David Courtier-Dutton 041
View the rush: David Courtier-Dutton
Slice the Pie founder David Courtier-Dutton discusses the wisdom of crowd and opportunities for organisations.
Transcript:
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Q. How did you personally become -- how did you decide this was what you wanted to do?
A. It kind of emerged out of frustration, I suppose -- frustration out of not the music industry itself but in terms of the ability to find the music to buy that I liked. I was buying lots of music but most of it I would get home and hear a track or two on the album that I had heard before and that was great and the rest, on the whole, most of the time was very average. Therefore I figured there had to be a better way of discovering music but, over and above discovering music, actually producing music because today you can go on MySpace, on I like Indie, Pandora -- you can go all over the place on the internet and listen to great new music, but how do you find the music you like and when you find it 9 times out of ten, you can not buy it because it has not been professionally recorded or produced or released. So you might have found your perfect band but you can still not play it in your car and that is where I got the idea, I suppose, of using the crowd, of using consumers to actually make all the decisions from discovery to finance and to share success as well of new artists and new bands.
Q. And what is your background have you always been in the music business?
A. No I have never been anywhere near the music business. I suppose I am just an average Joe who buys music. I was a lawyer, I worked in the city for a while, I worked in a public software company in the first dotcom boom, which was very exciting, I ran a property company and then I came up with this idea.
Q. So how did you go about sort of starting it?
A. It was essentially the first thing I needed to do was work out how the current music industry worked so I spent probably six weeks reading books. I did not know anything about the industry, so I read long legal books about the industry and got to the point where I understood in great detail what the deal was for the bands, what the deal was for the labels, how the distribution chain worked, et cetera et cetera. I then turned my attention to the internet because, if I asked anyone about the unsigned band market, no one knew anything about it because we all know, there is no money in the unsigned band market so who would ever want to start a business there. So I discovered MySpace at that point, this was back in early 2006, which was fantastic because somebody had already gathered all the bands and all the fans into one place which was one thing I would not have to do and I discovered there were millions of unsigned bands out there all frustrated. They all, to a man, thought they were fantastic and some of them were, and some of them were not quite so good. All of them felt the system was unfair, it was random, and there was no -- they had their fans but they never got to a point where they could make a album and actually, although everybody thinks that bands want to be superstars, most of them actually just want to produce an album and have a measure of success. The problem with the historic music industry is that it is an all or nothing music industry, it is like saying you have to be CEO of a public company or there is no job for you at all. But my contention is that, why should it not be like any other industry where artist can actually be slightly successful or quite successful or just get by, why do they have to be superstars or nothing at all. It is a crushingly harsh industry people who do get a record deal, of those, 95 per cent of them typically get dumped after their first album. A large proportion never even get to make an album even though they have a record deal and probably one in a thousand end up making a life time career out of it. So it is a very unfair industry so I suppose I was on the white steed of fairness charging into battle but more, on a more commercial level, really looking at a way to uncover the gems and to bring down the bar, where you don't need to sell 100,000 albums you can sell maybe five thousand or ten thousand and still make a good return and still return some money to the shareholders and people who have invested in the band.
Q. Could you describe the principles from which Slice the Pie is based?
A. The key principle I suppose is that no one is going to invest in a band that they chose themselves out of nine million bands sitting on MySpace at the moment, so we had to put a filter mechanism in place and to put that in place we decided to use what is known as the wisdom of crowds and that has been around for well over a hundred years and been proven again and again and again and the basic supposition is that, if you ask a large enough group of people -- it doesn't have to be big, maybe 50, 60 people -- for their opinion on something they will invariably come to a better decision than a room full of experts and it is quite uncanny if you get a crowd to guess how many jelly beans there are in a jar they will consistently beat the best guess. Occasionally, somebody will guess closer but the same person will never beat the crowd again and again and again and, just to give you an example of how accurate that is, if you put a track into one of our scout rooms in the site -- we will come on to what that is -- and it gets reviewed 50 times, it will end up with a score and, if you put the same track in another scout room and another one to be reviewed by totally different people from different countries or whatever, you will always be within two per cent of that score. So it is a very very reliable way of actually filtering music and actually separating what is liked most broadly by people, which is against tracks that are not particularly liked at all. So what we do on the site is we put a thousand artists in each scout room with three tracks each and then anybody can go in and review the tracks. They write a review and score it. They don't know what they are reviewing. They hear it. They don't know the band or the track name but they have to write their review, leave their score and then they are told who the artist is and what the track is and the better you are at scouting the more influence you get and the more stars you get and you get paid as well. So you get paid between 3p to 10p per review, depending on how good you are and we work out how good people are by working out how close to the average score they score each track. So there is a feedback loop in the scouting so it encourages people to scout accurately because, if they don't, they lose stars, they get paid less, they have less influence. So if you leave a bad review on a band unfairly, it is you the scout that will be penalised and because of the wisdom of crowds methodology, the actual band will not suffer as a result. It is a very powerful system and we have had artists that have been in five or six scout rooms out of 8,000 bands who every single time get into the top two per cent so it is completely predictable.
