Chris Anderson makes the excellent point that the people complaining about intellectual property being treated as free are missing the fact that free does not equal valueless. I’ll agree with him there. But a simple economic fact that IP-based companies and industries are going to have to wake up to is that markets operate because of scarce resources. According to most neoinstitutional economic thought, people trade because what the other person has is of more value. In a nutshell, If I farm celery and you farm tomatoes, we’ll trade because each of our goods is more valuable to the other person. But there are two things under the sun that I can think of that are not (effectively) scarce resources on this planet. One is sunlight and the other is brains (and with them, ideas).

As I’ve argued before there are two different types of product companies: commodity products and designer products. Designer products don’t tend to hold large marketshares but they do command higher prices. Up to this point, commodity products have been able to largely inflate their prices due to the proxy of brand as quality. As Chris Anderson points out in his article, when consumers are faced with a large variety of choices, they go with what they know. (Nobody ever got fired buying/hiring IBM, right?) And to further his point, as consumers are gaining more information from the market and becoming more informed, the effect of brand as a sign of quality is going to wear off. However, here he makes the leap and says that the tastemakers will become the stand-in for a symbol of quality.

But how do tastemakers choose their tastes? There are some that will take the money and wear whatever you give them. There are others that really do have a reputation for knowing what is the best quality product. I’m sure there are a lot of people who would take Bob Vila’s word on tools and materials without a second thought. And if you’re a tool company like Makita that comes highly recommended from many tastemakers then I’m not sure what you have to worry about. Designer product companies built themselves on reputation. Companies like Apple, BMW and Google don’t just have consumers&emdash;they have rabid enthusiasts ((Apple called their most vocal followers evangelists, which strikes a pretty good tone)) and NOT due to their brand but due to the quality of their products and the consumer experience. These companies, that make designer products, never needed a brand so much as a name to re-enforce their great reputation. Companies who have previously been concerned with their image are going to be forced to contend with their customer’s satisfaction.

The phony tastemakers will get eaten up by the information surrounding them. If they get paid to wear it, people will know. That might not even matter. But tastemakers who have an investment in being listened to by a market will make their choices carefully and they will do it based on quality and design. Those companies that make designer products will continue to survive just fine alongside everybody else and they’ll continue to retain their marketshare while everyone else’s fractions into a hundred little ones.

All in all, what Chris Anderson is spelling out in his article is Economics 101. (Though I mean no offense to him — his observations have been remarkable.) In a capitalist market (we are told) prices will work towards a market equilbrium provided that consumers have perfect information and there are a large number of competitors. That last quid pro quo hasn’t been true for the last few decades. It would appear that as the market-space begins to increase the capacity to contain a larger number of competitors and as consumers gain more information, we are well on our way towards a more perfect capitalism.

RSS services have also given us the ability to keep up with the ongoings of the niche markets and suppliers of the Long Tail. As Chris Anderson puts it:

The reason this is so important to driving demand down the Tail is that RSS feeds can provide a constant stream of links and suggestions for products and media that you otherwise wouldn’t have heard of. Best of all, they don’t have to be from conventional media and blogs; they can simply be notifications of availability or updates on what’s selling where.

Chris mentions netflix specifically and I just wanted to point out another one: iTunes [note: this link only works with the Apple iTunes software]. So now, while I’m browsing RSS feeds, looking for articles of note, I can get the latest updates on the iTunes music store. What I would rather have is updates on the bands that I like, but I figure we’ll eventually get there as well.

[1] By “atomitized” I don’t mean the Atom feed service, but just breaking-down-into-smallest-component. And obviously there are limits.