Friday, December 14, 2007
The Economics of Evil
Nic asks - can evil still be successful?
"...Given what I’ve learned from interviewing teens and college students over the years, they have *no* idea that these changes are taking place (until an incident occurs)."
It's a good question.
Let me try and make the economics of evil crystal clear, by discussing Facebook (again :) .
Evil isn't (just) a PR issue.
That's only the most superficial cost of evil.
If you've been reading, you'll note I've said many times - evil isn't a problem because of the bad PR it generates.
Rather, evil is dominated in the edgeconomy because it destroys the potential for future value creation.
Because Facebook is evil, it created Beacon, which actually raises the costs to interaction, imploding the utility of the network.
So whether or not your average lame brainless Ivy League teen is aware of it - he/she will feel it's effects, and their behaviour will, in turn, begin indirectly to shift.
So there are two effects. One is an information effect. I know you're evil, so I won't directly interact with you. That's a weak effect.
The stronger effect is the second: when you're evil, all else equal - even if others interact with you - your ability to co-create value implodes: because you make moves which are focused on shifting costs and extracting value, rather than creating it.
But it takes two to dance the tango of co-creation.
Conversely: when you're evil, the only game you want to - or can play - is domination.
That's exactly Facebook's problem: because it's evil, it's massive network is a deadweight loss - Facebook is learning to co-create no value with it, just trying to extract value from it.
And that's deeply dominated. Transferring value (from consumers to advertisers) isn't anything resembling strategy: the value of the network either shrinks or stays flat - but it certainly doesn't grow.
And from a strategic point of view, that just opens massive market space for other players, by raising the costs of interacting on Facebook.
Now, yes - the initial effects will be slow. But they're, like most other things, in the edgeconomy, nonlinear. Once the inflection point is reached - bang.
These economics hold true at every level of the next economy. Whether it's Ford, P&G, IBM, or CBS - good beats evil.
If you really wanna think about this stuff, reread this post.
Love the way your brain works.
This is great stuff Umair, but it doesn't suggest what the FB guys should be doing - the new value chain isn't very clear.
If you were the Strategy officer at FB, what would you do?
the new value chain is crystal clear - but unfortunately, that and what fb should be doing is the kind of deeper advice that's reserved for bubblegen clients.
thx for the comments guys.
You are so right about the dead weight bar being raised due to the hype that is Facebook. It is as if otherwise intelligent product management executives can't tear themselves away, and have been bitten by a fever.
I had completed an assigned six month research cycle on brand monitoring services for a major telecom's R&D lab, and after the big wrap up presentation, do you think they had intelligent follow up questions on the matter at hand?
No, the first question was, "How does this fit into a Facebook App?".
The notion of evil in the DNA is a bit one dimensional - in some senses FB is visionary yet in others it is stupid.
The whole apps thing and now opening the platform fits with your strategy of being the mesh/glue/fabric through which parties find/transact/interact with each other etc. (if I understood you right at FOWA).
Yet their money making initiatives are almost the opposite.
Amazing to me that hundreds of people at Facebook and their advertising partners thought hard about Beacon and believed it would fly from the start. They didn't even have the sense to phase it in slowly. Of course, they chose Door #1 because it seems closest to what VCs, MSFT and old-line marketing folks want. But apparently they didn't even conduct basic market fucking research! Imagine a focus group where FB kids get the entire Beacon story laid out for them. Are they going to go for it?
Evil is bad. The real danger is when evil is powered by smart people. When it's running on dumb juice, it's not so much a problem.