January 13, 2009

Stefan Stern's January 6 column "on management" (*) was quite timely. Quite an epiphany in fact. It should become required reading in MBA programs. And no, I have not received any favor from Stefan Stern nor do I expect any, besides his paying attention to my comments.

Stefan Stern's main point is that our Information Age is an "attention economy". This fact cannot be stressed enough. Our time is a resource limited by construction. So the more information is available, the more precious our time becomes. Even worse, the more precious the information, the less effective our time saving methods. One can speed up reading a thought-provoking column no more than listening to a Beethoven symphony.

Next Stefan Stern points out an evidence which our society would rather forget. The very notion of a new age dawning upon us calls for the collapse of "business models built in the industrial era" and the current downturn can only accelerate this phenomenon. Wisely he does not dare to tell us what the new business models will be, beyond the obvious conclusion that they will have to attract and retain our attention.

Do not think for a second that I am here damning Stefan Stern with faint praise. To ask a good question is often a philosopher's most fruitful legacy, long after his or her own answers have sunk into oblivion under their own weight. In the instance, hindsight will be the most important quality to look for in those bold enough to predict future business models. A God send for MBA professors as uncertainty makes for lively classroom discussions.

We can however single out three candidates, although they should give us pause lest they succeed. The first is based on all out betting. We already studied this invasive proliferation of the star system. Stefan Stern is a live example. Were he not protected, still, by his employer's traditional business model, could he survive on his own? Probably not, by his own admitting not to be one of its "top two" columnists per Internet popularity. It's a virgin forest out there. Underneath the canopy of its tallest trees, perpetual shade stunts growth and few ever ascend to the light, often by means obscure.

Yet, is the lopsided ability of top stars to command our attention and the lion's share of the attending spoils a lasting business model? According to Jonathan Guthrie (**), flexibility is more important than size for long term survival. Beetles will beat bears in the Darwinian competition. Will not business models which promote sharing ultimately prove more robust?

Networks and computers have detached data from physical supports. This newly found freedom is not unmitigated progress as it promotes the dark side of our human nature. Take cheating for instance. We mentioned last week that a whole network of trusted recommenders abetted the Madoff swindle. Individuals cannot hope to do away with recommendations altogether. After all, this is how we save time picking what deserves our attention. Unfortunately good business models for recommenders are hard to find.

The most common one is to cheat. Salesmen paid by those seeking our attention masquerade as recommenders helping us to target our attention. Whether, John Gapper muses (***), through sheer incompetence or outright fraud, Madoff's recommenders acted as his obligees. The same model is behind search engines which commingle paid advertising with search results. But again is cheating truly sustainable? Google easily displaced its predecessors by clearly segregating ads from genuine searches. And today Madoff's pseudo recommenders are running for cover.

Business models based on star systems and role falsification have a nova like quality. They have a bright future but they tend to explode in the end like all bubble phenomena. The most promising, and hence the most dangerous, model is based on stealing. The latter word may carry a pejorative connotation. From a scientific perspective, it is but a convenient label for economic relations enforced by constraint. History is witness such relations, once established, can endure for centuries if not for ages.

Stealing does not have to be brazen. In fact it pays to give it the appearance of a bargain. What gives the plot away is our inability to refuse, as Mario Puzo famously observed. Personalized advertising as advocated by Google and other pretenders is the best example. They start by stealing our personal data by bundling this as an "exchange" for access to free or partially subsidized utility-like services. Once in possession of our own detailed profile, it becomes an easy step for them to capture our attention and resell it at a high profit. Likewise pharmacies capture prescription data under cover of fulfilling the prescriptions. What next?

Mr US President-elect, bundle tax forms with the authorization to resell taxpayers' data! Capture our attention and contain the federal deficit. Although, come to think of it, abetting social disorder in the name of progress would hardly be a change, wouldn't it?

Philippe Coueignoux

• (*) ..... Your attention, please, I need you to focus on this now , by Stefan Stern (Financial Times) - January 6, 2009
• (**) ... Darwin's recessionary tip: act like a beetle, by Jonathan Guthrie (Financial Times) - January 8, 2009
• (***) . Funds of funds have to work harder, by John Gapper (Financial Times) - January 8, 2009