Thanks everyone for having me up here

I used to come to Toronto to do presentations of individual book titles

at the sales conference for Publishers Group Canada.

It's sort of funny to be here talking about books in a much more abstract way

and I look forward to also being able to present titles to PGC sales conference again in the future.

An odd little personal anecdote: I suffer from a very very benign heart condition

that causes my heart to beat at 120 beats a minute while at rest

and I control it with beta-blockers, and I forgot to bring the beta-blockers.

So I'm going to be doing this presentation in a biological state akin to permanent stage fright

so bear with me if the adrenaline becomes too much.

For the recorded history of publishing, risk was about what books you acquired,

it was a supply-side issue: What product will we supply?

And that contained two questions, effectively:

What titles? and how much do we pay for them?

And Bob alluded to the "How much we pay for them?" problem

but I'd like to delve a tiny bit deeper for a second into understanding

the true pathology of unearned advances.

Because it was discovered in the early 1970s

that, when you're engaged in a competitive auction,

for something the long-term value of which is not clear

the winner always overpays. Not sometimes, but always.

It was three oil economists trying to figure out why they were always overpaying for drilling rights.

And they did exhaustive studies and comprehensive game theory analysis,

and, in fact, the rest of the world has figured this out.

When they were auctioning the wireless spectrum for 3G, back in the early '00s,

several countries structured their auctions so that the second bidder won,

because the assumption was the first bidder was going to so overpay

they would not have enough money left to build all the towers and infrastructure required to execute on 3G.

So this isn't just an accident of a couple of individual editors going slightly off the reservation

or sort of a little bit of a bad habit, it is a profound pathology in the industry that we are taking

our working capital out of what we do and handing it to authors,

and it is part of the deep structure of how we've been operating.

Even if we were to solve that particular miracle, however,

of transforming our capacity to not overpay,

the question with supply still becomes: Well, what do we publish?

And a fascinating thing of what's happened over the last hundred years

is that in a certain sense the supply... it doesn't matter anymore, because the supply

of content is going infinite.

The 20th century has been a history of supply of long-form narrative content increasing.

It began...-and it's a beautiful thing-, it began with reductions in the overall degree of racism,

and sexism in our society.

The so-called "Golden Era" of publishing in the 1950s consisted of white men in tweed jackets

publishing each other.

It was a golden age for them, it wasn't a golden age for the rest of society,

who were suffering from bigotry, and racism, and sexism all along.

So, as our societies let the other 60 to 70% start writing, start getting educated,

get access to tertiary education, access to the social, intellectual, creative capital

required to just be able to write, and discover an agent, and discover a publisher,

that was really the first moment revolutionizing over the supply chain of publishing.

And the second moment is a digital moment that has nothing to do with the Internet,

and is something that enabled a lot of the people here in this room to be publishers,

which is good old Adobe Pagemaker.

The "desktop publishing revolution", as it was once called,

the Xerox, the Kinkos -you don't have Kinkos in Canada but... oh, you do? Ok-

Softskull Press started in a Kinkos in 1993, with two people who were employees

working the graveyard shift

laying out their book on Pagemaker, chopping it, chopping it, tape-binding it,

and, over the course of about 8 weeks, they had 400 tapebound paperbacks to publish,

and that the first Softskull book.

So the explosion that we've seen in the number of titles published in the United States,

depending on how you estimate it, about 25000 in 1990, and half a million in 2008,

is not at all even a function of the Internet,

because those were all print books. It is a function of goold old desktop publishing.

So we've barely even begun to see the effect of marginal cost of reproduction of digital narratives

and the fact that it goes to zero. We've not even begun to see the effects of that.

Everything we're contending with right now is a function of Kinkos,

and the aftermath of the Kinkos revolution.

The quote that you see behind me

is taken from an article in Wired magazine from about two years ago

it was an article about the Netflix prize.

Netflix -is there Netflix in Canada? I should have checked out. No, ok.-

So Netflix is basically a DVD rental service where you sign up and

you pick 3 DVDs, they mail them to you,

you mail back the DVD when you've watched it and it sort of cicles through like that.

It's a monthly membership.

And they've a very complicated algorithm that they use to try to tell people

well, the people who watched this movie rated these other movies 4 stars,

and since you rated this movie 4 stars and they did, then, these other movies you might also like.

It's "people who bought ... algo bought ..." in a more sophisticated level.

And they wanted to improve the algorithm by 10%.

And they announced a million dollar prize

for the person or persons who could pull this off.

It took about three years, and they got about 85% of the way there fairly quickly,

so they'd 1.5% left, and they looked at what was the other part of the 1.5,

the data points that were the components of what they weren't able to figure out

and it was basically Wes Anderson movies.

