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R E C E N T L Y

Just pay for it
By Andrew Leonard
Technology may bring the Olympics to your desktop someday -- but not for free
(02/11/98)

21st Challenge
By Charlie Varon and Jim Rosenau
Ticklers for every situation
Plus: Haiku error message winners
(02/10/98)

Windows on their world
By Karen Lillington
On site at Microsoft's museum and shop: Where the Windows never cease
(02/09/98)

AOL's insecurity complex
By David Cassel
The online service can't even keep its own staff bulletin boards private
(02/06/98)

Let's Get This Straight
By Scott Rosenberg
Technospeak, part 2: A turnkey solution in every pot
(02/05/98)

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Such examples explain why Lewis' audience paid close attention. The jargon may be easily ridiculed, but the reality is no joke. And Lewis -- chairman of the computer science department at the Naval Postgraduate School in Monterey, Calif., as well as the owner of Technology Assessment, "a consulting firm that advises high-tech companies on techno-marketing in the friction-free economy" -- is as plugged in to the Silicon Valley Zeitgeist as anyone. So what if his paeans to "retro-agrarian tribalism" (a characteristic of the friction-free economy), invocations of chaos theory and nonlinearity and single paragraph dismissals of Adam Smith, Karl Marx and John Maynard Keynes (they all got it wrong) make him seem loopy. Huge sums of money are being wagered on the basis of friction-free theories. The slippery stuff is worth grappling with.

Certainly, the software business, in combination with the distribution realities of the Internet, operates under new and different rules. When you can make copies for free, and get them to customers via the Net, you can avoid a lot of old messy, friction-inducing stuff like warehouses, trucks and even middle managers. Never mind how much it might cost to run a Web site that gets hit by millions of people a day, like Netscape's or Amazon's, or the niggling little problem of how to define the oh-so-costly category of "technical support" in the friction-free dictionary. That's old post-industrial thinking. Who cares about making profit and loss figures match up? Just get the market share. Lock those consumers into your tribe!

The real joke, however, may have a painful punch line for the market-share-or-die wired warriors. As one astute questioner asked Lewis: In the friction-free economy, isn't it true that consumers can switch allegiance at little cost to their own personal bottom line? The rate of technological change is so fast now that the wily masses can just leapfrog from one free, or heavily discounted, product to another. "Switching costs," as the marketing vice presidents like to say, are minimal.

Let's just exclude for now the example of Microsoft, which has achieved the Holy Grail of total free-world lock-in. For the rest of the marketplace, those companies that are betting the venture capital bank that somewhere down the line an increasing-returns bonanza will kick in may wind up sorely disappointed. In the friction-free economy, where everything is completely fluid, it may be just as easy to lose lock-in as to gain it.

Lewis shrugged off the question. "It's a high-risk business," he said. (Let's hope he doesn't charge the big consultant bucks for that kind of advice.) More revealing was his response to questions about Netscape.

In his book, Netscape is the flag bearer for the friction-free new paradigm. Chapter 1 leads off with an enthusiastic description of how Netscape gave away its Navigator Web browser and in the space of a few months had 80 percent market share and a $3 billion stock market capitalization. Throughout the book, Lewis holds up Netscape as the single company that best exemplifies the principles of the "Wired World."

Today, of course, Netscape is busy laying off hundreds of workers and grappling with mounting losses. Its once-vaunted market share has been decimated by Microsoft.

Whatever happened to "lock-in"? To "increasing returns"? To giving away the company jewels?

"They lost their vision," said Lewis.

Bzzzt! Sorry -- too easy. Sure, Netscape can be criticized for management mistakes. But that's hardly the full explanation. Netscape's real problem was its unhappy collision with a steamroller named Microsoft that just happened to have access to more capital, far better distribution channels and, amazingly enough, a quality product.

Nothing new-paradigmatic about that. Simply business as usual. Bloody, yes. "Friction-free"? Hardly.
SALON | Feb. 12, 1998