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Significant Objects Becomes A Book... More Infinite Goods Creating New Scarcities

from the cool dept

Last year, we wrote about a fascinating "art" project, called "Significant Objects," that involved a bunch of writers buying up random cheap/worthless trinkets, but then listing them on eBay along with a creative (fictional) story about the object. The "story" was given away for free, but the object cost money. What those involved in the project quickly found was that these worthless trinkets were suddenly selling for a lot more than their nominal "price." It was a perfect example of how an infinite good (the story), when properly attached to a scarce good (the trinket), can make that scarce good much more valuable. This is a point that many have trouble grasping. They think, when we discuss the economics of infinite and scarce goods, that the price on scarce goods always remains the same, and never seem to take into account how a connected infinite good can greatly raise the value and the price of a scarce good. A hit song (infinite) heard by millions increases the price of a concert tickets (scarce). A brilliant blog post (infinite) can increase the price of a consultant (scarce) who wrote it. A sterling reputation (infinite) for an automobile company can increase the price of the cars (scarce) they sell. It goes on and on and on.

The Significant Objects experiment was just a neat "pure" example of this in action, clearly showing how objects that otherwise would have been valued quite low by most potential buyers, could gain in value when an infinite element (a good story) was attached.

It's cool to see that those behind the Significant Objects projects are still trying to do more with the concept. The auctions apparently are still going on, but now they're trying something different as well. They're taking those stories and compiling them into a book (scarce). In fact, the story behind the book (infinite) makes the physical book more valuable as well. To make it even more "valuable," they've brought on some top artists to illustrate the stories -- so even if you read them for free online, there's now more value in buying the physical book to have the physical artwork as well.


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  1.  
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    Suzanne Lainson (profile), Jun 17th, 2010 @ 6:50pm

    Unique story/common object

    My take on it is that unique stories enhance mass produced objects. So I view the stories as the one-of-a-kind objects.

     

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    Anonymous Coward, Jun 17th, 2010 @ 6:59pm

    This will never work for really uncreative people and isn't the purpose of copyright to protect really uncreative people and their uncreative works?

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 7:11pm

    In recognition of a great storytelling merchant:

    1903 Badger Shaving Brush > New - OM No. 78 | The J. Peterman Company: "I was browsing in a Paris antique shop one winter afternoon when a fitted leather train case caught my eye.

    It contained silver-handled brushes, boot hooks, a straight razor, several silver-stoppered glass bottles…

    One bottle was different. Encased in yew-wood, with a handwritten date: 1903...."

     

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    ChurchHatesTucker (profile), Jun 17th, 2010 @ 7:15pm

    Re: Unique story/common object

    What will really bake your noodle is when you realize that the stories are easily copyable.

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 7:38pm

    Re: Re: Unique story/common object

    What will really bake your noodle is when you realize that the stories are easily copyable.

    Of course they are copyable. They aren't even true, and presumably everyone knows it. But people play along. So I guess everyone who buys a Significant Object is actually paying for the opportunity to participate in the game and they get to say they paid the most money to "win" the prize.

    Maybe what we should be exploring here is game psychology as a marketing vehicle.

     

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    Anonymous Coward, Jun 17th, 2010 @ 8:31pm

    "They're taking those stories and compiling them into a book (scarce)." - it is scarce until someone digitizes it and gives it away online for free. information wants to be free and infinite, so this stuff isnt scarce. are you suggesting that books in general are scarce? isnt that like saying shiny plastic discs are scarce?

     

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    Anonymous Coward, Jun 17th, 2010 @ 8:44pm

    Re:

    Yes, physical items are scarce.

     

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    Nick Coghlan (profile), Jun 17th, 2010 @ 8:50pm

    Re:

    Books as collector's items are scarce in a way that a normal mass market paperback (or even hardcover) book isn't. When the book is a work of art in its own right, it differs from its digital counterpart in much the same way that a sculpture differs from a picture of that sculpture.

    That said, even ordinary books can provide decoration and self-expression in a home (the mere fact of *having* a lot of books says something about your interests, and visitors can browse book shelves to get an idea of your tastes or look for recommendations for reading material in a way they won't browse your computer).

    I've mentioned a few times in the past that Howard Tayler's collections of Schlock Mercenary stories are like that. The entire comic archive is available online for free, so Tayler makes sure that the books are a pleasure to look at and read, and then releases box set containers every few books as well.

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 8:53pm

    Re: Re:

    Yes, physical items are scarce.

    I am wondering if we will see more of a shift back to keeping creations offline, with people trying not to digitize anything. If you really want to make it exclusive, keep it out of the hands of the masses.

     

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    Tek'a R (profile), Jun 17th, 2010 @ 8:58pm

    Re:

    a book is a relatively valuable product in itself. Home binding and even industrial PrintOnDemand processes often fall short of the finished product from a professional printer.

    Compared to CDs/DVDs, once you burn your media, via the number of cheap and effective tools on the marketplace, the end result is often as good if not better (better by content, pbetter by removing ads, etc) then what the original publisher stamped out.

    a good book is scarce for delivering the content in a particular way at a particular quality. a shiny plastic disc that anyone could replace or improve is not scarce, it is at best a wrapper for the content and at worse a damaging interference (rootkits, self-installing anything, etc)

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 9:04pm

    Our own stories

    Of course, I'm a big believer in everyone making their own art for themselves. So one way to promote scarcity is to encourage everyone to make their own "treasures" so that each object comes with its own true story and doesn't have a duplicate anywhere else.

    All the stuff your kids make at school is like that.

    So instead of people spending money on knickknacks on ebay that come with stories that someone else made up, we can encourage everyone to value all the stuff around them that have real personal meaning. Go to the beach with your kids. Have them find shells. Put the shells in a special box. Have the family write a story about the day they found those shells.

    Wouldn't that be nice?

     

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    Nick Coghlan (profile), Jun 17th, 2010 @ 9:05pm

    Re: Re: Re:

    For non-functional items (i.e. stories, music, videos) I suspect what we'll see along those lines is for physical releases to focus more on high quality, high margin, comparatively low volume products, with the high volume low-or-no margin products migrating to the digital realm.

    Computer games will likely be the longest standing holdouts, due to the structure of the console gaming market, cracked games being such a notorious vector for infection of computers with viruses and the increased linkage of games with online services that provide DRM levels of control without actively pissing off customers.

     

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    Modplan (profile), Jun 17th, 2010 @ 9:39pm

    Re:

    How are physical book and CD's not scarce? It's the content that's easily reproducible, which makes it non-scarce, not the medium it's printed on. This was explicitly mentioned in the arti...

    Oh wait, it's TAM.

     

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    ChurchHatesTucker (profile), Jun 17th, 2010 @ 10:08pm

    Re: Re: Re: Unique story/common object

    Exactly. If only someone could come up with a pseudo-matamatical statement of such behaviour....

     

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    Darryl, Jun 17th, 2010 @ 10:10pm

    Infinite wisdom - finite knowledge - confused 'consultants'

    Mike on this one, I really think you have got it completely wrong.

    Seems you do not really understand what infinate and scarce means, and you seem somewhat confused about the economics of supply and demand.


    "It was a perfect example of how an infinite good (the story), when properly attached to a scarce good (the trinket), can make that scarce good much more valuable. "

    The story in FINITE, its even unique, error no.1
    Why is a story or a hit song finite, because there are not an infinite number of them,

    **** THE CONTENT IS FINITE *** the media (book, cd, dvd,radio, TV) is infinate.

    So a hit song is most certainly not an infinite good, it is very very finite.
    Does an infinite number of hit songs exist, NO. Can an infinite number of copies of a UNIQUE and finite song exist, YES.

    Supply, demand and scarcity.

    These are concepts you seem to try to twist, or confuse as well.

    _____________________________

    "A sterling reputation (infinite) for an automobile company can increase the price of the cars (scarce) they sell. It goes on and on and on."

    How can a reputation be infinite ? you can have a good reputation, a great reputation, a bad reputation, but can you tell me what an infinite reputation is ?

    Then tell me, why the car company, cannot make enough cars to meet demand ?
    Your saying, if demand is too high the company cannot increase production to meet that demand?

    Why not ?


    The econimics of supply and demand, is all about ** consumer demand **, and producer supply.

    You can have an oversupply of a product, (a glut) but if there is no demand for that product then regardless of the price changes it will not sell. (no demand, plenty of supply).

    so making something scarce does not necessarity increase or decrease its value.

    Where demand exceeds supply, on FINITE goods, then price will increase. That model is based on commodities, such as fruit, food, vegies, pork bellies, juice and so on.

    On limited supply commodities, it is possible to have scarcities of supply, (farms might fail, or yeilds low for that year), as the demand (consumber demand) is still there, the price of the product will increase, ** TO a point **, after that point demand will drop off as people are not willing to pay that much for their fruit.

    But supply and demand of scarce resources does not really apply to manufacturing industries.
    Most companies, if demand increases are capable of increasing production to meet demand.

    Car companies, publishers all business except a small group that have limited resources (food, comodities) can have supply and demand issues from season to season, and are able to price their product accordingly.

    Car company, just has to make more cars to meet demand, and they would be at fault if they did not do that basic business tactic.
    Meeting market demand.

    These people "giving away the story for free, making you pay for a worthless trinket" ok, so if I asked them for just the book for zero money, would they allow that?

    Is that not just a form of tieing ?

    The day I can go to my music shop and choose from an infinite number of **different** hit songs, I will admit you are right and I am wrong. But I cant see that happening for awile.

    Media is infinite, content is finite.

    If a consultant writes a brillant blog, how is that not unique, and how is it infinite ?

    Im sure that there is only ONE brilliant blog, but the media which it is on (the internet) approaches infinite.

