Principle #1 Build & They Will Come
The past two decades of music industry resemble two halves. The first half saw the industry resist change with a defensive legal strategy of suing customers, websites and internet service providers – akin to an actual (as opposed to theoretical) farmer resorting to pesticides to preserve crops rather than tilling the land. The music industry’s pesticides did more harm than good; it spent millions and lost billions.
The second half saw the industry establish the macro- and microeconomic evidence it needed to reach out and grab the new vine of streaming. The industry’s ongoing recovery is now the envy of all those experiencing their own Napster moment today.
Builders viewed the problem of rampant music piracy as one of monetisation: consumers were consuming more music than ever before, and the industry just needed to make a better platform to monetise that consumption. This was the original vision of Spotify – build and they will come. Farmers, on the other hand, saw the problem in a black-and-white legal mindset: consumers were stealing instead of buying, and if the thieves could be stopped, the industry would recover. Builders got the business to the place where it could recover. Yet, here’s the twist
it’s up to the farmers to move back in, stabilise the industry’s recovery and ensure the long-term growth of the industry.
Distilling it down: Builders prefer to solve fewer, bigger problems; farmers like to solve more, smaller problems.
Principle #2 Specialising or Optimising
The first fork in the road that you face when navigating the path ahead is the economics of attention. It can appear binary – you have it or you don’t – but it’s also stackable: many distractions can tug on our attention at once. The contestability of attention reminds us of how the battle plays out – how one attention merchant’s gain is another’s pain.
we’re witnessing a ‘tragedy of the commons’ where these attention merchants all want more of our time, and we all have increasingly less to give. Monopolising attention is not solely about getting ‘attention in’, but increasingly it is in being able to ‘screen distractions out’.
If Netflix can win over fifty hours of our precious time by enticing us to binge-watch five seasons of Narcos, then that’s fifty hours that no one else can claim. Not only does Netflix win, but the long list of losers is left with even less attention to go around – making contestability even more crucial to understand.
Builders specialise in monopolising attention, with an all-or-nothing bargain; farmers are more suited to optimising it, where stacking sources of attention means different distractions can complement each other. Builders are more suited to the Netflix model, where there is a pure-play offer of attention in one form; farmers are better able to juggle bigger and more diverse bundles, like Apple One, an all-in-one subscription that bundles up to six Apple services, where different attention-seeking properties need to be catered for.
Distilling it down: In contesting for attention, builders specialise; farmers optimise.
Principle #3 Quality or Quantity
Principle 3 told the two old rules of drawing a crowd remain relevant to our new schools of thinking. The most important lesson we learned from Tupperware was how Brownie Wise developed a bottom-up viral network in response to the failure of top-down marketing; Tupperware parties leveraged social networks and social pressure to sell more Tupperware than conventional advertising ever did.
Similarly, Russ Solomon’s Tower Records showed us that some choice is better than none, but more isn’t necessarily better than some. Solomon’s bricks-and-mortar stores stocked a tiny percentage of the music available on a modern streaming service, and yet that relatively small stock of discs would have accounted for about 90 per cent of the streaming business today. You don’t need all the content on earth to draw a crowd, you only need the right content.
Builders will be more agnostic to which crowds they draw and are motivated to ‘gun it’ for scale at all costs; farmers will know that some crowds are worth more than others. Builders will have little time for such nuanced lessons in scale, focusing instead on headline metrics like ‘active users’ and asking how big a crowd is. Farmers want to know how active those users are.
Distilling it down: Builders scale the quantity of crowds; farmers harvest the quality of crowds.
Principle #4 Having the Guts to Go it Alone
Principle 4 told the story of Radiohead’s famous In Rainbows experiment, when the band decided to break from its record label and release an album themselves. The band made more money thanks to their ‘ballsy move’ than they did on their previous records, but they also had more freedom to experiment and learn about their fans. Radiohead’s experiment explored new territory in the decision to make or buy – to go it alone or bring in the services of others to get there – and left a map that many have followed since.
Platforms like Patreon and Kickstarter have put new tools in the hands of those willing to go it alone. Meanwhile, the role of the traditional ‘audience-makers’ has changed – even a creator who is ready to cede control to an audience-maker will find that same audience-maker expects the artist to build their own audience. So, increasingly, the builders – the creators looking to forge new paths to success independent of traditional gatekeepers – are empowered to go it alone. And the farmers – the traditional intermediaries – are having to justify their relevance in the value chain.
A chasm, then, is opening up between the builders and the farmers. Builders instinctively see the educational value in ‘making it themselves’ and developing an audience directly. Should they need to buy in intermediaries, then they will be on better terms to do so and needn’t let go of the direct relationship with the fans they’ve made along the way.
Farmers need to pivot to remain relevant and adapt to these new terms of trade, leaving behind a world that was akin to a Keynesian Beauty Contest, in which we compete to win over the judges, and moving towards a world where we communicate directly with the consumer.
Distilling it down: Builders win over consumers; farmers win over judges.
