Amazon vs Apple AKA Jeff Bezos vs No Direction AKA The Evolution Economy vs The Leisure Economy

Amazon vs Apple isn’t really worth discussing. Yet, the main stream press keep discussing it.

There’s an article today from one of the TechCrunch guys writing about how much profit Apple is going to make in the holiday quarter and how little profit Amazon will make. It’s a general theme that constantly amazes me – Apple is finally successful. Why still try to show you’re superior?

If your sense of worth doesn’t flow from inside yourself then at least having $60 billion cash in the bank should fill that hole in your soul.

It makes you wonder exactly why Apple and Apple people need to trumpet how amazing and revolutionary Apple products are.

Did electricity have to send out a Press Release touting why it’s better than candle light? Did the wheel hold a fancy presentation to tout how much better it is than square-shaped transportation attachments?

When it strikes you the answer becomes apparent. When what you are doing isn’t really permanent then you have to constantly pretend it is. To feel good about yourself.

Bill Gates left the PC Wars to try to find cures for Malaria and Cancer and solve the really big problems. Perhaps nothing comes of it. Perhaps something does. If he does manage to achieve even one of his big targets (cure malaria, cure cancer, create a culture of billionaires pledging half of their money to such causes) then he would have done something that is perhaps far more important than putting a computer on every desk (which he did do).

Jeff Bezos is doing a lot of things that potentially have huge long-term impacts i.e. Blue Origin (space), Kindle (the future of books), AWS (a move to a cloud infrastructure), the future of retail. He doesn’t need to pose in a half-lit room and show the world how zen-buddhist cool he is. Because if Blue Origin ends up being one of the winners in the Space Race or Amazon takes over retail or Kindle replaces paper – every single person for the next 5,000 years will know who he is.

He’s even building a clock that will work for 10,000 years. Perhaps that helps explain why he doesn’t care what the leeches and parasites of Wall Street think about his plan to invest in the future.

Google, despite the distinct possibility that it becomes the Matrix, is doing Search and Maps and Self-Driven Cars and lots of Translation work and a lot of information organization and gathering.

***

When you do stuff that has really big impact and are focused on the really long-term – you don’t need the validation of short-term success. Things like popularity and acceptance and being cool are pretty meaningless.

Note: We aren’t judging here. Every person is different and some people want to be Prom Queen and some want to write a book that is timeless. Everything is fine. The problem is when you try to have your cake and eat it too. The Prom Queen should stop insisting that her winning the Prom Queen title is timeless and as significant as Shakespeare writing Macbeth.

Let’s consider someone who isn’t making pretty gadgets and isn’t considered the Technological God of the current generation and is relatively unknown – Elon Musk.

This is what he wrote about what areas he chose to focus on (courtesy Wikipedia) -

His undergraduate degrees behind him, and drawing inspiration from innovators such as Thomas Edison and Nikola Tesla; Musk then considered three areas he wanted to get into that were “important problems”, as he said later, “One was the Internet, one was clean energy, and one was space.”.

These are the companies he’s part of or owns (or was part of): SpaceX (which won that multi-billion dollar contract from NASA to handle space launches), Tesla (the electric car frontrunner, in most people’s opinion), SolarCity (one of the largest solar panel installers), PayPal (which did something pretty impressive).

Not many people know of him because he isn’t really focusing on ‘making people happy for the short-term with shiny gadgets’. Conversely, he probably has little need to gain ‘the love of the common people’ and be considered ‘the greatest technology person alive’. If even one of his two main bets works out – then every single person for the next 10,000 years will know who he is.

Here’s the crux of the argument:

If Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin become 2 of the big winners in the Space Race. If Bill Gates cures some major disease and sets up the richest fund ever for the good of humankind. Will anyone remember who made the Walkman or made the prettiest Tablet?

That, in a nutshell, is why the consumerist culture engine is so focused on taking the Vatican of Consumerist Culture and portraying it as life-changing and revolutionary. It’s a futile attempt but impressive. There’s probably a maker of pure ivory tools from prehistoric times who wishes he had the same marketing engine – He’s convinced that if he did, then today his pure ivory nutcracker made from only the finest Mastodon teeth would be considered more important than the wheel.

***

All of this leads to a brief detour.

Amazon vs Apple is meaningless. Jeff Bezos is still here to build Amazon into something (and Charlie Rose really should ask him this the next time he goes on the show) that lasts longer than his 10,000 Year Clock.

Steve Jobs built something that now has no head. It’s literally a giant stack of money and 5 years of plans for fancy gadgets and then nothing. It’s a Validation Providing Engine without the one person who most understood the need for validation and how to provide it.

