It’s time to round up the year in more ways than one. Our advertising agency Honesty’s first fiscal year just ended a month ago, and I’ve been treating myself to some well deserved vacation on a sailboat in the Stockholm archipelago. And for those of you who have never been here, it’s quite a place:

It has been a strange but amazing year. Definitely tough. Probably the toughest year of my life. In February 2009 I had just left McCann (been fired is probably a more accurate description actually, I was a bit of a pain). I was on the street with no job, no financial stability to speak of and, in the typical ironic style of the game of life, no voice since I had throat surgery planned for the day after I left McCann. I couldn’t even call anybody to tell them about my predicament. Probably just as well as I was pretty high on painkillers as you can see below. Nevertheless it was what one could call bad timing.

At this point all options were open. I guess I could have joined another agency, I could have left the business altogether for something else, or… I could start something of my own. But as I was laying there in the hospital bed, I made a decision. I knew the concept we had at Verymuchlogo (the agency I left) was basically right, though somewhat crude, but the project was slightly off center in the staffing since we were missing an important piece of the Ocean’s 11 team and we were lacking the right production philosophy. Now was the time to make it all perfect from the start. But it was not going to be an easy ride.

In February 2009, still with pain in my throat and strong painkillers to fight it, I filed all the papers to start the advertising agency Honesty. To this day, I still have the original sign on the door of my apartment.

Shortly thereafter I moved into Honesty’s first office located in Forsman & Bodenfors’ old office on Hötorget in Stockholm.

Here I was hanging out with amazing people like Louise Hamilton and Daniel Jouseff, ping-ponging ideas and meeting tons of people.

Great meetings were held with everything from creatives and strategists to potential financiers and clients. The office was an expensive place for only one person to pay for, but looking back, it turned out that it actually paid for itself many times over.

And it was an important time, albeit painful – being on my own like that was a quite scary experience since I had nobody but myself to rely on for basic stuff like food and rent. It was important because it forced me out on the ledge. If I would have taken the safe route, Honesty would have been dead and gone a long time ago. Instead, I spent time digging through our industry and surrounding industries, like SEO, social media consulting and business consulting, to figure out what was being done right and wrong in our industry, or put into business terms – where the inefficiencies were that could be exploited. I saw (and see) the music industry as related and wrote a lot about that too back then. Check out the walternaeslund.com blog posts from February here.

Besides doing some smaller consulting gigs to stay afloat, my persistent bloggin was starting to pay off with more readers coming in every day and public speaking gigs starting to pop up, both in Sweden and abroad. I fell in love with the stage and it’s still a great marriage!

I also helped out as a consultant where I could. One of these gigs that I’m really happy and proud to have been a part of was the “Sweden’s Most Swedish Job”-campaign that Syrup planned for during the spring and executed in the summer. It was an awesome campaign, not least PR-wise, where we sent around a guy all over Sweden to rediscover the country and stay at STF’s (the client’s) hostels.

It was also an opportunity for me to work with the fantastic Henrik Frenne who is, by the way, a one-man-agency in himself. (Grab him if you can afford him).

My lifestyle at this point was anything but luxurious. All my money went to my expensive office and pitch projects and living expenses. There was one exception however: Our oyster Thursdays. Here me and my friends met up for oysters and discussed life. These Thursdays did chip away on my lean budget, but still I really think they helped keep me sane.

Around this time we started to throwing the epic Daniel & Walter-parties at the Stockholm club Collage. At least we thought they were epic. We always had a great dinner at the club before firing up the turntables and partying until 2-ish. Also a great way to keep my spirits and creativity up (we had a new theme every week).

Summer came. In many ways this was a huge frustration. The ad business slowed down and went into vacation state. All I wanted to do was work, but things around me were slow. Looking back I can see that this was actually really good. I fixed up my apartment and read up on a lot of stuff that I didn’t have time for before, like evolutionary psychology and the psychology of attraction, themes that are now at the core of my lecturing and overall strategy.