     

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    Anonymous Coward, Jun 17th, 2010 @ 10:24pm

    Re: Infinite wisdom - finite knowledge - confused 'consultants'

    mike often gets confused between the product (song, story, whatever) and the medium on which it is delivered. he focuses narrowly on a small part of the process (delivery) and forgets the unique creation. i think he does this purposely to devalue the often unique creation that is a story, a movie, or a song.

    worse, he contradicts himself by suggesting that putting his apparently infinite story on paper in a book suddenly makes in scarce. changing the medium doesnt make it any more or less scarce or unique, for two reasons: the underlying uniqueness of the original story is never changed, and any scarcity of a book (or other physical product) is an artificial one, created by limiting the copies rather than the limits of our ability to reproduce.

    in other words, if a song is never put on a torrent site, only sold on, say, vinyl, then it is in his world very scarce. yet, as soon as it is digitized, it is infinite. but the original song is still incredibly unique and scarce. most artist are lucky to release 100 songs in a career. that makes each one incredibly scarce.

    i think that mike is very myopic when he looks into things. he focuses very closely on the parts he wants to see, and forgets to step back to see the full picture and all the implications.

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 10:24pm

    Re: Infinite wisdom - finite knowledge - confused 'consultants'

    That's been my take on this example as well.

    The reason it works is that the person buying the object believes or at least pretends to believe that it is a unique story attached to this particular object. You can repeat the story multiple times, but for it to be useful, it can only be attached to one object, so in essence it is inseparable from that object. It is one story attached to one object, no matter how many times you cite the story.

    To use a music example, let's say you go to a performance where the artist performs just for you and you pay a high price for that. You can tell people about the event many times, but the event was a one time thing involving you and the artist.

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 10:38pm

    Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Another issue you have to factor in when promoting the concept of "infinite" is that to encourage the entire world to download your content for free will turn it into a mass-marketed product.

    That works for some items, and works against others. If you want to cultivate an elite audience, you don't want to promote to everyone. One of the best ways to cultivate an image of a rare product is to display it to people by invitation only. Imagine telling someone, "Only you and five other people know about this."

    When a guy makes a pitch to a woman, she definitely doesn't want to think she's hearing the same story that 100s of other women have heard. She wants to think he's sharing something with her alone.

    One of the coolest clubs I went to in New York didn't ever advertise. To find it, you had to know someone who could take you there. It was hidden and you'd never find it on your own.

     

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    Anonymous Coward, Jun 17th, 2010 @ 10:41pm

    Re: Re: Re: Re:

    Funny, I had to download a cracked .exe to run a game I bought because the DRM was preventing me from using my purchase. No viruses, just a product I paid for that now works properly.

    (maybe you mean entire games and not just .exe files?)

    I agree computer games will be the holdouts, though. Personally, I don't trust digital downloads and the strings attached and prefer physical media, so that's okay with me. The only downloaded games I'll buy are vetted to not have burdensome or hateful DRM (goes for physical media games too, in fact). I miss the days when I could buy whatever, smack it in the drive and get on with my life. Sigh.

    I also agree that scarce, tactile goods will become more precious, and therefore print will never die. :)

     

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    ChrisB, Jun 17th, 2010 @ 10:47pm

    Re: Infinite wisdom - finite knowledge - confused 'consultants'

    **I think you are confusing your Economics and your Art or Feelings.

    Scarcity has to do with Limited Resources, and only limited resources.

    Scarcity can only be determined in so much as the medium a product is introduced into the market with. So, if a *unique* story is digitally available it is an infinite good, because the ability exists to create an infinite number of copies of said story. If the *unique* story is introduced into the market printed on paper, it is a Scarce Good, as there are a finite number of pieces of paper available to print the story on.

    Scarce goods have nothing to do with Uniqueness, or Quality, or Color, or Content. Scarcity has everything to do with the ability to reproduce the good. These qualifiers can add or detract from the Value of a product but they do not determine if there are limited resources to reproduce the product.

     

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    MadderMak (profile), Jun 17th, 2010 @ 11:04pm

    Re:

    I think you missed the point. The physical bound book is the scarcity -not the content. By their very nature physical objects will be a scarce good (until some clever boffin invents the duplicator).

    People are willing to pay for a scarcity... they could get the content for free, since content by its very nature is an infinite good... actually so are ideas.

    So it does not matter if the content is scanned copied etc... there is still a market demand to be satisfied.. and if they wish to professionally print and bind the book - well more power to them - it's probably going to cost more than the purchase would (in both effort & money).

    Now i just need an idea for a duplicator :)

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 11:08pm

    Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    If the *unique* story is introduced into the market printed on paper, it is a Scarce Good, as there are a finite number of pieces of paper available to print the story on.

    I can point you to some discussions about "post-scarcity."

    Not everyone agrees that finite = scarcity.

    There isn't a book of economic laws handed down by God that everyone agrees upon.

    Scarcity doesn't have a lot of meaning when there is excess production and you end up dumping those goods because there is no demand for them.

     

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    MadderMak (profile), Jun 17th, 2010 @ 11:16pm

    Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Perhaps it is a question of interpretation (semantically speaking). In this context I interpret Mike's terms of reference as follows:

    scarce = measurable/significant cost to produce/duplicate 1 item
    infinite = no measurable/significant cost to produce/duplicate 1 item

    Seems to me if using that interpretation his points are valid.

     

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    Mike Masnick (profile), Jun 17th, 2010 @ 11:34pm

    Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Mike on this one, I really think you have got it completely wrong.


    Hi Darryl. Always nice to hear from you.

    Seems you do not really understand what infinate and scarce means, and you seem somewhat confused about the economics of supply and demand.

    I don't believe so, but let's see what you've got to say...

    The story in FINITE, its even unique, error no.1

    No, I'm sorry Darryl, but I'm afraid the confusion is on your part. An infinite good is one that has no marginal cost to produce a copy. The stories are digital and are infinitely reproduceable at zero marginal cost, so they are "infinite goods." You are correct that each story is *unique* in the market for "stories" but we're talking about the supply of this particular story. And it is infinite. That's not arguable. It's a fact.

    **** THE CONTENT IS FINITE *** the media (book, cd, dvd,radio, TV) is infinate.

    I'm afraid you have that backwards. Tangible goods are scarcities: i.e., if you take one from a pile, there is one less. The content is infinite: I.e., if you take one from a pile, there's now one more in the world.

    Does an infinite number of hit songs exist, NO. Can an infinite number of copies of a UNIQUE and finite song exist, YES.

    Right, and we are discussing the market for those copies. So I'm glad to see that you are now admitting that they are infinite, despite denying it earlier. Weird, but ok.

    Supply, demand and scarcity.
    These are concepts you seem to try to twist, or confuse as well.


    No, I got it exactly right. You do seem a bit confused in that you first say the song is not infinite, but then later admit that it is.

    How can a reputation be infinite ? you can have a good reputation, a great reputation, a bad reputation, but can you tell me what an infinite reputation is ?

    It means it is not diminished as you learn about it.

    Then tell me, why the car company, cannot make enough cars to meet demand ?
    Your saying, if demand is too high the company cannot increase production to meet that demand?


    I'm not sure what you're asking here or how it's relevant. Car companies can ramp up production if they need to, though it obviously depends on the fixed and marginal costs of doing so. But that's somewhat irrelevant here.

    You can have an oversupply of a product, (a glut) but if there is no demand for that product then regardless of the price changes it will not sell. (no demand, plenty of supply).

    Well, classical economics from Adam Smith through Alfred Marshall and on to pretty much all modern economists would say that if you have abundance, such that quantity supplied is greater than quantity demanded (please note: quantity supplied and "supply" are different, but related. "supply" means the curve. "quantity" means the point on the curve) then the price will continue to fall until that imbalance is rectified, and that can drive a price all the way to zero (which is, in fact, the situation we are talking about today).

    You claim that price doesn't have any impact, but I'm curious if you can point to a single economist who shares that view. Economists disagree on a lot, but I've yet to find one who does not believe that price changes have no impact on quantity demanded.

    so making something scarce does not necessarity increase or decrease its value.


    Nor has anyone said it did. I'm not sure where this charge comes from, because I certainly never said that making something scarce increases or decreases its value. And, in general, you can't "make" something into a scarce good. It either is, or it isn't. You can set up an artificial scarcity, which almost certainly decreases the value, but I don't think that's what you're talking about here.

    Where demand exceeds supply, on FINITE goods, then price will increase. That model is based on commodities, such as fruit, food, vegies, pork bellies, juice and so on.

    Just to clarify, so that we're both talking in actual economic language, I believe you mean, where *quantity demanded* exceeds *quantity supplied* on ANY good, then price will tend to increase -- which is the same point I was making above, that is well established economics from Adam Smith forward.

    On limited supply commodities, it is possible to have scarcities of supply, (farms might fail, or yeilds low for that year), as the demand (consumber demand) is still there, the price of the product will increase, ** TO a point **, after that point demand will drop off as people are not willing to pay that much for their fruit.

    Darryl, perhaps the problem is that we are using similar words in very, very different ways. When I am talking about scarcities, I am using the term in the economic sense, which has a clear definition: a good that if you take one, there is one less in the pile. That's it.

    You are talking about *shortages* above, not *scarcities*.

    Perhaps that is where your confusion lies?

    But supply and demand of scarce resources does not really apply to manufacturing industries.

    Your economics professor would like a word with you. The above statement would get you laughed out of any economics class in the world. The economics of supply and demand absolutely do apply in manufacturing industries. Seriously, find me a single economist who will say the law of supply and demand don't apply to manufacturing.

    I'll wait.

    Most companies, if demand increases are capable of increasing production to meet demand.

    Right. That's that's the *supply curve*. What you describe in this sentence is a recognition of the FACT that, yes, supply and demand do apply to manufacturing, despite your previous sentence.

    I don't mean to be rude, but I must ask if you have ever taken an economics class? It is not a problem if you have not: lots of people can teach themselves economics and be quite proficient at it. But your confusion on rather basic economic concepts is making this discussion difficult.

    Car companies, publishers all business except a small group that have limited resources (food, comodities) can have supply and demand issues from season to season, and are able to price their product accordingly.

    What you describe is the supply and demand curve, despite your denial that it works.

    I really don't know how to respond to that other than to say you appear to be contradicting yourself, in part, because you are unfamiliar with the terminology.

