Scalable and non-scalable music

In preparation for my new startup, I spent this past summer reading some books on the subject, including The Lean Startup, The Innovator's Dilemma, and Founders at Work. As it turns out, some of the shortsighted practises they mention as cautionary tales are exactly how many of today's indie labels operate. So I've been trying to draw further parallels, hoping that knowledge of startup culture can lead to greater understanding of the problems currently facing indie rock. But so far, none of my attempts on this blog have really quite grasped it.

Until now, that is. I think I've got it now. And in retrospect, it seems absurdly obvious. It's really all about a distinction that's quite basic in the business world, even as it's rarely acknowledged, if it's understood at all, in the music world. I'm talking about scalability.

Startups such as Blogger, Facebook, and Twitter are scalable. That is to say, they're designed to accommodate unlimited growth of customers and users. This is because what they offer, ultimately, is new ideas. Since there's little precedent to show how well a new idea might succeed, though, startups operate under great uncertainty. A seemingly bad idea today might be worth millions tomorrow. Or… it might just be a bad idea.

A non-scalable business, by contrast, combines time, labour, and raw materials in a way that doesn't easily accommodate new customers or users. A pizza joint is a good example. Since each pizza joint can only make so many pizzas a day, none competes intensely with any other. And everyone likes pizza, so there's no need to create a new market from scratch. The downside of this certainty, of course, is that few in the pizza business can expect to make an easy living.

Since a pizza joint's sales are relatively steady from week to week, whether it can stay in business might depend on the tiniest sliver of net profit on each pizza sold. When I was a delivery guy many years ago, the owner could give me the exact cost, in pennies, of a single handful of each topping. So once a pizza joint is firmly established, its main priority is to extract ever more value from the limited time, labour, and raw materials it's able to invest.

By contrast, what's a startup's new idea worth? Since there's no market for it yet, no one knows. Even a ballpark range is impossible. So instead of fretting about the net profit of each individual user, startups simply work to acquire more and more of them. And since the underlying idea is ultimately what makes or breaks fortunes, they need to stay flexible should their initial assumptions prove wrong. But a pizza joint would be foolhardy to stray from its original mission of making the best pizzas ever.

One last difference is that since startups have no fixed limit for number of users, they're often open to hiring more people. After all, the cost of dividing their fortunes even further is easily offset by the resulting growth to their user base. By contrast, a pizza joint with a fixed customer base shouldn't hire any more workers than it needs to get stuff done.

So which is better, scalable or non-scalable? Of course such a question is absurd. We want online chat, but we also want lunch. We want people out there thinking differently and challenging our basic assumptions about how the world might be. But we also want people out there giving us exactly what we want, the tried and true approaches that keep the world sane and running smoothly. It's pointless to compare the two. They fulfill vastly different needs.

The music world has its own versions of scalable and non-scalable. The former see creativity and the ability to generate new ideas as their best assets, while the latter focus on cultivating skills that will allow them steady work. In the classical realm today, for example, composers generally belong to the former, and performers the latter. And just as in the world of business, it's pointless to argue which is more important. Throughout history, however, the circumstances of the world have not always treated them as equally important.

Even as late as Mozart's time, composers and performers were both treated as tradesmen. In fact, it was the critic who was held in highest esteem back then! (If this sounds bizarre, remember that those doing the critiquing were the nobility.) So both were non-scalable since their efforts weren't appreciated outside the courts that hired them. It wasn't until Beethoven inspired the cult of the "brilliant, tortured artist," and new advances were made in printing and publishing, that the world's first scalable musicians arrived in the form of the Romantic composers. A century later, audio recording allowed performers of popular music to be scalable as well, and everyone was happy.

Unfortunately, scalability didn't (and still doesn't) always equate with quality. New business strategies sprang up to wring maximum sales out of minimal talent, thereby undermining the key premise of scalability, which is that achievement of scale is its own proof that scale is deserved. So when file sharing came along to disrupt this practise a decade ago, most just shrugged, including myself. And since scalability, or the ability to scale, is meaningless once opportunities to scale have been removed, the spotlight has now shifted back to non-scalable musicians, much like in the time of Mozart.

These non-scalable musicians differ from scalable musicians just as pizza joints differ from startups, in that what they have to offer is their time and labour. In other words, their work requires them to be there in person to get paid, usually in small amounts at a time. Not surprisingly, then, for the past decade a certain glee has been palpable in the air now that creative works by themselves, without further time or work put in by the artist, no longer generate the exorbitant earnings they once did.

The newfound attention received by non-scalable musicians also means that they're now filling up the rosters of the record labels, whose business model was optimally designed for scalable musicians. But… this is a problem, isn't it? Because as corrupt and degraded as scalability was at its worst, the historical record will always show the heights it reached at its best. These heights just aren't going to be repeated by musicians holding non-scalable concerns and priorities, and I think they themselves would be the first to agree.

But it's not too late to give today's scalable musicians the opportunity. And if any should succeed, it will probably be the ones who think most like startups. That is to say, the ones offering new ideas, being flexible in their assumptions, and eagerly splitting fortunes with those who can bring them a wider audience. The first thing that smart investors often ask about a startup is, is it scalable? It won't be long before the smart labels start asking the same about the bands they sign.

So now I fully understand what my startup is meant to do. The point isn't to sow tension or resentment between scalable and non-scalable musicians, who fulfill vastly different needs for their respective audiences. We want some musicians to challenge our basic assumptions; we want others to give us what's comfortable and familiar. It's not a contest to determine which is more important. So I just hope to give all musicians, as well as other artists and eventually all individuals, the chance to be scalable by genuinely deserving that scale, in a world where such opportunities are quickly eroding away.

Yeah, that's it. I think I've got it now.