Economics Of Abundance Getting Some Well Deserved Attention
from the about-time dept
It’s great to see Chris Anderson getting lots of attention for his recent talk on “the economics of abundance,” because it’s exactly the type of thing that a lot of people have been discussing for a while — but still hasn’t permeated the mainstream. In fact, it’s quite similar to the talk I gave at the Cato Institute back in April in discussing why certain people seemed to have so much trouble grasping the economics of the digital age. Basically, it’s the problem that occurs when people focus too hard on the idea that economics is the study of resource allocation in the presence of scarcity. That only makes sense when there’s scarcity — and in digital goods, scarcity doesn’t exist.
Dave Hornik has a wonderful post about Anderson’s talk while Ross Mayfield is also discussing how he’s come to realize that the economics of scarcity doesn’t apply digitally. Now, if we stuck with the focus on “scarcity,” then I should be upset that these two are basically repeating the “idea” I discussed back in April. Those who keep harping on the importance of “property” and love to say that you can “steal” content might even say that this idea was “stolen.” That, obviously, is ridiculous. These are basic ideas that we have all realized is fundamental and a truth of economics. And, it’s hardly a new idea (which is why my one quibble with Anderson’s own post is his decision to call the idea of the economics of abundance a “radical attack”). Mayfield talks about those who helped him realize it, from Jerry Michalski to Howard Rheingold. In the comments to that post, Julian Bond brings up the ideas of Buckminster Fuller and and Alan Cooper. In my case, the inspiration came from many different people, including the teachings of Alan McAdams (my old mentor and professor) and the writings of Brian Arthur (who focused on “increasing marginal returns” rather than diminishing ones) and even back to Thomas Jefferson, who famously said:
If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.
That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property.
So, no, it’s not a new idea at all — and yet, many people still don’t seem to want to understand it. They don’t believe that the free market can function with a lack of scarcity. It’s understandable why that could make some uncomfortable — but, it’s a fundamental misunderstanding based on this desire to force scarcity where there is none, just so economics can continue to be the study of scarcity. It’s this inability to get rid of that scarcity thinking that’s holding back a number of developments these days, and the more people who realize this and the more people talking about this, the better. And it is fitting with the theory of abundance. The more abundant this discussion is, the more likely people will grasp it. And, it’s especially exciting that someone like Chris Anderson is pitching it, because of his ability to take complex economic ideas and make them easy to understand, while getting people to listen. Hopefully, this is just the beginning of a widespread discussion about this topic.
Comments on “Economics Of Abundance Getting Some Well Deserved Attention”
Can Techdirt toot its own horn more?
Re: Re:
> Can Techdirt toot its own horn more?
Odd. I read it the other way. Mike is basically admitting that when he gave the talk, no one cared. Now that Chris is saying similar stuff its getting attention. If anything that’s the opposite of tooting your own horn. It’s admitting that his version didn’t really get the job done.
Well, yeah
I’ve been talking about this stuff for years… I prefer to call it “post-scarcity economics”
Economics Of Abundance
It may not be a new idea but it’s new to me. Thanks for the intro. Quite interesting.
Scarcity vs Abundance
Perhaps the problem is that a) if you have a really good idea, you don’t have to worry that someone will steal it because it is more likely that you’ll have to shove it down their throat and b) working in abundance appears to be contrary to our current way of thinking: “supply and demand.” What does one do when one has lots?
It seems that a fair number of marketing plans are built on this “lack-of” theme (sometimes having to create the demand) and are based on being the only one with the [right] product for you. Did you know you have IBS?
Allegedly, (spelling anyone?) it is easier to sell an idea that’s (that is) only 10% new [and improved] and so they teach us to take something that has already been created and make it better because it’s so much easier to get the customer/consumer to accept, than a brand new idea, i.e., the telephone, the camera, electricity…
As usual, I could be wrong.
Re: Scarcity vs Abundance
working in abundance appears to be contrary to our current way of thinking: “supply and demand.” What does one do when one has lots?
Actually, that’s a really important point. People assume it goes against supply and demand, but it doesn’t. It just means you have infinite supply — and if you look at the chart, infinite supply means price gets push way, way down. Now, some may say that’s why you need fake restrictions — but others would point out that if you flip the equation, and use the infinite supply to your advantage, you’ve suddenly lowered the cost of your inputs, and that’s a good thing. Suddenly you’ve decreased the *cost* of doing business, and that opens up tremendous new opportunities.
Re: Re: Scarcity vs Abundance
I must be brain-dead. I can’t quite get your point…
I’m not sure that I want to buy a million of something because there are an infinite amount, they’re cheap and I happen to have the money.
Conversely, I’m not sure that selling cheap is going to be rewarding enough. Perhaps, keeping the idea of “infinite supply” to myself would help my profits? That is if we are talking about something physical.
On the intangible side we have things like information, intelligence, spirituality, etc. and I feel that those things are costly, however abundant they may be.
I understand your cost-reduction point, but I’ve missed how that helps so much. Reducing the cost of doing business is always good, but not at the expense of your profits. What am I not getting?
Re: Re: Re: Scarcity vs Abundance
I must be brain-dead. I can’t quite get your point…
No, not your fault. I did a really bad job explaining… I may write up another, much more detailed post tomorrow trying to go through the basics.
I’m not sure that I want to buy a million of something because there are an infinite amount, they’re cheap and I happen to have the money.
No, you don’t buy a million of something.
