quality, the only way to compete is by having the BEST experts on your team.
    http://www.itbusinessedge.com/blogs/rob/?p=142&page=2

    No, the solution is to protect your experts. If you will increasingly have problems trusting external resources and there will be an increasing shortage of experts, then moving rapidly to identify and protect the trusted resources you have becomes a critical survival strategy, regardless of expertise.

    Another way of looking at this, from a competitive standpoint, is that if there is a shortage of qualified experts and you have more than your competitors, then, over time, you should be vastly more successful (translated into actual financial performance) than those competitors.

  5. ioanna says:

    Wow this guy’s article (amoral web) is so wrong it almost looks like anti-Net Neutrality propaganda. Also very simplistic to say ‘web bad’ I mean we are talking about the medium a tool to be utilize not one specific thing. Oh I could write a book about how this guy’s wrong, but I’m sure others have beat me to it.
    It’s not internet-worship that’s insane, after all the internet has been around for so little time and it already brought on so many positive changes in our lives.
    Just a tiny personal example is this site, right here. Wouldn’t this fall under what he calls ‘free’? And yet it is far superior to any fashion education I could get anywhere close to where I am. No, I have to say this cause this guy’s got me so mad.
    What is perverse is elevating traditional media and economies of elitism and exclusion, which is what we had forced upon us before the internet came along. The Media Monopoly doesn’t spend money on ‘experts’ and ‘professional’ journalists to promote the spread of facts and knowledge to the world. There are tons of books on that subject (and one by that very name, The Media Monopoly by a guy who was initially called alarmist and paranoid when he foresaw how a handful of companies would control all the media.)
    No, it’s not just that I don’t buy that the internet would bring about the next Dark Ages like the author of this article suggests. It’s that I think that he is a tool of the establishment (whether he knows it or not) of those who want the power to remain in the hands of the very few (and information is that power) and the rest of us to sit back and be good little drones.
    Yes the internet has the potential of harming established economies, but those economies work by funneling 90% of all the world’s wealth to the hands of about 1% of the people [destroying people and the Earth in the process.] The internet at least has the potential of leveling the field a little bit.
    Think about all the cool new bands (ex. Bishop Allen) who utilized the internet to promote their music successfully without paying the middle man (i.e. the record companies) who might have even ignored them in favor of say another Britney Spears-type “star.” With the internet they put out their own records, sold out their concerts and found their audience.
    Sorry for the incredibly long post but people like Nick Carr make me so mad. But I’m sure Murdoch will write him a nice little thank-you note.

  6. One thought: while use of this site is free, Kathleen created it to promote her book – and her book is her source of revenue. You can’t access the forum without buying the book.

    By including both a commercial element and a gatekeeper function, Katleen is able to keep a high level of value in the site rather than repeating the basics over and over again. The main site isn’t Web 2.0 because it’s Kathleen, Miracle and verbalcroquis posting the content. We add to it, comment and question, but Kathleen has ultimate authority to delete or comments.

    A true Web 2.0 site would have everyone posting anything they wanted all the time. This describes the forum, but the forum isn’t free. And again, Kathleen can take away our access priviledges if we don’t play nice or by her rules.

  7. Kathleen says:

    I can’t be for or against the ideas these writers present. This isn’t so much a double edged sword as it is a three dimensional tool. The unsharpened side of the blade supports the honed edge. The tool is useless otherwise.

    An idea I find offensive is the presumptive ignorance of the average person, that they’ll fail to exercise due diligence in ferreting the information they seek. Sure, many may be sated with hyperbole and urban myth -and I won’t miss their absence- but the quality of the integrity of one’s intellect will be the most effective gatekeeper of all just as it always has been.

    I do find the undermining of intellectual property to be highly problematic, at least in what it says about the integrity of those who infringe and whether prevailing social values migrate toward acceptance, based on the practices of the masses.

    I found the phrase “hegemony of the amateur” (Nicholas Carr) to be a provocative, interesting one. Hegemony with respect to prurient interests having the potential to overwhelm “experts” in the midst. Still, what is “amateur”? The simple diction of it is “lover”, what one does for love with no view of profit. Am I an expert or an amateur? I do it for love but need to generate revenue or I’ll have to do something else. But am I an expert? It’s gatekeepers of the educational institutional system who’d most emphatically deny I am. I do not have credentials as the system defines them and not qualified to teach in an accredited facility. In the same spirit that Liebling said “Freedom of the press is guaranteed only to those who own one”, Web 2.0 is the vehicle by which other voices be they amateur or expert, have the opportunity to be heard. As such, I think the veracity of what an amateur or expert offers is best measured by the quality of the audience they draw. The quote that Grace leaves from Enderle bears repeating:

    …the solution is to protect your experts. If you will increasingly have problems trusting external resources and there will be an increasing shortage of experts, then moving rapidly to identify and protect the trusted resources you have becomes a critical survival strategy, regardless of expertise …from a competitive standpoint, is that if there is a shortage of qualified experts and you have more than your competitors, then, over time, you should be vastly more successful (translated into actual financial performance) than those competitors.