Q. Could you tell me for example what you told me on the phone again about the - what was it?
Q. The, oh yes -- well the wisdom of crowds: The first really big recorded instant of the wisdom of crowds was in 1906. So a game fair down in the west country, there was a chap called Thomas Golten who was a mathematician, 85 years old and absolutely obsessed with measuring things and he was quite well known in his day. Anyway, he went to the game fair and at the fair there was a guess the weight of a ox. Once it had been butchered and dressed and there were about 800 guesses that various people put in. Some of them were butchers, some bakers some of them just ignorant farm boys. The majority of guesses were by people uneducated and really did not know the weight of an ox. Anyway after the competition was over, he collected all of the scores together and averaged them and the average weight of the ox according to the crowd was going to be 1,197lb. Now, when they actually weighed the ox, the weight was 1,198lb. Now that you could say is a fluke but it was not because, subsequently, experiments showed that it happened again and again and again and if you get the right circumstances, and this is very important -- you can not just ask a room full of people but, in the right circumstances, the crowd will always be better than the experts and those circumstances are diversity, so you need a lot of different people -- the more people you have with different experience and different opinions, the better the crowd is. So if you have 20 experts on a subject in a room and you add 10 people who are not experts the crowd opinion will actually be better than if you had another ten experts, which is counter-intuitive but it works. They need to be independent so they can not be influenced by everyone else in the room. So, if you are all working for the same company and boss says I think we ought to go that way and you ask everyone in the company which way they think, they have been influenced and the power of the crowd is diminished. They have to be able to give their opinions totally independently and you have to have a mechanism to actually aggregate all these diverse opinions. So the internet is absolutely perfect because you can have people from all over the world giving their own honest independent opinions and then you can aggregate them in a way that does not compromise their integrity or their independence next time you ask them a question.
Q. I wonder about the structure and the principles of your business, the way that you have described a bit of it, but what is the underlying... how does it play out?
A. (10.49) What it means is that, if you come on to the web site Slice the Pie and you want to invest in a band, that is at the end of the day what it is all about -- scout rooms are just the filtering process -- you will know categorically that the bands presented to you for investment are the most investable band out of that batch of a thousand. It doesn't make them the best band in the world but it makes them one in a thousand or two in a thousand or whatever it might be, which obviously makes them a far better investment proposition and it is not a record label telling you that, it is the crowd telling you and, if you did a million reviews of that band, you would still end up with the same score. So if you asked every music reviewer in the world, you would still get the same score and that, as with any investor, gives you a lot of confidence as an investor that, yes, you might not make money on it but at least you know it is the best one on offer.
Q. So there is a shift going on there from, you know, power being in the hands of three or four experts or chief executives of record companies to every.....
A. (11.10) Yes, it is. Some people try and set us up as label bashers, record label bashers, but we don't see ourselves as that at all. What we have, I think it is little more than stumbled across, but what we have created is a system that can be used in parallel with the experts. I mean what record labels do, they don't just pick a band and say lets throw them lots of money and then thereby they sell lots of albums. They have to nurture the talent, they have to train them, they have to have the publicity and marketing is absolutely fundamental. But where we can help them identify the ones most likely to succeed so they don't throw loads of money at artists who, when they finally get to the public, nobody likes.