How would you characterize a Wes Anderson movie?

It's not very plot-driven, it's driven by voice and by character.

So, what's the contemporary novel

other than a not particularly plot-driven thing, driven by voice and character?

So basically novels break algorithms.

And when this guy who wrote the article interviewed one of the mathematicians

-he was actually an organizational psychologist-

he made a comment about media, and it was this comment here:

"The 21st century is going to be about sorting demand..."

because the supply side... the game is over, in a certain sense.

The genie is out of the bottle. We're going to keep at least doubling,

if not tripling or quadrupling the number of books published

in the English language on this planet every year.

And even in everyone here in this room said: "We won't be a part of it, we won't do it," everybody else will.

So this is happening. So how do we respond?

How do we manage risk now that we cannot manage it by controlling supply?

It's going to be demand, obviously.

What can we do, therefore, to manage demand?

One of the main things we did in the United States over the last decade was pray for Oprah.

She doesn't have the same effect here, I know,

but there's Canada Reads, right?

I saw a woman on the plane yesterday reading Lawrence Hill with a Canada Reads sticker on it.

Oprah's genius, though... -we used to think of her as the patron saint of publishing in a certain sense-

but I want to propose what I think is a relatively radical notion about Oprah,

which is that she needed books more than books needed her.

Because Oprah was in the broadcast business.

And the broadcast business is not really a very good business to be in.

It's one-way communication.

And Oprah had an hour a day, at most, with her audience,

and it was a one-way conversation.

So how does she own her audience all their waking hours seven days a week?

How does she get into their heads?

How does she get mindshare?

She starts a book club.

Books are cultural objects that take fifteen hours to read,

fifteen hours of another person's voice inside your head,

and so the commonality between two people who've read the same book

is a profound and deep intervention.

The genius of Oprah was to use the book as the platform to own her audience.

So if we actually get to be in the book business

the book business where you are inside a person's head for fifteen hours

and you own that proxy object, that cultural proxy object,

that connects two people to one another in a deeper deeper way than any other media

then you've got something going for you,

you've got something really really deep going for you.

About two years ago I had lunch with a guy called Michael Cader,

who runs a newsletter called Publishers Lunch in the US,

and he said to me at one point, our business, our industry...

(you'll see the slides go a little faster than I go,

consider that they took their beta-blockers and I didn't)

Michael said to me: we're a tiny industry perched atop a massive hobby.

And so I submit to you in that sense that what Bob alluded to in the Q&A earlier

the person who's going to self-publish their memoir on a Espresso machine in a bookstore

that's the bottom, that's the massive pyramid, that's the industry

if we only stick to the little triangle on top, and functioning as gatekeepers,

deciding which of the hobby bit stuff reaches the little triangle on top,

then we're going to be stuck in managing the supply side,

whereas if we can engage with the entire pyramid,

with the whole hobby, then we're in the business of managing demand

which is a somewhat sexier area to be in.

As I moved into my post-Softskull life, a year ago, when I resigned from Softskull

a number of writers would come to me and say:

How do I get published?

They felt more comfortable asking me now that I didn't have any direct influence

in whether they would get published.

And I told them the things I think a lot of editors here,

when they're on pannels, talking to would-be writers say

and agents would also say

which is: "You should submit your stuff to literary journals,

check out your favorite author's blog, comment on it

go to reading series, apply to reading series,

go to writers retreats, participate in your community."

I explained that has the opportunity to increase serendipity.

An agent might discover you, an editor might discover you.

But I realized over the last year, as I was telling them this,

that that wasn't really the reason they should do it.

The reason they should do it is that it would make them happy.

Because I saw what happened when I published writers in the conventional way in which we do.

We edit, design, print, ship, shelve their books.

The moment they're shelved, the post-partum depression kicks in.

They're not happy being published, in the sense of the publishing supply chain.

They want to connect.

And that is in a certain sense the massive sidetrack that we've gone on in the publishing industry

where we've allowed ourselves to believe that being published is the thing, is the end,

and it is a means to an end.

The end being happiness, the end being connection.

We're in the writer-reader connection business,

and the fact that we build this elaborate supply chain to effectuate that

does not mean that we have to remain prisoners of that supply chain

if it is not effectively connecting writers and readers,

or, to frame it more possitively, only to the extent that it enables us

to best connect writer and reader should we be using the supply chain that we have constructed.

The slide that I just put up is something I'm sharing with you,

I'm in the middle of launching a startup called Cursor

and, when you do startups in this day and age, you do a lot of slides,

you do a deck, they call it.

A guy called Guy Kawasaki says "ten slides". This is one of the ten slides.

No one's seen this yet, other than a couple of venture capitalists, and my co-founder.