In September I wrote a blog post that exploded like a bomb. The post was about Forsman & Bodenfors’ campaign for The Church of Sweden and was intended as a clear and good example to show what happens when you design for man as man was fifteen years ago, in the pre-Google era, rather than designing for man as man is today, including the augmentation of the mind that search engines provide. Over the course of that week, my blog traffic doubled, tripled and quadroupled before hitting the Swedish advertising press in the form of an article in Resumé. At most I had six times my ordinary traffic on the blog going to that particular article. A week later I wrote about Lowe Brindfors’ new site, just to show that it is really not a Forsman & Bodenfors problem but an industry problem. Agencies need to get on the bus and design for man as man is today! During those two weeks, we had tons of traffic to the agency site as well, with all the big agencies topping our visitor charts. That week several of the biggest agencies where out searching for SEO-experts to hire. Ironically, we ended up on the top list of SEO-consultancies only some weeks later. The question I always get asked is whether the posts were a PR-trick or not, and my answer is: not really. I just told things as they were. Including screen shots. Sometimes a simple truth carries a long way.

Later that fall all the remaining 5 partners in the planned Ocean’s 11 team had signed on to the project, had gotten on board and received their shares. By October we were up and running. The old place was now way small and we moved into Honesty office #2 in Hornstull.

We were pitching small stuff and bigger stuff and were on a winning streak. To date we have withdrawn from two pitches and won the rest. Such an amazing payoff for all this hard work.

One of the ones we withdrew from was for, wait for it, the presidential campaign in the Philippines. That’s one you don’t do every day. This amazing ride was a great adventure including a week long very intense trip to Manila.

Instead we got to work on a dream project with one of my favorite designers Stefan Sagmeister and went over to New York to meet up and do workshops.

I’ve been a fan of his work on stuff for everything from superstars like Lou Reed and The Rolling Stones to small fun projects for a long time and also felt much appreciation for his philosophy and view on life. You can check him out speaking at TED.com here:

As a bonus, I also discovered and fell in love with Ace Hotel in New York. Fantastic place and a place I keep coming back to.

Things were starting to pick up speed now at Honesty. We added two employees to the staff, one art director and one account manager, and some freelancers and just pushed on full speed ahead. Before long we had outgrown Honesty office #2 as well.

By now we had won the accounts for Halebop and Stena Metall along with a bunch of other smaller accounts, and moved into our present space near Mariatorget: Honesty office #3.

This was a perfect stop for us where we could regroup and search for a perfect space without being too crammed. We have a couple of ideas for where our next space Honesty office #4 should be but haven’t quite decided yet.

Our first fiscal year, which was actually a year and a half, was closed on the last of June. Most of our real business has taken place from February, and that was an important lesson: it takes some time to start an advertising agency from scratch without financing. But when I got those books in my lap I was real proud, of myself, of my partners, and of everybody else who have made this happen. It’s just f*#!n cool that we could make it happen.

Before summer started I bought a piano. I was worth it. That’s where I sit down when I come home from work to clear my head before writing to you. It’s been an amazing year and an amazing ride. If you ever get the chance to do something like this, then do it! And if you don’t get a chance like that, make one.

When I got fired I called my mentor Magnus to tell him the news (well… I couldn’t talk remember, so i mumbled and whispered). I remember very clearly his reaction: “Walter – that’s GREAT news! It’s probably the best thing that has happened to you since puberty!”.

I guess he was right.

Have a great day!

As Spotify launched their iPhone app, the crowd cheered. The talented SEO-expert (and comedian) Simon Sundén publishes the follwing graph of Spotify Premium sales that went viral amongst us nerds. Half us us thought is was true, and who knows, it may be.

But even if this graphic joke isn’t true, it illustrates something quiet scary. Something scary that starts with an “M”.