Q. And does it mean you are actually ............. I suppose that is a different principle because it seems like, in businesses more broadly, people do try to make a lot of decisions at the top and this is trying to make as much as possible from the people you are concerned with?
A. It is but it is more than that. When people talk to you about, most people, about the wisdom of crowds, the immediate reaction is, oh well you are just getting a public vote so that sounds like a good idea. Actually it is far deeper than that and far more powerful. I mean if you look at something like -- it is a very simple example -- but if you look at Who Wants To Be A Millionaire the television show, the cross section of the crowd that typically goes in to watch that is -- and they have done research on this -- is normally people who have nothing better to do that afternoon. They are not particularly intelligent people -- some of them are but some of them perhaps the other end of the scale, not the contestants but the crowd. If you ask the audience to help you with a question, on average they get it right 91 per cent of the time in terms of the most votes, so the crowd has decided what the answer is. If you phone a friend, ie ask an expert, they typically get it right 65 per cent of the time. That is a very simple example. A far more complex example, but one that everyone has had personal experience of, is google which works entirely on the philosophy of the wisdom of crowds deliberately or not. That is what it does. It is about -- it directs you to web pages based on what other people have done on the web and links between pages and weighted links so those are two live examples of where the wisdom of crowds is immensely powerful, particularly google and that is far more than 100 people voting as to which web page you want to see. It is actually taking the collective knowledge of the crowd and applying that to create a solution and US government have used it or experimented with it in intelligence circles to combine all the different agencies' knowledge about, say, the Middle East to work out the percentage likelihood of Arafat getting assasinated next week or economic growth in Syria next year because it is a nice easy way of getting everybody to collaborate or get a collaborative decision made without having to put everyone in one room and discuss everything which, in itself, would destroy the integrity of the crowd.
Q. In terms of a business model how closely you are working with your users is very important, they are giving you a lot of valuable information and a lot of time which mean I suppose you need to treat them well, they are not just your....
A. (15.08) They are not customers. We are purely an enabler and we have been very clear about that from day one. We are not a record label we are financing and A&R resources but we are just an enabler and we have put in place a platform which enables one group of individuals to interact appropriately with another group to end up with a desired result and everybody involved knows the part they play and is happy with the part they play and no one is being exploited and what we are getting out at the other end of the process is some fantastic bands that we know have mass appeal and that are now being picked up by brands, by record labels, by all sorts of people looking at us and saying television programmes -- not this one but generally -- that recognise us as actually a very credible and sensible way of identifying the best talent out there.
Q. Broadly the way that applies to business I suppose, why are more people not doing this?
A. (16.16) I think two primary reasons: number 1, probably it is counter-intuitive. If I told you that 50 people that really knew not a lot about music or the music industry would consistently make better decisions than people who had been emersed in the independent -- you know, a team of three experts who had been working in the industry for 20 years -- your initial, ones initial reaction would be absolute bullshit. You know, that is rubbish and that is the reaction we get from some people in the industry too but I think we need to show them that we can assist them. We are not there to threaten them. We are there to assist them to do their jobs. The second reason is the internet has not been around for long. Social networking sites, which I suppose are the training ground for what we are doing, have only really come to the fore in the last couple of years so it is very very new and the internet is, I suppose, the environment that enables this independence or diversity to come together in a fantastic and easy way and the third reason I have completely forgotten.
Q. That partnership and that way of, you know, the move from "here's my customers I decide what they want, make it, produce it, ship it out to them they keep it and enjoy it"... the shift from that towards "right, you are not just this, you have ideas about things, you can choose". Can you describe a shift in the way of thinking...?
A. (17.51) Yes, it is about who is the consumer. The consumer used to be over there and I used to be here and I knew where the consumer was and I knew where they were going to be at 7.30 on a Monday night and I could talk to them but the consumer now is everywhere. Everyone is an individual consumer and what you have is a very rapid shift from a one to a many kind of broadcast which is all there. I can target them -- bang, off we go to a many to many. So those two consumers might be looking over there at that particular time. This one is looking over there. This one is creating content to actually fire back over at those consumers and it is a very very complex matrix now and you have to -- you cannot fight it. You cannot force all the consumers to go anywhere. You can encourage them and persuade them and control them, but you cannot force them. So the best place to actually be, in our view, is to sit in the middle and be the place where they interact and in that way they become not only the audience but the purest and in our case the financers and the decision makers so in effect you are empowering them by becoming enablers in the middle rather than telling them.
