The Long Tail by Chris Anderson Reviewed by Pam Bauer

The Long Tail
By Chris Anderson

I have read many business books in my time; but I have never read a book that has left me more excited about the future and the opportunities for small business as did “The Long Tail” by Chris Anderson. His premise is that “The Future of Business is selling less of more”. Now I know before you even start that it sounds like another one of those hyperbole statements that so many books start with. No real meaning and a lot of overstated ideals. Well you would be wrong. Chris goes through example after example to make his case.

First, let me explain what he means by long tail. That is a term that is used in statistics to explain a distribution curve that never quite gets to zero but continues a few points above the zero mark for a long time. Those statistical curves are called a long tail distribution. Imagine you are selling widgets and for the next few months the item has gone from selling 500 a day to 5. Your distribution curve might look something like this:

This scenario could play out for the next few months. Well at some point you are going to make the decision to drop this particular line of Widgets and maybe move on. After all it doesn’t make sense to keep them in inventory and incur that expense if they aren’t going to sell but 5 a week.

Well….. What if you didn’t really have to hold them in inventory? What would make sense then?

Chris gives us the example of online music. Prior to the current internet online stores; music stores had to keep inventory based on the best selling labels. They could not afford to keep slow sellers on hand. You could special order them but most people just went without. Now with the innovation of online music stores like itunes it does not matter how long it takes for a song or album to sell just as long as it sells. The cost does not change based on time and the storage is minimal.

In addition, the song might appeal to a very small interest group but because the store is accessible to anyone with a computer and internet access it can be sold anywhere. The small interest group could actually translate into very sizable profits. Imagine people in India sharing their music with people in Norway - niche markets take on a whole new dimension. The cost is a one time factor and the potential profits could just keep on rolling in. How cool is that!

However, it isn’t all roses as you might expect. It can be hard to see how these new digital bits enter the markets without driving price down to far (i.e. free). At one point Chris reminds us about the economics of abundance with the following passage:

“It’s hard to overstate how fundamental to economics the notion that you can’t have it all for free - the entire discipline is oriented around studying trade-offs and how they’re made. Adam Smith, for instance, created modern economics by considering the trade–off between time, or convenience, and money. He discussed how a person could live near town, and pay more for rent of his home, or live farther away and pay less, “paying the difference out of his convenience”. And since then, economics has been all about how to divide finite pies. That’s just the way it is Neoclassical economics explicitly does not deal with abundant inputs. It doesn’t deny that oxygen is free when you’re trying to light a fire; it just doesn’t include that in its equations. It leaves that to other disciplines, such as chemistry.”

Anderson goes onto remind us that we have entered the era of effectively infinite shelf space. The main functions of traditional economics are the marginal costs of manufacturing and distribution. Those components are trending to zero; or at the very least becoming a non factor in the long tail markets of digital goods.

It is my hope that after you read “The Long Tail” you will have another quill in your quiver to be more successful in your endeavor whatever that may be.

Thanks for stopping by feel free to comment if you feel the need. Meanwhile keep checking back I will be reviewing another favorite book next month. Bye for now Pam