Personal View

Information Still Rules

The book that continues to influence the information age—sixteen years after its publication

By Professor Carl Shapiro
Personal View

“Technology changes. Economic laws do not.”

Hal Varian and I put that pithy statement on the very first page of our book, Information Rules: A Strategic Guide to the Network Economy, back in 1999. Lest there be any doubt about our message, we added:

“The thesis of this book is that durable economic principles can guide you in today’s frenetic business environment.”

How did that work out? Pretty damn well, I’d say. Sure, our book, written in 1997 and 1998 and published in 1999, rode the crest of the boom. Some found it a bit stodgy, since we refused to endorse the idea that a “new economics” was needed for the “new economy.” But the book was very well received by business executives and by those teaching in business schools. More telling, Information Rules remained popular after the tech crash of 2000–2001, unlike virtually all of the similar titles of that era.

Why? Because the topics we covered are central to competitive strategy in the information age: how to set prices for information goods, how to create different versions of information goods, how to manage copyright in the digital age, dealing with lock-in and switching costs as a supplier and as a buyer, and especially this one: navigating the tricky cross-current in industries where networks play a central role in creating value.

We did not foresee the rise of Facebook or Uber, but we were able to draw on an extensive body of research on “network effects” to guide managers in the emerging social networking sector. We did not foresee the rise of the iPad, but we were able to use the examples of Microsoft and Intel and Adobe to illustrate how “platform” strategies can create enormous value by drawing together a network of application developers and users. We did not foresee the smartphone patent wars, but we were able to identify lurking problems associated with patents that are essential to practice industry standards. We did not foresee the rise of “big data,” but we were able to draw on the experience of the content and advertising industries to identify the extra value created by targeted advertising.

Plus, well, I got lucky: Hal Varian became the chief economist at Google in 2002. From that perch, he was able to accelerate the adoption of many of the strategy ideas found in Information Rules. Now, in 2015, Microsoft, eBay, and Amazon all have chief economists too. So:

Information still Rules.

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Carl Shapiro is the Transamerica Professor of Business Strategy at Berkeley-Haas and the co-author, with Hal R. Varian, of Information Rules: A Strategic Guide to the Network Economy (Harvard Business Review Press, 1999).

Shapiro served as a member of the President’s Council of Economic Advisers during 2011–12. Two years prior, he was the deputy assistant attorney general for economics at the Antitrust Division of the U.S. Department of Justice; he also held that position during 1995–96. From 1998 to 2008, Shapiro served as director of the Institute of Business and Economic Research at UC Berkeley. He has been editor and co-editor of the Journal of Economic Perspectives and a fellow at the Center for Advanced Study in the Behavioral Sciences, among other honors. Shapiro earned his PhD in Economics at MIT in 1981, taught at Princeton University during the 1980s, and has been on the Berkeley faculty since 1990.

Carl Shapiro