Conversely, I’m not sure that selling cheap is going to be rewarding enough. Perhaps, keeping the idea of “infinite supply” to myself would help my profits? That is if we are talking about something physical.
It’s not about selling cheap. It’s about not selling that product at all. It’s about recognizing that when the supply side is infinite, your price gets pushed to zero and therefore it doesn’t make sense to sell it. Instead, you do just what the supply and demand curve tells you: you give it away for free.
Now, obviously the first response is how does that help anyone? Lots of ways! First off, you need to recognize that if you don’t, someone else will. That’s why supply and demand work. As competition increases, you will eventually be forced to price at equilibrium. In other words, a competitor will price it at zero (i.e., give stuff away).
So, what do you do? You stop looking at the thing that has infinite supply as a good to be sold, and start looking at it as a resource you can use to promote or sell something else (something else that isn’t in infinite supply). You flip the equation. Instead of being forced to sell something cheap, you give away something to get people to buy something not so cheap.
I understand your cost-reduction point, but I’ve missed how that helps so much. Reducing the cost of doing business is always good, but not at the expense of your profits. What am I not getting?
As with my answer to Petrea above, as you recognize the lack of scarcity and embrace it, it opens up a ton of other possibilities for ways to make money. It’s about creating entirely new markets where none existed before.
Digitally yes, but physically?
Digitally, sure, scarcity should be rethought, but I disagree that the cost of the physical infrastructure is approaching zero. Sure, transistors and bandwidth are getting cheaper, but what about the electricity to run them (not to mention all the climate control they need)? What about the real estate to put them on?
Re: Digitally yes, but physically?
Digitally, sure, scarcity should be rethought, but I disagree that the cost of the physical infrastructure is approaching zero. Sure, transistors and bandwidth are getting cheaper, but what about the electricity to run them (not to mention all the climate control they need)? What about the real estate to put them on?
Indeed, we are only talking digitally here. As for the rest of your comment, to me that represents “opportunity.” 🙂 Note that the lack of scarcity drives business in lots of other areas that do have scarcity. That’s the trick…
Re: Digitally yes, but physically?
I agree, electricity and real estate are great examples for physical stuff that is not infinite or abundant.
Nevertheless, I do think that the vast majority of stuff is sold because of “manufactured demand”… that is, someone makes consumers think that they need that stuff. A few examples are:
– a new cell phone every year
– a new car every three years
– new clothes (style?) every year, for every season
– new computers, iPads, laptops…
All that is advertised, produced and consumed for the dump, as explained beautifully in The Story Of Stuff (http://www.storyofstuff.com/) and elsewhere. Planned Obsolescence is another strong driver for “re-buy instead of re-pair”.
I think once we (as humans) realise that we are wasting our time, money and last but not least our planet’s resources to just produce, sell and dump, more stuff and faster, we may finally be able to think of different models for doing business.
Why we are in this giant treadmill of trying to sell more stuff faster is because of our fundamentally flawed (because unsustainable) growth-based economy, which is dictated by an equally flawed debt-based monetary system. But that is another story…
There is always a cost
As long as there are some things that are not in infinite supply (e.g. land, energy, environment etc.), there will always be a cost, even if you have infinite supply of something. If you follow the effects of your “infinite supply” commodity, you will see taht at some point, it hits one of these other commodities that are not in infinite supply. The real cost just gets delayed or gets hidden in something else.
And there is always the opportunity cost of not doing something else. A free but inefficient idea may actually end up costing a lot more than a costly but efficient idea.
Re: There is always a cost
As long as there are some things that are not in infinite supply (e.g. land, energy, environment etc.), there will always be a cost, even if you have infinite supply of something. If you follow the effects of your “infinite supply” commodity, you will see taht at some point, it hits one of these other commodities that are not in infinite supply. The real cost just gets delayed or gets hidden in something else.
No, no. That’s the whole point! You find the point where you hit something that doesn’t have infinite supply, and that’s the business you want to be in — because it’s about to get really big. Then you leverage the infinite supply that pushes everything in your direction… And, at the same time, I’d argue it makes the opportunities much bigger. You suggest that it’s a zero-sum game where the costs that are moved out are the same, but I’d argue that they get inflated by the new opportunities.
Infinte? No?
The supply side is far from “infinite”. There are a finite number of creative people each with a finite amount of time and a limited amount of “real-world” resources (dollars, equipment, etc.). Nor is there an infinite supply of good books, good music, and good movies.
And there’s a difference between trading “ideas”, which are dime a dozen (and overpriced at that), and trading something like a movie that took hundreds of people and tens of millions of dollars to create and produce.
You and Chris might of had the same “idea”, but he took that idea, developed it, wrote a pretty good best-selling book on it, and marketed the heck out of it. And that’s what we buy. People don’t pay for “ideas”, they pay for 500 page novels, hour-length albums, and two-hour long movies.
It’s true that in the digital world distribution costs are dropping, but in the real world, where those items are created and in which people live, pay the rent, and send their kids to school, the production costs are anything BUT free.
If you really want to contribute, tell us how we’re supposed to create and pay for the diversity of content we currently enjoy, without overburdening it with marketing and advertising no one else wants either. Tell me how our best authors and singers and directors and actors can spend the time they need creating the content we enjoy when they’re expected to do it for free?
Tell us how we overcome the “public goods game” and free-rider problems so that everyone can have their cake… and eat it too.
Re: Infinte? No?
