kgautreaux/blog

An ocean of noise

Chasing "Tail"


I hope to cover this as a topic in a future Gaucast but I wanted to post about it here because I've been thinking a lot about macroeconomics lately. Funny that, as I can barely comprehend what the hell is going on with my IRA and 401(k) but books like The Wisdom of Crowds, Freakonomics, and The Long Tail are capturing my interest lately. The great thing about these books is that you don't have to really understand the math and science behind them to understand the general concept.

The general concept of The Long Tail is that as traditional commerce becomes (god, I hate this word) e-commerce the advantage of not having to pay for traditional stores is the ability to offer virtually everything. Taken to the extreme you get customers scattering into tiny niches of products that interest them rather than everyone buying the same thing because that is what's available. You really have to read the book to get the full theory but what it offers is promising. Eventually we may not have to suffer through 10 Norbits for every Children of Men, (just to take Hollywood as an example) because you don't have to please the lowest common denominator to make money in a world where it doesn't cost you anything to store or distribute the movie.

I've been thinking a lot about how businesses run lately and something really bugs me about Product (RED). According to this Advertising Age article Bono's plan to get companies (who need to show significant growth every quarter to satisfy their shareholders) to donate 50% of their profits for each Product (RED) item, has fallen significantly short of the goal. i.e. they spent (some estimate) $100 million promoting Product (RED) and they have raised $18 million. Whoops, I guess AIDs in Africa has bested us again because last I checked that means you lost $82 million. Now, I realize that we don't actually have to pay AIDs $82 million but I don't think $18 million is really going to eradicate it.

This is probably a function of the fact that the companies are keeping half of the profit. Now, admittedly, they make these products and need to recoup some of their outlay for manufacturing but couldn't it be 50% of the sales? That would be a serious commitment for a company and not just a free publicity ride. Or, better yet, instead of buying that ridiculously gaudy Red Razr you could donate 50% of what you'd spend on it to charity. I'm Sally Struthers.