As a result, the crack of the  10  Hardgrave et al (2006). 11  Cohen (2002). 12  Akerlof (1970). 13  eBay (2012). 14  Grean and Shaw (2002). 15  Lee et al (1997). BIS central bankers’ speeches  5  bull-whip has been nullified along the product supply chain, reducing system-wide instabilities. For Wal-Mart, common standards have revolutionised ex-ante risk management, allowing real-time aggregation and visibility of risks and opportunities along the supply chain.16 For other industries, a common language has also transformed ex-post risk containment. Take the pharmaceuticals industry. Building on existing GS1 standards, individual packets of drugs can now be assigned a unique serial number by the manufacturer, along with information on the batch from which it was produced and other relevant attributes. These data can be shared in a common pool with retailers and distributors. As at Wal-Mart, the packet’s location is logged at every stage of the supply chain from factory to pharmacy. This central supply chain information system has transformed drug risk management in a crisis. In the past, before drug packets had unique identifiers, defective products would have resulted in a mass recall of all packets of a certain drug type. This often caused massive disruption to the manufacturer and generated panic, bordering on hysteria, among consumers. The bullwhip effect was powerful and destabilising. Today, those instabilities have been calmed courtesy of common standards and improved technology.
Digital publishing and distribution has fundamentally changed this market. Both the books and the shelves are now electronic. Authors can now format books for e-readers in a couple of hours. Sales platforms like Amazon Kindle Direct give access to a worldwide audience with essentially no upfront costs. Supply can close to perfectly match demand as the marginal cost of creating and delivering an eBook is effectively zero. This digital revolution has caused barriers to entry to plummet while simultaneously raising returns to author entry: they now receive as much as 85% of the royalties from an eBook, compared to as little as 10% from a physical book. Previously unpublished authors now sell millions of books. The incumbent middle men – book publishers, distributors and retailers – have found their lunch devoured in one sitting. In effect, they have been disintermediated by technology and (in a delicious irony) a common language. This pattern has been replicated in the music industry. For half a century or more, the music supply chain was unchanged. New acts were discovered by large record labels who distributed physical goods (vinyl, tapes or CDs) to retailers for sale to the public. Over the past decade, the costs of copying and distributing music have fallen to close to zero. As in publishing, barriers to new artist entry have plummeted. The middle-men – music production companies and distributors – have seen their piece of the pie eaten. And as a direct result of this industrial transformation, the pie itself appears to have grown.