    These people "giving away the story for free, making you pay for a worthless trinket" ok, so if I asked them for just the book for zero money, would they allow that?

    The *book* (physical) is a scarce good. If you take one from the pile, there is one less in the pile. So, it does not make sense for them to give it away for free. The *stories* in the book, however, are infinite. They are what make the physical/scarce book more valuable -- such that it is worth paying for.

    Is that not just a form of tieing ?


    Yes. Usually it's called bundling, but you are correct. That's the point. You need to bundle the scarce and infinite goods.

    The day I can go to my music shop and choose from an infinite number of **different** hit songs, I will admit you are right and I am wrong. But I cant see that happening for awile.

    When you download a song, is there one less for others? No? Then this already is happening.

    However when you talk about an infinite number of "different" songs, you are changing the subject. We're not discussing the market for "songs". We're discussing the supply of "a song." Again, I believe this is where your confusion comes in.

    Media is infinite, content is finite.

    I don't think those words mean what you think they mean.

    If a consultant writes a brillant blog, how is that not unique, and how is it infinite ?


    The content may be unique, but it is also infinitely available. You saving a copy on your computer does not take away any copies from the rest of the world. In fact, in doing so, you have increased the number of copies in thew orld.

    Im sure that there is only ONE brilliant blog, but the media which it is on (the internet) approaches infinite.


    That makes no sense.

    Darryl, I'm afraid we're struggling to communicate here because you are using terms in ways that do not fit with how they are used in economics. Perhaps it would help if we clarified the language choices?

     

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    Mike Masnick (profile), Jun 17th, 2010 @ 11:36pm

    Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    scarce = measurable/significant cost to produce/duplicate 1 item
    infinite = no measurable/significant cost to produce/duplicate 1 item


    Exactly.

    Seems to me if using that interpretation his points are valid.


    Right. The issue is that the people like Suzanne and Darryl are trying to pretend I have said something I have not, by changing the commonly accepted economic definitions of the terms I am using.

     

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    Suzanne Lainson (profile), Jun 17th, 2010 @ 11:38pm

    Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    infinite = no measurable/significant cost to produce/duplicate 1 item

    From a marketing point of view, though, creating "infinite" goods does not necessarily enhance the salability of "finite" goods. High levels of visibility do not always go hand-in-hand, and in some cases can work against, creating demand for "finite" goods.

     

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    Anonymous Coward, Jun 17th, 2010 @ 11:40pm

    Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    but it gets back to myopic viewing of the situation.

    if a book takes a writer a year to write, and requires editors, reviewers, and a bunch of other people before the book hits the market, there is a cost up front.

    the myopic view is to ignore whatever it takes to get to the point of distribution, and look only at the cost of distribution (which is rarely zero).

    the method of distribution doesnt make something more or less "infinite", as mankind for the most part has the ability to reproduce almost any book, cd, or dvd to levels that would rival infinite numbers (more than total demand). further, while we have the ability to digitize them and sell them online, the costs related to selling something negates the good being infinite, even if an infinite number of copies can be produced, because in normal commerce it would never be free.

    as suzanne said, "Scarcity doesn't have a lot of meaning when there is excess production and you end up dumping those goods because there is no demand for them." - the type of scarcity that mike talks about in hard goods is artificial, man made, created not by some grand limitation, but only by someone saying "only make 100 of them". the true value isnt in the artificial scarcity, but rather in the actual value of the product itself. 20 years from now, few people will be trading collectible techdirt hoodies. hoodies in and of themselves are not rare or special, we can always make more (and even make exact replicas). the scarcity of those hoodies is entirely artificial in nature.

    "Seems to me if using that interpretation his points are valid." - basically, if you are willing to ignore reality and stand too close to see the big picture, they make sense. but standing too close to a anything can make you lose its true context and meaning.

     

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    Mike Masnick (profile), Jun 17th, 2010 @ 11:45pm

    Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    From a marketing point of view, though, creating "infinite" goods does not necessarily enhance the salability of "finite" goods.

    Really? Then you're doing it wrong. All scarce goods can have salability increased by infinite goods.

    High levels of visibility do not always go hand-in-hand, and in some cases can work against, creating demand for "finite" goods.

    I'm not sure what "visibility" has to do with anything? And, are you really claiming that demand would *decrease* when more people know about something? That's a... unique assertion. Please explain.

     

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    MadderMak (profile), Jun 18th, 2010 @ 12:01am

    Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    "the method of distribution doesnt make something more or less "infinite", as mankind for the most part has the ability to reproduce almost any book, cd, or dvd to levels that would rival infinite numbers (more than total demand)." .... no but the "cost" of distribution does.

    "further, while we have the ability to digitize them and sell them online, the costs related to selling something negates the good being infinite, even if an infinite number of copies can be produced, because in normal commerce it would never be free. "..... please xplain as this appears to make no sense to me? How do the costs rellated to selling negate a good being infinite... and in normal commerce it well could (and does) be free (as in beer) if the cost to produce it are zero (effectively). Did you just perform a sleight of hand with what we were discussing there?

    "as suzanne said, "Scarcity doesn't have a lot of meaning when there is excess production and you end up dumping those goods because there is no demand for them." - the type of scarcity that mike talks about in hard goods is artificial, man made, created not by some grand limitation, but only by someone saying "only make 100 of them". the true value isnt in the artificial scarcity, but rather in the actual value of the product itself. 20 years from now, few people will be trading collectible techdirt hoodies. hoodies in and of themselves are not rare or special, we can always make more (and even make exact replicas). the scarcity of those hoodies is entirely artificial in nature."...

    okay got several problems with this one. Where did value come from - we were discussing cost? cost != value. I agree hoddies are not rare or special... but the "infinte" good of owning an original released in 2010 Techdirt hoodie could be quite valueable - because of the background. The hoddies "value" as you are using it is related to its scarcity... if you make a copy surely you "valued" it enough do outweigh the cost of doing so?

    I return to my original point cost != value ! = scarcity.
    We would appear to have semantic shenannigans in this thread :) (and I may be equally at fault since no economics at all)

     

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  30.  
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    Anonymous Coward, Jun 18th, 2010 @ 12:03am

    The case "Green v. LifeVest Publishing, Inc. et al" #1:2009cv00925 found that using name and/or likeness of the author in a book could be considered copyright infringement.

    If one were to use an infinite good such as a journal, series of emails, or even blog posts to create a scarce good, such as a book, they would probably cite this case. Considering this, it's probably best to obtain rights to republish others work.

     

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    MadderMak (profile), Jun 18th, 2010 @ 12:05am

    Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Hi Mike,

    Maybe we could have a post dedicated to a discussion of just what cost, scarcity, etc are in economic terms... those you use? I for sure would find it usefull.

    (and yes I could research it on the interweb... but it's the discussion around the terms I am looking for)

    Cheers.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 12:17am

    Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    I'm not sure what "visibility" has to do with anything? And, are you really claiming that demand would *decrease* when more people know about something? That's a... unique assertion. Please explain..

    I think heavily promoting Rolls Royces through infinite goods would work against the car's image.

    It would suggest that demand isn't sufficient already and that the company felt the need to attract more buyers.

    In some cases, any marketing/promotion/free goods of any kind is too much marketing.

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 2:03am

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    I think heavily promoting Rolls Royces through infinite goods would work against the car's image.


    You are making a bad assumption. Rolls Royces are *already* marketing through infinite goods. But what you are saying is that BAD marketing would hurt Rolls Royce's image.

    On that we agree.

    But you seem to be suggesting that I recommend bad marketing?!? I really don't understand you at all Suzanne.

    I'm saying you market *appropriately*. Using infinite goods does not mean going mass market.

    It would suggest that demand isn't sufficient already and that the company felt the need to attract more buyers.


    You don't think Rolls Royce markets to its target audience?!? Um... Really?

    In some cases, any marketing/promotion/free goods of any kind is too much marketing.


    Yes, bad marketing. Why do you insist on assuming that we are recommending bad/mistargeted marketing when we are doing no such thing?

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 2:23am

    Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Rolls Royces are *already* marketing through infinite goods.

    Can you be more specific? What Rolls Royce infinite goods are you talking about?

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 2:38am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Can you be more specific? What Rolls Royce infinite goods are you talking about?

    The brand. The prestige surrounding Rolls Royce is an infinite good.

     

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    Richard (profile), Jun 18th, 2010 @ 2:58am

    Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Does an infinite number of hit songs exist, NO. Can an infinite number of copies of a UNIQUE and finite song exist, YES.

    The inifinitely copyable nature is what makes it an infinite good. That is the definition of an infinite good.

    That is the point that you seem to have missed.

    The infinite good adds value to scarce things like
    the creator's time and attention, the original manuscripts etc etc.

     

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    Darryl, Jun 18th, 2010 @ 3:07am

    produce/duplicate not same thing

    "scarce = measurable/significant cost to produce/duplicate 1 item
    infinite = no measurable/significant cost to produce/duplicate 1 item"

    I would say

    Scarce = supply lower than demand
    infinite = infinite (a very very large number, uncountably large + 1)

    sure you can copy something a very large number of times, but you have a fixed finite source of 'stuff' to copy. (scarce).

    To say "a hit song is an infinite resource" would imply there is a very large number of hit songs. There is a finite number of hit songs.

    There is a finite number of stories for books, sure you can have an infinite number of books, or files, but you cannot have an infinite number of DIFFERENT content.

    Content is scarce, often unique, and often very expensive to create.


    "produce/duplicate" cannot be tied together, there is usually, mostly, may be even always are lage differential between the cost of production and the cost of duplication.

    Two totally seperate things, it could cost millions to produce a movie, and cents to duplicate it.

    Everyone can duplicate, as much as they like, that is why its the infinite resource, but the THING you want to duplicate (the produce, production), cannot be produced by everyone at zero cost.

    That is why we pay other people to do it for us, we pay movie makers, and musicians to undertake the high cost of production. They make their money back from the large differential between production and duplication costs.

    Just because duplication is free, does not allow you to do it, if that is against the wishes of the producers of the product. After all, that is the expensive part, that file sharing does not address.

