The Four by Scott Galloway

Author:Scott Galloway
Language: eng
Format: epub
Publisher: Penguin Publishing Group
Published: 2017-10-03T04:00:00+00:00

Information’s Price Tag

The hacker credo “Information wants to be free” set the stage for the second golden age of the internet. The origin of the phrase is worth reviewing. First proposed by Stewart Brand, the founder of the Whole Earth Catalog, at the 1984 Hackers Conference, his formulation was:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So, you have these two fighting against each other.10

Information, like the rest of us, desperately wants to be attractive, unique, and well paid—really well paid. Information wants to be expensive. The most successful media company in America, other than Google and Facebook, is Bloomberg. Michael Bloomberg never fell for it—giving information away. He mixed other people’s information with proprietary data, added a layer of intelligence and—here’s the trick—made it scarce. It was expensive and had its own vertical distribution (storefronts) in the form of Bloomberg terminals. If you want breaking business news that might impact the price of a stock in your portfolio, you sign up with Bloomberg, get a terminal installed in your office, and soon the screen is rolling with an endless flow of news and financial data.

The “information wants to be expensive” part of Brand’s quote seems to have been erased, like Trotsky from photos, by firms looking for content for free. Indeed, it was the tension between the two that Brand was interested in, and it was in that tension where he foresaw innovation. Google (and Facebook in a different context) has mastered that tension. It takes advantage of the declining costs of distribution by giving its users access to a world of previously expensive information, then extracts billions in value by being the new gatekeeper.

Facebook too has leveraged the tension between information’s ever-lower costs and its persistently high value. Its jujitsu move is even more dramatic than Google’s. Facebook gets its users to create the content, then it sells that content to advertisers so they can advertise to the users who made it. It’s not “stealing” our baby pictures and political rants, but it is extracting billions of dollars from them using technology and innovation unavailable to us as individuals. That’s world-class “borrowing.”

Facebook built its foundation on a second lie, repeated thousands of times in early meetings between Facebook’s army of sales reps and the world’s largest consumer brands: “Build big communities and you will own them.” Hundreds of brands invested hundreds of millions on Facebook to aggregate enormous branded communities hosted by Facebook. And by urging consumers to “like” their brands, they gave Facebook an inordinate amount of free advertising. After brands built this expensive house, and were ready to move in, Facebook barked, “Just kidding, those fans aren’t really yours; you need to rent them.” The organic reach of a brand’s content—percentage of posts from a brand received in a fan’s feed—fell from 100 percent to single digits.

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