Free and Open Markets out-takes

The fundamental independence of individuals on the Net is best expressed (in my humble but biased opinion) by Chris Locke, in his introduction to The Cluetrain Manifesto, which went up on the Web in April, 1999. This is it:

Note the first person plural voice. The "we" here is people, not companies. It's customers, not "consumers".

The first thesis of the Manifesto's ninety-five is "Markets are conversations." David Weinberger and I unpacked it in a chapter by the same name in Cluetrain the book. About what happened in the Industrial Age, we wrote,

The goal was simple. Customers had to be convinced to desire the same thing, the same Model-T in any color, so long as it’s black. And if workers could be better organized through the repetitive nature of their tasks, so customers were more easily defined by the collective nature of their tastes. Just as management developed a new organizational model to enhance economies of scale in production, it developed the techniques of mass marketing to do the same for consumption.

So the customers who once looked you in the eye while hefting your wares in the market were transformed into consumers. In the words of industry analyst Jerry Michalski, a consumer was no more than "a gullet whose only purpose in life is to gulp products and crap cash." Power swung so decisively to the supply side that "market" became a verb: something you do to customers.

In the twentieth century, the rise of mass communications media enhanced industry’s ability to address even larger markets with no loss of shoe leather, and mass marketing truly came into its own. With larger markets came larger rewards, and larger rewards had to be protected. More bureaucracy, more hierarchy, and more command and control meant the customer who looked you in the eye was promptly escorted out of the building by security.

Things have improved since then, but the old industrial assumptions are still alive and well. Worse, they

Really? What if your choice is between a lame cable company and a lame phone company? What if your state says the only legitimate providers of Internet service are phone and cable companies, and even your local municipality can't provide Internet connections? What if your choice between ISPs includes nothing you want?

In fact the telecom and cablecom marketplaces are full of captives. Customers are captive to ISPs in markets with no desirable alternatives — if they want to connect to the Internet at all — but government bodies at every level are themselves captive to the influences of powerful lobbies, chief among which are phone and cable companies. In The FCC and Regulatory Capture, Richard Esquerra of the EFF writes,

The telephone and cable companies have deep, long-standing relationships with the FCC and lobby heavily to neuter, derail, or otherwise reverse the course of regulation that goes against their agenda.

And, since Preisdent Obama took office, the influence of Google and its friends has been added to the same mix.

Economic conservatives should be concerned about how far this has drifted from the teachings of Milton Friedman, the most influential and revered consevative economist of all time. In Chapter 1 of Capitalism and Freedom (Chicago: University of Chicago Press, 1962), Friedman writes,

Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion--the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals--the technique of the market place.

The possibility of co-ordination through voluntary co-operation rests on the elementary -- yet frequently denied -- proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.

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No development in the history of civilization does more to support the bi-lateral and voluntary abilities of parties to transact and to inform each other than the Internet. Today the Net is so supportive and essential to our shared economy that it is hard to imagine the civilized world without it — even though we lived in that world less than a generation ago.

Among the Net's most important virtues is the support it gives individuals who wish to perform the "voluntary co-operation" that Friedman calls "the technique of the marketplace." Customers today have the ability to speak directly to companies through their own emails, tweets and blogs, in addition to interactive functions companies themselves provide (such as ways of submitting comments and writing reviews).

Yet corprate marketers still talk about customers as if they were farm animals or slaves: creatures to be "targeted", "acquired", "captured", "locked-in", "controled" and "managed". Why is that?

The first reason is that companies still believe captive customers are more valuable than free ones. That's why they build programs for "managing" relationships with customers whose only choices for interaction are those provided by the program. The second reason is that individual customers still lack the tools required for engaging with multiple companies in consistent ways, and on the customer's own terms.

To be worthy of the noun, relationship needs to be mutual. Both parties need to bring their own means of engagement, and respect for the originalities of the other party.

Human beings are all different. That's one essential feature of being human. Even identical twins differ in many ways. It's hard for companies to respect individual differences when they use systems built to treat customers as templates and to classify them in categories. It's even harder when companies' marketing is obsessed with making better and better guesses about what customers might want. "Loyalty programs" make matters worse by burdening customers with tools of engagement that work exclusively for each company, and are blind and deaf to everything other than what those programs allow companies to see and hear.

For example, I shop at a grocery store called Shaws for two small reasons: Cholula hot sauce and pork breakfast sausage. When I go through the checkout line at Shaws, I flash the Shaws tag on my keyring, and a barcode tells the store that I'm a "member" of their program, and therefore entitled to "discounts" that look like the absence of higher charges for non-members. What my barcode and purchases don't tell Shaws is that I would rather buy large bottles of Cholula sauce (the store only carries small ones), and that I'd prefer my breakfast sausage to be fresh rather than frozen. But Shaw's system won't allow me to express either preference. All it knows is what I've bought. Its guesses about what I might buy next are based on those purchases, plus whatever they might gather from other data I've left in my digital crumb-trail, or that they buy from a service selling interpretations of that and other data.

Guesswork about what customers want is a half-trillion dollar business. According to ZenithOptimedia, advertising alone will reach that threshold in 2012. According the Gartner, Customer Relationship Management (CRM) was already a $9+ billion business in 2008, and growing at a 12.5% annual rate.

"Loyalty" programs are less about earning actual loyalty than about increasing "switching costs" and gathering data on trapped customers. And the data they gather is theirs, not yours.

While personal computing and the Internet have given us a great deal more freedom in the world, we have not yet cracked the mainframe-ish way that big business itself works inside many categories.

Take "loyalty programs" for example. Each