Let me tell you a story to explain:

Chapter 1 – The Music Industry

Think for a minute about how the music industry works. This is an industry that has built it’s entire business model around their monopoly on information distribution. Largely, the monopoly has been built on the control over distribution of plastic circles. In recent years, as silver became the new black in the plastic circles industry, the information started to find other ways of distributing itself over the internet, and the monopoly of distribution started to break down.

Desperately, the record industry tried everything to stop these new an superior modes of information distribution by trying to sabotage them with destructive and inefficient “inventions” like DRM. When that didn’t work (because Darwinistic innovation always gravitates towards the efficient), they cried foul, and tried to persuade their friends “in Washington” to legislate and punish anyone who had the audacity to use these new and efficient modes of distribution instead of using theirs.

Why so desperate, you may ask? Well – this was all they knew. It was not them, but the musicians who created the music. What they, the record industry, had to offer was marketing and distribution. And when their monopolized mode of distribution was suddenly outdated, and marketing was suddenly taken over by the music itself, it’s own viral distribution, communities like MySpace, and crowdsourced services like LastFM, the music industry was suddenly cut out of the loop, unable to provide value. And like the dinosaurs before them, their fate looked sealed.

Chapter 2 – The Innovators

But the file sharing systems, though hugely more efficient than the plastic circles, was not perfect. Billions of redundant copies of the information had to be kept on harddrives where you wanted to access the music, sharing the music meant sending over entire files, and meta-information was incongruent. Instead, thought a group of innovative individuals, one would like to take the route of the semantic web and have ONLY ONE instance of every file, with congruent meta data, stored in ONE place so that we could share it by only sending links pointing to the specific files. Then each of us could have access to all information and create a hugely efficient market for sifting out the very best. A more efficient model to be sure, and as we know, Darwinistic innovation always gravitates towards the efficient. The group of geniuses created and productified this new and superior mode of distribution. And they named it – Spotify.

Chapter 3 – The Cartel

And here, the music industry saw it’s chance. In one of the weekly meetings of The Cartel, the organisation they had set up together “to act for the common welfare of artists everywhere”, one executive stood up and said – “we can’t stop every single individual on the internet, but we can stop one company! We can threaten to destroy their new value, and claim part of it as ransom! We can regain our distribution monopoly by using their own value against them! But we have to act quickly! If more inventive companies emerge and compete, like Chilirec for instance, we will loose this last chance for survival of our kind. Sure, Chilirec will try to sue us, in fact, they already did, but that’s no match for our lawyers. We have our own people in the courts”.

One young assistant’s assistant, who had observed them in silence from the end of the table, mumbled quietly “but what value will we contribute? How will we make things more efficient? Will this not stifle competition and put an end to innovation?”? BE QUIET! Roared an executive at the end of the table. THEY NEED US! THEY WILL SUBMIT OR BE DESTROYED!

Said and done. The Cartel cheered and applauded. “If we all agree to let Spotify use our music, and let Chilirec use none, we can cut any deal we want. They have no chance to do this without us. We can use their new invention to return to the times of the distribution monopoly! We can be rich! Maybe we can even keep all new releases within Spotify and NEVER NEVER NEVER release the files to anyone else! Trying to hack Spotify and batch down these files will be easy enough to stop! We couldn’t control the data on the plastic circles, but we CAN control the data on the Spotify servers! We can even demand to own part of Spotify“! The room went silent as his words resonated through the spines of The Cartel directors like a chilling wind. Own the only source of music… on the planet.

Epilogue

When Apple realized what hit them it was too late. A year earlier, soon after The Cartel’s spirited meeting, Apple had given away their last line of defense and allowed the Spotify client on their iPhone. As the power of the iTunes store faded away, Apple tried in a last attempt to launch their version of Spotify, called iTunes Unlimited. The service was impeccably polished, integrated into their brand new Wild Cat operating system, and could play songs while texting on the iPhone, something that the Spotify client couldn’t. But what was the use of all this if they had no music. Or at least, just enough music not to be able to compete with Spotify. The number of Spotify exclusive songs and artists soared and left the rest of the industry in rubble. A lot of people said that “we should have seen this coming when Spotify restricted the iPhone app to paying premium users”. But now it was to late. The war was over. They won.

