It's unlikely you could sell 10,000 copies of a book called A Few Exceptions to the 80/20 Rule, but that's the most appropriate title for The Long Tail.
Often called the Pareto Principle, after the Italian statistician who observed that 20% of Italian families represented 80 percent of that country's wealth, the 80/20 rule says, among other things, that 80% of your revenues will come from 20% of your activities. Expressed more broadly, 80 percent of all consequences come from 20 percent of all causes. (My father adapted this rule when he asserted that 10 percent of all fishermen catch 90 per cent of the fish.)
You do not need to understand the 80/20 rule to know that in retail, you cannot afford to carry merchandise that doesn't move; it's too expensive to use valuable shelf space for products that just lounge there, taking up space and the shelving and inventory costs you could use to bulk out the better sellers.
For years, retailers have followed this sensible principle, focusing on the 20 percent of products that move. That practice led bookstores to focus on best sellers and Hollywood to focus on blockbusters, and led both industries to quickly cut their losses on "stuff without legs."
But the internet now makes it possible to make a lot of money selling stuff without legs, and to make a business of selling "less of more," as The Long Tail's subtitle states. Amazon and Netflix show that they can make a profit on books and movies that attract only 20 buyers a year, because the sheer number of those books and movies is huge and the cost of carrying them is low enough to produce a profit. But the book's claim that "the future of business is selling less of more" doesn't withstand analysis, and isn't even demonstrated in this book, interesting and intelligent as the author appears to be.
Actually, there's ample evidence that author Chris Anderson never really believed that the future of business really was selling lots of dogs -- no pun to the long tail intended. The subtitle for his October 2004 Wired article out of which this book grew read "the future of entertainment is selling less of more" -- recognizing that his examples were selling entertainment and not mutual funds, minivans or haircuts. Obviously, the publisher insisted the book had to reach a bigger audience beyond the narrow business of entertainment, and this hyperbolic subtitle is the result.
Selling stuff on the long tail can be a great business, it turns out. But how many profitable long tails are there, really?
The book identifies very few. In fact, the book is the story of seven businesses that comprise just five industry segments: search-plus (Google and Yahoo), auction (eBay), movies (Netflix), books (Amazon), and music (iTunes and Rhapsody).
But if the future of business really points in the direction of the long tail, why are there only seven current examples? And for that matter, are there really seven? Rhapsody currently has a four percent market share and refuses to release its numbers; is it profitable? Viable?
It's not for any lack of effort. Thousands people seeking billions of dollars in venture capital traipsed up Sand Hill Road with promises of the next Amazon. And millions, likely billions, followed them back down the hill. But years later, where are they?
Why have only six or seven companies succeeded -- with over 12 years of trying? Amazon started a dozen years ago. Yahoo and eBay are over ten years old, Google and Netflix have passed their eighth birthdays, and iTunes and Rhapsody are seven. Why no breakthrough in the last six years, if their long tail model represents the future of business?
Does this model apply to larger or perishable items that are more expensive to stock and ship -- to Herman Miller chairs, cars or vacuum cleaners? And can this model possibly apply to the bulk of our economy, which is now services (most notably financial services and healthcare)?
Who can see how?
A look at the Lucky Seven suggests that the model has limited application. These companies all share in common that they distribute over the internet small, nonperishable, frequently purchased and relatively inexpensive items (information, in the case of Yahoo and Google) that can be stored and shipped easily and inexpensively. To date, that's as far as the long tail model goes.
Is the 80/20 Rule less a rule because there are seven exceptions? If so, then the Hearsay Rule in the law of evidence is not a rule either, because at last count, courts recognized at least 14 exceptions, including one so broad it's called "the catchall exception." Again, it appears that the author has merely isolated the very few exceptions that prove the validity of the general rule: there's no money in selling things almost no one wants.
Anderson presents an interesting idea, and his gentle introduction into the world of Statistics makes his book somewhat like those of Malcolm Gladwell and James Surowiecki: Smart Subjects for Dummies. But The Long Tail is not about the future of business. It's about the future of the next Amazon -- a company that a thousand ambitious young men and women and their venture capital firms have been dying to discover, without success, for over a decade.
This year Tiger Woods turns 30, and will be golf's leading money winner for the sixth time. Jack Nicklaus won that designation only eight times in his entire career. In 25 professional playoffs, Nicklaus lost 11 times. In 11 professional playoffs, Tiger has lost once. In a 72-hole event featuring the best golfers in the world, Tiger won by 15 strokes. In all his major tournament wins, Tiger's average margin of victory has been 4.6 strokes; Jack won his by half that many. Jack beat his rivals; Tiger scares them, then destroys them. His name could not be more apt: this young man has fangs.
Recommended reading: A World Lit Only By Fire, William Manchester; The Headmaster, John McPhee; Krakatoa, Simon Winchester; The Crisis of Islam, Bernard Lewis; the Science Section of each Tuesday's New York Times; You, Inc. (arrival date less than six months away!).
Upcoming: Caracas, Venezuela. If you've visited there and have travel recommendations, please email them to us.
Congrats to partner Christine Clifford Beckwith upon winning the first flight of the Minikahda Club Championship -- coming from seven strokes behind with seven holes to play!
Harry Beckwith is the best-selling author of Selling the Invisible, which has been named one of the top ten business books of all time, with over 675,000 copies sold in 14 translations. He is also author of The Invisible Touch and What Clients Love, which have sold over 275,000 copies in 13 translations.
He has been a keynote speaker for 14 Fortune 200 annual sales meetings and the National Speakers' Association convention, and has made presentations in Europe, South America and Asia. He is cited regularly in national media including CNN, The Wall Street Journal, Business Week, Entrepreneur, Crain's New York Business and numerous American, European and Asian newspapers.
A Phi Beta Kappa graduate of Stanford University, Harry resides in Minneapolis with his wife Christine Clifford Beckwith. He is the father of six children.
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E-mail questions and comments for Harry Beckwith to invisble@bitstream.net.