The Barbell Effect. It's not what you think.

When you remove friction, more people default to either hyper-targeted “if” options, or default “else” options. When this happens, you get winner-take-all effects, or at least winner-take-most, in the “else” category.

The Barbell Effect. It's not what you think.

24 August 2021 · Issue #916 · View online

The emergence of department stores opened up a vast array of choices for the everyday consumer. No longer did they have to go to the corner store and hope their store clerk was selling what they desired — these massive stores offered a larger selection of products at cheaper prices. Sears, Macy’s, JCPenney — these were all great businesses.

-Erik Torenberg

The Death of The Middle

Erik Torenberg:

Until the internet and Amazon came along and reshaped the industry to fit a barbell distribution.

We saw an explosion of higher quality products at lower prices (from better economies of scale) on one side, and the rise of the boutique, or the rise of specialists (Gucci, Apple, Lululemon, etc) on the other.

So department stores got destroyed. Malls got destroyed. Anything that was in the middle got destroyed.

In this piece we’ll discuss why the internet reshapes industries to fit a barbell distribution curve, and why this results in “the death of the middle.”

This barbell bifurcation is happening across many other sectors, including media, music, and even VC — and the bifurcation is only getting bigger. In media, as we discussed in a previous post, local newspapers got obliterated once the internet went mainstream. General interest magazines too.

People today either want the mass market stuff, or the highly niche bloggers (as we see with the prominence of Substack).

We see a similar thing in music. While we all used to listen to the same ~100 bands, now global hits are bigger than ever, and the long tail is bigger too. The middle has been hollowed out.

So why’s this happening?

One reason is the classic innovator’s dilemma. Executives at companies “stuck in the middle” are making so much money they don’t want to take risks, which keeps them optimizing for local maxima at the expense of something truly disruptive.

Another idea is that the internet is changing our preferences — we’re getting more interested in either exactly what we want, or whatever’s most frictionless.

Aggregate or specialize. In other words, give people everything they want or the one thing they need.

Everything in the middle gets slaughtered.

Consider McDonald’s as an example. Before McDonald’s there was tons of variance in hamburgers — you never knew what you were going to get, as there was no “one size fits all” burger. But then McDonald’s decided to standardize their product; you knew exactly what you’d get no matter which Mickey D’s you entered.

The same thing happened with Starbucks, Gap, and most other big brands that promise consistency as their main value proposition.

Our main decision as internet consumers has become a flat out no, unless we’re getting exactly what we want, in which case that no becomes a yes. We only want the very specific thing, or the good thing that’s most convenient and consistent.

So the choice is now: “I’m going to find this niche obscure thing, or I’ll get the mass market thing.”

It’s either Paul Skallas or Malcolm Gladwell. Aesop Rock or ASAP Rocky. Boutique brand or Amazon.

You get the idea.

And you’d think removing friction creates a more level playing field — if it’s easier to find & purchase someone’s products, you’d think consumers would pick the easiest option.

But that’s not always the case. Instead we see the familiar barbell with global mega hits on one side and a long tail of niche creators on the other.

Alex Danco’s series on understanding abundance captures it best (Note: I quote him verbatim liberally throughout this piece — read his whole series to get a much better understanding):

When you remove friction, more people default to either hyper-targeted “if” options, or default “else” options. When this happens, you get winner-take-all effects, or at least winner-take-most, in the “else” category.

This is why on a street with three coffee shops, Starbucks will be crowded, and on a street with ten coffee shops, Starbucks will be even more crowded. That said, the other quirky, independent espresso shops are probably doing okay too. They may also have their own little dedicated customer base that chooses them preferentially.

The decision function looks something like this:

Continue Reading =>

The Death of The Middle
And how the internet creates barbell effects

Photo credit: John Arano on Unsplash