Jobs-less Apple will release an easier to use and prettier TV and will then claim that TV was nothing before this. That making remote controls easy to use was the real magic. That Baird and Farnsworth and everyone else were minor contributors. But no one at Apple now knows how to link Apple TV to people’s need for validation – not without letting people realize it’s just a pipeline of Validation sent out by and connected to the Vatican of Consumerism.

Without Steve Jobs there is only reality and reality does not treat Validation Engines very well.

Amazon vs Apple is such a concern for the main stream press for this precise reason. If Apple’s Press Acolytes really thought Amazon was not a danger they would be indifferent. Truth is that they are scared out of their wits because Jeff Bezos might beat Apple’s Validation Engines with his Value Engines.

It’s bad enough he doesn’t have Time Magazine spend 25 hours lining up the perfect photo to show how artistic and cool he is. What’s worse – he doesn’t care about profit or the short-term.

Enough of this pointless detour. Let’s get to the real story.

***

The Evolution Economy vs The Leisure Economy

There are two warring viewpoints trying to take over the world.

The Leisure Economy

Everything is fine. We are never going to have any problems. We have evolved enough and now we can just sit back and enjoy. The Human Race has reached its zenith and it’s either going to last forever OR it’s not our problem.

It’s the Leisure Economy. If it weren’t for those annoying greedy parasites on Wall Street – every person would have enough for a comfortable life and we could just worship Angry Birds champions and write about how the person who thought up virtual goods is more important than the person who invented the wheel.

It’s perfectly OK – We each have the option to choose any view-point we like. And we have the right to choose our heroes and Gods.

The Evolution Economy

Humans as a race need to keep evolving. All this worship of the present and thinking the American Idol winner is more important than your parents is getting out of hand. If teachers and policemen and doctors and librarians are considered worthless, and actors and musicians and people good at hitting a ball are worshipped, then it’s a warning sign.

People with this viewpoint look around and wonder -

What happens if we need another Planet? As in – really, really need another planet so we can survive as a species. Then they start thinking Space. Or, if they are elected officials focused only on the next election, and on pleasing their Wall Street overlords, they disband our Space programs and hope someone else will solve the problem.

What happens if we run out of Oil? Apart from minor inconveniences such as not being able to drive to MacDonalds we would have more serious issues like not being able to transport anything. Literally everything runs on Oil (including several governments ;) ).

What happens with our water situation? A lot of people are dying (literally) because they can’t get any drinking water. If the absolutely imaginary global warming continues/happens/magically appears and the areas affected expand – what then? Would Consumerist Culture Jesus appear and turn wine into pure water?

It’s quite a long list. It’s also a list that we should pay at least a tiny bit of attention to. If not for ourselves, then for our kids. If not for our kids, then for whatever reason excites your fancy.

The Leisure Economy is very seductive

Who wants to believe in a world where things are hard. Reality is terrible. It’s like that person you really like who is crazy enough to not like you back. Love only hurts the heart – reality hurts every single part.

It’s much easier to embrace the fantasies and imaginary adventures of the Leisure Economy.

To believe that the biggest challenges your grandkids will face is choosing what color of iCar to buy and deciding whether to enter the Google matrix at 11 or wait until 21.

Perhaps people like Jeff Bezos and Bill Gates and Elon Musk are wrong. We truly have reached a Leisure Economy and nothing will go wrong and everyone will wake up and the World Peace fairy would have made everyone good and kind and benevolent. The Earth will never change its weather patterns. Asteroids will always stop at red lights. Sea Water will become drinkable. And that crazy man who was turning leaves into Oil will turn out to be right.

It is however, a very dangerous bet to make. We can look back all through history and the few times a Civilization reached riches like ours (Roman Empire, Ottoman Empire, etc.) – it didn’t turn out well. The Barbarians at the Gate didn’t have iPads or Angry Birds.

On a long enough timeline the survival rate for everyone drops to zero.

What accelerates things is when a species starts believing the illusion that there is no timeline. We are God’s chosen people and unlike every other empire and species before us we shall remain untouched.

Dinosaurs never had iPads. Otherwise they could have just used the iPads as shields when the Asteroids hit. All our human experience of playing Space Invaders will surely pay off.

That really is the belief amongst people who believe a bit too much in the Leisure economy – the voices of the American Idol singers and the bats of the Red Sox and Yankees and the iPods we throw out into Space will stop the Asteroid. Then they will fall back as a mix of pure oil and pure water and also cleanse any thoughts of war from the minds of the entire human race.

Our Species is safe. If that annoying Ice Age starts creeping up on us our rappers will just smile at it and their gold teeth will scare it back.

***

Should we really be thinking beyond the next 50 years?

It’s a good question. Probably depends on whether you have kids. Whether you think the human race deserves to live on.

What about beyond today?

An even better question. Wish I knew the answer to that.