    File duplicators are not file producers, producing, creating is the finite and hard, expensive part.
    Duplication as you have stated is cheap, it has always been cheap, pressing a record would cost a few cents each, an record would sell for much more. 100's percent markup.

    But that is still nothing considering the cost of producing a product.

    Once again, you can have all the supply in the world, but if there is no demand it makes no bearing on the price, or worth of the product.

    People will not buy rubbish, no matter how many of them there are, or what the price is of them.

    But if demand is higher than supply, then there is nothing stopping the company making more of them, if the materials are an infinite resource, like cars, if demand is higher that supply, the company will increase production. To meet demand.

    If supply is higher than demand, they may try to lower the price to increace demand, or they may reduce production to the level of demand.

    That is why cars and most items are not scarce, because the company will increase supply to meet demand.

    There is artificial scarcity, to increase demand, therefore the supply demand cross over is higher (higher selling price).

    So a "limited edition" may sell for more than the regular version.
    That is an artificial scarcity, and there is no other way around it, you cant produce more and say its "Limited edition".

    But you may see 'only 500' made, that creates an aftificial demand, and accordingly commands higher prices.

    But the inverse it not true, as you assume it is Mike, if you just keep producing more and more of something, no matter what happens when supply exceeds demand, for you its the end of the story. No matter what you do, you will not move any more product. Even at FREE.

    If there is no demand, that means people wont buy it at all, even for free.
    And the demand is for content, not for the media on which is lives.
    You dont buy a DVD just to have a DVD, but if you buy a movie, you pay $20 knowing full well that the DVD cost 50cents, but the movie might of cost $50 million to make.

    so my $20 is for me to enjoy a $50 million movie (content) on cheap media (DVD).
    Just like if I go to the movie theatre, I pay $20 dollars to see something that cost millions to make.

    I buy a Music CD, I pay for the content, not the media, the media is infinite, the content is unique.

    The media is valueless, the content is highly valued.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 3:13am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    The brand. The prestige surrounding Rolls Royce is an infinite good.

    Okay. The principles of branding and advertising have existed for decades before the digital world. I'm fine talking about the value of image in terms of enhancing marketing. Branding and image can be done via word-of-mouth and don't need to involve a reproduction cost.

    And for that matter, it's been a fact of life as long as we have had communities. Reputations are built on perceptions, which don't have to involve a reproduction cost.

    I probably wouldn't use the term "goods" to talk about reputation management, but at least we have clarified what you mean. You say goods. I say marketing. And I probably would be more interested in highly targeted marketing rather than wanting to see the same message reproduced millions of times. The extent to which I can treat each person as unique, the better.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 3:21am

    A bit on post scarcity

    Here's a good discussion (read the comments, too).

    The concept of scarcity really doesn't mean the same thing to everyone and there on-going discussions among knowledgeable people about what is or is not scare these days. I'm interested in it to the extent that I see an abundance of creativity these days and the technological tools to help people produce it. So I see the economics of selling creativity to be changing as more people are doing it.

    What Happens When the Economics of Scarcity Meets the Economics of Abundance?” HBS Working Knowledge: "Prices are NOT set when demand collides with limited supply. Rather, prices are set when supply collides with limited demand. In other words, in most markets, there is the theoretical ability to produce an unlimited quantity of produce to meet demand.

    As long as there is one more customer willing to buy one more item at one cent more than the cost to produce, one more unit of output will be produced. Ford limits its supply of cars to the number of cars demanded. In theory, it could build a million factories to meet demand for a billion cars. 'Long tail' goods are not produced because of an absence of demand, not due to supply constraints."

     

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    Headbhang (profile), Jun 18th, 2010 @ 3:48am

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    You *may* have a certain point, but I don't think I'm convinced...

    Mike has already dealt with the Rolls Royce case, which bases its appeal on exclusivity, and for which the infinite good of prestige is a good thing. *Everyone* knows about Rolls Royce and I'm sure they love when people talk about them.

    Some things do derive at least some of their appeal from their obscurity (not exclusivity), though, but for that to translate into better profitability I think an unusual condition needs to be met, namely that excess demand actually *harms* the product.

    You seem to have your example of that secret club in mind. Clubs have the characteristic that its demand is part of the product itself, because the people (what kind and how many) go there definitely influence the experience you get and thus ought to be controlled.
    Bouncers and prices are the natural way of handling it, but may not be ideal in some conditions, such as if huge queues are not practical due to the location or if your target market isn't the ĂĽber-rich. Therefore, controlled obscurity might be a good alternative, but that is only because the demand is a very important component of the product itself.

    Another example could be how some metal (or indie) music fans, for instance, definitely seem to like and seek bands based on how "underground" they are, and may soon lose interest if they seem to be getting too much visibility. This would certainly translate into some lost fans, but whether this detracts from the overall demand and profitability would depend on whether the added visibility fails to attract enough new people to compensate for the initial loss. The music would need to be quite onerous (or bad) for that to be the case.


    Of course, not everyone is concerned with maximum profitability (thank goodness), and some people are willing to stick with sub-optimal profits in order to be loyal to a particular vision, ideology or aesthetic.

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 3:48am

    Re: produce/duplicate not same thing

    Darryl,

    Please, please, please, can we get on the same page here in terms of basic terminology. You are making claims that make no sense in any economic sense.

    "Scarce = supply lower than demand"

    Darryl, "supply" is the supply curve. At some points it's above the demand curve, at other points it's below. What you mean is *quantity* supplied.

    But I really wish you would stop trying to redefine things.

    We already explained how "scarce" and "infinite" goods are defined in economics, which explains what we mean. For you to change the definitions is to pretend we said something we didn't.

    Scarce has a very clear and well established meaning: it just means it's a good that if you take one off the pile, there is one less in that pile. It's a scarcity. It doesn't matter how big the pile is.

    Infinite means if you take one off the pile, the pile doesn't get any smaller. It doesn't matter how unique the product in the pile is.

    But if demand is higher than supply, then there is nothing stopping the company making more of them, if the materials are an infinite resource, like cars, if demand is higher that supply, the company will increase production. To meet demand.

    This is such an infuriating sentence because it has no basis, whatsoever, in any real world economic logic.

    If the *quantity demanded* is higher than the *quantity supplied* (again, you are misusing supply and demand), then the company has to make an *economic decision* if the *marginal cost* of increasing quantity supplied will give a return on investment to those who demand it.

    You ignore all of that, as if there's some magic wish fountain where automakers magically pop out new cars when there's greater demand.

    Have you ever taken an economics class?

    But the inverse it not true, as you assume it is Mike, if you just keep producing more and more of something, no matter what happens when supply exceeds demand, for you its the end of the story. No matter what you do, you will not move any more product. Even at FREE.

    Again, you seem to have totally confused basic economics. What you say here is the point that I have been making all along, which you claim you disagree with. Yes, even at free, you will still have a massive supply left over.

    That's a good thing.

    Read up on Carver Mead to understand why.

    If there is no demand, that means people wont buy it at all, even for free.

    Indeed. But that has nothing to do with what we are discussing.

    And the demand is for content, not for the media on which is lives.

    Indeed. But that has nothing to do with what we are discussing.

    You dont buy a DVD just to have a DVD, but if you buy a movie, you pay $20 knowing full well that the DVD cost 50cents, but the movie might of cost $50 million to make.

    Again, you are agreeing with me, but apparently unable to realize it. You are not doing yourselves any favors here.

    What you are saying here is that people buy the DVD (scarce) at a higher price, *because* of the content (the infinite good). That's the very point I have been making.

    And you are agreeing with me, but apparently unable to process that.

    so my $20 is for me to enjoy a $50 million movie (content) on cheap media (DVD).
    Just like if I go to the movie theatre, I pay $20 dollars to see something that cost millions to make.


    Exactly my point. The infinite good makes the scarce good more valuable. I'm glad you recognize that fact, that I can't, for the life of me, figure out why you think this proves me wrong. It is the very point I am making.

     

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    Richard (profile), Jun 18th, 2010 @ 4:03am

    Re: produce/duplicate not same thing

    Just like if I go to the movie theatre, I pay $20 dollars to see something that cost millions to make.

    No you pay $20 to sit for a couple of hours in a nice seat. That is the scarce good. The infinite good (the movie) makes that seat more valuable to you - that is why you pay the $20. But the seat still costs most of the $20 to provide - even if there was no film showing.

    Only a small proportion of the $20 goes back to the film makers - effectively the film is financed by taxing the cinema seat.

    The problem is that without a scarce good that has some significant marginal cost the taxation rate goes to infinity - and no-one likes the idea of an infinite tax rate.

    Therefore - where there is no physical scarce good to tax one has to resort to funding the scarce prototype of the infinite good directly. That is why sites like kickstarter exist - to allow the scarce prototypes to be funded by those who are prepared to pay simply to bring them into existence.

     

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    Headbhang (profile), Jun 18th, 2010 @ 4:56am

    Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    I concur that it would be a good idea (and to have it somewhere convenient for quick access).

    So much discussion takes place here because of misunderstanding of terminology, "scarcity" being a recurrent theme.

    To be honest, it is understandable. Scarcity in its economic sense DOES mean something quite different from the colloquial, intuitive meaning and if the difference is not clear from the start to everyone, disagreements due to miscommunication will never end.

    It is all made worse since sometimes the concept of scarcity in its colloquial meaning does come up meaningfully sometimes. For instance, "artificial scarcity" can be applied both in the economic sense (pretending or trying to force some infinite good to appear scarce) and the colloquial one (limiting the quantity supplied of some non-infinite good such that it is rare and the demand for it exceeds it). It can be rather confusing for folks who don't immediately get the distinction and is the source of much misunderstanding and disagreement.

     

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    Anonymous Coward, Jun 18th, 2010 @ 5:12am

    Ayn Rand is probably spinning in her grave so fast that the magnetic flux surrounding her coffin is producing several watts of heat to the surroundings.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 5:23am

    Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    You all might find this of interest, too.

