Those of us who make predictions about the future can often run into a particularly frustrating problem – being right, but being right too early. This is something I’ve been through a few times, particularly with the Naked Corporation – I thought, and continue to think, that it’s a great book about the future of the enterprise and transparency, but when it was published in 2003 it never really gained the traction I hoped for. Fast forward to 2007 – while I was particularly happy about how well Wikinomics was (and continues to be) received, when I saw this cover of Wired Magazine that came out around the same time… let’s just say I couldn’t help but wonder how the Naked Corporation would have fared if the timing worked out better.

Such issues of timing and prediction underlie Paul Krugman’s excellent Op-Ed piece in the NY Times called “Bits, Bands, and Books”. He opens by quickly recapping the technology bubble of the late 1990s, the inevitable collapse, and then jumps to the recent oil and food shocks that have reminded us we still live in a “material world.” But it’s what he says next that is most important:

So much, then, for the digital revolution? Not so fast. The predictions of ’90s technology gurus are coming true more slowly than enthusiasts expected — but the future they envisioned is still on the march.

The particular part of the “future” he focuses on is a prediction credited to Esther Dyson – that the ease at which digital content can be copied and disseminated would result in “creative activity” been sold cheaply, or given away, in order to allow the creator to be paid via services and relationships. Krugman goes on to highlight a few recent stories and examples where creative product markets are heading further in this direction. Rolling Stone’s recent article “Rock’s New Economy: Making Money When CDs don’t sell” is indicative of how the music industry continues to slowly march towards alternative business models, and Amazon’s new e-Book machine (Amazon Kindle) may just be pointing to the book publishing industry having to go through a similar transition soon.

Krugman wraps up the article with the following, which is worth thinking about for a few minutes:

“Bit by bit, everything that can be digitized will be digitized, making intellectual property ever easier to copy and ever harder to sell for more than a nominal price. And we’ll have to find business and economic models that take this reality into account.”

While I agree wholeheartedly, I do think some of the positives here should be reemphasized. Take, for example, the music industry – without a doubt it has been facing a lot of challenges. But if you happen to know many musicians (or take a few seconds to Google the topic), it is not hard to find out that they have generally received a very, very, very small percentage of the revenue they have generated – a buck or two per CD is not uncommon. That is the legacy business model we’re talking about here, and many authors can similarly let you know that writing books is a very hard way to make an easy living. As the cost of production and distribution for digital content trends towards zero, there’s a very real chance that the business and economic models which emerge will allow the creators of content to earn as much or more than ever before, even while prices paid by customers plummet. There are a lot of winners in that scenario… though some of the people caught in the middle aren’t going to like it.