***

Reasons a Leisure Economy is Unsustainable

Even if we do magically reach a perfectly balanced and perfectly secure Leisure Economy where every single person is happy and has enough money to buy a Maybach with platinum rims and 3D TVs, there are still a few problems.

  1. A Black Swan event. Nassim Nicholas Taleb would explain this a 1,000 times better. In a nutshell – we might have the perfect world and annoying Earth might decide to go into an Ice Age and freeze us all to death. Or an Asteroid might hit. Or a virus might evolve faster than our defences and our medicines. Or a thousand different things. Low probability but if a black swan hits the Leisure Economy - The End, My Friend.
  2. Wall Street Banker Syndrome. We’ve spent so much time as a species fighting for resources and fighting with each other that it’ll be impossible for people to live happily in a Leisure Economy. You’ll want more and your neighbours will want even more and the chain continues until people think 100 million kids dying due to poverty is fine because they need to make money on commodities trading.
  3. War. This is not about inequality but a difference in opinions. Look at the world around us. The only thing saving us is that one country has huge military superiority. If we are unlucky enough to reach a state during our lifetimes where the Middle East and/or China become as powerful as the US, then all dreams of the Leisure Economy’s permanence will be permanently shattered. To be absolutely blunt – all those people working 70 hours a week making iPods and iPhones and Kindles and Xboxes might not treat us very well if they become the most powerful country in the world.

There’s a long list but it mostly stems from the fact that humans are used to competing with each other, for fighting for things, and to the Feudal model (Kings and Lords ruling over the peasants). There are also a lot of things going on that we ignore but shouldn’t (the race against viruses and parasites, the Earth itself, the energy situation).

Does that leave only the Evolution Economy?

That would be brutal. To find out that the only way for the human race to survive is to keep doing what it’s been doing (working and improving and evolving and doing things other than killing the time).

That people will have to keep inventing wheels and steam engines and electricity and airplanes and cars. That doctors and scientists will have to keep making medicines and discoveries. That we can’t all just sit and design ever prettier toys.

That’s a real bummer. Instead of having 7 billion people spending all their time figuring out how to amuse each other, we might be forced to evolve as a race and do boring things like explore space and the oceans and discover new technologies and sciences.

It almost suggests that we will bifurcate. This is where it starts getting really interesting.

The Evolution Economy AND The Leisure Economy

You could argue this is already happening.

25% of people choose the Evolution Economy. They build flying cars and fly to Mars and discover how to purify sea water and find new energy sources.

74% of people prefer the illusion that everything is perfect and they just need to think about the next ballgame and the next device upgrade and the next mortgage payment.

1% of people realize that there is a lot more money, in the short-term, in providing the above 74% people with the dream-illusion of the Leisure economy. That if you make a device shiny enough and market it well enough – the 74% will start thinking it’s as revolutionary as Electricity and the Steam Engine. That if you conjure up fantasies that are compelling and easy then the 74% will leave behind the harsh reality of the real world and embrace the fantasies.

That really is where I think the world will end up.

25% will choose reality and live in the real world and be part of the Evolution Economy.

1% will cater to the 74% that don’t like Reality - they will create a perfect matrix where you might be in vat of fluid the size of a coffin but you think you are flying to Switzerland for a ski in the afternoon and then walking on a farm in Wisconsin in the evening and finishing up by having dinner in Paris. Every day is just perfect and, to your senses, perfectly real.

It’s free choice – And it’s understandable.

It’s also completely natural that for people who choose the Leisure Economy the real heroes and Gods are the 1% who create it.

People in the Evolution Economy might find it strange that in the Leisure Economy the heroes are the ones who can allay the Satanic evil of boredom, even if just for a few minutes. But that really is the crux of the Leisure economy.

Everything is taken care of. No risks. No worries. Just Leisure. The highest goal anyone can achieve is fending off the terribleness of boredom and attaining the nirvana of being entertained. The 1% will figure out a way. To take all the drives and instincts built up over millions of years of fighting off saber toothed tigers and building cities and raising families. A way to channel them into fighting off Green Pigs and building virtual farms and raising imaginary children who never become ungrateful teenagers.

It’s inevitable and we just have to choose whether we are in the 25% who choose reality, the 74% who embrace total fantasy, or the 1% who keep the fantasy alive. Perception is reality – it’s debatable whether it’s the 25% choosing the Evolution Economy who are delusional or the 74%. Perhaps it’s the 1% who are truly delusional – they are the only ones who neither get to enjoy fantasy nor reality.

Every author really should read this book – today

John Locke has written a book about how he got 1 million ebook sales through Amazon in just 5 months.

How I Sold 1 Million eBooks in 5 Months by John Locke.

There’s a special genius in him pricing it at $4.99. If an author can understand why all his books for readers are $1 but his book for authors is $5 then that author will know she has to make sure she buys it, reads it, and executes on the advice better than other authors. Not to mention why it’s going to become incredibly difficult to survive as an author if you don’t cement your place as a top author.