At least until the rebels on the far moon of MySpace started their indie music rebellion. But that is a whole other story.

In about an hour we will know the verdict in the Pirate Bay-trials. Let’s hope that people are being smart about this. Because a guilty verdict would not be good for anyone. Especially not for art and artists.

A guilty verdict would do little to boost sales. I believe we’ll see the opposite result. Darknets and stealth services (like Pirate Bay’s own would evolve quickly. Innovation incentives in the legal realm would be smaller. We would do little but slowing down inevitable change. From a wider perspective, it is just not intelligent.

If they are found not guilty however, it will be considered a future oriented statement. One that would benefit artists, culture, our country, and eventually the world. The music industry will have to come up with something better and more useful than Pirate Bay, and to be honest, they already have. Though Spotify would perhaps need some healthy competition. Spotify is just one small step, but it is a step in the right direction. This type of evolution is where we are going. A guilty verdict would just make us look dumb. Especially in the history books.

From the angle of the artist, nobody has put it better than Paulo Coelho:
“I didn’t start writing to get rich, I started writing to get read”.

I‘ve written quite a bit about the Pirate Bay trials and how the music industry is undermining itself and its own business. As of tomorrow we have a new law in Sweden, the IPRED-law, allowing copyright holders to go after downloading youngsters. Any such attempt is of course entirely in vain. I’ve written about it here, and you can see this concept being popularized in recent articles here, here, here, here, or any of these. And these examples are only from 1 Swedish, very large newspaper.

Anyway – just in time for this new law, Viasat presents a study by Sifo showing that most people are sceptical to this new law. Not only that, Viasat, who are themselves “victims of piracy” state that they are NOT going to utilize this law AT ALL.

Now, this law is suddenly useful, though perhaps not in the way intended by the record labels. A brand like Viasat opposing the law may give them a nice position, branding them as future- and customer oriented.

Smart move.

I‘m not so sure record labels have a role anymore though. Artists need production, distribution and marketing. Production is cheap and easy today. Perhaps this “new production” will change the sound in some direction, but just like there is a sound of the 70′s for instance, this will be the sound of today. Distribution will soon be self service, and we’ll probably see marketing agencies specialized in music pretty soon. Come to think of it, that is probably what the labels have to become in order to survive.

A few days after the fact I read this article on Realtid.se. The contents of the article are nothing jaw dropping. The comments on the article however, reflect the fact that so much of this discussion is taking place well outside the realm of relevance. People are talking about whether or not artists should be able to be artists, something that would require them to get paid for their work. Fair enough. But it is utterly irrelevant. Art will not dissappear. Neither will the internet. I will not waste energy on this discussion. Like most things, it will evolve Darwinistically.

To be productive we have to discuss value. The business model of charging for copies is obsolete. Some copies, such as physical books, have a certain value and will prevail. CDs are just a hassle. So are digital self hosted files really. So where can we add value? Here are some examples:

1. Hosting. Hosting music and syncing it between players is a hassle for the consumer. Especially if you have to authorize the player (In which case the stolen product is actually superior to the purchased one. Go figure).

2. Shareability. An effect of sharing a central database of music is that sharing music only requires sharing a tiny link. The evolution of sharing services is still somewhere around the stone age.

3. Upping the S/N-Ratio. There is just so much music! Finding the stuff you love could easily be a full time job. In my engineering days we talked about upping the signal to noice ratio. Last FM and Genious has scraped the surface of this field, but here you can create real value. And again, a centralized music database makes this much more effective.

