A Colleague Shares Some Thoughts on the Commodification of Knowledge
September 7th, 2006 by Gordon Cook
Frank Coluccio is one of the smartest people i know having been seriously involved with the creation of a significant part of New Yorks financial district’s telecom infratsructure over the past 25 years.
A couple of days ago Frank wrote: “The New York Times article on wikis inspired my thinking about the simplification that has occurred throughout the years in many of the technologies and pursuits that these threads began examining and anticipating almost seven years ago. [Frank refers to his forum on Silicon Investor] And the simplification I speak of runs hand in hand with commoditization, resulting from all of the many now-popular “-cosms” and “-igms” that got us here. Earlier today I wrote to a colleage, [t’was I - Cook’s Edge] with only minor edits shown below:
“The proliferation of wikis on the web, combined with the blogsphere and other forms of open forums, has really done a major number on the unit value of information, hasn’t it? [By that I meant the monetary value, not the intrinsic value, that could be gleamed by a unit of information.] Did you read today’s Wiki article in the Times?
“Collectively, these new outlets must be having a profound effect on the take rates of paid subscriptions for newsletters [Cook’s Edge: like my newletter] [and other sources of proprietary advice, counsel, consulting], and for the expertise of consultants like myself and others you’ve come to know in your travels. Is it any wonder, then, that many legacy experts hold on to the professional dictates in each of their disciplines (the regulatorium and other cartels) as the last jewels of knowledge that lend value to their/our existence? If you come across a treatment on this subject I’d be glad to read it. Perhaps we should be thinking about addressing it by focusing on the valuation of a bit of content, as opposed to the cost for sending one.”
Many of the holy grails we’ve sought over the years on this board have now largely become issues of the past, and with their passing we’ve come to focus on new challenges, with the greatest among those new challenges being, how to identify and characterize those new challenges. Amid our field of view we cannot help but notice some of the detritus being thrown off as waste emissions and orbital junkyard odds and ends from previous- and ongoing- trials and failures, along with an even greater number of enabling qualities of the new life that’s yet to come.
The ‘we’ that I refer to here, of course, is the global community of foreward thinking individuals that make up not only this forum but the tens of thousands, now millions, of other venues in our real and virtual lives (as though one could still think of real and virtual in distinct terms), ranging from blogs, wikis, hot-coffe cafes, cold-coffee multimedia conferences and the one-on-one conversations in all conceivable media that take place overlappingly and incessantly around the globe, twenty-four hours of the day.
Without taking the necessary time to pause and reflect, individuals today are like the managers of ‘real-time’ corporations whose IT systems have been designed to be so exacting and precise in capturing their inidividual outputs down to sub-second intervals, that they’ve left no margin of playing time in order to discern their relative standings among their peers. Algorithms that are supposed to be self policing are good, but they’re not clairvoyant. This is evidenced in the actions of even the NYSE, which has manual overrides in place to prevent runaway programmed trading from driving markets into meltdown.
Maybe what’s needed is a time out. I could sure use one right about now. I nevertheless am impelled to ask, despite however counter-intuitive it may seem with respect to the foregoing: What do you think?
A copy of my reply to Frank on this subject:
The free information available from the Wikis of the web might not come with a price but it doesn’t necessarily come without a cost. In economic terms, cost is what you could have done with the same resources, the alternative use. In the case of your clients, using free sources in lieu your services that come with a price, “It doesn’t cost any money, you pay with your life” to borrow a lyric from a Dave Bromberg tune. They can spend a considerable amount of time that could be used productively elsewhere sifting through conflicting opinions about best practices and solutions. A question I ask my clients all the time when they balk at paying my fee is “How much is your time worth doing what you do best?”
The cost of free resources may also come home to roost in the absence of any explicit or implicit warranty as to the accuracy of the information. I’m sure that with your biz as with mine, my recommendations to my clients weighs a heavy ethical as well as financial responsibility on me, I stand behind my work and I’ve had to eat more than a few mistakes in my career.