The main reason I’m recommending this book.

  • In my 3.5+ years of following the Kindle and the revolution in publishing this is the most successful indie author. Just by virtue of him avoiding all the traps all the successful indie authors before him fell into – his book is well worth reading. You might feel signing a $2 million contract is a bigger prize – in which case, A) You really aren’t the target audience for his book, and B) You are discounting the fact that ebooks will be 10 times as big in 2-3 years and then it will be 10 million ebooks sold in 5 months for the top authors (that’s $3.5 million to $7 million in profit in 5 months - depending on what the cut is). Why sign with a Publisher if you could be making millions a year in profit while having complete artistic control?

A few additional reasons why I’m recommending the book even without reading it -

  1. He sold a million ebooks.
  2. He sold them in 5 months.
  3. This is straight from the horse’s mouth.
  4. Every author will have to take responsibility for some or most of their marketing soon.
  5. John Locke gets a lot right. You can tell by the amount of hating going on that lots of people in traditional publishing are scared of what he’s accomplishing.
  6. He understands $1. While everyone else who got a $1 hit got greedy and tried to sell $3 books or signed a deal – he stuck with $1 and look how far it’s gotten him.
  7. Hate to be the one to point out that there were indie authors in 2008 and 2009 who could have been the first ones to 1 million ebooks if they didn’t sign ebook deals and didn’t fall for the trap of thinking $1 ‘doesn’t value them’ or ‘isn’t profitable enough’ – However, it’s the truth. As long as you keep giving readers $5 worth of book for $1 you will keep doing better and better.
  8. It’s reality – you need a marketing plan and a strategy. Everyone how is not a marketer/salesman thinks ‘a good book/product will sell itself’. Nothing could be further from the truth.

There are a lot of other reasons too. If you’re an author, three very important reasons I’d give for getting this book are -

  1. There are a lot more slots for independent superstar authors - authors who sell millions of ebooks per year. They are there for the taking – the ones who move first will probably get them.
  2. If you don’t get into these slots, or into the next set of slots (authors who sell 500,000 to 1 million ebooks a year), then you’re pretty much stuck with having to do something other than writing to support yourself financially. Wouldn’t you rather get paid, and get paid well, to spend all your time writing?
  3. You never know what happens to Publishers. Perhaps they get replaced by service companies that figure out (and if you think about this, it makes sense) it’s much better to make $1,000 per author from millions of authors than $5 per reader from tens of millions of readers.

Authors are on their own already, and will be on their own to an extreme extent in a few years. John Locke’s marketing strategy will be an important part of your skillset and overall strategy – If you execute it very well, it might be the thing that gets you to the top level. If you execute it decently, it might be the thing that saves your skin.

If you’re serious about being an author and making millions from selling books (or enough for a comfortable living), a good litmus test would be whether you finish reading this book today, this week, or never.

Another sign the Kindle for iPhone party might be ending soon

This post on why iFlowReader are closing shop is fascinating.

It touches on four things that this post will cover -

  1. Kindle Tablet is absolutely necessary for Amazon if it wants to keep dominating eBooks. Amazon can depend on Apple iOS and Android as much as iFlowReader can, i.e. not at all.
  2. Nook is a hugely important counter-weight to the Kindle.
  3. It’s exceedingly careless to not realize what an app store fundamentally is, i.e. the app store company’s personal kingdom and a means to find out the most profitable products. Most app store companies will want to take over these profit streams (because they are for-profit companies), and usually will.
  4. Reciprocation means that every move like this has consequences. When an Ecosystem owner takes advantage of an Ecosystem participant – the owner is eventually well rewarded for its ruthlessness. If a mass destruction of eReading apps and eBook App companies happens – It might be Apple jumping the shark.

Let’s start with the first.

Kindle Tablet is absolutely necessary for Amazon to keep dominating eBooks

Let’s work through a bunch of assumptions and facts.

  1. Kindle Reading Apps are just software. Out of all the elements – books, software, hardware, ecosystem - they are the easiest to replace.
  2. The core books are the same no matter what delivery vehicle you use. It’d be exceedingly foolish to imagine that your software can’t be replaced. If physical books can be replaced, then a piece of software can definitely be replaced.
  3. There’s lots of money in selling eBooks. Whether you approach it from the perspective of selling bits in the ether, or whether you approach it from the perspective of huge volume, there’s little doubt that $23.5 billion a year in book sales might morph into $10 billion+ a year in ebook sales eventually. And that’s just in the US.
  4. It’s very easy for any ecosystem owner to take over ebook sales. All they have to do is either kick out other ebook sellers or put their own ebook store as the default.
  5. Companies with power never spurn the opportunity to capture the lion’s share of the profits. There’s no company in the world that says – We’re happy with 5% of the profits even though we totally dominate the supply chain and could take 90%.

