Sunday, February 1, 2009

What business are you in?

At the most abstract level there are only a limited number of businesses.

The Rag Trade

The best business for the long term is infrastructure. You collect rent.
The best business for the short term is Rock 'n Roll. Big risks, big rewards.
The best business for fast growth is the drug business.
The lowest cost of entry is the sex business.
Most people are in the rag trade.

Selling printing is the rag trade + the sex business.

The rag trade is the right stuff for the right price at the right time. It's a great business if you can get the right stuff at the right cost and sell it for the right price. Consider WalMart.The sex business is the oldest profession. It's about delivering a "personal service". Consider barbershops, chiropractors and physical therapy.

The sex business is about making someone happy. It usually is not related to stuff. That's why the cost of entry is so low. The downside is that it is dangerous and unpredictable. You never know why someone is going to be happy. Mostly it is caused by things beyond your control.
Consider consulting, solutions provider, trusted partner.

Newspapers used to be infrastructure. They collected rent for the information real estate in Print. The marginal cost of Print real estate is very low. But not as low as the marginal cost of real estate on the internet.

The rag trade has the lowest, fastest cost of entry. It also is at the center of small business. Sell and deliver stuff at price that is less then your cost. The lower the cost, the less you can charge. The less you can charge, the more you can sell. Think Costco, Martha Stewart, the New Yorker magazine, ready to wear fashion and the Long Tail.

If newspapers used the web to get into the rag trade, every once in a while, they will stumble upon a hit. Think Obama's book sales. They have a shot at earning the rewards of the rock 'n roll business, without the risk. If they combine Print + Web, they will have a very cheap, very effective to sell stuff to fans. The marginal cost of the Print Page will get much lower. As newspapers continue to lower the cost of selling Print Page real estate, all the pieces are finally in place.

But then, you have all the problems of the rag trade.

Except for Rock n Roll, the general trend of societal evolution is to the infrastructure business.
Sex to infrastructure. Nevada, Amsterdam.
Rag trade to infrastructure. WalMart.
Education and government are now finally and quickly moving from sex to infrastructure.
Health is moving a little slower from drugs to infrastructure.

That leaves rock n roll. It's driven by creativity and the right movie or song at just the right time. But then, everyone gets the chance to be a star.

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