    Should 'Scarcity' Be Part of the Definition of Economics? - BusinessWeek "Now, I'm doing an economics textbook for McGraw-Hill, and I'm thinking about using a different definition of economics, which doesn't depend on scarcity.

    Proposed definition: Economics is the study of the functioning -- and malfunctioning -- of the economy, with the aim of improving living standards

    My justification for a different definition is that there are big chunks of the economy where scarcity is not important, in any but a formal sense. If anything we seem to have an abundance of food and manufactured goods, and the cost of moving and manipulating information has fallen very very sharply. I'd also like to get in the sense that economics has a purpose."

     

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    Richard (profile), Jun 18th, 2010 @ 5:24am

    Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    mike often gets confused between the product (song, story, whatever) and the medium on which it is delivered. he focuses narrowly on a small part of the process (delivery) and forgets the unique creation. i think he does this purposely to devalue the often unique creation that is a story, a movie, or a song.

    No Mike is not devaluing the fixed costs of initial creation, just explaining how they have been covered in the past, why that sometimes doesn't work anymore (why it sometimes still does) and what new ideas are now possible to recover those costs.

    The bottom line is this. Fixed costs have traditionally been covered by adding a small tax to the marginal cost of copies.

    Whilst the cost of copies was relatively high people were happy to pay this tax - since it was a tax linked to ability to pay.

    Now that the marginal cost of copying has shrunk to zero the tax rate has effectively become infinite - and hence is unlinked from ability to pay. History shows that people always rebel against taxes that are not linked to ability to pay, and that in the end such taxes are always abolished or severely modified.

    This leaves two choices :

    1. Find some goods with a non-zero marginal cost to tax instead. (The subject of this thread.

    2. Use a fund and release system to pay for the creation up front and cover those high initial costs at the time they are incurred.

    What some people seem not to like about either of these options is that they do tend to remove (to some extent) the opportunities to make a really big fortune and/or to live in comfort without working for the rest of one's life. However it should be remembered that most of the greatest artists/ composers/ writers of the past never saw even a tiny fraction of the money that their work has generated since - so this misgiving is born only of greed.

     

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  47.  
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    Anonymous Coward, Jun 18th, 2010 @ 5:53am

    Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    dont confuse mike with reality. it blows he ideas out of the water. his whole application of his mba is that anything that can be made infinite is infinite, and infinite good have no price (supply and demand). but in the real world, in practical terms, we often pay for things that would qualify as either "infinite" or "easily converted to infinite (such as scanning a book or magazine article)".

    further, he always fails to address that reproduction costs are often a very small part of an overall unit cost for something. producing a patent medicine, example, may only costs pennies a pill, and in his simple busienss model, they can easily be reproduced and thus should be cheap. yet, the signficant part of the costs of medicines is the research and developments done up front. failure to consider the full implications of costs that occur to get to the reproduction stage.

    music is another great example. it can take a year or more of time to write, record, and produce a record, with maybe a dozen or more people involved. yet, in theory the music can be made digital and thus "infinite" and without price. but those costs related to the production of the music dont go away. so while the reproduction costs are nil, the costs to get to that point are signficant.

    so in a technical and myopic view of supply and demand, mike is right. but it is such a narrow look at the systems that is fails. it is pretty much as if he wasnt there past the first year of his mba.

     

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  48.  
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    Andrew D. Todd, Jun 18th, 2010 @ 6:18am

    Here Are Two Books You Should Read:

    Look at Gaston.Leroux, The Phantom of the Opera (1911) to get an idea of the kind of context in which music existed before recorded music became dominant.

    http://onlinebooks.library.upenn.edu/webbin/book/lookupname?key=Leroux%2c%20Gaston%2c%201868%2d1 927
    http://etext.lib.virginia.edu/toc/modeng/public/LerPhan.html

    The Opera star Christine Daae takes her lover-patron-customer on a backstage tour of the Opera.... "And she would drag him up above the clouds, in the magnificent disorder of the grid, where she loved to make him giddy by running in front of him along the frail bridges, among the thousands of ropes fastened to the pulleys, the windlasses, the rollers, in the midst of a regular forest of yards and masts. If he hesitated, she said, with an adorable pout of her lips: 'You, a sailor!'

    "And then they returned to terra firma, that is to say, to some passage that led them to the little girls' dancing-school, where brats between six and ten were practicing their steps, in the hope of becoming great dancers one day, 'covered with diamonds. . . . Meanwhile, Christine gave them sweets instead." (Chapter XI ABOVE THE TRAP-DOORS)

    The other book, dealing with how a similar tradition can exist in an industrial society, is:

    Liza Crihfield Dalby, _Geisha_, 1983.

    In the 1970's Liza Dalby, an American anthropologist, went to Japan and became an apprentice Geisha. Geishas represent the "House Party" carried to the ultimate extreme. Geisha, Gei-sha, literally means "art-person," or artiste, and specifically, someone devoted to one of Japan's traditional performing arts. By the 1970's, Geisha were not prostitutes as the term is ordinarily understood, though they cultivated a somewhat risque ambiance. They didn't sell content-- what they sold was the ambiance.

    At the upper levels of geishadom, the male host, typically a businessman, would hold a small dinner party, he would invite several male guests, and he would also invite several geisha-- who were paid to be there, but paid indirectly, and through intermediaries. The geishas served the men at table; if asked, they could sing, or dance, or play an instrument; in any case, they flirted. A regular host might become a particular geisha's patron, and take her out on dates, and she might even become his mistress, but in this, there was no suggestion that she should supplant his wife-- ever. The two roles were in separate spheres.
    At the other end of the social scale, Tanaka-san the Japanese Salaryman runs a department in a big Japanese company; his department does well, makes its quota, or whatever; so he takes his troops, all fifty or a hundred of them, on a multi-day spree at an Onsen, a traditional Japanese hot-spring spa-resort. They stay at a hotel, typically all sleeping together in a single room, all buddy-buddy, GI's in the barracks, that kind of thing. Parties are laid on, with geisha hired. The atmosphere is not so refined as the upscale party... it's a bit more "recreations of a warrior." It works out in practice to stumbling drunks pathetically trying to grope girls, who being quite sober, are able to keep just out of reach.

    More fundamentally, the idea is that a geisha does not make a distinction between performance and life. Her art is supposed to infuse the entirety of her life; and everything she does, or is, is supposed to become invested with the quality of her art. In the West we are comfortable applying this kind of thinking to a scholar. There is a Jewish phrase, "His Torah was all lip service," to describe a rabbi who might have chapter and verse memorized, but who does not lead a pious life. The idea is that there must be something wrong with the man's learning if it does not inform his actions. The same principle applies for a professor, of course.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 6:25am

    Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    1. Find some goods with a non-zero marginal cost to tax instead. (The subject of this thread.

    That's where I think most musicians, writers, etc. are going to hit a wall. The "scarce" goods many of them are offering aren't really all that scarce. Plus given the recession, what spending money consumers have is going to necessities (e.g., housing, food, transportation, health care). I read the economic reports daily and we're not out of the woods yet.

    People really do want music in their lives, and for the most part we can all get it for free. That means money we might have spent in the past on music is now free to go elsewhere, to those necessities or to cellphone providers, or ISPs, etc.

    News coming from the live music sector this last week hasn't been good, so people really aren't shifting music dollars from one music place to another. Rumors of a lot of tour cancellations, and major ticket sales reductions.

    I think the Significant Objects experiment is very interesting. But what I have taken from it is that stories make objects more meaningful. I don't think you have to buy objects enhanced by other people's stories, though. Why not write your family's stories and attach them to objects you already have or items you find or make yourselves?

    I'm not trying to be difficult. I'm just trying to point out that there are a lot of varying opinions, even in the field of economics.

     

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    Darryl, Jun 18th, 2010 @ 6:57am

    Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Yes, or to put it another way, he's applying microeconomic principles to a macroecononic real market.

    If a farmer grows a huge amount of produce, he is not going to drop his price to zero, to meet demand. There is a break point where it is cheaper to plow it back in, rather than prepare and transport it to market.

    Regardless of supply, if there is no demand there is no sale.
    And the demand is for the content, not the media.
    The value is in the content, not the media.

    I can pay hundreds of dollars for a book, that contains the same amount of paper and the $1.20 local news paper. The value of my expensive book is in the contents of the book and not the media. Is that so hard to understand, Mike... ?

     

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    Anonymous Coward, Jun 18th, 2010 @ 7:38am

    Re: Re: produce/duplicate not same thing

    "Only a small proportion of the $20 goes back to the film makers - effectively the film is financed by taxing the cinema seat." - incorrect. the vast majority of the money in ticket sales goes to the film maker / distrbutor / etc. it is the reason that 20 cents of popcorn costs $5, because the theater has to make money somewhere.

    the actual cost of the theater seat for 2 hours is probably in the range of pennies per seat. the seat has little to do with the value of going to the theater, the movie is everything. you wouldnt pay $20 to see a bad movie (poor reviews, actor you dont like, whatever) but you will gladly pay it for the right movie at the right time. the value isnt in the seat, it is in the content, which is actually scarce (good movies are scarce, no matter how potentially infinite the distribution could be).

     

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    Anonymous Coward, Jun 18th, 2010 @ 7:47am

    Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    "No Mike is not devaluing the fixed costs of initial creation, just explaining how they have been covered in the past, why that sometimes doesn't work anymore (why it sometimes still does) and what new ideas are now possible to recover those costs." - the ideas that are tossed around here mostly involve doing non-related economic activities to make up for the effects of piracy as it creates infinite distribution. few bands / record labels / whatever are actively pushing all of their music for free all of the time, most of them are still selling via itunes, shiny discs, and the like. most of them do not want or need infinite distribution, as the costs to them net is higher than any potential get back that can be given for most of them.

    when the income is no longer related to or relative to the expensive producing of the product (recording music) the money goes away from it. music and entertainment (movies, etc) are luxury items, things we choose to enjoy and consumer. making the income source come from a luxury on a luxury (concert tickets, t-shirts, mini putt games to meet your favorite drummer, whatever) is a poor economic model because you have moved the spending from optional luxury to "optional optional" level. first to get cut off, last to get put back. they will still want your music, and still want to see the movies, but because the market has been brought to zero in those areas, the income disappears.