For years information was controlled by the expense of transferring that info. Before the printing press books had to be hand written adding a considerable challenge to information transfer, the information was free but you had to pay someone to write it down for you. Once the printing press came along, you paid for it by the pound if that info was needed widely enough to warrant a book. As to the high cost industry newsletters, that info was controlled primarily by people’s distaste for freeloaders (if I’m paying for this, I’ll be damned if I’ll give it to you for free) although I imagine each newsletter probably had three (if not more) non-paying readers to every paying reader. That ratio exploded with the net where anonymous individuals routinely post, for public consumption, high priced newsletters. If US copyright cases were less expensive to pursue an enterprising newsletter writer could certainly find more fertile ground in suing infringers than in writing the letters themselves.
Now information can be duplicated and accessed with incrementally small costs but has just as high a value, as you point out, in it’s implementation and the actual information might come at a huge cost spread out over the collective experience of many individuals and companies, some compensated and others not. It is in no way “free”, but the cost is largely unknown and not necessarily borne by those who eventually benefit from it. One cannot price information based on the “by the pound” method any longer.
That said, the volume of information has increased at such a rate there is probably more paying work for consultants in sifting through that mountain than ever before. Aren’t you rather daunted by this mountain? I know I am. The hardest part of running an information based biz is convincing your clients to pay your price for what the novice might see as easily available “free”. Sometimes the only way they can learn is by paying the cost directly by trying to do for themselves what they used to hire you to do. I’ve seen this over the years in my biz, the dance between hiring someone on the outside, like myself, or taking it “in house”. When a client is determined to take it “in house” to save money I never try to dissuade them, I usually wish them luck and remind them not to lose my phone number. They are about to learn, at no real cost to me, first hand what would take me thousands of words and many of hours to explain. Some of the most faithful clients are those who returned having learned the hard way why it is that division of labor works so well to build wealth. The other lesson is they learn is that everything has a cost.
As I approach the ripe old age of 50, I’m thinking more and more about the trade offs involved in what I do. How do I manage my limited resources - most especially time and money? I’m getting more and more picky on what I spend my time on - I consider each engagement as trading off a piece of my life (measured in hours, days, weeks, etc.) in exchange for some form of monetary compensation. There is a qualitative and quantitative assessment involved in evaluating each new project. I think this is the essence of the time / money trade-off that Grace talks about above. It is inherent in every build v. buy / outsourcing decision that an organization faces as well.
There’s also that aspect of value, where we ascribe value to a resource based on how much we paid for it. In a world of abundant, “free” information, we think in terms of commodities and getting things at least cost. And in today’s Internet world, we all tend to suffer the illusion that information has been somehow devalued because substitutes are readily available at no or low cost. In fact, the marketplace just grows richer and more complex with more free information.
But we tend to overlook the time involved in processing information, separating wheat from chaffe. Consultants, more experienced and better connected, provide the value-added service of sorting through the mountains of “free” information to find the kernels of truth that will make an impact on their lives or businesses, the real value that the client seeks.
In a hyper-competitive, time-crunched world, where each decision can have ever-greater impact, the ability to evaluate all the decision variables is compounded not only by the lack of time, but also by a surfeit of information. The organization that tries to do it all themselves risks becoming penny-wise and pound-foolish. A consultant offers a way to mitigate that risk and ensure better decison-making.
I believe we’re in the middle of a transition in how we do business, at all levels. How we leverage our resources - including how we manage and use information to our advantage - makes the difference in a success and an also-ran. And as with any other business, those consultants who offer high-touch, high-value service will stand out from the pack. We live in an age of plenty, information and otherwise, and there exists a continuum of choices regarding information acquisition and management.
Differentiation is key. Service providers who are successful at packaging information into valuable, unique knowledge services, custom-tailored for their clients, will stand out from the crowd and are at little risk of being commoditized by ever more free information (IMHO, its about the 3 Rs: relationships, reputation, and referrals).
But the availability of so much information is increasing the number of substitutes for such high-touch consulting, and each new low-barrier-to-entry business with a better information mouse trap creates ever more downward price pressure on the consulting marketplace. And any service provider who offers no real differentiation from a few hours spent on Wikipedia and Google is already a commodity, they just don’t know it yet.