The supply side is far from “infinite”. There are a finite number of creative people each with a finite amount of time and a limited amount of “real-world” resources (dollars, equipment, etc.). Nor is there an infinite supply of good books, good music, and good movies.
You’re talking about something else. I’m talking about the supply of any digital content, which is infinite. You’re write that those other things are not infinite — and I was not claiming they were.
And there’s a difference between trading “ideas”, which are dime a dozen (and overpriced at that), and trading something like a movie that took hundreds of people and tens of millions of dollars to create and produce.
Well, not in terms of supply. They both have zero marginal cost.
You and Chris might of had the same “idea”, but he took that idea, developed it, wrote a pretty good best-selling book on it, and marketed the heck out of it. And that’s what we buy. People don’t pay for “ideas”, they pay for 500 page novels, hour-length albums, and two-hour long movies.
I’m not sure what you mean about Chris’s book. This isn’t about his book, but the latest talk he gave. And, yes, it’s great that he has developed the idea and taken it beyond what I did with it. A lot more people will pay attention to him, because he does such a great job explaining things. And that’s GOOD.
It’s true that in the digital world distribution costs are dropping, but in the real world, where those items are created and in which people live, pay the rent, and send their kids to school, the production costs are anything BUT free.
You are confusing fixed costs and marginal costs.
If you really want to contribute, tell us how we’re supposed to create and pay for the diversity of content we currently enjoy, without overburdening it with marketing and advertising no one else wants either. Tell me how our best authors and singers and directors and actors can spend the time they need creating the content we enjoy when they’re expected to do it for free?
I’ve been explaining for years, over and over and over again. I’ve explained it in post after post after post. Clearly, though, if you don’t see that, we need someone like Chris to take it and explain it better.
However, just in these comments alone I’ve explained it a few times.
Tell us how we overcome the “public goods game” and free-rider problems so that everyone can have their cake… and eat it too.
Well, I hate to rewrite what I’ve written a hundred times before… but perhaps some links will help:
http://www.techdirt.com/articles/20060825/095653.shtml
http://www.techdirt.com/articles/20030912/1032238.shtml
http://www.techdirt.com/articles/20060605/1759213.shtml
http://www.techdirt.com/articles/20050214/1311237.shtml
http://www.techdirt.com/articles/20060322/1030219.shtml
http://www.techdirt.com/articles/20041230/1415204.shtml
http://www.techdirt.com/articles/20060829/183311.shtml
etc. etc. etc…
The point is simple. You need to STOP thinking about content by itself as a product you sell. You said it yourself above. You don’t sell “ideas” you sell books, or consulting services, or reports or conferences (or a bunch of other things). You don’t sell music, you sell CDs or concerts or t-shirts or access (or a bunch of other things). Basically, you look at the content itself (which is infinite in supply) to sell something that isn’t infinite in supply.
Re: Infinte? No?
Not only is there an infinite number of good books, good songs, and good movies there is no free-rider problem. The current system on copyrights causes an artificial scarcity.
I would argue that without the artificial scarcity of the fiat money none of the physical items would be very expensive. You might do well to read more about artificial scarcity.
In my blog entry titled Infinite Supply, the Problem with Copyrights & Patents I explain in great detail why there is an infinite number of any information and explain about paying for people to discover it. I’ve included a link to a great Google Tech Ed video detailing the history and impacts of copyrights.
Just a hint at some ways artists can get paid without advertising:
Re: Infinte? No?
It seems that for us humans to understand anything fully we must eradicate the ‘middle ground’. That grey, fuzzy, unclear area which is neither wholly black nor wholly white just attracts us back repeatedly until, finally, we manage to (mis-)categorise it in one box or the other. Michael demonstrates this perfectly in post #13.
The problems arising from this are then numerous. Apart from the fact that once we have categorised something as subjectively ‘good’ or ‘bad’, we really don’t like to change our minds and re-categorise, even in the face of overwhelming evidence sometimes, there is also the fact that though we now call it ‘black’ (or ‘white’), grey actually does still exist.
It’s not ‘all or nothing’. It never was. The choice we are faced with is not ‘keep the status quo or threaten the diversity of production’.
Take music as an example. If epic, or sony or any other of the big (multi-national, multi-continental) producers of music stopped paying quite so much to their top ‘stars’, it would not ‘kill off’ the music industry.
Quite the opposite, in fact, as there would be more money left ‘in the pot’, however finite the pot, for more artists to share – increasing the plurality of voices and meaning that there is a REAL chance of any aspiring musicians ‘making it big’. This in turn attracts more would-be musicians etc etc.
Aside even from that point, the ‘arts’ are practised to amazing levels for free by a majority of people. In choirs and orchestras, through am-dram groups, poetry recitals, open-mic spots, sports teams, motor sports etc, people are not only willing to devote their time and energies for nothing, but will actively PAY to do so!
The point here is that the ‘scarcity’ paradigm ‘they’ fight so hard to propagate does not actually exist. If every musician actually had a realistic chance of producing an album, many more would actually become ‘good enough’ to be released. There are already millions of fantastic amateur musicians who’d jump at the chance to release their own music – myself included.
There COULD be an ‘infinite’ supply of ‘good’ (subjective terminology is yet more ‘grey avoidance’ there; what’s ‘good’ to you isn’t necessarily ‘good’ to me) music, books and movies! The problem isn’t with scarcity of money, talent or time.