     

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    Modplan (profile), Jun 18th, 2010 @ 7:55am

    Is it so hard to understand?

    I can pay hundreds of dollars for a book, that contains the same amount of paper and the $1.20 local news paper. The value of my expensive book is in the contents of the book and not the media. Is that so hard to understand, Mike... ?


    Except that no one has stated that content has no value. It can be used to increase the value of other goods. But it alone is easily reproducible to the point where supply easily outpaces demand, ergo has a cost of 0 (or close to it).

    In fact, Mikes entire point is about using non-scarce goods (digital copies of media and the content itself) to increase the value or market size of other offerings, like this exact example which shows precisely this concept.

    Is it so hard to understand Darryl...?

     

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    Modplan (profile), Jun 18th, 2010 @ 8:01am

    Re: Re: Re: produce/duplicate not same thing

    Any movie is infinitely reproducible. So no, it is not scarce, as it can be easily reproduced for near zero cost to the producer.

    When the same content is available via multiple means, then there is no competition via content. The competition happens via delivery method and the advantages/disadvantages of it. No one has denied content has value, but it works as part of a larger equation that involves the values that the medium it is delivered by as well.

    The theatre provides value by having comfier seats and better sound/audio, along with a social experience. TV provides value via convenience (watch at home, and cheaper). iTunes provides value via convenience. If there is no benefit in the delivery method, then the price drops to marginal cost, which is 0 for anything that can be transmitted digitally.

     

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    Headbhang (profile), Jun 18th, 2010 @ 8:17am

    Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Do you honestly believe Mike is that stupid?? If so, you are thicker than I thought.

    He understands very well the issue of fixed costs and the need of recouping them somehow for a business to make sense. Only the dumbest of the "freetards" would miss that.

    What he does is to suggest alternate ways of recouping those costs, and making a profit, which does not involve trying to sell stuff whose price is naturally forced down by the laws of the market, which will dictate that goods with (near-)zero marginal cost will be regarded as free *regardless of their initial fixed cost*. He is not saying it should be like that, just points out that it just IS, whether you like it or not. Gravity makes objects fall down. The market makes infinite goods become free. You can try to make things fly and you can try to charge for infinite goods. It's possible, but you are swimming against the current.

    To be honest, I'm not yet convinced that every form of content can be succesfully supported by alternate means. Sometimes the fixed costs do seem too high, and the scarcities too insignificant, for certain businesses to seem viable. There are no guarantees that everything can survive in a changed landscape. It may be that artificial measures would be necessary to keep certain things afloat. I don't know. But I DO know that the less you waste your energy fighting against nature, the better.

     

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    Anonymous Coward, Jun 18th, 2010 @ 8:57am

    Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    I'm a complete economics n00b, but I will try to educate you.

    ***

    Imagine that Oil is infinite. All you need to do is open a hole in the ground and Oil starts flowing out (careful when digging your backyard!) and anyone can do it. There are costs, of course, especially if you want to mass extract it. Driling equipment and whatnot. The costs of setting this up are your problem to deal with and have no impact on the actual price of the good (I mean, nobody cares if you spent 1 mil to set up the drill, they only care to pay for what's in front of them).

    But once the drill is set up, the supply is infinite and clearly surpasses the demand, even though anyone and everyone needs oil (currently).

    This obviously drives the price to 0. I mean, if you sell oil at 50$, the guy next door can sell it at 20$, and some other dude can just sell it at 10$. This ultimately drives the price to 0 (because of a little thing called competition...dammit).

    Now what do we have here is a problem: you can't sell the stuff at more than marginal cost (because the guy across the street will squash you, in terms of price). So in short, you go out of business and die poor and miserably. End of story.

    Nah, just kidding. What you do is be smart. No one will pay you for oil (because they can just pump it off the ground or get it cheaper from the guy across the street), but what if you stick oil to something else or make oil more interesting somehow?

    So you start converting oil to gasoline. You start selling oil containers like jerrycans. You can build related products, like cars. You can even become a famous oil baron and start selling looooots of t-shirts (who would ever buy those?). Suddenly, you are using an infinite good to enhance the value (and price) or a finite good. You are making money out of something that is priced at 0. Isn't that wonderful?

    ***

    So where do you fail? You assume that it is the final consumer that must bear the costs of your initial investment (read: your bad planning). Unfortunately for you, my friend, you are wrong. If you fail to create enough reasons to buy something when cheaper alternatives are available (I mean, come on, who pays for infinite goods?), you will fail and your business dies...simple.

     

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    Anonymous Coward, Jun 18th, 2010 @ 9:17am

    Re: Re: Re: produce/duplicate not same thing

    Content isn't scarce because all content is subjective. For example, everything I have ever watched in my entire lifetime has been good. Even the bad content is good, to me. From a cheap, midnight showing of a blockbuster to a free BBC documentary on YouTube, it's all good and abundant.

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 10:20am

    Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Should 'Scarcity' Be Part of the Definition of Economics? - BusinessWeek "Now, I'm doing an economics textbook for McGraw-Hill, and I'm thinking about using a different definition of economics, which doesn't depend on scarcity.

    Proposed definition: Economics is the study of the functioning -- and malfunctioning -- of the economy, with the aim of improving living standards


    You do realize I have said the same thing. The reason you and so many others are confused about this is that you keep treating infinite goods as if they were scarce *because* your understanding of economics focuses on scarcity.

    I've been saying for years that *defining* economics as being about scarcity has been a mistake:

    http://www.techdirt.com/articles/20061025/014811.shtml

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 10:22am

    Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    further, he always fails to address that reproduction costs are often a very small part of an overall unit cost for something.

    Have addressed this repeatedly -- often directly to you. In response you continued to pretend that average costs mean marginal costs, when it does not. This was explained to you by an actual economist in one thread, and you insisted the guy must have never taken an economics class.

    If you understand the differences between fixed and marginal costs, this is not confusing at all. If, on the other hand, you choose not to learn such concepts, you will be confused.

    I see which path you've chosen.

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 10:29am

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    If a farmer grows a huge amount of produce, he is not going to drop his price to zero, to meet demand. There is a break point where it is cheaper to plow it back in, rather than prepare and transport it to market.

    Congrats Darryl, you have officially shown that you do recognize marginal costs, implicitly. You are correct that at some point it becomes cheaper to plow it back in then take it to market. And that's because the farmer recognizes the *marginal costs* of taking it to market.

    That's why marginal costs are important.

    But the marginal costs of a digital file are quite different than getting an apple to market.

    Regardless of supply, if there is no demand there is no sale.
    And the demand is for the content, not the media.
    The value is in the content, not the media.


    I already responded to this in my other comment to you. What I find odd is that you don't respond to my long response to your original comment *at all* where I explained all of this, and instead respond to a personal attack on me.

    Can you really not respond to the points I raised, Darryl?

    Really? I thought you were actually here to discuss stuff, and not act like some of the trolls. Did I have you figured wrong?

    I can pay hundreds of dollars for a book, that contains the same amount of paper and the $1.20 local news paper. The value of my expensive book is in the contents of the book and not the media. Is that so hard to understand, Mike... ?

    Darryl, again, the point that you are making here *IS* the point I'm making. It's not hard for me to understand because you are *agreeing* with me.

    Why does that book cost so much more, it's because of the content! The *content* (infinite) makes the *book* (scarce) worth more! We agree. So I really cannot fathom why you keep claiming we disagree on this point.

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 10:31am

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    I'm a complete economics n00b, but I will try to educate you.

    For an economics n00b, you got it exactly right. Nicely done.

    And this is the point I raised above in asking Darryl if he had studied economics. You don't have to have taken economics classes to understand economics, but it makes you look pretty silly when you make statements that have no basis in economics -- as Darryl has done a few times here.

    Thanks for your example, though I'm afraid it is likely to fall on deaf ears.

     

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    Richard (profile), Jun 18th, 2010 @ 11:58am

    Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    when the income is no longer related to or relative to the expensive producing of the product (recording music)

    It never was. It was related to the viable taxation rate on the cost of the copies. If it was related to the upfront cost then there would be no millionaires in the music industry. It was always the disconnect between capital costs and marginal costs that allowed fortunes to be made.

     

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    Richard (profile), Jun 18th, 2010 @ 12:09pm

    Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    if a book takes a writer a year to write, and requires editors, reviewers, and a bunch of other people before the book hits the market, there is a cost up front.

    Recovering that cost is a business problem you have to solve in the real world as it is now - not in some past or imaginary world. If you can't then you either

    1. Don't make the investment.

    2. Decide that it is "art for art's sake" and do it anyway.

    3. Try to find others who want the work to exist and are prepared to fund it. The net makes this approach easier - see http://www.kickstarter.com/

     

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    Richard (profile), Jun 18th, 2010 @ 12:32pm

    Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    so in a technical and myopic view of supply and demand, mike is right. but it is such a narrow look at the systems that is fails. it is pretty much as if he wasnt there past the first year of his mba.

    Sorry, I'm afraid that it is your understanding that is myopic.

    The fact is that just because it costs a certain amount up front to produce a song, or a drug, or a book or whatever does not mean that there has to be a way to recover that cost at all - let alone that it has to be recoverable in any particular way.

    Suppose you develop a virus that stops mosquitoes from carrying malaria. Once you introduce it into the world it will just spread uncontrollably and do the job. There is no way to get paid from the beneficiaries.

    The alternative is to try and raise the funding before you incur the cost.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 12:44pm

    Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    I've been saying for years that *defining* economics as being about scarcity has been a mistake

    So why don't you quit using the term "scarcities" in your posts? That will avoid the confusion.

    Since we both agree that there aren't many scarcities, let's come up with another word. In some cases it is physical goods. In other cases it is experiences. Not necessarily "scarce" goods or services, but just goods and services that people are hoping to market as unique or desirable. That's about marketing rather than scarcity and I'll totally agree with you on that concept.