All of that is a convoluted way to say – If Apple sees Amazon make lots of profit from ebook sales through iOS devices, it will take over that profit stream.

iFlowReader just demonstrated an App Ecosystem’s True Purpose (1 out of a few)

iFlowReader is just collateral damage. However, its experience points out a few interesting things -

  1. The Agency Model might have been the first step down the slippery slope of Apple taking over iDevice ebook sales. It seems a bit crazy but it’s worth considering.
  2. The Apple directive to hand over 30% of ebook sales means any apps selling ebooks will not only struggle to make a profit, they will probably run into significant losses.
  3. Apple might be asking for 30% of sales, but it’ll usually be 50% to 100% of profits.
  4. A lot of the companies selling ebooks will have to close down.
  5. Apple will, in effect, be left with all the ebook profit streams that other companies had created/found in the iOS system. Whether it’s individual book apps, eReaders like Kindle for iPhone, or some other means of selling books – everything will flow to Apple.

Lest we devolve into a pro-Apple, anti-Apple conversation - Nothing against Apple. It has just demonstrated how to take supreme advantage of other companies. Surely, the shareholders don’t care that some small app developer company is dying.

In fact, Apple has done every other company dependent on iOS a favor by demonstrating the precariousness of depending on someone else’s ecosystem and someone else’s customers.

 Let’s switch back to the Kindle Tablet.

Kindle Tablet is the only way Amazon can gain a direct channel to Casual Readers

Apple and Google have made very strong moves to eat up the profit streams Amazon and B&N spent so much money and effort to uncover -

  1. Google has opened an eBook Store that is the default eBook Store for Android.
  2. Apple has introduced this ’30% of revenue, 90% of profits’ tax levy.

Amazon should have done what B&N did - it should have released a Kindle Reading Tablet to appeal to casual readers. It’s mystifying that Amazon still doesn’t have a Kindle Tablet out. Everything that happened to iFlowReader, and the fact that it, quite rightly, laid all the blame on Apple, should be a stark reminder to Amazon.

All those glorious Kindle for iPhone ebook sales are about to be snapped up by Apple. Although Apple will settle for 90% of the profits and a Thank You!

Nook is a hugely important counter-weight to Kindle

If we look at the eBook and eReader landscape, this little iHoodwinked fiasco highlights the danger of a single company dominating one or both of eReaders and eBooks.

There is no guarantee that the dominating company won’t pull an Apple.

Give us all the profit streams. You can keep the struggle to survive.

A dominant ecosystem, one which controls eReaders and the flow of eBooks, has no reason to limit itself to only 10% of the profits. Why wouldn’t it take 90% of the profits?

Barnes and Noble, with Nook and Nook Color, is ensuring there’s some semblance of balance. A second eReader and a second eBook Store.

What is an App Store?

Here’s what an App Store is on the surface -

  1. Developers make apps and sell them and profit.
  2. Device owners get more features for their device, sell more devices, and profit.
  3. A share of sales revenue is kept for the Ecosystem’s maintenance.

This is perfect. On the surface we have a great win-win situation.

It is, of course, tilted a bit in the favor of the ecosystem because the ecosystem makes money from every app sold – whether or not the app developer makes an actual profit on total investment. However, that’s fine because the ecosystem company is providing a channel to customers of good intent.

So, it seems to be relatively well-balanced. But, it isn’t. In reality, the odds are stacked heavily in favor of the Ecosystem Company. The House Always Wins.

Here’s what an App Store is in reality -

  1. All of the things in the prior list.
  2. Totally dominated by the App Store owner, and by the App Store owner’s moral compass.
  3. A testing ground to weed out the most profitable sub-businesses in an ecosystem.

While some of the sub-businesses are roped off (for example, music in the iOS ecosystem) there are other profitable sub-businesses. Once these are found we get a very interesting situation – The App Developer found the vein of gold (Ex: Amazon finding ebook profit) but the App Store owner owns the mountain. It comes down to the Moral Compass of the Company and that Moral Compass is Profit.

That’s the point everyone seems to miss. It’s not immoral or right or wrong for an App Store owner to say -

How nice of you to invest heavily, take a huge risk, and discover this amazing stream of money.

Now, let us take it off your hands.

It’s just the nature of a company. It’s a bit strange to expect a for-profit company, that completely owns an ecosystem, to let another company make tons of money from that ecosystem without asking for a cut. It’s even stranger to expect the ecosystem company to not demand the largest possible cut.

That’s what’s happened. Apple has realized ebooks are a goldmine – and that it’s really easy to sell ebooks. It’s decided it wants the goldmine for itself.