The issue is actually one of abject greed, alongside damned good marketing and a near-stranglehold on the sources surrounding the music biz.
Example – if we want to copy a Sony artist’s cd, we must buy a (sony?) pc or laptop. We’d also need a (sony?) cd writer, some blank (sony?) discs or some other form of media (sony walkman?)to store it on. We could call a friend from our (Sony?) mobile phone to tell them about the artist. Our friend could listen to the charts on their (sony?) radio to hear our artist, but the song will only be in the charts if the artist has had enough radio airplay in the first place. The (sony?) tv is another place to look, but the tv music channels are all owned by producers of music (like sony). Even the software used to create the music in the first place and play it out over the airwaves (Sony Fruity loops, Sony cool edit pro etc ) has been bought out. The cameras at the tv stations are made by Sony, as are the headphones, earpieces, mikes etc ad infinitum!
The few producers currently only pay a tiny minority of their huge profits to the recording artists anyhow. Multiplicity and diversity scare these suppliers because they assume it would inevitably put a dent into their over-inflated income – except that of course in the real world it wouldn’t! If Britney Spears hadn’t been hand-picked as the ‘face’ to launch that music/those products etc, and instead the 1% she got went to 20 different bands, there would be a larger target audience resulting in more sales overall!
There will always be people performing music for free. Buskers do it for a small donation, yet we don’t think of the few pence given to him as being opportunity cost which therefore stops us buying cd’s! More ‘fresh’ money is instead poured into the market..
If nothing else convinces you, compare books to cd’s for a moment. Where would the world be if it were not for libraries? Authors do not – cannot – prevent ‘their’ book being ‘shared’ in almost every town and city in the western world. Yet we still buy millions of books, the same books we could read for free time and time again if we wished!
Finally, it’s a mistake to think that NEW ideas, or ideas which extend or stretch existing businesses or whatever, are either “a dime a dozen” or “overpriced at that”. (Or to think that something requires tens of millions of dollars to be spent in order for it to be worthwhile.)
Bottled water makes millions of pounds worth of sales in the UK every day, despite the fact that our tapwater is among the best, cleanest and safest in the world, AND the fact that we have already PAID the water companies well for that privilege!
Clever extension of an existing idea, now worth billions. The man who thought of it almost certainly does not own the companies that make the money (coke, pepsico etc who ‘own’ most of our big producers of bottled water) but again, that’s actually a good thing!
Hope I’ve not been too guilty of repeating what’s already been said – I never meant to steal your ideas!!
Codeye
Relative Scarcity
I don’t know about you, but I still witness plenty of scarcities when I go to the supermarket. Non-moldy raspberries are scarce, scent-free dishwashing soap is scarce, certain kinds of cooking spices are scarce. Due to the whims of the fashion industry, many kinds of clothing are scarce at any given time — e.g. right now, it’s very hard to find a winter jacket that is not dark. Local news, local forums are still scarce on the internet. Reliable medical information is scarce on the net, overshadowed by ads for bogus “natural” products. As long as there is room for improvement, the “old” economics still apply.
Okay, Mike
Content. I think I know what you mean when you talk about content. You said two things that may have put me on track.
Firstly, content is what most webdevelopers are trying to stuff into their websites in order to improve their search engine rankings and that, they give away for free, in order to get more people to view their site, with the end result of a higher conversion rate. Give something away for free in order to optimize the thing that costs.
Secondly, it isn’t the content of something that makes the money, it’s the package that you put it in. Example: if I were to have an idea for a new tv series, I would have to write scripts, make a video and do all the other things required to make the idea into a hardcopy / copyright-able sale. If I were to sit down with some producers and explain the idea, without that hard copy, I would effectively give the idea away.
Am I close?
Re: Okay, Mike
mousepaw, I agree on the first point, but not totally on the second. It’s not just about “the package.” It could be lots of other stuff. So, for example, if you were a musician, you could give away your music for free, and use that to get more attention so more people came to concerts.
Look at how some videobloggers are now getting attention and getting professional gigs out of what they did. They gave away their talent for free and it helped get them recognized and got them business deals that make them money. The content is free because once it’s made is infinite. But, getting that same person to do future work for you is a scarce resource, so you can price it accordingly.
Music
Since you want to pick on music, let’s go there. Apparently, in your world view, if I want a band’s music I should be entitled to it for free, as the “supply” is “infinite”. (Never mind the costs it took to produce it, or the time and energy and talent it required, or that if no one pays for it they’ll probably have to get a real job at Wal Mart.)
But to continue, if I feel bad about being a freeloader, I can go one of their concerts when they come around every five years or so, or buy a CD, even though I have an iPod and don’t want a CD, or I can buy a t-shirt or poster I won’t wear or that I don’t really want on my wall. And if I don’t feel bad, well, guess I get to spend my money on beer. Or….
At last count, I’ve bought music from about a hundred artists on iTunes., to the tune [sorry] of about $300. The artists made something I wanted (music) and I paid directly for it in a series of “micro”-transactions. I didn’t have to track down 100 CDs, or go to 100 concerts to “support” them, or make a 100 “donations”, or engage in a hundred blind contract in the hopes they’ll make something I want in the future, or buy a pile of crap in a hundred indirect transactions.
Nope, they produced something of value, I bought it.
And no, you misinterpreted what I said, I don’t want a CD, I want Aimee Mann’s new song; I don’t want a pile of paper, I want David Weber’s latest novel, I don’t want a DVD, I want to see Serenity.