    I don't think people would even be disagreeing with you if you hadn't said "creating new scarcities."

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 1:04pm

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Suzanne, are you being willfully misleading here?

    So why don't you quit using the term "scarcities" in your posts? That will avoid the confusion.

    Seriously. Do you even read? I did not say that scarcities are not important. I said that economics is not *defined by scarcities*. Same thing as the article you linked to said.

    Can you really not understand the difference? Really?

    I can say that it is possible to get from point A to point B without a bicycle and that doesn't mean that bicycles are forbidden.

    Economics is not just about scarcities (the point I made and the point your article made) but it does not mean that scarcities are not a part of it. The only point that we are making (which you seem to have missed) is that it's not JUST about scarcities.

    Since we both agree that there aren't many scarcities, let's come up with another word.

    We don't agree on that. I mean, we should agree that the statement above is flat out wrong.

    In some cases it is physical goods. In other cases it is experiences. Not necessarily "scarce" goods or services, but just goods and services that people are hoping to market as unique or desirable. That's about marketing rather than scarcity and I'll totally agree with you on that concept.

    You can't discuss economics without using economics terms. I'm sorry.

    I don't think people would even be disagreeing with you if you hadn't said "creating new scarcities."

    Yes, how dare I be accurate. It seems when I do that you misinterpret me.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 1:08pm

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Let me go a bit further, in case I wasn't clear.

    In most cases people aren't selling REAL scarcities. They are trying to "market" scarcity, but that's more of a game than a reality.

    It's like the guy in the bazaar pulling out a statue, making up a story, and telling you this is the only one like it in the world.

    You buy it, believing him, and then after you leave, he pulls out another one and makes up a story about it to tell the next customer.

    Kind of like the "Significant Objects" experiment.

    Not real scarcity, but very clever marketing.

    If we drop the word "scarcity" and just go directly to talking about marketing, then I everyone will grasp the concepts.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 1:16pm

    Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Seriously. Do you even read? I did not say that scarcities are not important. I said that economics is not *defined by scarcities*.

    Then I guess we don't agree. I see a post-scarcity society in many sectors, and I also see hypercompetition as a factor in driving down costs, so I think we operate in world of excess production for many goods, services, and labor.

    Therefore I'm most concerned with what people will be doing to cover their basic needs if traditional jobs which have provided an income disappear.

    For example, if we don't need people to build more cars, how will we employ them? And where should they live?

     

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    Mike Masnick (profile), Jun 18th, 2010 @ 1:25pm

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    For example, if we don't need people to build more cars, how will we employ them? And where should they live?

    Heh. Wow, you are just an out and out luddite.

    There were similar fears about what we would do with farmers when machinery helped farming and we went from a country that was 80% farmers to less than 3%. And the economy grew and more people have a much higher standard of living than any time before.

    There were similar fears when we went to direct dial telephones and all the operators who connected your calls were put out of business. And what happened? Well, direct dial calls created tons of new industries that more than picked up the slack, and today there are more operators in "call centers" than were ever needed to connect calls before.

    If you think that new jobs won't come out of the greater efficiencies of automation you are ignorant of history. It has never happened. Each new abundance creates new scarcities. This is not an opinion on which you can disagree with. It is a fact. You can deny a fact and be wrong or you can realize it is a fact. Your choice.

     

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    Richard (profile), Jun 18th, 2010 @ 1:36pm

    Re: Re: Re: produce/duplicate not same thing

    the actual cost of the theater seat for 2 hours is probably in the range of pennies per seat. the seat has little to do with the value of going to the theater, the movie is everything. you wouldnt pay $20 to see a bad movie (poor reviews, actor you dont like, whatever) but you will gladly pay it for the right movie at the right time. the value isnt in the seat,
    The costing of the seat is very complicated, it depends on the time of day. The pricing of the film to the theatre is also complicated, depending on how long the film has been released for, etc etc.

    However there certainly are real marginal costs associated with providing the seat and so the public is prepared to pay the tax associated with the film. It may be high but the public accepts quite high taxes - we have paid close to 90% on petrol in the UK at times. Infinite taxes are another matter however.

     

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    Suzanne Lainson (profile), Jun 18th, 2010 @ 1:40pm

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Heh. Wow, you are just an out and out luddite.

    No. Quite the opposite. I think technology will reduce the demand for a lot of labor, but during the transition time we need to figure out how to redistribute wealth. Right now. (Yup, folks. I'm not a libertarian. My father was a career military officer and I liked the way the government provided for us. Free housing. Free health care. It was a nice way to live.)

    We've got massive unemployment in Detroit. You can buy a house for $20,000. What do we do to provide for people this year? Next year?

    Me, I'm all in favor of using taxation money to rebuild schools, increase energy investment, set up a more efficient health care system with coverage for everyone, etc.

    I'm just talking about the practicalities of wealth redistribution while the level of political polarization is so high that we can't get much done.

    That's one reason I hate to see rants and name-calling on Techdirt. I'd much rather have everyone work together to solve problems. And part of working together is welcoming a discussion of all sides. Let's do that, okay? Let's be friendly. :-)

     

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    Darryl, Jun 18th, 2010 @ 6:01pm

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    "who pays for infinite goods?" No one, that is the problem, and the flaw with your scheme, and with Mikes later agreement with you. Is this, you **somehow** get your 100 million dollars to sink this magic well, (no well is infinite, but ill play along). But as you said yourself there is a vast abundance of possible wells, and anyone who wants too can drill one. You also said something like: Here is where your example and model fails. But once the drill is set up, the supply is infinite and clearly surpasses the demand, even though anyone and everyone needs oil (currently). "the supply in infinite and clearly suppasses the demand, even though everyone needs oil. (currently)." Ahh, but here is the rub !!!! Once supply suppasses the demand, the statement "everyone needs oil" turns into "NO ONE NEEDS OIL" Thier demand has been satisified, the market for oil is saturated, so you pump all this oil from the ground, employ oil rig workers, and pay energy bills, and so on (running costs), and you end up with a huge lake of oil that you cannot sell. that NO ONE wants. Even for free, they cant use it, their demand has allready been met. So it's not a viable model, you dont just keep selling your product for cheaper and cheaper, you get to a point where supply meets demand, and you dont sell any more. All you can do is increase demand, that might be from entering another market and creating a demand. but if you create a demand derived from your infinite resource (your magic well), the demand for that product will be quickly filled as well, and again supply exceeds demand, Once that happens you cant sell any product, no one wants it. And its not possible to cover the cost of production, if you cannot sell the product. And if everyone has wells, or can get a well if they need it, they have no use for your oil, or oil derivatives, no use equals no demand, no demand means no one wants your product. No where in this model is a part where the cost of setup, and ongoing running costs, insurances, taxes, wages are coming from, and nor does it indicate any way to finance or fund such a project. Who would finance a oil rig, in a market where supply has exceeded demand, so there is no market or buyers for your product at any price. (they all have what they need). Its not a business model, its a financial sink hole. Its also why the existing model is so popular, because it works.

     

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    Darryl, Jun 18th, 2010 @ 6:26pm

    Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Gravity makes objects fall down.

    Equally, gravity makes objects riase !!

    (thats called the whole truth, the complete picture).
    What you said is true, but only half the true story, probably to reinforce a point.

    Market forces, the effect of supply Vs Demand is the same as gravity, it allows some object to raise and some to fall.

    And I still have a huge problem with how it can be said that a content can be infinite, the media can be, but I know there is content that I have a demand for, and content I dont have a demand for, no demand means no matter what price or availability, I dont want it.

    No demand means no market at any price.

    And the demand is in the content, and the content is finite, there are not an infinite hit songs that I have demand for.

    There is not even an infinite number of average or bad songs that I have a demand for.

    That applies to everyone, im sure there are songs and movies that you would not care if you never watched or listened to, even if it was for free.

    some content, I would not watch if you paid me.

    those products, that content has no demand, and therefore, it wont be sold, or taken by people at any price, no demand, no market.

    To create a demand, you need to create content people desire, you create the demand and you fill the demand.

    You create that demand by creating finite content that is or will be desired or wanted by people.

    But not everyone, there will be those that dont want it at any price, you cannot create demand from them, based on content no media.

    Media is your infinate resource, like video take, and movie reels.
    Content is finite, there is a finite number of movies, and an even lower number a subset of those that are in demand. Many are not, even at FREE.

    So you can duplicate and distribute at amazing efficiency, but for who and to where, no one wants it.

     

    reply to this | link to this | view in thread ]

  74.  
    identicon
    Andrew D. Todd, Jun 18th, 2010 @ 7:12pm

    Know Then That There Is A Man Called Frog.

    In Eugene, Oregon, home of the University of Oregon, there is a man named David Miller, commonly called Frog. For the last twenty-some years, he has been selling joke-books on the city streets. I got to know him back in the late 1980's, when I was there, and when he was just starting out. He's the kind of guy who's always telling jokes, one-liners, generally more or less raunchy, though he can edit his repertoire to be suitable for children when appropriate. At any rate, he sells joke-books while telling jokes. When I knew him, the joke-books were extremely crudely produced. The master copies were made with a typewriter rather than a word processor. Frog simply inked corrections into the typescript, rather than trying to make a clean copy. The joke-books were pamphlets of about twenty pages, stapled together, with a sheet of ordinary colored paper for a cover, instead of construction paper. The joke-books sold for two or three dollars each, and Frog signed each book he sold, both in the form "To Andrew from Frog," but also adding his personal signature, a drawn portrait of himself as a frog. He carried one satchel of joke-books fastened in front of him, and another satchel on his back, to balance him out, and when he sold you a joke-book, he would often ask you to reach into his back-satchel, and pull him out some more joke-books to sell. At the time, the storekeepers were egging on the police to drive him away, and there was ongoing police harassment, and eventually, that came down to a lawsuit, but that was after my time.

    http://www.myspace.com/frogsjokebooks

    http://twitter.com/Frogsjokebooks

    http://saigon bob.typepad.com/saigonbob/2007/03/how_a_frog_beat.html

    http://www.dailyemerald.com/opinion/campus -jokester-riddles-eugene-1.1306675

    http://www.smartwords.biz/samples/people/04.htm

    http://www. oregoncommentator.com/2007/09/20/eugene-city-council-high-on-downtown-ideas-weed/

     

    reply to this | link to this | view in thread ]

  75.  
    identicon
    Anonymous Coward, Jun 18th, 2010 @ 7:50pm

    Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    Uhm, I think you are massively confused.