Q. Can you watch the creaking of the chair.
A. Sorry.
Q. Okay. How strong is that as a sort of business model, are you saying you can not force consumers to do what they are told anymore what does this mean, does this mean we are going to see many many more business models like yours?
A. (19.34) I think we will. I mean I am not one of the people that signs up to the thought that all future content will be user-generated and that is all people will see. There is a place for brands and you yourself see brands actually positioning themselves in the social networks, all of them frantically trying to position themselves together with credible music and associating themselves with this new environment because they canggnot just sit there on a billboard and shout at people anymore because no one is looking. So yes there will be a lot more. I think where perhaps we differ from social networks -- social networks is a new communications tool, iTunes is a new distribution mechanism. What we are actually bringing is the power of the wisdom of the crowd into decision making and actually harnessing that power in a very useful way which is having a direct impact on a very large industry.
Q. Could you describe the ... change then in how businesses work... what do good companies need to be now?
A. (21.24) I think it is not like the internet has just arrived and we need to totally change what we are doing. I think there is a untapped wisdom within organisations which could be harnessed to improve some decisions, some important decisions, that could be made. So if you are a large company and you need to make some commercial decisions about territory, products, whether or not we ought to be aiming at the 16 to 18-age group or the 22 to 23 years old age group. If you could in fact harness all the employees in a company to give their view or a score of how likely it would be to succeed, you would end up with a percentage. If you averaged it all out, something that would be as good a guess that you could get to and it would probably be correct as well in the same way as I said earlier about the US defence agency getting together -- if you can get everybody's wisdom, everyone's innate knowledge and apply it (interruption) If you could harness everyone's wisdom and gather everyone's innate knowledge and experience and combine it using the wisdom of crowds, using independence, diversity, whatever, and have a mechanism to achieve that, then you end up with a near perfect interpretation of what the future will hold, whether it is a product or a country and that changes. There is a web (police sirens) There is a web site in the states, been running for a long time called IOWA something markets but essentially what it is is there are about 800 people who regularly bet on that and they bet on opinion poles -- who is going to win the next election blah blah blah -- and the price moves according to what they reckon is going to happen. They are consistently within one and a half per cent of the final result months before the election takes place. They consistently beat all opinion poles. There is another site in the states called the Hollywood Stock Exchange, again, where people bet on how much a new movie will gross on its opening weekend and that is far and away the most accurate estimate and consistently right. Recently they identified using this mechanism, wisdom of crowds, every single Oscar winner in every major category before the Oscars took place. They were then bought by Cantour Index, a betting company, because of the value of the information which enabled them to set the right odds on movies and artist winning, so it is not actually that new an idea. It is just the application of it to the music industry, which is what we are doing, is a world first, obviously, but it is very easy to engineer situations or work out how you can apply it to almost any industry, whether it is product development, marketing, government, it is a very very powerful system.
Q. Is it a shift in power.....d?
A. I would not call it a shift in power. I would call it more an smarter decision making. You still need the boss. You still need the management team. You can not throw every decision open to everyone in the company and then expect anything to get done but, if the leaders of business or industry actually recognised that they will make better decisions on a consistent basis, if they capture the the wisdom of crowds and then apply it, why would you not do that. You are going to -- you will be more effective, you will stay in your job longer, you will end up getting paid more, you will be seen as a visionary and you will not be doing anything revolutionary because you are just tapping into something that works exists and has been proven time and time again.
Q. ..............?
A. Well I stated it is counter-intuitive to say that people who don't know the business particularly well between them will consistently make better decisions than you will, but you can not deny what is a fact and whether you -- I think the losers will be the people that say I will always make better decisions and the winners will be the ones more open-minded and understand that the world is changing and the internet is a huge opportunity to make things better. It should not always be looked at as a threat which it often is.