Neither you nor I pay for containers, because, in and of themselves they have no value. The only thing of value in those transactions is the content: the words, the music, the movie.
Fundamentally, I fail to see what’s wrong with the current system. Hundreds of thousands of people produce content on spec. We judge those finished products on their merits, and if they have value to us, pay a miniscule fraction of their costs.
All of your other links are, to my mind, mostly pie-in-the-sky models attempting to complicate the system by introducing contracts or dozens of other indirect transactions and mechanisms… all with the ultimate aim of getting us back to where we started.
A plentiful supply of content at (mostly) reasonable prices.
Re: Music
Since you want to pick on music, let’s go there. Apparently, in your world view, if I want a band’s music I should be entitled to it for free, as the “supply” is “infinite”. (Never mind the costs it took to produce it, or the time and energy and talent it required, or that if no one pays for it they’ll probably have to get a real job at Wal Mart.)
This is wrong on many accounts, and I apologize if the statements I made implied this. But, to correct your assertions:
1. No, you are not “entitled” to anything. The point is that the producer of the content needs to recognize that the competitive market is going to push the price towards free. No one is entitled to anything. I have NEVER supported infringing on content. I have always supported that the content producer recognize the natural market trends, however.
2. I do not say “never mind” that the content cost money to produce. I am simply pointing to the factual reality that fixed costs do not factor into pricing. That’s basic economics. Don’t blame me for what economics says to be true.
3. If they are good, and can create a business model to support them, they won’t need to get a job at Wal-Mart. In the entertainment business, you need to build attention. The point of all of this is that giving away your music is the best way to get attention and to build up alternative business models.
But to continue, if I feel bad about being a freeloader, I can go one of their concerts when they come around every five years or so, or buy a CD, even though I have an iPod and don’t want a CD, or I can buy a t-shirt or poster I won’t wear or that I don’t really want on my wall. And if I don’t feel bad, well, guess I get to spend my money on beer. Or….
Again, you misinterpret. It’s not about being a freeloader. It’s about the musicians deciding it gives them more opportunities to make money giving away their content for free — especially as the competitive market goes there. So, it has nothing to do with freeloading. And, I’ve given plenty of other examples that have nothing to do with concerts or posters. There’s a ton of possibilities, including things like sponsorships and fan club access. Just because *YOU* can’t think of business models doesn’t mean they don’t exist.
Nope, they produced something of value, I bought it.
Good for you. I have never said there’s anything wrong with that. All I’m saying is that over time the economics are clear that they’ll be better off giving that away for free. Then, you’ll be even better off.
And no, you misinterpreted what I said, I don’t want a CD, I want Aimee Mann’s new song; I don’t want a pile of paper, I want David Weber’s latest novel, I don’t want a DVD, I want to see Serenity.
I know you want the content, but the content is infinite. Infinite supply is FUNDAMENTALLY something that will eventually have a price at zero. But that doesn’t mean there can’t be a business model around it. I’m not saying you don’t want the content. In fact, I am very specifically saying you WANT the content. That’s why the content is the *promotional* material. Aimee Mann’s new song is the promotional material for the CD. David Weber’s writing is the *promotional* material for the physical book.
Neither you nor I pay for containers, because, in and of themselves they have no value. The only thing of value in those transactions is the content: the words, the music, the movie.
This is just bad economics. The containers are what have marginal cost over greater than zero. They’re what you’re paying for. The smart content creators, however, have figured out how to bundle the two.
Fundamentally, I fail to see what’s wrong with the current system. Hundreds of thousands of people produce content on spec. We judge those finished products on their merits, and if they have value to us, pay a miniscule fraction of their costs.
There’s nothing “wrong” with the current system. It just won’t last. That’s the nature of economics. Abundance increases supply. Supply pushes price down. Infinite supply means price will go to zero. It’s not saying the system is bad now. It’s just saying it won’t last. It’s fundamentally how the economy has always worked.
All of your other links are, to my mind, mostly pie-in-the-sky models attempting to complicate the system by introducing contracts or dozens of other indirect transactions and mechanisms… all with the ultimate aim of getting us back to where we started.
You again miss the point. I am not saying that any of those models is right. But that there will be many such models that come into existence, because they have to.
A plentiful supply of content at (mostly) reasonable prices.
Great. Except that the supply is infinite and your basic economics tells you that’s not sustainable without artificial barriers.
Look, you have to understand, I’m not making a moral judgment here. I’m just saying that the economics are obvious and the trends are clear, and what we have now is fundamentally unsustainable. What will happen is that, increasingly, new upstarts will recognize that they can make more money giving away their content for free… and that will make it harder and harder for those who want to keep charging. You may like it, but they’ll be in a competitive situation where it won’t be possible.
I’m not saying it’s good or bad. It’s what it is.
Re: Re: Music
I think there is an interesting distinction to make here as well. In reference to the difference between wanting to possess the Aimee Mann CD or listen to the musical content, it worth noting that the valuable resource ISN’T the song, but the artist’s creative ability. What should be marketed and sold is the creative talent embodied in the artist, not their works. Since the works can be replicated without creativity (i.e. stupidly by a machine), they are in the limit worthless. I believe Mark’s entire point is that, for example in music, for so long the scarcity of a musician’s talent has been manifested in the scarcity of the physical product. However as the the physical product becomes abundant, the worthwhile product can no longer be traded in a manifest other object. Musicians must now actually market their talents, not their products. This process is simply reducing production down to its core elements – was is really scarce in creative content isn’t the CD, it is the CREATIVITY. This theory is just explaining why in the end, this is the ONLY marketable and valuable asset in the mix.
