December 4, 2008
I use Google Alerts to tell me when there has been some mention of Dilbert or me on the Internet. It’s the digital equivalent of being a fly on the wall because no one really expects me to be one of the six people reading their blog.
Yesterday I came across a blog post about a prediction I made in 1998. I will link to it because I think the post is well written.
My prediction about confusopolies was better than I imagined. For example, I keep reading articles about entrepreneurs starting their own electric car companies. When the barriers to entry for starting your own car company come down, you know we’re in a commodity world.
Thanks to the Internet, relatively efficient capital markets, and the fact that some company in China can make just about anything, anyone with drive can start just about any kind of company. The interesting part is that in the near future it can never be profitable to do so, because a hundred other people will start the same company next week and drive down your margins. Your only defense is to be confusing, so customers believe, incorrectly, that your product has advantages.
When I started my first restaurant I was surprised how easy it was for someone with no experience to succeed in that business. I hired the right people or companies for every facet of building the business and my operating partner put all the pieces together. The restaurant was an instant hit and lines wrapped around the block when it opened.
But you know the rest.
The fact that it was easy to enter the business is exactly what eliminated the margins. Scores of independent restaurants opened in the general area in the next few years and all cannibalized each other. With our current economic downturn, I predict 40% of the restaurants in my area will shut down within three years. Their margins had disappeared even before the economy imploded.
My theory of confusopolies had a lot to do with my involvement with dilbertfiles.com. It’s a business with lots of competitors, and the options and features are confusing. Most of the comments on this blog about the service took the form of “Why would you need a car when a horse can do the job!” In other words, the competing services had confused people about exactly what they offer to the point of equating a horse and a car.
My involvement with dilbertfiles.com is different from the typical celebrity endorsement in an important way: I actually use the service for my own work, and did so long before I had the notion to partner with sendyourfiles.com for a Dilbert branded version of their product.
When you see a tennis star endorse a tennis racket, there is no chance that star uses that actual racket. Pros use heavier rackets, tricked out for their preferences. You couldn’t buy Roger Federer’s actual racket if you wanted.
I could give other examples, but the point is that you rarely see a case where the celebrity was already using the product before the endorsement or licensing deal was initiated. Sure, he might play professional games in the sneakers that have his name, but there is little chance he would have chosen that particular shoe if his name wasn’t on it.
Obviously I could be risking my reputation and lying about a product I use, trying to make a few bucks, but my incentive to do that isn’t high. I see my role with dilbertfiles.com as “a guy you know (sort of) who is already using the service and is happy about it.” If you don’t want to wade through the confusion and do the research yourself, that can be helpful to know. And realistically, no one has time to research every little decision.