A view from (under) the long tail

See below for Richard Epstein’s response

I lead a double life. It gives me something in common with spies, weekend cross-dressers and fugitives from the law, but in my case the reality is much more boring. As an academic, I spend much of my time thinking and writing about the internet economy, wondering about innovation and access and the transformations that “dis-intermediation” – the cutting out of middle men – will have on market and society. But since the centre I run also sells its publications online, (not for profit, I hasten to add) I have a very different, worm’s eye view of the process. This is an attempt to merge the two, to provide a stereoscopic perspective on the new economy.

The academic in me has been very interested by the much hyped arrival of the “long tail” economy – the idea that the future lies in using the efficiency of the internet to sell smaller quantities of more goods (think of the astounding range of books on Amazon.com). One optimistic image is that thousands of small producers and entrepreneurs worldwide will be able to bypass the need for large chunks of capital and complex distribution schemes. Instead, they will be able to offer their wares direct to the public, producing a massive democratisation of production and distribution (think of Ebay).

The bookseller in me finds a rather different reality. Our centre sells books through Amazon. It was an easy choice – ubiquitous, trusted, familiar and that fabulous customer service! The speed! The responsiveness! I sometimes imagined the Amazon customer service folk borrowing the Tardis to deliver apologies for their incredibly rare mistakes before they even happened. But that was as a purchaser. As a vendor I entered into a shadowy different universe. Where Amazon’s normal customer service seems to be run by suspiciously cheerful MBAs from Stanford, who break off from counting their stock options to write apologies and deliver refunds, “Amazon Advantage”, the ironically named system for selling wares, is clearly based on the last days of the Soviet system.

The problem with their representatives is not that their native language is not English, it is that their native planet is not Earth. Only that could explain the strange delays of weeks in replying to emails, the apparent time distortions that will suddenly lead them to re-enter a months-long dispute in the middle, and the curiously non-terrestrial logic of their replies. When the Amazon system inserted random hieroglyphics into the description of our comic book it took many e-mails to reach a human – or at least sapient – being. When we did we were told reassuringly that Amazon’s system for updating web pages was broken and that there was no prospect of fixing it. For this, we give them 55 cents out of every dollar and an annual fee? “In the new economy,” I told my colleague, “deft intermediaries will compete with laser-like efficiency and stunning technology to capture customers worldwide!”

“They’ve messed up the picture of the heroine, too,” she replied mordantly “it makes her look really fat.” Ezra W. and Mansoor, the earth names that our customer service reps use, just ceased replying at all at that point – being replaced by an automated response. That happens a lot. And as for the “search inside the book” people, it’s a tragedy. They have disappeared altogether. Perhaps a star portal went out.

As an academic, I am very interested in network effects – the curious economic features of networks, which increase in value as they increase in size. Does this mean that customers will be “locked in” to the system that achieves ubiquity – Microsoft Word, or the QWERTY keyboard? Does this threaten the efficiency that the networked economy was supposed to provide? As a vendor, I fume and rant, but am unable to convince myself that we can shift distributors: will the people who want our books trust an unfamiliar name?

As an academic, I worry about the effect of electronic commerce on privacy and particularly about the danger that the state and private entities will pool the massive amounts of information we leave behind us in cyberspace. As a merchant, reading the material Amazon helpfully provides us, I just really want to know whether the person who bought the “Wonder Woman cami and panty set” did so before or after reading our work on the public domain? And what about the guy buying all those books about “the hidden tricks of locksmiths”. What is he up to? Do they know each other?

As an academic, I have railed against “business method patents” which are now being filed in stunning numbers by online retailers and financial services companies. There are patents over auctions, selling with one click, even over what appears to be pretty basic arithmetic. Will this undermine the competitive forces the web was supposed to unleash? As a vendor, I just think of Ezra W. and Mansoor frolicking on the other side of the universe and wish they would return our emails.

Comment on this column

James Boyle is a professor of law at Duke Law School, the co-founder of the Center for the Study of the Public Domain. His books Bound By Law and Collected Papers on the Public Domain are occasionally available on Amazon.com.

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Richard A. Epstein: That Ubiquitous Long Tail

It is reassuring realize that Jamie Boyle, head of the Center for the Study of the Public Domain, thinks that on balance the best source of distribution of the books that it produces is through a private network that operates on, but does not own, the Internet. Boyle, of course, does not need to apologize for the decision to sell his books at any price that he chooses, either at a profit or a loss. The decision is based on a judgment of how important his centre finds it to get the book into circulation. Partial subsidies are of course a good way to split the difference.

Nor do I see anything wrong with Boyle’s decision to sell his books through an exclusive on-line agent, Amazon.com instead of running through all on line sellers simultaneously. The question of whether to get the full force of one outlet behind you or take a more limited push from multiple operatives is not distinctive to the Internet Age. It arises every time a homeowner decides whether to give an exclusive agency to one broker, or to use a broker that shares commissions and listings. Lots of hard business choices which for ordinary people have no legal implications whatsoever. It is another instance of how business on the Internet falls within familiar pre-Internet patterns.The same is true of the long tail issue that has become so voguish in recent days, whereby the break-even point for sales is met by ever smaller quantities of any item, books included, that are available for sale.

The phenomenon is universal The usual patterns in all business is for the generalist to win the opening round of any cycle of product innovation. Want to get anything for the home in 1900, then (in the United States at least) you go to the Sears Catalog. But once search becomes cheaper, fragmentation will set in. Those individuals that run modern businesses that cater, on-line or off, to particular segments of the market - food, jewelry - will pull customers away from the general lists, which in turn have to adapt or perish before the new challenge. The situation is no different from one in which the all-purpose summer camp slowly loses ground to specialist operations for football (American or English style) or any other sport. And for the real aficionados the break downs get ever smaller: camps for dribbling basketballs or playing a man-to-man defense crop up as well. Folks pay a premium to get just what they want, with no wastage.

The same logic applies to collections. The secret of the large daily newspaper is that its stories are arranged in some rough order of importance, without any attention to their content. Readers buy the whole, notwithstanding the wastage, because they know (especially when there are multiple users) that the paper will contain the information that they want. It is for the same reason that lawyers purchase the entire volume of the case reports, even when most of the cases are of no interest to them. But as the cost of repackaging goes down, specialist magazines and specialist reporters take over, and for the same reason, less wastage in target markets. On the internet, the unbundling is complete, as users download only those matters from a huge commercial database that are of interest to them, leaving the rest for others.

At this point case citations are only ways to get into the base, with no physical referents at all. What happens with law reports happens with music. Why buy the bundled album if you can purchase the individual song? And if the costs of maintaining the data base of old books go down, we should expect to see the same rise in niche purchases. The process of disaggregation and selection occurs with the Internet, but don’t make the mistake that it is unique to it, or has any troublesome implications. We should all go with the flow, and enjoy the ride.

Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law, The University of Chicago, and the Peter and Kirsten Senior Fellow, The Hoover Institution.

His latest book is OVERDOSE: HOW EXCESSIVE GOVERNMENT REGULATION STIFLES PHARMACEUTICAL INNOVATION, (Yale University Press, 2006), at http://yalepress.yale.edu/yupbooks/newbooks.asp