I received a lot of verbal feedback about my last post. Many people pointed me to rebuttals arguing that the Blockbuster hit is very much alive. An interesting recurring argument attributes the decline in record sales and box office turnout to “external” factors - the creation of eMule, iPods and DVDs, etc. As if these are not indicative of long tail economics and their drivers.

The Long Tail theory is not set out to prove that the blockbuster hit is dead. Whether or not this is true can be argued, but like I said it is not the point. The more important insight is with barriers to entry, and more importantly to domination. Those, in many industries, have left the hands of the elites. As such, these industries are now open for everyone - journalism, books, music, movies - all are but examples of alternative mediums which compliment the traditional channels. Sometimes in a way that makes the older channels even obsolete. 

There are 4 main factors which contribute to the creation of a long tail:

1. Production costs declining dramatically due to digitization, home equipment and ease of replication.

2. Distribution costs nearing zero due to virtualizations, efficient supply chain and online delivery where possible.

3. Automatic filters replacing human filtering chains. 

4. Real time, free, global communication.

The result is almost infinite choice and vivrant markets. A continuous demand curve matched by dynamic and organically growing supply, thus creating what we refer to as “The Long Tail”. One could argue that these conditions are only applicable to a narrow set of “modern” products, but I very much disagree. As a matter of fact, I believe every “Brick and Mortar” dominated market is a Long Tail opportunity, even if somewhere down the road.

I believe The Long Tail is a 101 book, as is Small is the New Big, by Seth Godin for anyone who is interesting in really understanding the new dynamics and how to play them right.

A more interesting discussion revolves around the forces that catalyze the creation of advanced markets. In the The World is Flat, Tom Friedman suggest the top 10 shaping events that contributed to leveling the plain field  (Thanks Guy Horowitz for urging me to read the book already). Friemdan coins the term of “Globalization 3.0″ as descriptive of rapid flattening of the world in terms of markets, supply chain, communication, consumption and overall opportunities. I haven’t finished the book yet but I am pushing off sleep to do so.

The top 10 catalysts Tom Friedman suggest are:

1. Collapse of the Berlin Wall - which was the shaping event of the overall triumph of capitalism and democracy.

2. Foundation of Netscape - which brought the power of Internet to the people.

3. Work Flow program - from protocols to services - that led to easy continuity across companies, industries, programs and every other meaningful process with multiple contributors

4. Open Source - which led to the collaborative development of organic software.

5. Outsourcing - which took a quantum leap due to the international need to tackle “2000 Bug”

6. Job Mobility - across cities, companies, countries, environments.

7. Multiple Particles Supply Chains - result of easy communication and outsourcing.

8. In sourcing - focusing on creating core value on top of the supply chain, not just focusing on managing it.

9. Self education - in real time, organic, using tools like Google.

10. “Steroids” - power devices like iPod, Blackberry, Laptop - which put power technology at the hands of the masses.

A fundamental book at the level of Clash of Civilizations by Samuel Huntington (only a much easier reading). I am certain it will catalyze a few posts at own merit.