Music March 2010

Management Secrets of the Grateful Dead

The Grateful Dead Archive, scheduled to open soon at the University of California at Santa Cruz, will be a mecca for academics of all stripes: from ethno­musicologists to philosophers, sociologists to historians. But the biggest beneficiaries may prove to be business scholars and management theorists, who are discovering that the Dead were visionary geniuses in the way they created “customer value,” promoted social networking, and did strategic business planning.

Oddly enough, the Dead’s influence on the business world may turn out to be a significant part of its legacy. Without intending towhile intending, in fact, to do just the oppositethe band pioneered ideas and practices that were subsequently embraced by corporate America. One was to focus intensely on its most loyal fans. It established a telephone hotline to alert them to its touring schedule ahead of any public announcement, reserved for them some of the best seats in the house, and capped the price of tickets, which the band distributed through its own mail-order house. If you lived in New York and wanted to see a show in Seattle, you didn’t have to travel there to get ticketsand you could get really good tickets, without even camping out. “The Dead were masters of creating and delivering superior customer value,” Barry Barnes, a business professor at the H. Wayne Huizenga School of Business and Entrepreneurship at Nova Southeastern University, in Florida, told me. Treating customers well may sound like common sense. But it represented a break from the top-down ethos of many organizations in the 1960s and ’70s. Only in the 1980s, faced with competition from Japan, did American CEOs and management theorists widely adopt a customer-first orientation.

As Barnes and other scholars note, the musicians who constituted the Dead were anything but naive about their business. They incorporated early on, and established a board of directors (with a rotating CEO position) consisting of the band, road crew, and other members of the Dead organization. They founded a profitable merchandising division and, peace and love notwithstanding, did not hesitate to sue those who violated their copyrights. But they weren’t greedy, and they adapted well. They famously permitted fans to tape their shows, ceding a major revenue source in potential record sales. According to Barnes, the decision was not entirely selfless: it reflected a shrewd assessment that tape sharing would widen their audience, a ban would be unenforceable, and anyone inclined to tape a show would probably spend money elsewhere, such as on merchandise or tickets. The Dead became one of the most profitable bands of all time.

It’s precisely this flexibility that Barnes believes holds the greatest lessons for businesshe calls it “strategic improvisation.” It isn’t hard to spot a few of its recent applications. Giving something away and earning money on the periphery is the same idea proffered by Wired editor Chris Anderson in his recent best-selling book, Free: The Future of a Radical Price. Voluntarily or otherwise, it is becoming the blueprint for more and more companies doing business on the Internet. Today, everybody is intensely interested in understanding how communities form across distances, because that’s what happens online. Far from being a subject of controversy, Rebecca Adams’s next book on Deadhead sociology has publishers lining up.

Much of the talk about “Internet business models” presupposes that they are blindingly new and different. But the connection between the Internet and the Dead’s business model was made 15 years ago by the band’s lyricist, John Perry Barlow, who became an Internet guru. Writing in Wired in 1994, Barlow posited that in the information economy, “the best way to raise demand for your product is to give it away.” As Barlow explained to me: “What people today are beginning to realize is what became obvious to us back thenthe important correlation is the one between familiarity and value, not scarcity and value. Adam Smith taught that the scarcer you make something, the more valuable it becomes. In the physical world, that works beautifully. But we couldn’t regulate [taping at] our shows, and you can’t online. The Internet doesn’t behave that way. But here’s the thing: if I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced. That was the value proposition with the Dead.” The Dead thrived for decades, in good times and bad. In a recession, Barnes says, strategic improvisation is more important then ever. “If you’re going to survive this economic downturn, you better be able to turn on a dime,” he says. “The Dead were exemplars.” It can be only a matter of time until Management Secrets of the Grateful Dead or some similar title is flying off the shelves of airport bookstores everywhere.

Recently, Barnes has been lecturing to business leaders about strategic improvisation. He’s been a big hit. “People are just so tired of hearing about GE and Southwest Airlines,” he admits. “They get really excited to hear about the Grateful Dead.”

Until now, scholars who studied the Dead were limited to what was available in the public domain. Barnes sought access to internal documents more than a decade ago and was turned down. When the Dead Archive opens, he and others expect to gain many new insights, because they’ll finally be able to draw on primary source material—and there’s plenty. For years, unbeknownst to just about everyone, the band’s longtime office manager obsessively stashed away everything that came into her office. The possibilities seem manifold. “From the economics folks to the anthropologists,” Barlow says, “increasing numbers of people are going to make a pilgrimage to the archive to see how this all came together.”

When a famous author or statesman donates his papers to history, the task of studying and making sense of them usually falls to some obvious discipline. That’s not quite the case here. Even with the recent renaissance, Dead scholars are few. The bulk of the expertise lies outside the academy, with ordinary Deadheads. So Santa Cruz library officials have devised a novel approach (some would call it strategic improvisation) to curating the collection. They intend to post as much of it as possible online in the hope that Deadheadszealous social networkers that they arewill contribute their knowledge, and perhaps material of their own, to help build up the record. With the culture wars of the 1960s finally beginning to subside, the possibility for sober reflection on a charged era is more feasible than it once was. Today, the Dead are more attraction than liability. The library will seek to become a haven for the study of pop culture since the 1960s, with the Dead Archive anchoring its collection.

“Revolutionaries get vilified, and then, once they get older, they just become cute,” says Steve Gimbel, who is a philosophy professor at Gettysburg College and edited the recent collection The Grateful Dead and Philosophy. “Think of Oscar Wilde. Once they’re not dangerous anymore, it’s okay to discuss them in serious ways.”

Joshua Green is an Atlantic senior editor.
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Joshua Green is a former senior editor at The Atlantic.

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