There is no way an app developer can guard against this. None. All it can do is build its own channels to customers and invest in other ecosystems - make sure that it doesn’t depend 100% on a revenue stream that is totally out of its hands.

Reciprocation Works Both Ways

Here’s the thing Apple is missing – Reciprocation. If you don’t treat people well, they reciprocate by treating you badly.

Apple needs app developers more than app developers need it.

That might sound strange if you don’t look at things as they really are. But the truth is that the single biggest advantage Apple has over competing closed and pretend-open ecosystems is the range and quality of apps.

Think of each app as a value-add for some set of customers. With 300,000 apps you get a lot of extra value for nearly every owner. With 300,000 apps each individual app’s importance goes down.

However, app developers as a collective group are still the engine.

Apple’s move with the 30% ebook tax is rather interesting. There isn’t really a way to fathom it because 30% of revenue means that almost every single ebook app developer will have to close shop.

There are tens of thousands of ebooks being sold as individual book apps that will have to either give Apple 30% (which is nearly all the profit) or close down. There are big eReader apps like Kindle and Nook selling millions of ebooks every month that will either have to give Apple the entire 30% they get from ebook sales or close shop.

It’s a massive betrayal of developers. Developers who took a chance on the iOS ecosystem. Developers who helped sell iPhones and iPads and iPods.

Every other app developer will notice. It’s a clear message – Come in and make apps and help us sell devices. If you do really well, we’ll just take over your profit stream for ourselves.

It takes away the possibility of building up a big sustainable business in the iOS ecosystem.

It means that unless you are creating and selling your own product, without any partners or invested parties taking a share, you can’t really survive in the iPhone App Store. How many really big businesses (or, for that matter, companies) do we know where everything is done by one company?

It’s almost impossible. Yet, that’s what you would have to do if you want to build a viable business in the Apple App Store.

Apple keeps making stupid moves like this one – which helps the growth of Android and other competitors. Isn’t it making enough money from selling status indicators? Why try to rob developers out of profit streams they put a ton of effort and money into uncovering?

iFlowStream spent 1.5 years and close to a million dollars to build their business. Now, it’s been stripped away. The way Apple is treating iFlowStream means that other app developers will learn to choose other platforms, or will build direct channels to customers.

Whether it’s a closed ecosystem, an open ecosystem, or a pretend-open ecosystem – Someone else controls it. Sooner or later, they either want you to hand over the profits or to make less/no profit. It’s best to build your own site and your own store and your own channel to customers. That’s so much easier and so much purer.

Indie Authors and the Importance of Stacking

‘Stacking’ is such a rough word. You could probably find far more elegant business terminology in some $175 book on ‘How to Blow $100 Million on Marketing in 9 Months or less’.

However, the concept of ‘Stacking’ is super powerful, multi-layered, and rather interesting.

What does Stacking mean?

Stacking means a few things -

  1. Stacking up promotions to happen at the same time. 
  2. Stacking up value to get a ton of value into one book. 
  3. Stacking up books so you have a range of titles available. Then, when a reader reads one of your books and likes it, she has other books written by you she can buy.

Fundamentally, stacking means arranging factors/forces so that they affect things at around the same time (ideally, in parallel). The value of the various factors/forces can then ‘stack up’ and create huge impact.

Stacking up Effects vs Consistent Trickle of Effects

There’s a time and place for arranging a consistent trickle of effects (perhaps a Zen Garden). However, when you want to break out and establish yourself – your only option is to stack everything together.

In particular,

  1. 10 sales a day, for 100 days in a row, is worthless. On the other hand, one thousand sales in a day will get you into the Kindle Store Top 50.
  2. Having 10 books that each make readers a little happy is not super valuable. No one remembers moments when they felt 10% content. Having 1 book that makes readers very happy is very, very valuable.
  3. Stacking up 10 books where each book individually has the ability to make readers very happy - that’s priceless. Basically, 10 books where every single book provides as much value as 10 good books.

Consistency is valuable once you’ve established yourself. However, at the beginning, your sole aim should be to break into the Top 100 (or the Top 100 in your category). For that, you need to stack up factors.

Indie Authors and Stacking

Stacking up Value

Please stop all this lunacy of trying to maximize how much money you can get. Instead of focusing on getting $10 from each book copy you sell, it’s far better to focus on providing 10 times the value to readers (10 times what they pay for).

If you have a series – Instead of making the first $1 and the remaining $3 each, make a combined volume that’s $1. Then, users can pick either the first for $1 or the entire series for $1.

Indie Authors are trying to get $10 per book when they are complete unknowns.

Big Publishers with hit authors are trying to get $10 per book. As an indie author you can never compete with them. Switch things up and provide $10 worth of value in a $1 book. Go further and provide $20 worth of value in a $1 book.

