I came across this from reading Chris Locke’s ‘Mystical Bourgeoisie’ blog (which I read whenever it is updated – I’ll do a post about that separately), and it wasn’t at all what I expected. It was good to read something totally surprising, which was also informative about the business world, and personally clarifying for me.

The Cluetrain Manifesto began as a website developed by Locke and some friends, articulating the way in which the internet was changing the viability of standard business models. In sum, the cluetrain manifesto argues that the internet allows a genuine market to re-emerge, the genuine market being a meeting place of individuals, with a high level of human contact, and consequent structures of trust and authenticity shaping the boundaries of trade.

For example, if you are considering purchasing a digital camera, it is now possible to use internet search engines, not simply to find the cheapest model, or the cheapest outlet for any particular model, but also to discuss the qualities of the different models with other users. In this situation where there is a wealth of available information to the purchaser the producer of any particular digital camera can no longer enjoy what economists call ‘informational asymmetry’ – we can’t be brow-beaten or intimidated by the (apparent) possession of superior knowledge on the part of any particular seller. Often (and this has often been my experience in places like Dixons!) the purchaser knows >much
In this context, a viable business model is one that ‘lowers the barriers’ between the company and the purchaser. There is no benefit to a company in enforcing ‘company speak’ or a ‘line to take’ – all that happens is that the purchaser comes to the reasonable conclusion that this particular company ‘doesn’t have a clue’, and therefore disengages. A company which, on the other hand, allows its own workers to speak directly to customers, without insisting on corporate ‘firewalls’ (whether electronic or social) stands to benefit directly from the high quality human interactions (trust) thus generated.

This might seem overblown – surely the internet is, even now, a minority pursuit, and most companies can safely ignore it, at least for some time to come? This ignores what economists call ‘marginal income’. If a company manufactures widgets, the cost of manufacturing widgets is split between the ‘fixed costs’ (establishment of factory, salaries etc) and the ‘variable costs’ (the material used to make a particular widget). So to make any money at all, the company must first cover all of its fixed costs; once that has been done, then the level of profit accruing from the extra sales of widgets increases radically. Let us assume that a company has to sell 100 widgets to cover its fixed costs in any particular year. If the company sells 110 widgets then those extra ten widgets only have ‘variable costs’ associated with them (the raw material from which the widget is made). That raw material cost is generally a much smaller proportion of the total cost of each widget. What this means is that the ‘marginal widget’ – ie the widget that is sold last – provides a much bigger contribution to overall profits than the first widget; and each extra widget sold is crucial. However, if a small proportion of the company’s market is put off from purchasing widgets due to the company ‘not having a clue’ – ie behaving in a bureaucratic and generally inhuman fashion – then the sale of those marginal widgets becomes immensely problematic. Even if the internet only diminishes sales by a few percent – that few percent can make all the difference to a company between profit and loss. This is why the internet hugely magnifies the effect of informational symmetry between buyer and seller – it is the impact that it has on the margins which levers in huge social and cultural changes at the level of the corporation.

The theme in the book which most struck me, however, was the emphasis upon the human voice. That the traditional market was one in which the human voice made the difference between buying and selling, and where all participants become experts at sniffing out the bullshit. The development of Fordism in all its forms minimised this historic aspect of the economy – giving rise to the corporation in all its alienated and alienating glory – and it is this which the cluetrain manifesto argues is coming to an end. The most important thing for any company now is to be a recognisably human institution, with recognisable human beings working within it. One recent example – the Times newspaper is encouraging its writers to start blogging directly, as with Ruth Gledhill or David Aaranovitch. If there is to be a viable economic model for news organisations, it will surely be along those lines.

This is, of course, why it made so much sense to me – for the blog is indeed the best expression of particular human voices on the ’net, and it is why I enjoy blogging so much. Here I can express my own thoughts, in my own voice, and it is liberating.

So: an excellent book, thoroughly recommended. It is available free, on-line, here.