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Derivative Information Products
Or strategic simulacra
Meet Jack. Jack was born in 1903, and he was a lumberjack. He earned money by felling trees and was proud of his job. He worked hard and died in 1985 surrounded by his family.
And meet John. He was born in 1985 and also became a lumberjack. But then he started blogging about himself and his work on YouTube, Twitter, and Instagram. He quickly gained popularity. When his followers turned 500.000, he changed the subject of his posts and videos.
Now he teaches his audience how to become a top blogger.
He no longer fells trees (or he does it occasionally just to take some catchy pictures for Instagram). He earns money by selling online video courses on blogging.
I call such blog posts and courses ‘derivative information products,’ and we live in a world of them.
When John started blogging, it was a second-order phenomenon. When he began making money by blogging and teaching others how to make money by blogging, it was a third-order phenomenon.
The business strategy world is also full of strategic simulacra.
A simulacrum is a copy of a real object or phenomenon without the substance or qualities of the original. For instance, a character in a commercial is a simulacrum – they are just a simplified copy of a human being.
The buzz about business strategy is full of simulacra or derivative information products. And this creates second-, third-, and even fourth-order effects.
Major consulting firms publish analytical reports full of data and forecasts. Usually, they contain bold statements and predictions to draw attention. ‘AI will be after your jobs’ or ‘Banks will be fully digital by 2030’ are some examples of such projections.
They spend time and resources on these predictions (on the record) to help their customers navigate a fast-changing world.
But in reality (off the record), they do it to give their clients the impression that clients need their professional (and very expensive) help. The consulting firms get more clients, and existing clients stay with them because they are afraid to fall behind. This is a first-order phenomenon.
Thousands of bloggers, journalists, and the idle public repost these bold statements and predictions because they are eye-catching.
Frequency illusion or Baader–Meinhof phenomenon makes millions of people trust those forecasts. This illusion forces us to believe that if something is repeated many times in different information channels, it means it’s true.
Josef Goebbels, minister of propaganda for the Nazi German government of the Third Reich, understood the power of repeating falsehoods. “If you tell a lie big enough and keep repeating it,” he asserted, “people will eventually come to believe it.”
And this is a second-order effect. I hear the cliche about the ‘fast-changing world’ in every lecture I give.
But this is not the end of the story.
CEOs and entrepreneurs all around the world are also humans and nothing human is alien to them. They also read business magazines and social media and believe in strategic fairy tales. They allocate huge budgets to innovations they believe their companies need, such as AI, digitalization, web3, blockchain, etc.
Sometimes it creates new industries from scratch, or they start growing quickly. This is a third-order phenomenon.
But major consulting firms see the respective numbers and analytics and add them to their reports. And the story starts from the beginning.
And this is the fourth-order effect.
When business strategy became an industry, it created a whole world of fictional entities related to analysis, forecasting, and consulting.
I am not going to blame all the big consulting firms, experts, and theorists for deliberately creating simulacra. Many of them are decent and brilliant professionals who bring a lot of value to the business world.
But to think strategically, we need to understand the shortcomings of the industry and take them into account.