But it is a way to try to describe the economic logic of what I'm saying to you.

In interesting ways it reflects something that Bob already alluded to.

Basically, it's a demand curve,

and it basically says that a demand for a given writer,

one person will pay ten grand, or a thousand grand, to have them wash a toilet,

to connect with a writer or artist in some personal way,

and then there's maybe ten thousand people who will pay a buck to connect with that writer

let's say, with a digital download.

And the demand curve basically is everything in between.

And we in the publishing business, because we got so addicted to our supply chain,

have only ever captured the value

under that demand curve that lies between 10 and $30,

and we've let everything else on the table,

we have no products under $10, and we have no products above $30,

so whether there might be people willing to pay $1000 to connect to our writer,

we haven't figured out a way to get those other $970 from them

and we refuse to supply them with stuff for a dollar,

in the belief that all these products are completely interchangeable,

whereas pretty much humans beings have shown in every area

from fashion and cosmetics to furniture

that we don't actually consider these things interchangeable at all.

That we buy paperbacks because we buy paperbacks,

and we buy digital objects because we buy digital objects

and we go to dinner parties with Paul Auster because we want to go to a dinner party with Paul Auster

and a digital download is not a substitute for the $250 Pen Awards gala ceremony with Paul Auster.

So the only way we are going to be able to effectively get out from under the supply chain we've created

is discover all the other value that exists under the demand curve,

that is there either being fed in a half-assed way by MFA programs

or for-profit writing centers, or bittorrent.

But it's going to get supplied by somebody

and, for our sakes, it better be publishers,

if you're interested in finding out more about this particular endeavor,

this Cursor endeavor, you can go to ThinkCursor.com

and just stick in your email address.

This here takes a lot of work to do in PowerPoint.

And it's there because I believe that our industry has to face the same thing

that we ask our authors to face,

they have to face the blank page with the blinking cursor

and we need to do that too.

Thank you very much.

I'm happy to answer less abstract questions than the much more 30000-feet-style-thing that I just did.

All those questions that you asked Bob, I was like, I have to ask me something like that

I could just start answering some questions.

I will throw out one thought, in relation to enhanced books.

I lean towards the "enhanced digital books are the CD-ROMs"

there's absolutely no evidence that there's any demand for them

if there were, people have been making pictures out of words for a very very very long time

yet we still read long-form text-only narrative.

The absence of audio and video in text-only long-form narrative is a feature not a bug,

and thus far it's been treated as a bug by people who have basically hammers

and if that's the only tool you have, then you see an enhanced ebook,

which is not to say that there isn't a role for video and audio in relation to text,

but that's called a website.

Creating something that downloads is going to be kind of pointless

in a universe of 4 and 5G and Wi-Max

already there's 4G in Stockholm that works 60 feet below... in tunnels 60 feet under the ground

So we're going to be in a universe of completely pervasive always-on connectivity

where text and image and sound will work together in a device,

so the notion that we have to bundle it together into a downloadable file seems...

Bob says it's only ($)10000, but only 10000 is only 10000 if your marketplace is the United States

10000 is not an "only" number for a Canadian independent publisher.

So my little advice there is don't waste money on elaborate video in relation to text,

just make a website.

Are there non-imaginary questions? Shawn, thank you

[Q: Can you talk about Print-On-Demand, Publishing 3.0,

and the opportunity to explore under-served, unknown markets through digital?]

My belief is that if you're in the demand management business

then you've got to own the community.

There's just no other way around it

the price of digital content is going to zero

it has already in music

you can get any song you want for free

and at a certain point you'll be able to get any text you want for free

it's just not going to not happen

and it's delusional to think it's not going to happen simply because it hasn't happened yet

the only extent to which it has not happened is frankly lack of demand

as Bob pointed out, 2000 pirated whatevers is a good sign, it means somebody wants the damn thing

most of our problem in the publishing industry it's been people don't want the things that we create

So the price of digital content is going to zero, so how the hell do you make money?

Well, you make money by owning the community.

How are you going to make money under that demand curve?

You've got to own the community. You've got to know who's going to pay the ten grand to take a workshop

a personal tutorial with Miriam Toews,

People are already doing this. The British publisher Faber has launched something called "Faber Academy"

which is basically Faber writers teaching writing workshops.

Miriam Toews is going to be the first writer doing that in Canada.

That works, Faber is a brand, people think: "'Faber Academy', I want to write like a Faber author"

therefore there they go.

So it's by really establishing mindshare over your audience,

either at the level of the author, which would be the case of blockbuster publishing,

with the Gary Vaynerchuks and up, where he's got mindshare of his audience.

Or if you're not in that business, if you're not in the blockbuster business,

everything below that, everything midlist and below,

you're going to have to basically circle everybody together,

and cluster everybody together, so that you can really get to learn who the hell is reading these books.

