July 26, 2011

Neither homeless nor hopeless, the Guide Michelin has only moved its headquarter from Paris proper to one of its better suburb. Yet, according to James Bowell (*), it has lost its direction, which for an institution dedicated to helping travelers is never a good sign.

Our readers are familiar with the underlying issue. In the Information Age, good recommenders are unable to make an honest profit out of their services despite being indispensible to society for helping it sift its oversupply of suspect data. As "Peter Harden of the eponymous UK restaurant guide" readily admits, "if you look at all of the brands that have authority offline, none of us has really discovered a brilliant online business model, because nothing really works with all that free stuff out there".

A recommendation indeed is but a piece of information. Once given, it inevitably becomes freely available to all. And while some shared secrets take longer to transpire, those who publish their valuable recommendations either in book form or online must know pirates take it as an invitation to plunder and repurpose as many digital copies as demand will require.

When one is so ruthlessly victimized, the temptation as always is to forsake one's own moral standards, join the pirates and help society descend in a spiral of self-justifying anarchy. In the instance, the surest path to profit from one's recommendations is to overlook conflicts of interest.

Why not charge those whom one recommends as practiced by the credit ratings agencies? Could perhaps this throw doubt on "the independence and autonomy of how [the Guide Michelin] select restaurants"? "Claire Dorland-Clauzel, the Michelin executive in charge of international branding" clearly believes it to be the case and declares "we will not compromise this... People think we are honest and they trust that".

Charging instead those to whom one make recommendations would eliminate the conflict of interest. Unfortunately this model mainly applies to dirt digging, not praise heaping. For, when one buys negative information, either one is willing to pay the premium prices charged by a Pellicano or a Mulcaire for one time explosive secrets or one finds safer to keep it confidential, for example as one makes hiring decisions.

Not so worried about piracy decreasing their sales, dirt diggers may even decide to play it safe themselves. As Max Drucker, chief executive of Social Intelligence, told Jennifer Preston, "all we assemble is what is publicly available on the Internet today" (**). I believe him. Marc S. Rotenberg, president of the Electronic Privacy Information Center, points out "people do not always realize that comments or content they generate are publicly available". In a less politically correct perspective, if the law sees no robbery, how could you charge a company for fencing information?

If one cannot charge for advice, why not eliminate one's costs? A popular business model today is to base one's recommendations on the popular vote of vocal users, the happy slaves behind the Facebook formula, rather than a "secretive network of restaurant inspectors" who daily dine at one's expense. Wanting to preserve both its users' trust and its expert authority, the Guide Michelin thus faces the publishers' dilemma. The very source of their added value, be they editors, journalists or inspectors, has become a seemingly unaffordable luxury.

Any solution however must acknowledge the two risks made unavoidable by a centralized recommender's success.

First, no matter how objective, recommendations by too powerful a source are deadly for the ability to do business is proportional to one's reputation. Positive recommendations provide a virtuous uplift but negative ones create a downdraft which soon turns into a self-fulfilling fall to earth.

Read Aline Van Duyn and Richard Milne on the big three rating agencies whose "influence [...] is once again causing furious debate around the world" (***). Some have proposed "an increase, from 12 hours to three days, in the period of notice an agency must give a government before releasing its rating to the market". Rating agencies may call this an ugly skew, but would diners object to give extra warning to stressed chefs?

Second, no matter how justified, the resulting power breeds conflicts of interest. Making a recommendation taints any related activity. Recall the ethical travails of Morgan Stanley and Goldman Sachs. Should Google recommend its own content when it refuses to make its algorithm public? While selling tires is not an issue, it does not free the Guide Michelin from making its process as transparent as possible, with a possibility of redress.

One way to avoid conflicts of interest is to establish a clear self-interest. When Facebook offers "media companies [...] to give up 30 percent of their sales for [the promise of new customers]", as April Dembosky reports (****), it bills itself as an iTunes. Salesmen's recommendations may be interested or, in Steve Jobs' case, quirky, they are still recommendations. The best stores are keen to stock premium products only. What they cannot promise is to stock all of them, as suppliers may refuse to be listed.

Accordingly, the Guide Michelin could take a 30% cut on all restaurant reservations made through its store and maintains its integrity. With its scale, who would believe it so dumb as to list unfit restaurants for the small marginal revenue they would bring when its own reputation is on the line?

The downside may be that too many fine restaurants would be keen to avoid the Guide's cut. But the Guide could signal all the tables available within reasonable reach from a traveller's real time location, from ten minutes for one star up to one hour for three stars. With the appropriate technology, the Michelin Guide could deliver this service in a total respect of its users' privacy. Would restaurants dismiss the increase in trade?

As it requires the Guide to actively court restaurants rather than the other way around, this however may prove too much of a change. Another possibility is to remember information is like produce. Its value resides in its freshness. Hard earned, a serious recommendation will not wilt in a day, but a recommender is free to garnish its offer with more fleeting fare for which subscribers will be more than willing to pay.

When Larousse dictionaries have a one year shelf life (1), can hourly information on restaurants be far? Broadway tourists prefer the marquee name to perform on stage. Why not tell if the chef is in the kitchen rather than at another outpost of his far flung operation? When the SNCF fills its train according to yield management, why not offer restaurants a free reservation service which would let them list available tables at variable prices?

And if all else fail, why not fire up a phoenix? Quit the publishing business but keep the ranking in place, in fact promote and demote all year long and let the chefs know where they stand. How would the public know? One expects the restaurants to advertise their Michelin stars. How could the public be sure? There we go. Set up an online verification service to enable suspicious travellers to verify the real status of any restaurant for a fee.

Restaurants may indeed be tempted to extend the truth, say by hanging on a lost star for a few more months. Such a service being but a variant of dirt digging, do not forget to crown particularly bad chefs with one to three dunce caps, "give a wide berth" mirroring "worth a detour".

My advice may be difficult to stomach. For a director with the gut to follow it, I recommend Rebekah Brooks. She knows how to dig and dish dirt.

Philippe Coueignoux

• (*) ......... Falling stars, by James Bowell (Financial Times) - July 16, 2011
• (**) ....... Social Media History Becomes a New Job Hurdle, by Jennifer Preston (New York Times) - July 21, 2011
• (***) ..... Arbiters under fire, by Aline Van Duyn and Richard Milne (Financial Times) - July 25, 2011
• (****) ... Facebook eyes digital stream of revenue with Credits system, by April Dembosky (Financial Times) - July 20, 2011
• (1) see Le Petit Larousse in the French wikipedia