2) O’Reilly is a great example, and we should all keep a close eye on their successes and failures.

I do agree that we all need to experiment and be open to new ventures, new ways of doing business. But most of us can’t afford expensive experimentation with no obvious business model/payoff (see the Nature Network as an example). Every publisher should be doing R&D but I don’t think we all need to be flooding the market with costly social networks that may one day pay off, IF someone ever figures out how to make that work and IF our readers ever show any interest in using them whatsoever. Those are big if’s for small companies to risk significant chunks of money. There are smarter ways to invest in the future than jumping on the latest trend, particularly when that trend has no obvious pathway to revenue generation.

1) What is to stop publishers going after VC investment? Startups can do it, why can’t we?

2) O’Reilly have managed to ride the storm. Their business took a very big hit from Google at the start of this decade. Their business approach was driven by that event and they seem to have diversified very nicely into things that are still Publishing. If they can do it, why can’t we?

My point above, was that the model of build-test-learn-iterate cannot succeed when it isn’t entered into the finances as an essential enabling business component, due to the need to meet external short term obligations.

Nick Bilton (New York Times) made a point at TOC09 this year – “I rang up a bunch of publishers and asked to be put through to the R&D department – most didn’t even know what I meant…”

I think every publisher should have an R&D capability of some sort.

What’s the Venture Capital funding model ? Fund 10, hope the 1 or 2 winners more than makes up for the 8 or 9 losers. That’s right. Most VCs expect to have at least an 80pct failure rate.

Sure, Google and Apple can afford to lose hundreds of millions of dollars in failed experiments. So can the big publishing conglomerates. And it’s easy for the Facebooks and Twitters out there to be brave with other people’s money. But what about the smaller scholarly publishing houses? Should we really be expected to invest like the big boys? Can we afford to throw money after the latest short-lived trend? Is there a more cautious approach toward seeing what really sticks and is really useful that might serve us better?

And even if you succeed wildly like Facebook, what happens when you’re no longer the flavor of the month? Take a look at what is happening to Myspace now–was that a good investment of $580 million for Rupert Murdoch?

In regards to David’s comments, it is partly the information economy itself that is putting short-term pressure on corporate performance. With the onset of the internet, people can follow along neurotically – and trade neurotically – minute by minute. Hard to take the strategic view when you are watching every fluctuation. We now have an over-abundance of information and as humans we are driven to hoard, not filter. But hoarding data keeps people from taking the long view. I don’t have an answer to this exactly but you are right on point. Too much thinking about the problems of today and tomorrow without thinking about what will happen next year.

Thanks for using an excerpt from my post here. Really critical discussion to have.

Publishing
Car manufacturers
Banks
You name it

All having to bend to the needs of two groups of current customers. The ones they sell product to. And the Shareholders whose dividends they must meet. If the two interests align, all is well, but if they don’t…

If shareholders are not about making longer term commitments to investments (and the evidence is that in the years before the fall, they were chasing the biggest hits in the shortest space of time) then there was no way investment in speculative new business approaches is ever going to fly. The shareholders won’t support it, because it’s better for them to move on to the next growth player than to play a role in the ongoing viability of whichever investment it is is that they are currently into.

It then follows that most CEOs aren’t about to put their heads above the parapet, and that approach then cascades down through the industry.

I cannot help but notice that the rise of the “free” business model coincides with the arrival of historically cheap debt financing. No wonder ‘Free’ looked so attractive when the cost of debt had seemingly been magicked down to incredibly low levels.

When reality hits (and I don’t think it has yet – not in the places it needs to), and economics comes back to the business of making things, perhaps we can get back to investing in the future in a real sense. I just hope we are still around for that.