Re: Re: Re: Music
It would be interesting, would it not, if your favorite artist(s), whoever they may be, the one(s) who recorded their talents and songs that you would not want to live without, never recorded anything or even wrote them down.
Perhaps artists should stop recording, play only live, allowing no one there to record anything or take pictures or anything.
So all anyone can buy from them is a one time experience.
Recording is so last century anyway, and now that those recordings have no value…
scarcity
The so-called “economics of abundance” is nothing more than the question of whether the benefits of establishing property rights are worth the cost of doing so. There are certain resources (like oxygen) where except in very limited and specific circumstances, it has never been worth doing so. There are others, like fisheries and pasture, where sometimes it has appeared to be worth it and other times it has not.
Digital technology raises the cost of establishing and protecting property rights in various forms of “content” by dramatically lowering the cost of reproducing that content. The extent to which it is worth maintaining the protection of property rights under these changed circumstances is a very interesting one. Right now, it’s in dispute. Within 5-10 years, it will probably become trivially obvious.
Perhaps a middle ground?
I have followed the development of Chris Anderson’s book, as well as followed the open source software model. I’m no expert, but I think I get it.
One of the confusing aspects of this discussion is the casual use of the word ‘infinite’. Can I suggest a better term might be ‘unlimited’, where it means that the marginal cost of delivering a product has no significant bearing on the revenue model? Also, this draws on the mathematical concept of a limit, as something ‘approaches’ zero. Infinite leaves the sour taste of division by zero, or traveling at the speed of light.
The benefit of seeing this as an ‘approaches zero’ problem is that we can see the progress of efficientcy in the market. The music industry changed as we progressed towards zero: first in phonographs, next in radio broadcast, and now in the Internet. I don’t want to take the ownership rights away from the creators of content, but their strategy for monetizing the value of their creative output changes as the efficientcies of distribution change.
Things in the music industry are especially hard to figure out because the cost of production is also dropping towards zero, thus removing barriers to entry. Supply is affected by both trends, but these trends are distinct.
I listen to Pandora.com radio channels, and that influences the CDs I buy (then rip to my IPOD). I buy CDs because this extra cost is equivilent to a built-in ‘backup service’, and because I like styles of bands more than any particular track. But I digress…
The software industry has been dealing with unlimited supply from the start. Open source doesn’t change the marginal cost of production, but rather, challenges the price/revenue strategy used by software vendors. The real marginal costs are in support after installation, and that is the opportunity open source strategies use to generate revenue.
Why would a software vendor invest in a development project to create intellectual property that competes with open source? I think this eventually will come down to an advantage in providing lower costs of support: economies of scale apply to support structures. Features built into sofware can, and do, facilitate lower support costs. The key is that in either case the supply of content is unlimited, but supply of support is not. The cost of production of support structures are not zero, so there are still barriers to entry.
To sum up, the presence/absence of an economy of abundance is not something I see as a binary choice, or something inconsistent with macro economic theory. I think of it as a sub-field of macro economics that studies the effects of products that approach zero marginal costs.
Is this the middle ground that we can all agree on?
Re: Perhaps a middle ground?
To sum up, the presence/absence of an economy of abundance is not something I see as a binary choice, or something inconsistent with macro economic theory. I think of it as a sub-field of macro economics that studies the effects of products that approach zero marginal costs.
Yes, absolutely. That was the point I tried to make in my talk at the Cato conference. Those who are pushing for stronger property rights basically say that traditional economics breaks down in the absence of scarcity, and therefore you need to put in artificial barriers (intellectual property) to create scarcity.
My point was that the economics is actually just dandy as is. It shows that you are approaching zero (actually, “zero” was a big part of my talk), and the economics still applies. My point is that people are making decisions on the idea that economics no longer applies with digital content and therefore some solution needs to be put in place to bring it back into line. And that’s wrong.
So I agree 100% that this is no inconsistent or radical. It’s traditional, proven, acceptable economics — and a special case of it, that is happening with increasing frequency.
Old ideas are in infinite supply - new, good ones
In this discussion, “idea” is a code word for a complete expression of a complex of ideas, e.g. a song. It’s true that once you disseminate an “idea” in digital form, supply of that “idea” is infinite. However, it is extremely difficult to create new, good “ideas”, so these are scarce. In the extreme view, T.S. Eliot said new “ideas” are non-existent – that’s pretty scarce. So when people treat “ideas” as scarce, they are acknowledging that it’s very hard to produce things like songs, movies, novels, business plans, and computer chip designs that are of any quality and originality. The Constitution acknowledges this, allowing Congress to pass laws “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”. We should all accept that digital data cannot be controlled and address new ways to encourage innovation in this context. That’s the hard part, and it still involves scarcity.
Free markets cannot exist until currency is define
Go here and read the comments, Free markets cannot exist until currency is defined……
http://www.steve-olson.com/false-belief-number-1-money-is-the-root-of-all-evil/
And expanding the idea...
if you try to engineer scarcity into a naturally
cost-free distribution mechanism, the result
will inherently be less economically ‘efficient’ than the mechanism that more closely matches the naturally
occuring ‘scarcity free’ mechanism..
in the pay per download thing, you’re dealing with
“micro scarcity” e.g. yeah I could get the song for free of p2p,
but this is soo much easier it’s worth paying a few cents.
