ACT Reading Dec. 2016 74H - Passage II

Questions 11-20 are based on the following passage.


SOCIAL SCIENCE: This passage is adapted from the article "Management Secrets of the Grateful Dead" by Joshua Green (©2010 by The Atlantic Monthly Group).



Since the 1970s, the Grateful Dead has invited

academic examination. Musicologists showed interest,

although the band's sprawling repertoire and tendency

to improvise posed a significant challenge. Engineers
5 studied the band's sophisticated sound system, radical

at the time but widely emulated today. Other disciplines

have also found relevant elements of the band's history

and cultural impact to be worth examining.

Oddly enough, the Dead's influence on the busi-
10 ness world may turn out to be a significant part of its

legacy. Without intending to-while intending, in fact,

to do just the opposite-the band pioneered ideas and

practices that were subsequently embraced by corporate

America. One was to focus intensely on its most loyal
15 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 distrib­-

uted through its own mail-order house. If you lived in
20 New York and wanted to see a show in Seattle, you

didn't have to travel there to get tickets-and 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
25 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 1970s. Only in the

1980s, faced with competition from Japan, did Ameri-
30 can 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
35 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 vlo-
40 lated 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 deci­-

sion was not entirely selfless: it reflected a shrewd
45 assessment that tape sharing would widen their audi­-

ence, 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.

50 It's precisely this flexibility that Barnes believes

holds the greatest lesson for business-he 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 becoming the blue-
55 print 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.

Much of the talk about "Internet business models"
60 presupposes that they are blindingly new and different.

But the connection between the Internet and the Dead's

business model was made years ago by the band's lyri­-

cist, John Perry Barlow, who became an Internet guru.

In 1994, Barlow posited that in the information econ-
65 omy, "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 then-the important correlation is

the one between familiarity and value, not scarcity and
70 value. Adam Smith taught that the scarcer you make

something, the more valuable it becomes. In the physi­-

cal world, that works beautifully. But we couldn't regu­-

late [taping at] our shows, and you can't online. The

Internet doesn't behave that way. But here's the thing
75 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,
80 Barnes says, strategic improvisation is more important

than ever. "If you 're going to survive an 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
85 Dead or some similar title is flying off the shelves of

airport bookstores everywhere.

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Question 11 One main idea of the passage is that the Grateful Dead