The merchant of Prato

September 14, 2008 at 2:51 pm 1 comment

I’ve been re-reading “The Merchant of Prato” by Iris Origo. 

The central character – Datini – works away from home a lot, his relationship with his young wife is strained, she spends too much on the housekeeping, he doesn’t entirely trust his business colleagues, he lives in fear of sudden changes in tax regimes. He uses cheap labour from eastern Europe and his religious friend councils him to give more to the poor. His wife can’t conceive, he has an affair with a girl half his age producing a child that was probably his,  he repents, they patch it up etc.

Think I’ve been reading airport novels again ? Well no. Dantini is a real person, a 14th century Italian merchant who made a vast trading empire which he left to charity when he died. The reason we know this is that he was an egotistical pack-rat. He kept all his records and donated them to the city of Prato on his death. The city promptly lost them for 300 years. Which turns out to have been a good thing as we now have the most detailed archive of letters, accountbooks, menus, shoppinglists and bills providing an incredible insight into his life.

As you can see people haven’t changed much since then.  But some things are utterly different. The other woman- was a slave – he bought her. (He subsequently freed her and arranged a ‘suitable’ marriage).

Communication was also different. Running a multinational business was a game of patience and huge risks. Basically, you found an adventurous trustworthy young man, you train him, then send him by ship with a pile of your money to (say) England act as your agent. You tell him the sorts of things the English make that you can probably sell (most often wool). The trip takes a few weeks, he settles into the Italian-merchants-in-London scene, and come the summer buys wool at some locally reasonable price.

The agent sends the wool back by ship to you – it arrives at least a year after you sent him out. You now have to hope that the price you can get for the wool is higher than what it cost you to get it. It may not be, but it might be higher elsewhere, you may choose to ship it on, or sell it to a merchant who has an agent in a city where wool is more in demand. If you had know that, you might have had your agent ship it directly there, but he didn’t know that when he sent the ship.

Which brings me (finally)  to the point, information traveled no faster than goods. (Ok, a fast courier might trim a few percent off the the time taken by a tonne of wool). These days physical stuff takes much longer to travel than ideas do. This fundamentally alters the way markets work, the way we do business and increasingly the way we conduct our social lives.

Imagine the value of singe message from Datini to the agent – “Austere Pope elected – buy black wool and send to Rome.” Huge – but only if none of the competitors had that information and connection. So the value of a medium is all about timing, content and provenance, not the medium itself.

Modern telephony fails to capitalize on this distinction.  A 5 minute call between location A and B is few cents, irrespective of the importance of the message. There is no club-class for Voice. For a crucial business call, sealing a deal, I might be prepared to pay 10$/min if it provided me with critical benefits. So what sort of benefits might add a factor of 1000 to the value of a call? 

  1. provenance – If I know exactly who I am talking to (and even perhaps their legal role?)
  2. security – certainty that the call won’t be intercepted by my competitors
  3. un-deniability – The carrier could produce a recording in the event of a legal dispute
  4. standing out from the crowd – If I get a call and I know the other side is paying $10 per minute then I’ll probably answer it even if I have no clue what it is about. (LinkedIn are heading this way with InMail – a sort of hyper expensive Email) 

Conversely there is a largely untapped market in almost free calls – a kind of ambient call, where 2 or more people hangout over the phone whilst doing other things – cooking, homework, watching webTV or whatever where there is absolutely no need for any of the above features.

Would Datini have remained faithful if they had had Facebook and MSN ? Maybe, but probably not, the internet hasn’t changed human nature (yet).

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The VC’s holiday home The new rock and roll. Which is it – Telephony 2.0 or Web 2.0?

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