4. Augmented Intelligence. Yes, Jan Guillou, I know you’re upset about your audiobooks and that I’ve been focusing on music. But here is an idea for audiobooks as well: If a centralized service keeps track of what I’ve “read” of what audiobook it can help me mine this data (since audiobooks are also available in text form) and help me draw conclusions that I would perhaps not otherwise have seen. I’ve personally co-developed a service doing knowledge clustering for the television industry. We could just as well do it with this data. Suddenly the person using this service is smarter than the person downloading on Pirate Bay. Again – this is real value. If anyone out there would like to develop this service, give me a call. I’ve made quite a bit of progress here already.

The current discussion about Pirate Bay is a joke. We will laugh at it ten years from now. If that.

I really think that the Pirate Bay trials are a big waste of money. Possibly worse. What is the music industry hoping to achieve? Will people start buying records again? Buying DRM-sabotaged (yes, that is what DRM is) digital files? Hosting them on their own hard drives? It’s the worst of two worlds.

In the unlikely event of a Pirate Bay defeat, things will just move underground. Technically, this is just a matter of time (not so much time). All of a sudden we’ll have a whole movement (huge because everybody loves music) creating great technology for anyone wanting to avoid detection, including terrorists and criminals. Stealth file sharing technology development will explode. In the long term not a smart move for our democratic world.

Instead there should be focus on development of the music industry. If the commercial product is better than the stolen one there is a real value that people will be willing to pay for. I think this is the case with Spotify for example. With Spotify I don’t have to host and structure a huge music library and sharing music is suddenly a breeze. That is real value.

Read more about the trials (in Swedish) here, here, here, and here.

Yesterday Spotify announced that they are removing songs from their database, and imposing country restrictions on others. Again, we see the record labels showing off their power. But it’s really a dangerous game to play.

As I’ve said before, both in lectures and on this blog, the only way to properly fight piracy is to provide a BETTER service than the illegal one. And this is exactly what Spotify has been so successful in achieving. With Spotify you don’t have to host huge amounts of data yourself, and you have a shared library with your friends so that you only have to share links.

But there are potential weaknesses in Spotify. One important weakness is if the database of music is too limited compared to pirated alternatives. Then piracy will start gaining momentum again.

Thus, seeing the labels forcing Spotify into actions like the ones of yesterday is alarming. Are they aware of the long term risks of taking action in this direction, or are they blinded by short term greed?

If I could do one thing, it would be to force-feed this speech to people in the music business. And this, mind you, is from 2005.

Last Thursday Identity Works invited former Harvard professor, and current Konstfack professor in Interdisciplinary Studies, Ronald Jones, to the agency to talk about creative work across disciplines. The talk was just jam packed with interesting stuff. We probably all see it as obvious that interdisciplinary projects run a much higher risk of failure, but did you know that almost NO breakthrough innovation happens in monodisciplinary projects?

That means that we need to work across disciplines to really achieve disruptive results. And when we do, we need to put major effort into handling risk. We also need to embrace failure and learn from our experiences. We need to have a learning culture rather than a performance culture.

The 9/11-commission concluded that “…don’t think we had the imagination to envisage such an attack”. But perhaps what was lacking, and that led to a lack of imagination, was interdisciplinary skills, both between the different American institutions and between cultures. When comparing the 9/11 attacks to the rise of companies like Linux or Napster you see similarities. Microsoft and the music industry didn’t see them coming either. I guess it’s a Trojan Horse phenomenon.

Fortunately imagination isn’t just talent, knowledge or luck. Institutionalizing innovation is a very real possibility. Sometimes it’s as easy as shifting perspectives, like when Black & Decker stopped viewing their products as power drills, and started viewing them as holes.

Professor Jones also had plenty of other perspectives and examples in store, from Bill Gates to one of my favorite visionaries Daniel H. Pink. If you ever get a chance to attend one of Professor Jones’ seminars, you should really take advantage of it. Inspiring and fun, and not least a source of hope for our business.