All the possible reasons you could have for not doing this are reasons derived from fear or greed or unreality.

Reality is that authors who are providing $10 worth of value via $1 books are doing exceedingly well. There are 10+ indie authors in the Top 100 with $1 books. There’s not a single indie author who’s in the Top 100 with a $5 or $10 book (perhaps not even in the Top 1,000).

Stacking up Books

Once you have your first $20 book being sold for $1, you have a hit. However, a single book will neither cement your brand nor make you rich (rich = rich for a long time, not rich for a month).

You have to figure out how to create 9 other books worth $20 each, and then you have to sell them for $1 each. Perhaps you could even create and sell 49 of these ‘super high value for money’ books.

The second big trap indie authors fall for (in addition to trying to get $5 or $10 for their books) is that they sell their first book at $1 and then price the others at $3 or $5. It’s a trap.

Would you rather have 5 books in the Top 100 (like John Locke) or have 1 (or none) in the Top 100?

Let’s say you end up with 7 books in the Top 100, where each is creating a surplus of $19 worth of value for readers. You’re in the Top 100 and making a lot of money. As long as it isn’t free, you’ll make a lot of money. There’s no reason to go all Scrooge and try to provide only as much value as you are paid for.

Stacking up Promotions

Indie authors seem to be experts at getting little insignificant amounts of publicity every few days. At spreading out their promotional efforts over weeks or months – so that the net result is that nothing of consequence happens.

Instead, pick a fixed date and schedule all your promotions around that date. You still have to work non-stop – However, you stack up your promotions so they all happen on the same day. That way, all the sales add up. That’s the only way you can break into the top sales ranks. That’s the only way to get noticed.

Spending 1 hour a day, for 50 days in a row, and getting mentioned on some small site every 5-6 days is worthless. You have to get mentioned ‘everywhere’ on the same day.

Of course, there are things like your own blog and permanent channels of traffic that you should build up. However, the promotions and one-offs are worthless if they don’t happen at around the same time on one particular day.

Stacking Applies Everywhere

You can see the effect of stacking everywhere. If a company makes a good product and stacks on good customer service then the incremental increase in value takes our experience from ‘good’ to ‘great’.

If an author writes well and stacks on solid research to further increase the value, then the book has far more impact. Take Lord of the Rings and the fact that Tolkien created an entire language for it. How many other books have an entire language created just for the book?

You can see it in movies too – the cinematography, the script, the sound, the special effects, the acting, and the chemistry between actors all stack up on top of each other.

Publishers believe in Anti-Stacking

In books we are seeing a rather perverse movement towards cutting up the value and selling it in separate bits – trying to provide less value for money. Publishers want to parcel out large print books, audiobooks, ebooks, and physical books as separate products. They want to take books that very long and split them into two or three books.

Indie authors have an opportunity to reverse this trend and gain a huge advantage over publishers.

  • Publishers won’t enable text to speech – enable it in your books.
  • Publishers want to sell books for $15 – sell your books for $1.
  • Publishers want to sell audiobooks for $30 – offer the audiobook free with the ebook.
  • Publishers won’t sell physical book and ebook bundles – Offer the ebook version free with the paperback.
  • Publishers won’t make the effort to format and proof-read ebooks properly – take pains to make everything look great and be accurate.

Not only do indie authors have the opportunity to fully use the power of stacking – they have the opportunity to do so while Publishers (the main competition) are moving in the opposite direction. There’s never going to be another opportunity like this.

Why Authors & Publishers need to beware geeks bearing gifts

If there’s a single rule that authors and Publishers need to keep in mind, it’s – Beware Geeks bearing Gifts.

Actually, they should beware Greeks bearing Gifts too, especially if they are Horse shaped.

Please Note: If you prefer, replace ‘geeks’ with – Really intelligent and really delusional technology companies that would gladly destroy a market so that they can make a little money. Companies that would also want credit for destroying the market because they are so delusional that they truly believe they were trying to save the market.

Beware Geeks Bearing Gifts

That’s the golden rule.

It doesn’t matter how decent or altruistic or polite or considerate the company seems to be. That company is just trying to use the chaos in Publishing and your struggles to weasel its way in and make some money.

Evolution is cruel. Nature is cruel. The strong prey on the weak.

People who are forthright about their intention to compete are OK – they are a known quantity. The known devil, you can prepare for. People who pretend to be helping you, but are secretly waiting for the right moment to pull a Brutus, are infinitely dangerous.

Authors and Publishers would be well-served by keeping in mind that any person/company always acts in self-interest. Publishers and Platforms are fine – Because they are clearly outlining what their cut is. However, anyone who’s offering you a free ride is going to end up stealing your lunch.

In the chaos there will be lots of companies that will offer opportunities that seem too good to be true – Guess what, they are too good to be true.

