February 7, 2005
the ignorance premium (cont.)
In explaining The Ignorance Premium (how the less the customer knows, the more companies can charge) I cite gentleman’s tailoring as an example:
Know diddly-squat about tailoring? Then you’re more likely to pay that extra $300 for that Armani, less likely to save $600 from going with the old man in Chinatown.
But then EnglishCut comes along… suddenly the conversation available to most people gets much smarter.
Katherine in the comments rightfully asks:
How much extra does not knowing have to cost me before it’s worthwhile to get smart? Sure, I can save $600 by finding the tailor in Chinatown. But if the time I spend finding him is worth more than $600, what have I really saved?
Obviously, if the time you spend finding him costs you more than $600, you haven’t saved anything.
But what if the cost was only $500? $300? $50 $15? Or how about “virtually free”?
And what if this virtually free information, which is now only available to the few readers of EnglishCut, somehow managed to spread out to thousands of people? Tens of thousands? Hundreds of thousands?
How would a company like Armani adapt?
But this isn’t really about tailoring. This is about all of us.
A lot of the markets we work in are starting to get far smarter, at a noticably faster rate than the companies we work for i.e. the companies servicing these markets.
Have you a plan?
inherent dream + perfect plan + a miracle = $$$$$
Hey Hugh…
Just a thought… the difference between long term thinking and short term thinking. If it DOES take me more time to find the saving, and the saving is less than what it cost me to FIND the saving, this is not necessarily a bad thing. It’s an investment in my knowledge.
In the case of finding that Chinese tailor, if I need eight suits over my lifetime of suit-wearing, the cost of FINDING the tailor in the first place is trivial.
And marketplace-as-conversation makes it cheaper for me to find the Chinese tailor.
Second order thinking takes that deeper… my being OPEN to conversation as a market tool makes me more likely to find the Chinese tailor.
Third order thinking has the Chinese tailor with his ear on the conversational pipeline realising that someone like me might be in need, and he may raise his voice above the clamouring crowd.
Blue skies
love
Roy
Agreed, Roy, I particularly liked your Point # 3 =)
First I have to find EnglishCut in order to know that the Chinese tailor exists. Then I have to find the particular Chinese tailor who is convenient to me, since he probably doesn’t have anywhere near the advertising budget or location visibility of the Armani store. Then I have to physically meet with him at least once and probably several times. Plus I have to make all the hard decisions about cut, color, fabric, etc. (or get to know the tailor well enough to let him make them for me).
If my hourly rate is high enough to afford Armani in the first place, my $600 savings will vanish pretty quickly.
I agree with you in principle. I just think your analysis is a bit simplistic. The Internet may have made the efficiencies of mass marketing and mass production less important, but it hasn’t erased them.
You wrote:
A lot of the markets we work in are starting to get far smarter, at a noticably faster rate than the companies we work for i.e. the companies servicing these markets.
This is getting some discussion just in terms of performance-based data and how it shapes markets for nontraditional “commodities” such as medicine — yes, it’s helpful for hospitals to study the ways that some of their colleagues get disproportionately better outcomes, but once that data exists, it’s also pretty reasonable for patients to stop trusting the nearest hospital to give them optimum care… It will take a *long* time for hospitals (and doctors!) to figure out how to work within that new space, and long before that, the patients will have changed their distribution. (or at least the smart ones.)
Hi Katherine…
Yeah, I agree, my analysis IS simplistic. What I’m trying to illustrate with it, though, is that short term thinking has a different perspective to long term thinking.
In the short term, you lose money by seeking out the Chinese tailor. And you’re inconvenienced. And so on.
In the long term, you’ve found yourself a tailor, you’ve engaged in a new conversation (or set of conversations), you’ve met a new set of people, you’ve expanded your network.
Short termists wouldn’t want or need the long term gains. They’re not interested in the conversation in the first place. They just want a suit, any suit, and will pay the price for it. They’re really not looking for savings even. They want instant delivery.
The long termists are coming at life and business from a slightly shifted paradigm. You, for instance, are probably a long-termist, cos you’re taking time to converse in a blog comment thread. In order for you to chat with me about this, you’ve got to periodically head for Hugh’s blog and see if any additional comments have been made. You’re investing in my and your expansion, and that of the other readers of this thread. And so am I. And so is Hugh.
Short term, we gain nothing. Long term, my name gets out there. Your name does too. One day, we hook up and do conversational business. Cos we’re not dissing each other. Cos we’re being mutual about this chat. We’re not making each other wrong. And we’re demonstrating this in a way that short termists wouldn’t get close to.
I dig this stuff. We’re in a new world.
Blue skies
love
Roy
I think we all take a short term view in some situations and a long term view in others, actually. Someone who appreciates fine tailoring more than the “coolness” that comes from a designer label is more likely to seek out the Chinese tailor. Someone who enjoys cooking as an art is more likely to track down farmer’s markets, artisan bakeries, etc. Though it might be very worthwhile to bring that attention to detail to all aspects of your life, very few people actually do so.
For me, the interesting thing about the Internet isn’t so much smarter conversations, but more diverse conversations. (Cf. Wired on the Long Tail) If I want to talk about fine tailoring, or artisan bakeries, or just about anything else, I can find like-minded people. If my cultural tastes run to Mayan folk music and Middle Eastern films, I can find them, too. Likewise, as an independent creator, I can find my audience without necessarily fitting into the mold defined by Big Media.
Katherine, it’s OK… you can buy Armani if you prefer
You can also pretend that markets never get smarter, or even if they do you are far too ahead of the curve for it to ever make a difference to you personally.
In fact, I bet Armani sell a lot of suits to people who think exactly that