(the marginal __ kind of like how delivery food costs more
than take away .. probably the same difference in those
prices would match the song, if someone did a study..)
I’m sure someone with an economic theory background
could do some proofs here.. I only hade 101 level Macro/Micro and this makes sense to me .. although
this is fun, maybe I should have had more!
I’ve been thinking this scarcity thing for a while,
and like the Jeffersonpost above am just glad
“That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, “
Ideas aren’t abundant, copies of ideas are. A kid with a PC and freely available software can nowadays do the job of a whole CD factory and logistics chain. Might be the time to stop selling copies, no?
What you could sell instead are the originals. Of course, you can only sell an original idea once (since copies, after all, are abundant.) But that’s the case with every other service industry. You only pay once for dental work, you only pay once for someone to fix your pipe, you only pay once for someone to teach you play piano.
In fact, even the content industry does it that way. The movie / software companies pay a one-time fee for the creators to produce an original. And the original is what they should sell on, getting a one-time payment for it.
Copyright creates scarcity
I agree that digital technology renders scarcity (almost) meaningless in the context of producing and distributing content. And I understand and sympathize with the view that copyright has not adapted to the digital age. But, copyright was developed essentially to create scarcity. The printing press had just as dramatic an effect on content scarcity as the computer. The rationale behind copyright is to give creators the opportunity to reap economic benefits from their creations. I’m not arguing that copyright laws are perfect (far from it!). And I’m not arguing that economics is all about scarcity. I’m saying that your point about scarcity not exisiting for digital assets ignores the deliberate (if artificial) scarcity inherent in copyright protection. It might be bad, but it is the law. Your use of quotes around “property” and “theft” make it seem as if you don’t believe these are valid concepts. The “property” in this case isn’t a Jeffersonian “idea”, but a right. And rights can be stolen. While this doesn’t give the RIAA the right to do whatever they want to enforce copyright laws, I think the real issue is how we should adapt copyright to the digital age. (That discussion should also include patent laws, but they aren’t quite relevant to a discussion of content.)
Makes sense Mike
Thanks Mike.
What you say makes sense.
Sounds like alot of people are getting caught up in details.
I think everyone is missing the point of ‘the flipped equation’.
I am simply pointing to the factual reality that fixed costs do not factor into pricing. That’s basic economics. Don’t blame me for what economics says to be true.
So where can I buy 4GHz PC microprocessors (any brand – Intel, AMD, whatever) at marginal production costs? Why do pay-toll highways exist? After all, the road is ‘already there’. Why do I have to pay to use it?
Maybe you should re-read your basic economics more carefully.
Music
Its interesting to see how what was “old” is new again.
The time was when musicians were paid for play… not for some “concept” of a recording. When that changed with the invention of the phonograph, new business and economic models had to be developed. Live music did not “Die” nor did musicians starve.
What did happen was a bunch of businessmen inserted themselves into the pay (read food) chain and made themselves wealthy off of the labor and creativity of the musicians.
They’re “contribution” was in the production and distribution of the content created by musicians… and more often than not the musician was paid pennies on the dollar for his creation.
Now that the costs and availability of production and distribution are dropping with new technology, these FatCats are crying foul and lobbying the government for restrictions to protect their “investment”.
I am going to agree with the above poster who says we’re paying for the packaging here. Plastic, Paper, fuel… these things still have significant expense. To hold a CD in your hand is to hold all of those expenses… and you pay for that.
To listen to a song you are left with nothing tangible. There is no “Product”… you didn’t buy a hammer and drive a nail to have a hammer left over. You listened to a song… and it is ethereal… it is a moment in time gone with nothing tangible left over but the memory. without the backup CD we are all 1 virus or hard drive crash away from having nothing… so we own nothing.
Lets also review how the RIAA have also gone at the music education industry. They are trying to shut down Tablature sites that help other musicians learn to play, claiming the works being interpreted are stolen and used without permission.
Copyrights may have been intended to serve the creator, but have been perverted by the industry to hold us all hostage. Now their house of cards begins to crumble… musicians and listeners all begin to rebel against the manipulation-for-profit of something that is intended for the listening enjoyment of everyone.
I also agree with the original poster of this thread (Mike) that the industry will adapt and change to work… and that its inevitable… no one will stop the forces at work here… all they can do is adapt or die.
economics and spirit
An economics of abundance is as natural as the rising of the sun. Given the definition, economics is the careful mgt. of resources and on a personal level, ones life is the most valuable resource. It can be deduced that economic value is an inheritant condition. When we as a humanity create a monetary/information mgt. system that codifies and accounts for the inheritant value of man then all can participate in a global economy. Then service to the least will be the best paying job on earth. Note, a rising tide lifts all ships
trying something new may help your business
Business is always related to new things, new products, new advertisement, and new market. E-business is not a new way for us, but E-business with Chinese maybe new to you. New providers to help you, new markets to support you. At http://www.acb2b.com, you can find the latest information about Chinese markets of all lines as well as the policy, laws, regulations, and others you need to know.
trying something new may help your business
Business is always related to new things, new products, new advertisement, and new market. E-business is not a new way for us, but E-business with Chinese maybe new to you. New providers to help you, new markets to support you. At http://www.acb2b.com, you can find the latest information about Chinese markets of all lines as well as the policy, laws, regulations, and others you need to know.
