How the Digital Economy Really Works
Where have all the DVD/record stores gone? They have been vaporized, according to digital pioneer Robert Tercek in his book Vaporized: Solid Strategies for Success in a Dematerialized World. “Vaporize” is the term that Tercek uses to describe the impact of the mobile technology that drives our world today. His term captures the essence of what is happening around us: The physical manifestations of what was once thought eternal elements of our world are disappearing. Airbnb provides the same core service as traditional hotels: offering temporary accommodations to visitors. It just does so without the buildings and without the people to staff those buildings. iTunes provides the same service as the old records stores, but again, without the building and the people to staff those buildings.
It is not just the service that is vaporized but the product as well. The music from iTunes is digital. Airbnb is vaporizing its industry, as Tercek explains, through peer-to-peer economics in which digital communication enables a physical product (a room or house in a city) to be shared.
In Vaporized, Tercek explains what is happening and why. In a chapter on information-age infrastructure, for example, Tercek describes how every digital business is both a switchboard and a market.
As with the old telephone switchboards that technologically connected callers to each other, the information age switchboards digitally connect buyers to sellers. The switchboard operator, Tercek explains, can see every transaction and can harvest data from every one of those transactions. Knowing who is shopping, what they seek, which items are selling and so forth allows the company that manages the switchboard to build its competitive advantage in what becomes “vaporized markets.” The keys to success in these markets are speed (buyers want to buy quickly; sellers want to sell quickly) and scale (buyers want access to a maximum of products; sellers want access to a maximum of buyers).
A number of digital companies are not simply large-scale businesses connecting buyers to sellers; instead, Tercek explains, they are “platforms” that enable scores of different businesses to operate. Amazon is the prototypical platform, supporting just about every type of business serving every type of customer.
On top of the switchboards, markets and platforms, according to Tercek, is an even more vast and complex level of infrastructure: the ecosystem. The mobile app ecosystem, which includes content providers, app developers, marketers and retailers all feeding off the various platforms for apps, is one example.
Vaporized is not simply intended to be a descriptive book, however. In chapters on issues such as infrastructure, big data, platform bullies, decentralization, robotics, disintermediation or education, Tercek’s in-depth descriptions lay the groundwork for action steps, which are summarized at the end of each chapter with a set of “Ask Yourself ” questions. For example, when dealing with the “big bullies in the app dictatorship,” as he calls them, companies should sell a digital service in addition to the product, have a presence on every platform, offer an app for free and study the platform with care.
Tercek, a pioneer in the creation of interactive content and a former executive at large media companies including Sony Pictures Entertainment and MTV, offers a brilliant, detailed and entertaining owner’s manual for the digital era.