Key Economics Lessons For The Digital Era

from the things-to-remember dept

Jeff Jarvis has a series of short notes that he’s put together on “hard economic lessons” for the news business, but many of them apply to pretty much any industry — and it seems worth pointing some of them out for discussion:

  • Tradition is not a business model. The past is no longer a reliable guide to future success.
  • “Should” is not a business model. You can say that people “should” pay for your product but they will only if they find value in it.
  • Virtue is not a business model. Just because you do good does not mean you deserve to be paid for it.
  • Business models are not made of entitlements and emotions. They are made of hard economics. Money has no heart.
  • Begging is not a business model. It’s lazy to think that foundations and contributions can solve news’ problems. There isn’t enough money there.
  • No one cares what you spent. Arguing that news costs a lot is irrelevant to the market.

There’s a lot more at the link, much of which I agree with (a few I think are slightly misleading or wrong, but those are outweighed by the ones I do think are dead on). However, these were the key points that resonated the most with me and which I think are good pointers that many in traditional businesses have trouble with. Many of the arguments we hear against the new business models we talk about (or the bad decisions by those legacy businesses) stem from not understanding the six points above.

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Comments on “Key Economics Lessons For The Digital Era”

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Anonymous Coward says:

Re: Re:

No one complains more than IP maximists. “I want more IP or else artists will starve!!!” Copy protection lengths are never long enough, infringement damages are never high enough, patents are never ridiculous enough. and when anyone else complains about these absurd laws, you complain about their complaining. You think that you should be the only one allowed to complain.

Citizens have a right to complain because we pay taxes. This is supposed to be our government and when they misbehave it is our duty to complain.

MrWilson says:

Re: Re: Re:

I never cared for the whole, “because I pay taxes,” reasoning for why you deserve a voice. You deserve a voice (an actual impact, that is, rather than an impotent gesture that gets ignored) because you’re a citizen.

The concept of paying taxes reinforces the same mentally amongst the rich and entitled that paying money means you deserve something. “I spent $50,000 on this luxury car, so I own the road!” “I paid lobbyists to push this bill on Congress, so I deserve the benefits that it brings me!”

If money has anything to do with politics, it’s always a bad association because more money equals more influence. If financial contributions to political candidates are free speech, then more money equals more free speech.

Some rich people actually do pay more taxes than us little guys, but they obviously don’t deserve more influence on the government than we do.

Nina Paley (profile) says:

begging to differ

Begging actually is an OK business model for some. As money accumulates in the hands of the very wealthy few, they need to offload some of it – there are only so many yachts and mansions and petite lap giraffes even the greediest oligarch can maintain interest in. So some of it goes to their favorite “beggars” – charities, NGOs, nonprofits, and artists. Begging may not be a viable business model for news organizations, but it works for many other “content providers” like opera companies and rarified fine artists.

On another level, people enjoy supporting artists and projects they like, even ordinary people without much money. Giving money to cool projects is a way to participate in them, be connected to them, be a part of them, and it feels good for everyone. That’s why crowdfunding works. It doesn’t work for everything, of course; but no business model works for everything.

Cynix says:

Contradicting yourself?

“Should” is not a business model. You can say that people “should” pay for your product but they will only if they find value in it.

Mike, you’ve always made the point that price and value are distinct, so that something can easily have great value, yet no price.

However, you’re statement above contradicts this. Which is it?

Chargone (profile) says:

Re: Re: Contradicting yourself?

one better: price and value aren’t the same, but people will pay more for things they value, and outright refuse to pay for things they place no value in (because they don’t want it) if not compelled by outside forces.

price =/= value
in the same way that
effect =/= cause
supply =/= demand (the concepts there-of, specifically)

price is what you ask for something. value is how important having it is to the person you’re asking to pay the price. the heigher the price is set, the more the person must value the item in question before the’ll pay the price in order to obtain it.

MrWilson says:

Re: Re: Re: Contradicting yourself?

It is appearing a child comment to ComputerAddict’s annoyed, but completely legitimate criticism that points out aptly that you clearly didn’t read or at least comprehend that Mike wasn’t the author of the points.

Chargone responded as well to ComputerAddict’s post before you posted anything and therefore his post appears before yours.

Chris-Mouse (profile) says:

Re: Contradicting yourself?

There’s no contradiction there.
Every item has two values and a price. There’s the value the item has to the seller, and the value the object has to the buyer. The price is negotiated between them.
In order for a sale to occur, the negotiated price must be less than the buyer’s value, and greater than the seller’s value. If this is not possible, then no sale occurs.
Your ‘contradiction’ is simply a case of the seller valuing something higher than the buyer. No sale occurs, no matter how much the seller might want one to occur.

Mike Masnick (profile) says:

Re: Contradicting yourself?

Mike, you’ve always made the point that price and value are distinct, so that something can easily have great value, yet no price.

There’s no contradiction. People won’t pay for something unless it has value, but that doesn’t mean that if it has value, they’ll automatically pay for it. So, yes, something needs to have value if you want people to pay for it. But that doesn’t mean value and price are the same thing.

Does that make sense?

MrWilson says:

“The only thing that matters to the market is value. What is your service worth to the public?

Value is determined by need. What problem do you solve?”

These are my big criticisms of modern commerce. People seem to think that advertisements should create demand when they ideally only publicize supply.

It’s like retail store management pushing employees to make more sales. I consider it unethical to pressure people into buying more. If they want or need it, they should be free to decide on their own.

Suzanne Lainson (profile) says:

Costs can be a selling point though

While it might be a bad pitch to say, “We spent $100,000 so you should pay us X dollars,” it’s very common for people and businesses to say, “Let me explain why what we are doing requires so much money.”

If you are raising money for a child on life support, part of your pitch is probably going to be, “This is so expensive that the family can’t afford to pay for it without help from donations.”

Or if you are selling a luxury good, you will likely say, “This item is made from a rare wood that requires a team of 10 people trekking into the wilderness for 9 months to harvest it and bring it back to civilization.”

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