In the future, corporations won’t be able to be as controlling. They will need to let information out. So a more transparent company is a better organization. There is also a lot of evidence that groups make better decisions than individuals, especially when they are selected from among the smartest and most interesting people. The wisdom of crowds argument is that you can operate a company by consensus, which is, indeed, how Google operates. The role of a leader, in this case, is not to force an outcome, but to force execution—literally, by having a deadline. Either by having a real crisis or creating a crisis. You also need dissent. If you don’t have dissent then you have a king.

At the same time, businesses are going to become more complex, due to the nature of technology. Most will have more products and more variance. Part of maintaining competitive advantage will be to have resilient, scalable, differentiated, and global products. That means companies can’t be built by two people anymore. At Google, we recognize that this type of innovation comes from small teams and we organize that way. We encourage people to talk to each other and we have tried to avoid the sort of business unit structure that prevents collaboration. If people in the organization understand the values of the company, they should be able to self-organize to work on the most interesting problems.

The Internet will change markets and competition. The common perception is that the Net has created such a level playing field that the long tail ¹ is absolutely the place to be—since there is so much differentiation, there’s so much diversity, so many new voices. Unfortunately, that’s not the case. Instead, something called a power law comes into play, where a small number of things are very highly concentrated and most other things have relatively little volume. Virtually all of the new network markets follow this law. So while the tail is very interesting, the vast majority of revenue remains in the head. And this is a lesson that businesses have to learn. While you can have a long-tail strategy, you better have a head, because that’s where all the revenue is. In fact, the Internet will lead to larger blockbusters and more concentration of brands.

Business models are changing as well around the idea that free is a better price than cheap. There are new models that take advantage of adjacent revenue sources. And, in fact, free is a viable model when combined with branding advantages, charges for service, and other things.

But that’s a different business model from what most of us are used to. A rule of economics is that for manufacturing and mature businesses, the price of the good eventually goes to the marginal cost of its production and distribution. Well, in the digital world, for digital goods, the marginal cost of distribution and manufacture is effectively zero or near zero. So, free works. Obviously, for things that have some physical cost of production, you’ll be losing money in a million units at a time unless you come up with some offsetting revenue. Telephony is a classic example. Most of the costs for telephony physical infrastructure are sunk costs. The cost of operating is not that great—mostly billing and so forth. So you could imagine a situation where telephony changes from being billed by the minute to being billed by the purchase of the phone. You buy the phone, and covered in the cost of the phone is a part of that infrastructure. And then you could use the phone forever.

¹ A phrase coined by Chris Anderson, editor-in-chief of Wired magazine, in an October 2004 article of the same name.

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