Long tail genius?

Chris Anderson on Charlie Rose via TechCrunch

“Let’s say Craig (of craigslist) has taken $400M of wealth from the newspaper industry… and Craig himself takes a tenth of that. Where does the rest go? I think what it does is it gets distributed to all of us. Each one of us who use this service save a little money, we have a better experience, and we get a better price. What you’ve taken is a re-distribution of wealth from advertiser driven publications and the advertisers to all of us.”

<<cringe>> Where do I start? <</cringe>>

I can’t be the only person to furrow my brows and immediately think of Mankiw (specifically principle #2 - the cost of something is what you give up to get it.) Individuals derive varying degrees of value from free newspapers (I find them useless, others like knowing which advertisers can afford to get favorable local coverage). But we can all agree that the quality of news reporting will have some correlation to the resources available to that news agency.

Ergo, fewer resources causes worse reporting.

I’ve praised the role of craigslist and other recent technological developments that seem to be having profound impact on our daily lives. However, the Schumpeterian nature of these developments by no means infers a “new economy.” That phrase alone should cause trepidation.

My concern is that market inefficiencies exist today that are the direct result of the consumer-favorable environment (the low interest, fast moving technological period of the last 8 years) . I’m concerned that we will simultaneously see increased regulation to address concerns of the public, and increased monopoly control as big market survivors exercise economies of scale. This is a lousy scenario, and may seem hyperbolic, but I do think the naivete of statements such as Anderson’s - that the movement toward free is inherently good - is cause for concern.