The role of POD [Print-On-Demand] in that? It's a tool

It's certainly a tool for reducing your working capital outlay,

to the extent that you're still participating in the supply chain

and it's also a tool... You could say a 25-copy artisanally-made limited edition

that you've printed the 25 copies of because you've already got 25 credit card numbers

and you're going to charge them 250 bucks

because the author is going to put his bloody thumbprint on the title page

is a kind of Print-On-Demand.

I know almost everybody in this room has to think very concretely about what do you do tonight,

what do you do tomorrow to address some of these things?

But I also urge you to be able to step back and think about the business you're in,

so that you can make choices about which of these tools to use

because otherwise you're just throwing a bunch of tools against the wall and seeing what sticks

and that's not going to work any better than throwing all the books against the wall to see what sticks.

So Print-On-Demand can mean two very different things to very different publishers.

The trick is: who am I selling the book to?

Who am I connecting this writer I represent with?

[Q: Do you consider this a marketing or a publishing strategy?]

It's a complete business strategy.

It is the business you're in.

It always used to bug me when people announced they had open online marketing departments

because I was wondering what the offline marketing department was doing.

It couldn't be anything terribly useful,

if it was going to be separated from how people spend half their lives.

Most of their reading life, our text-processing life.

I think you have to think about it in profoundly integrated ways.

In other words, your act of publishing is an act of marketing.

My business is perceived -to some degree by outsiders- as a digital-only business, let's say, this Cursor model

and it takes a while to point out to people why I'm being distributed by Publishers Group West

and Publishers Group Canada

These communities are going to produce books that are going to go through the supply chain

why am I doing that? I'm not doing that to make money.

One of the ways in which I tested my business plan was

I took all the non-publishing-supply-chain revenues out of it, and costs out of it

and I discovered I had in the business plan operating margins of 3%,

so I'm like, ok, this model clearly works, because we know that's true.

I'm doing it because 500 heavily-trafficked-by-book-reading-people bricks-and-mortar retail locations

around the country, where I can put a 6 by 9 inch ad about the book and the community for free

is not something I intend to give up very likely.

Publishing is a marketing strategy for an owner of a community.

Publishing is a marketing strategy for the Daily Beast,

this website that Tina Brown has set up in the United States.

She's going to do publishing. She's not going to make money publishing,

but she's going to build brand equity for the Daily Beast publishing.

A lot of people who own communities, knitting, fly-fishing,

paranormal romance, whatever the community is,

they're going to start publishing, because that's a way for them to build brand equity,

and for them publishing is marketing,

That's the kind of conceptual challenge that we face.

You're not going to face it tomorrow, or the day after, but that is the challenge we face,

and I know this sounds very abstract, but when we think of this topic,

this "Calculated Risk", effectively what we are saying is that

it is too risky not to completely reconceive our business.

That's where the risk lies, it's in remaining siloed,

remaining in the manufacturing business.

We are in an intellectual property business where almost our entire cost basis is based in manufacturing.

if you look at the markup on shoes, farmaceuticals, anything,

the markup that everybody else gets to put over the manufacturing bit of the business

is so much greater than what we do in publishing

and we are in the pure intellectual property business.

When I say content isn't king, culture is, that's what I'm trying to get at,

that the container, the cultural artifact, the object itself, isn't what we are doing

it's the connection between people that that object enables,

whether that person is a writer or a reader, or a reader and a reader, or a writer and a writer.

[Q: Does asking writers to start selling something other than their writing

undermine our commodity (writing as culture)?]

Pulped-wood bound in cardboard isn't culture, the words in it are the culture.

It's no more cultural than a t-shirt.

I'm not suggesting the we abandon it,

but I've been chatting with a number of writers...

I mean, I get what you are trying to get at,

are we distracting writers from the pure process of creativity

and turning them into product shells?, the cruder way of summarizing that.

And I have two observations about that

one is that there is no writer happier than the writer who is not writing.

Beckett, the greatest sort of allegedly antisocial curmudgeon of all time,

wrote plays and TV scenarios and radio stuff so that he could get out of the house.

Writers actually want to connect, they don't like spending three years stuck in the attic,

they like getting out, they like connecting,

they may be erratic about doing it or may be scared because they're not used to it

but engaging with the readers is what writers want,

so we're not forcing them to do something that is absolutely alien to them

and it is also the case that, prior to Gutenberg,

culture thrived, poets were allowed to run around and sing for their supper,

and that worked reasonably well,

so assuming that the physical book is the only conceivable incarnation

for the writer-reader connection is, I think, a mistake.

They want to connect.

I'm... Time. Thank you very much.