    I will try break this down for you real simple:

    1- Let's assume there is always demand for oil. People and industries want oil. Therefore, there is always some constant demand for it.

    2- In my fairy tale, oil spurts out of the ground indefinitely if you drill for it. Therefore, the supply is infinite (meaning, you can never run out of oil).

    Joining 1 and 2, you have a situation where there is a constant demand for oil, and yet, the supply never runs out.

    Ok, now how much are you going to sell the oil for?

    Remember, people WANT oil...there is demand, so there will always be buyers. Just in case this is still confusing you: people consume the oil they buy (the meaning of consume here is open for interpretation, but the point is that they somehow "spend" it), therefore, at some point, they will have to buy more. Luckily for them there is an infinite supply, which means that, no matter how many (insert measure) of oil you take, there is always more.

    Let's try pricing it at 20$ a barrel. Ok fine, but some other guy (that also has access to an infinite supply of oil) decides to fight back by lowering his prices to, say, 10$. Ok, now you are in trouble. If you don't lower your prices, you have no way of gaining an advantage over the other sap and people will buy from him.

    So you lower your prices to, I dunno, 5$. You can see where this is going...eventually, you both have a product priced at 0. This highlights the following fact:

    3 - If there is infinite supply, the market will always pressure you to place the price at 0.

    But now you have a problem:

    4- The equipment necessary to extract the oil in industrial amounts is relatively expensive. (If you want to, you can also toss in the prices of taxes, wages, etc, etc..)

    Ok, this is obviously a problem, but, the fact that you have running costs and setup costs to extract oil should have no weight in the matter. You can TRY to demand exorbitant prices from people to try to recover some losses, but since there is always another dope willing to sell at a lower price than you, you are screwed. You need to find another way to recover those costs. For that, you must, somehow, create something that is unique enough to be worth money.

    You can, for example, produce gasoline out of oil and sell it (and luckily for you, there are about a bazillion other products you can extract from oil, so, more profit for you).

    People also need ways of transporting the oil (carrying it in your hands is somewhat of a bad idea and also having all this oil out in the open is just asking for trouble), so you can sell oil cans or other forms of safe oil containers. Or better yet, build an oil pipeline and charge people for access to that pipeline (charge them for the convenience of delivering oil to their...uhm...homes?).

    Now replace oil with movies, oil cans with DVDs and pipelines with netflix and you get the picture of how this can apply to content in the real world.

     

    reply to this | link to this | view in thread ]

  76.  
    icon
    Modplan (profile), Jun 19th, 2010 @ 7:40am

    Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    "Content is finite, there is a finite number of movies"

    Whether a product is scarce/finite is defined by its cost to reproduce it, not by its particular story, actors and so on.

    Toyota may have a novel car design, but it's not scarce because it's the only company with that design, its scarcity is defined by how many reproductions of that car exist and whether they beat out demand.

     

    reply to this | link to this | view in thread ]

  77.  
    identicon
    darryl, Jun 21st, 2010 @ 10:33am

    Re: Re: Re: Re: Re: Re: Re: Re: Re: Infinite wisdom - finite knowledge - confused 'consultants'

    1. 1- Let's assume there is always demand for oil. People and industries want oil. Therefore, there is always some constant demand for it.

    Um, lets not shall we. That is an assumption that is not correct in your scenario. There will not always be demand, demand and usage are not the same concepts.

    There will always be usage, and therefore an amount of demand, but once that demand is met there is no more demand, and supply equals usage.

    So there is a demand for oil and oil products, but there may well be no demand for YOUR oil.
    People need too use oil, but they don't need to use your oil.

    When supply meets demand, demand becomes zero the demand is met by the supply.
    You can create or extract more supply than demand. But as there is no demand, there are no buyers wanting it.. As everyone who wants it, all ready has a source that meets their demand.

    It appears this time, with this post you have modified the model to include infinite demand, infinite demand in not possible, even if infinite supply is available.

    What is unique or different about your well and your oil that would make someone pay you for it, if it is just as easy and cheaper to extract their own ?

    That would entice a buyer to purchase your oil, transport it to their location (at cost), and use it ?
    When you have met demand, and you cannot sell any more oil, at any price (as its just not possible for the earth to consume more than a finite amount). Once you sold enough the meet the demand, then what do you do? You cannot sell any more oil, because there is no one willing to buy it, as there is no demand?
    How do you pay your workers, your insurance, you company and taxes, how do you pay for all the certificates and registrations required?

    The same applies for everything, there can be a very high demand, but once the demand is met, there is no more demand.
    Assume you create a product that everyone in the world just have to have, its so good. May be even have to have 100 of them or more.
    The demand for that item is very high, if everyone wanted 20 of them, then the demand would be 20 times the human population.

    Yes that is a big number no doubt, but its not infinite. And demand is something by definition can be met. And once everyone in the world has 20 of these items. The demand will drop to very low values, may by related to world population growth. So as new people come into the world they will want 20 of your things.
    Still the demand is fixed by world population times 20.

    So you create a song, or content of value, such as a book. There will be a demand for your product, if you create a demand for it. You might have to advertise, get your song on the radio, send demo's to record companies. But somehow you have to generate demand for your product.

    Supply and demand are 2 curves, interrelated the supply curve, is linear (not a curve as such), and would represent the price range of the product being sold.

    The lower price would probably be cost to market price, and the upper price is determined by the point on the demand curve (a bell curve) where demand falls to zero.

    So the price curve, is the range of possible prices the company can sell their product for.
    From lowest possible (cost to market) to highest that people will be willing to pay.

    So that set of curves allows manufacturers to optimize production Vs sale cost, they are trying to catch the peak of the demand curve. (the bell curve).

    That peak represents the most amount of product sold and the highest price. Any higher a price and demand fall away, and lower in price they make lower profit.

    Obviously there is a point where its most efficient to manufacture a product and sell it at that price, cheaper means loss on revenue and higher means loss of sales.

    Its a "cost Vs earnings" calculation, you only get earnings if you can sell your product within a range of prices, below a certain price its not possible to make them cheaper due to production costs. Over a certain price, and people will not see the value in your product and spend their money on something else.

    "Remember, people WANT oil...there is demand, so there will always be buyers. Just in case this is still confusing you: people consume the oil they buy (the meaning of consume here is open for interpretation, but the point is that they somehow "spend" it), therefore, at some point, they will have to buy more. Luckily for them there is an infinite supply, which means that, no matter how many (insert measure) of oil you take, there is always more."

    Ok, yes people want oil, and there is a constant demand, but that does not mean "there will always be buyers", and yes I know people consume oil, but why would they want to consume YOUR oil ?

    You say at some point they will use up all they have, and at some point will have to buy yours, but you do not have a monopoly on this magic well, anyone can sink their own well. So if they have a demand they would meet that demand with their own source of oil.
    And once the demand is met, its met, there is no more demand. Supply has met demand, and any further supply cannot be used or sold.

    It cant even be given away, if everyone has all they need, and at a price they are willing to pay, they do not want any more, at any price.

    And if the price of their source is too high, they will get their own, to meet their demand, or find some other source that is cheaper.
    That all means that there would not "always be a demand, and people who want to buy it".

    In your world, you have had to modify to model to not only include infinite supply, but also infinite demand!

    If that were a song, and not oil, that means everyone in the world would want an infinite number of copies of that one song to meet demand. Lets be real and say everyone on the planet (and their dog) would want 3 copies of this one great song.
    That would mean the demand would be 3 times human (and dog) population. Not infinite.

    Now everyone in the world wants 3 copies, but not everyone in the world will have enough money to pay for it, so they set the price to account for the best amount sold for the best possible sold.
    They maximise profit, if the price is too high not everyone will be able to afford to pay for it, if the price is too low it's not worth making it in the first place, (zero profit) and lower still is loss.

    So they want to sell a lot, but they want to sell it for a good price to profit ratio.
    So they set the price to find the peak of demand, where they sell the most for the highest price.

    That is assuming perfect demand, everyone wants 3 of them, if that is not the case, they have to create demand, create a desire for the product, make people want it. And then provide it at a price that will make profit and pay expenses.

    You say "In my fairy tale", well Mr Anonymous coward, that is all it is a fairy tale, and has no relation to reality what so ever.

    And to make it real simple, you need to work out the difference between usage, and demand, and supply and demand and work out that usage and demand are not the same thing, and once demand is met, demand falls to zero.

    I will try to break this down for you real simple:
    When supply meets demand, there is no more demand, everyone who demanded (or demands it) has a supply of it. So they no longer demand it.

    Any production "OVER" demand, is production that cannot be sold, as there is no buyers, because the buyers demand has been met, (remember, when demand is met, demand falls to zero).
    But usage does not have to fall to zero, and if demand increases, that does not mean that demand will increase for you. If their demands are all ready being met, there is still no demand.

    And you still end up with a lake of oil, that no one wants.


    And if someone really needs a lot of oil, they will drill their own infinite well, not bother with you.

     

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  78.  
    icon
    Suzanne Lainson (profile), Jun 22nd, 2010 @ 6:24pm

    To add to the scarcity discussion

    A.R.T.: what is A.R.T.:

    "Q.: How will you achieve your goal?

    A.: We don't believe art needs to be scarce to have value. So all our pieces are issued in open editions.

    Q.: Besides open editions and a commitment to quality, are there other unifying characteristics to works of A.R.T.?

    A.: Every piece utilizes state of the art digital technology in its design and production, such as tele-fabrication, where digital files are transmitted over the air to robotically controlled machinery in remote studios. It's a reflection of our commitment to modernity and a pragmatic means of producing art at the scale we envision."

     

    reply to this | link to this | view in thread ]


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