The impulsive economy

Scott Adams has a glum view of the outlook for authors and other creative-artist types in the coming decades. He sums it up as his theory of content value: "As our ability to search for media content improves, the economic value of that content will approach zero."

I predict that the profession known as "author" will be retired to history in my lifetime, like blacksmith and cowboy. In the future, everyone will be a writer, and some will be better and more prolific than others. But no one will pay to read what anyone else creates. People might someday write entire books - and good ones - for the benefit of their own publicity, such as to promote themselves as consultants, lecturers, or the like. But no one born today is the next multi-best-selling author. That job won't exist.

Adams isn't the only one predicting the death of Old Media. There's been a bull market in such predictions anytime this past fifteen years. The argument goes: since "content" is essentially free (on the internet), the only reasons people are still paying for it all boil down to inertia, and that won't last forever.

While I have enormous respect for Adams (and other prophets who've said the same thing), I think they're working from a fundamentally flawed mental model.

The flaw dates right back to the economics we learned in school, where a consumer has $whatever to spend, and divides it up into 'budgets' - $something for necessities, $something for savings, $whatever's left for luxuries/discretionary spending. Within that "discretionary" budget - the theory goes - they make rational decisions based on what will give them the greatest satisfaction ("utility") for the $.

In that case, why would anyone spend their limited $ on something that they could get for free? It's - not rational.

And that model is well and good. But it's based on a fundamental assumption that just isn't true in real life: that the consumer is on a budget.

Oh, of course they are in a sense. Big-picture wise. They live where they can afford to live, the clothes they wear and the consumer goods they possess and the car they drive - these things are dictated, in large part, by their income. But for the small stuff - for books, magazines, movies, fast food, drinks - there is no exact limit to their spending. If they overspend one month, all that means is that they put off buying that big-screen TV for another month. It's not a decision they'll even notice making.

In general, the only time they'll set a fixed weekly budget is when they're driven to it by a crisis - unemployment, baby, divorce or whatever - and when the crisis is past, they'll abandon the budget just as soon as they think they can get away with it.

What this means is that a significant part of people's spending is not so much "discretionary" as "impulsive". And getting one's hands on that money is not about offering them the most attractive package for their money, compared with your competitors. It's about persuading them to give you some money.

Not much money. The best business models for this part of the economy, I think, are those that take small amounts, but take them frequently. A coffee shop is a good example (occupying the same niche that pubs have, by and large, been taxed out of).

Another is mobile phones. The operators have only recently realised that their market falls into this category, which is why they're now frantically marketing "packages" designed to subsidise heavy users at the expense of lighter ones - so that each individual customer only sees bills that are just small enough not to sweat about - because if the bill is small enough, then the provider can live happily in that "impulse" segment where spending isn't scrutinised at all.

In the digital economy, Apple has built the most successful business model of the past decade on this insight. Everyone knows that paying money for music, online, is entirely optional - there are lots of ways to hear that music for free, many of them entirely legal. But if you price it as an "impulse" buy, and make the process easy enough, then an awful lot of people will succumb to that impulse. In other words: you can compete with "free".

Within that impulsive proportion of their spending, people don't "spend" all their money to get the best possible "utility" for their limited resources. They spend it to feel better about themselves. From the providers' point of view, they're pretty much giving it away; the trick is to get them to give it to you rather than, say, Coca-Cola.

And this is the key to how authors are going to survive in the next couple of decades. It's not about "selling" a product. It's an exercise in persuasion. Make people want to give you money - to give a talk, shake your hand and collect your autograph, put your picture in a magazine, subscribe to your latest writings, convert you into a TV series or a range of coffee mug slogans, go to bed with you... whatever. Or even to have a small bundle of paper with your name and your words printed on it, to sit on their coffee table and lend to their friends and read wherever and whenever they like, unlike electronic devices which are too bulky, and too fragile, to use in many environments. We could call it "a book".

Three kinds of stupid

You're probably aware of the "Dunning-Kruger effect", although maybe not by that name. It's the psychological effect that shields us all from the ego-devastating realisation of how incompetent we are. It's why we're all, privately, sure that we'd be good at things we know nothing about, like designing websites or running restaurants.

I discovered this the other day while researching incompetence. It's a diverting piece of research. But it's not the kind of incompetence I wanted to write about. As I might have expected of myself, I successfully researched the wrong thing.

Every comic and wannabe from here to eternity has a stock of lines about how some intelligent, articulate, middle-aged professional spends hours trying to figure out their video/voicemail/laptop/Roomba/toaster, while their six-year-old kid only has to sneeze at it to make it sit up and perform tricks that would, in more enlightened times, have got the little brat burned as a witch and serve them right. But only Scott Adams, to my knowledge, has proposed a complete pseudoscientific theory of this widely-observed effect.

Adams (in one of his books, not available online) posited the idea of an "incompetence threshold" - a measure of our own capacity to be defeated by something that's supposed to be simple. This threshold, he says, rises a little with every year of our lives as the world around us grows more complicated, until we reach the point where we're completely flummoxed by tasks that would've seemed trivial to our pre-teenaged selves. And as each new generation grows up in a more complex world, they redesign tasks on the assumption of more complexity, and the "correct" way to complete these tasks slowly grows ever-more-infuriatingly opaque to older people.

Take recycling, for instance. Today's kids seem to have no difficulty at all with the rule that certain types of plastic - identifiable by the number stamped on the base - go into certain bins, and that's the end of it. But me, I can't stop thinking: "How clean does it need to be? Am I supposed to peel the labels off first? How do I know if the lid is the same plastic as the bottle? Can I put the bottles in a bag? What kind of bag?", and when I actually ask about these, or the myriad other questions that no-one seems to have mentioned, I'm made to feel as if I'm personally responsible for muddying the clarity of the basic message.

And so, more and more often, I find myself guessing the answers and hoping for the best. I'm deeply grateful that, for now at least, my wife handles most of the recycling - but, Adams's theory tells me, it's only a matter of time before she's as out of her depth as I am now.

Adams belongs to the Muntz school of philosophy: "people are acting stupid, ha ha". (Although in fairness, he does say that people aren't, on the whole, really stupid - it's just that, in certain circumstances and from certain perspectives, they appear that way.) Another famous blogger, Joel Spolsky, takes a different angle on the same issue. Spolsky, more constructively, tries to explain what it is that makes people seem so stupid, and how to help them.

Spolsky is in a minority. Laughing at people is always more fun than trying to understand or help them. It is, fortunately for us all, an influential minority - because people who think of incompetence as a problem to be solved, rather than a character flaw to be ridiculed, tend to get things done. In politics, however, it doesn't do so well. "Don't laugh, it's not his fault" is an inherently elitist thing to say.

What started me on this train of thought was my own experience, last week, of trying to comment on Nodressrehearsal's blog. Because my valued friend NDR has disabled "anonymous" comments on her blog, you need to sign in either with a LiveJournal account, or with something called "OpenID", which lots of sites, including Blogspot, support.

Now, I already have more Internet service accounts with more people than I can easily count, and I'd really like to minimise the number of these I create. So I decided to create an "OpenID" account, in the hope that it might also serve for other purposes someday.

And this was the task that defeated me. It seems to me that the powers behind "OpenID" haven't read or understood Spolsky's book. In a distracting environment, with lots of things to do at once, the task of signing in to a LiveJournal site with an OpenID proved to be beyond me.

It was quite a shock to learn that my incompetency threshold has reached the point where I am officially incapable of leaving a comment on NDR's blog, but it's just something I have to live with.