Principle #5 Communism with a Touch of Capitalism
Creators seek more independence by making (as opposed to buying), they become more dependent on collectives to distribute and monetise what they’ve made. Throwing hats into the collective ring, as opposed to selling our hats separately, makes sense. Without this collective solution, these fragmented markets would be unable to function due to the risk of anti-commons – where it becomes so complicated to deal with the many players in a fragmented market that the entire market ends up underused. Yet it is the revelation of ‘Groucho Marxism’ that reminds us what makes this balancing act so delicate: the most valuable member will have the least incentive to join (and the greatest incentive to leave).
Collectives are either ‘capitalism with a touch of communism’ or ‘communism with a touch of capitalism’. It’s a balancing act, and a delicate one at that. Builders tend to have a narrower focus and prioritise ‘looking after number one’ and are less motivated to spend time and energy forging and maintaining collectives. Farmers will be more attuned to the delicate diplomacy of keeping all the collective hats in the ring and beating off the Marxist temptation for the most valuable of those hats to leave.
Distilling it down: Builders lack the patience to form collectives; farmers possess the patience to keep them from falling apart.
Principle #6 Why We Need Two Competition Authorities
Principle 6, ‘pivotal thinking’, drawing on the late great Screaming Lord Sutch of the Official Monster Raving Loony Party’s famous policy proposal of having ‘more than one competition authority’.
After all, how can we assign the role of upholding competition to a monopoly? This is especially true when you look under the bonnet of how economics is being taught today, where core concepts, especially that of ‘monopoly’, are neither taught correctly at universities nor applied effectively by policymakers. Rather than reducing output and hiking prices, as the textbooks would have you believe, today’s tech monopolies want to expand output and reduce (or even eliminate) price. Today’s monopolies are oblivious to the concept of marginal cost and compete for convenience instead.
Defining the market is what distinguishes builders from farmers. If there is no defined market, then one cannot derive a market share. If builders are building something that has never been built before then, intuitively, market share isn’t on the radar. Farmers find themselves on the other side of the fence, preferring markets that are well defined – where precedent has already been set. There is a simple test to ascertain whether it’s builders or farmers who should prevail within your current environment: just ask ‘What is the market share?’ If the response is a bemused ‘Market share of what?’, then the farmers should move out and the builders should move in.
Distilling it down: Builders will circumvent theory to exploit gaps in the market, whereas farmers will seek to apply theory to understand the market in the gap.
Principle #7 What Matters Most is Being Measured Least
The seventh principle was to assess the state we’re in, lifting the lid on the worrying shortcomings in how the state measures the economy that surrounds us. At the highest level, making money on real estate, inheriting money from relatives and spending money on e-commerce has become a social norm for many in society, yet it’s not clear how any of this is accurately captured by government statistics. Look a little closer at how the economy is moving into the cloud and you see an even bigger divergence between what we do and what the state measures. Look closer still and there’s the increased popularity of free goods – Wikipedia, Facebook – none of which are adequately reflected in the state’s numbers. To paraphrase Robert Solow: The digital economy is everywhere except in government statistics.
A desire to close the gap between what you can and cannot measure is what separates builders and farmers. Farmers are more content with the status quo – data that’s been compiled over the years and the trends they produce – whereas builders are wary of this inertia and are more willing to start afresh. They’ll be willing to look elsewhere for real-time signals of hiring (and firing) in professions that traditional surveys haven’t yet categorised, like the impressive work of the LinkedIn economists who are capturing categories of employment that the official survey leaves behind, like AI. Herein lies a tension: farmers would feel threatened by this new approach of displacing the legacy of what’s been built up over the years.
Distilling it down: Farmers frame policy answers around what they can measure; builders ask policy questions about what they can’t measure.
Principle #8 Conjectures and Refutations
Principle 8 builds on the sceptical view of government statistics and jumps off that most important form of transportation, ‘the bandwagon’ of big data, arguing that it risks us making big mistakes.
We’ve leaned too far in the direction of big data and need to rebalance with ‘thick data’: understanding the people and not the quantifiable data points they produce. The temptation to use and abuse big data, to link correlations with causation, has clouded out common sense and risks falling foul of the quantification fallacy – disregarding anything that can’t easily be measured as irrelevant. Nowhere is this more needed than in a thorough re-examination of the NPS score – one number that claims to tell us so much but actually tells us so little.
To distinguish between our two personality types, we need to lean on the work of the influential philosopher Karl Popper and his theory of conjectures and refutations – everything we say needs to be challenged (or refuted) to prove that it’s true. Builders have a vested interest in making bold big data conjectures bolder to maintain funding for a start-up or academic institute, whereas farmers are more able to challenge the quantification bias, contest these claims with refutations as well as seek out better explanations. Builders will rush to market their big-data predictions for the future, but farmers will remind us that all data comes from the same place: the past.
Distilling it down: Builders make conjectures from the big data they’re able to measure; farmers provide refutations by drawing meaning from what can’t be measured.
As we all find ourselves staring at our Napster moment, we need to embrace Tarzan Economics in order to address life’s challenges sooner rather than later, as delay only means the problems get bigger and harder to solve.
You can now pivot faster and more effectively than any individual, organisation or institution that you choose to help. So, if there’s one final lesson to help you navigate the path ahead it is this:
Don’t wait for your perfect job description, create your job description instead.