    Unfortunately, he doesn’t suggest how this may be done. In our case, it relies on the voluntary selfless efforts of a divergent fragmented audience (with competing agendas) to work together toward the same purposes.

    Still, it is becoming increasingly difficult to be heard and found above the din of fast and easy promises promulgated by neophyte opportunistic consultants who excel at selling themselves. Like Keene, I cannot count the numbers of qualified people driven from the industry only to be replaced by caricatures of competence. I can only hope I won’t be one of those bled from the business. Prognosticating, a realist perspective dictates I plan a graceful exit. Sanity requires my coming to terms with it. I’ll stay until the negatives (reality) outweigh the benefits (sanity).

    As I said, judging the effects of Web 2.0 is not simplistic or one dimensional. Just as it has created (my) opportunities, it will diminish them too.

  8. J C Sprowls says:

    Just one comment upon another:

    Kathleen said: Still, it is becoming increasingly difficult to be heard and found above the din of fast and easy promises promulgated by neophyte opportunistic consultants who excel at selling themselves.

    I agree that the web has leveled the playing field by providing equal opportunity access. It has also produced a lot of slick tricks, flashy gimmicks and distracting sleight-of-hand, too. But, regardless how crafty a salesperson may be, the Consumer is not ignorant – for long.

    Sure, they are some who suckered by those of questionable ethic because their ignorance is leveraged against them. But, everyone was green at one time. Everyone has been suckered. And, everyone has learned most of their lessons the hard way.

    One can’t blame the web for making the carnival barkers more visible and more readily accessible. They exist in every industry, viz: $1500 patent services, $500 “incorporation kits”, $200 accounting packages. Those who have a modicum of exposure to high-calibre goods will slide right past. A few will get caught in the trap and pay handsomely for the tuition.

    I don’t argue that some business models are designed specifically to that end. But, I think you overestimate their staying power. They will weed themselves out of the industry, eventually, and are no semblance of competition or threat to an ethical and high-calibre business.

    Water seeks its own level. Dedicated Consumers will dispense with myth, lies and trickery when they sample high-calibre goods. The way to accomplish this is to make it equally accessible and readily available as the low-quality goods. IOW: engaging in a little friendly competition, “upping” the game, pushing further and, by virtue, pointing out woeful inadequacies in the competition simply by being your best.

  9. ioanna says:

    Heh. Just as I finished writing my post I imagined someone would jump in to remind me that this site is not really free, since it really depends on people buying the book and supporting Kathleen.
    Also I didn’t think about the argument in terms of ‘free to edit’ like wikipedia, I thought of it more like ‘free to comment’ or free exchange of information between interested parties who support one other.
    That clarification added, I don’t really think there is such a thing as completely free anyways. One of my favorite proverbs is ‘There is no free lunch.’ :)
    Taking part in this website is on KF’s terms, be it buying the book, or supporting it in another way, and then you need to pay for your internet connection etc etc.
    The point I was trying to make is that the author of that blog was going for the alarmist establishment talk of ‘sharing will ruin the economy’ which I don’t think is true. I think a lot of people are perfectly capable of sharing with respect to others work, and those who don’t will not ruin it for the rest of us.
    Maybe I’m just an optimist. Or believe in The Internet ;)

  10. Kathleen says:

    Slightly off topic but when Carr said:

    We should marvel, but people alive at such times usually don’t. Every few centuries, the steady march of change meets a discontinuity, and history hinges on that moment. We look back on those pivotal eras and wonder what it would have been like to be alive then. You and I are alive at this moment.

    This made me wonder what social historians a hundred years from now will make of us. Unless we have the big kaboom, these bytes of thoughts and meanderings will largely still be accessible, truly a historical first. And unlike other massive upheavals and challenging times in the past, historians will know what we -to say the average person- was thinking, not needing to glean from hard copy journals and letters. How will we be judged? One hundred years from now, which thought leaders of today will be considered important? I suspect who ever they may be, they can’t know their reach and influence. One thing is certain, the intellectual value of the web increases dynamically for each year it exists.

  11. Irene K says:

    I thought the Financial Models. . . was really fascinating. (thanks for posting that ‘no-comment title’) Not that I’d be in a position for a long time to hire employees, but it’s quite interesting to know how to break down their costs. Especially when comparing that to Rob Enderle’s recommendations on protecting your experts, which is very important. I’ve always been surprised by how easily replaceable various of my bosses’ have viewed myself and other employees as, when I myself know that in a new position, I make many mistakes I wouldn’t if I were more experienced in that particular position.

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