Realise the scarity is imporment
Market is also scarce. Without realisement of your present market, you can never step into a new market successfully. But it is also important to find out the details of the market you want to enter. If you are interested in entering Chinese market, go to visit http://www.acb2b.com. There you can find the details of Chinese market easily.
TRANSFINANCIAL ECONOMICS THE BASIS FOR HUMAN PROGR
I agree that an Abundance Economy would be possible but until the financial system is itself properly reformed human progress will be slow in this field…if not impossible in certain cases especially if earned capital is used. See my research, and development project of TRANSFINANCIAL ECONOMICS.
http://kheper.net/essays/Transfinancial_Economics.html
myspace.com/puppylove3125
OMFG IM 13 AND CHRIS ABADANZA IS STILL IN MYHEART AND I WROTE MY OWN SONGS SO IF U WANNA HELP ME OUT WIT A DEAL OR SUMTHIN MESSAGE ME ON MYSPACe
Alchemy
This economics of abundance is also called “Economic Alchemy” out of respect for and in deference to the ancient alchemists. The alchemists were the first people with the faith to believe that we had the ability to create unlimited wealth. Paul Zane Pilzer wrote about the alchemists years ago in his bestseller “Unlimited Wealth”.
Broken link in this post: http://p6.hostingprod.com/@www.ventureblog.com/articles/indiv/2006/001260.html
What's this "Bible" thing people are talking about?
I keep finding it amusing that these “new” ideas have so many old examples that fit their business models. Take the Bible, for example. Even before we had hotels, religion was thought of as anything but a scarce commodity. So with that mentality put aside, some guy named Gutenberg made a printing press became better known in history than any economist (probably richer, too).
From a Musician's Point of View
What this “new” model really means is that musicians will primarily be making their living off of live performances rather than attempting to earn wages through recordings and royalties. The musician’s “worth” is in their creativity, ideas, skill, and this will never change. People will pay for the experience of being at a live show, and this will always contain some worth because it’s not something that can be mass-produced like a recording can.
In a lot of ways that’s the way it has always been, since for the most part, the income made through record sales (even if the musician is relatively popular) has always been a small fraction of the whole. Course the recording industry’s shady business practices don’t help much with this either.
Could be a good thing in the long run — the media has long perpetuated the naive idea of the “hit song”, which makes it seem like all you have to do is win the cultural lottery and then forever live off of your royalties and residuals. The musician’s life is much more mundane than that…you earn your keep from gig to gig, gradually refining your skills over time. I’ve seen too many people ruin their lives trying to chase that elusive myth.
Time and effort to invest in ideas are scarce.
Limits of any resource base in context.
There is a viable way out of the present destructive approach of the debt based Price System, the Technocracy technate design.
Energy economics/energy accounting – non-market economics and a science designed system using biophysical economics connected with ideas from ecological economics was the invention of M. King Hubbert, Howard Scott, the Technical Alliance from Columbia University, Frederick Soddy, Alfred Lotka, and others.
Technocracy, the technate design is based on thermodynamics/themoeconomics.
These ideas represent the flowering of American culture and thought from the 20th. century.
It drops Adam Smith throwback economic ideas which track back to a time of low energy conversion and scarcity based economics.
The basis of the Price System is a throwback to middle east contract society based on human labor.
That time is over.
Technology, robotics, engineering design, eliminates purchasing power by eliminating jobs. That which ceases to function ceases to exist.
Kilowatt hours do not need to be monetized.
Money measures the abstract.
That will no longer do. Resource destruction for money is pointless and destroys sustainability.
A Technate would operate within a given resource base. Technocracy Study Course… main author M. King Hubbert.
Technate design-An Idea For Now-Stephen L. Doll.
There is no real reason to stick with the poverty, the misery, the waste, the crime, the disease, and the corruption which the Price System spawns.
Technocracy technate Master Archive File
Technocracy Incorporated file: How did Technocracy originate?
Currently many people are grasping for ideas of real alternative systems The Oil Drum: Campfire | Opportunities and Constraints – A Contest of Ideas
As viable information breaks into the awareness of larger groups of people… actual change can occur.
abundance
Are we are talking about moving from a negative sum game to a positive sum game?
Money is a score keeping methodology. Currency is a way to cheat on the score card.
Price is not just about today’s currency cost; but an indicator of tomorrow’s money costs. Price measures money’s value, thus making money useful as a store of time, labor, and innovation against future needs.
It’s all so hip and cool to be an intellectual communist, but I don’t believe it until it comes from someone actually still making a living somehow from authorial work while just giving it away for free, or to someone else’s profit.
Even Chris Anderson just had his book released for free for a short while, rather than releasing it in public domain, and giving it away to some publisher, declining to receive any share of the profits.
Yeah, maybe people whose intellectual work is more a matter of philosophy can still get paid to talk at some places (specially if they don’t air those talks for free), actors and writers can revive theater and leave cinema to amateur productions only (youtube cat videos, now sans money from google ads, though, or, shared with anyone who copies your video), and painters, photographers, can just live off private commissions. Or just have it as extra money, besides “real jobs”.
But no one actually making a living as an author is that interested in abdicating of ones’ own property rights, it usually comes from people interesting in acquiring or selling someone elses’ work without paying the authors any share of the profit. Just like the questioning of property rights usually comes from those more interested in having some of the rich people’s stuff.