Here are some typical promises -

  1. All your problems, mostly due to legacy systems and inefficient ways of doing business, will magically go away if you give us all your books for free. 
  2. We will make you so much money you won’t be able to count it – Except first you have to give us X, Y, and Z.
  3. You can make far more money from advertising than from selling. 
  4. All these people, who don’t read and don’t want to read, will start reading if you do X (which benefits us and hurts you).
  5. Transfer over all your brand power to us.
  6. Let us set up a store for you. See how well it worked for Borders when it let Amazon run its store.
  7. Give away your content for free and make money from other things. Look how much money newspapers are making from this approach.

It’s all trickery. Super intelligent technology companies are tricking you (and sometimes even themselves) and pretending that they want to help you - their true motivation is to steal your market’s profits.

The rule is very simple – Beware anyone who claims that their main motive is to help you. Most of all - Beware geeks bearing gifts.

Why Technology Companies are the Unknown Devil

We have had a big shift from the time when companies wanted to create products and sell them. Now companies want to get users and other companies to work for free and create content/a product/a service, claim ownership of that content/product/service, and profit from it.

Look at YouTube and Social Networks. They are doing nothing other than getting people to work for them for free.

Other, newer sites are going a step beyond. They are selling people virtual goods and are simulataneously selling users’ private information to advertisers.

In this environment, where all we have are looters and arbitrage experts, if a company is telling you – Let us help you, for free. Perhaps it’s a good idea to be very wary.

An Example – Scribd

Here are two things Scribd was, intentionally or unintentionally, doing – making money by running advertisements against pirated material, making money by selling subscriptions for books/content written by other people.

Notice that in their minds this is perfectly justified because they are providing a service.

Publishers partnered up with Scribd to sell books. What part of ‘this site makes money by letting people access pirated material’ did Publishers not understand?

Technology Companies are masters at fooling everyone

Including themselves.

Here’s what actually happens -

  1. Company X sees an opportunity to come in and eat up 50% of the profit in books.
  2. It deludes itself into believing that its real motivation is helping Publishers. Note that this step is critical for it to be successful.
  3. It talks to Publishers as if the spirit of Mother Teresa has suddenly entered its corporate culture and the $23.8 billion in annual revenue books generate in the US never crossed its mind.
  4. It convinces Publishers to trust it and place one or more strategic elements/assets under its command – the starting point, the decision point, the branding, the actual books, the purchase point.
  5. It gradually takes over power. Then it takes over profit.

Publishers won’t realize what’s hit them until they find themselves marginalized.

They should look very carefully at what happened with newspapers. Everyone on the Internet talked newspaper publishers into giving away all their news content for free. Lots of people made money from blogs and advertising. Newspapers got destroyed.

Book Publishers would be well served by looking at everyone who ‘helped’ newspapers and avoiding every single one of them. They would also be well served by reviewing all the arguments newspaper publishers fell for – being on the Internet is necessary, advertising is the future, go for volume rather than good customers, give away your main product for free, you must be on the Internet to survive.

Amazon and Apple and B&N are honest. They are not the enemy

All the companies that Publishers are upset with – Amazon (because it is becoming powerful), Apple (because it won’t share user information), B&N (because it is a big player in both physical books and ebooks) – are not the enemy.

They are forthright about wanting a cut, and about wanting a cut that’s painfully inconvenient to Publishers. Publishers have to understand that they will have to hand out a large cut – one that pains them inordinately.

However, they are still in the thrall of a greed that says they could have everything they desire. And companies are more than willing to exploit that greed.

These companies offer solutions that seem too good to be true. These companies intend to leave publishers and authors with nothing.

Authors and Publishers should run away when they see technology companies with ‘gifts’

Here’s a rough translation of the language the ‘saviors of Publishers’ use -

  1. There’s lots of money in advertising. For us. 
  2. No one reads any more. You should give away your books for free to us. 
  3. You don’t need to change your processes. We plan to take over your customers so being efficient won’t matter. 
  4. Look at how well the music business did. Perhaps you’re stupid enough to believe us. 
  5. You let us do the tough part. That’s the part where all the power and control lies. 
  6. Let’s do subscriptions and make more money. Let us control the customers, the product package, and the content delivery. 
  7.  We really want to help you. Help us get rich.
  8. You could make more money. We could make more money.
  9. There’s an easy solution. This is how you can die quicker. 
  10. Converting eBook Formats is going to cost $5,000 per book.You really are gullible.

It’s tough.

Technology companies see the fear and desperation of Publishers and Authors and promise them a way out. They see the greed and hubris of Authors and Publishers and they promise them ways to make more money.

It’s like a bunch of vultures circling a man in the desert. The man is desperate and fools himself into thinking the vultures are friendly and directing him to the nearest oasis. We all know how the story ends.

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