Continue to laugh, funny boy. I find your glee at this one example humorous. You take a limited case and extrapolate to the universe.
This is not "a limited case". Rather it's one of now several examples put forward on this site of successful businesses using infinite goods.
o Anyone is free to do what Lee did and give their inventions away. There is nothing in our system that prevents someone from adopting his business model.
Exactly. Anyone can use his business model. In fact this site and others are advocating for exactly that. Because of infinite goods, the barriers to entry have changed. One of the properties of infinite goods is that copying is free or of such infinitesimal price that it is effectively free. So trying to erect barriers to stop copying is a largely useless endeavor. The new barriers to entry are things like Attention and Reputation. Look at Red Hat. They offer all their products for free. Anyone can download them and anyone can distribute them. Heck, anyone can do exactly what Red Hat does and charge for services like set up, optimization, enterprise, etc. So why aren't there innumerable competitors in this space? Because Red Hat has their reputation as a barrier to entry. Especially with enterprise customers, they often base their decisions on reputation.
o Logically, if a business model incorporating free is better than a business model incorporating pay, then the business model incorporating free will win out over the business model incorporating pay. Maximum options are obtained when both models are available, and may the best model win.
Business models that incorporate infinite goods are winning in the market place. This article about Lee is shown as yet another example. Without infinite goods, what would Lee or anyone else have to do to get every major company in your field to come to you unsolicited and offer you $$$? Lee achieved this result with minimal cost. All he did was share his idea and help push it out to as many people as wanted it.
o "Soon to be extinct," followed by "no time soon"? I suspect that "no time soon" will likely be closer to centuries, if ever, but hey, it could happen. Hillary Clinton could be elected President on write-in votes. It could happen. On the other hand, if the only people against IP are a small group of people writing on obscure blogs, and none of these people are working through the legislative process to eliminate IP, then guess when it will happen?
infinite goods is not about eliminating IP. it's rather about pointing out the nature of ideas and infinite goods being in conflict with artificial scarcity. patents and other forms of intellectual property create artificial scarcity in infinite goods.
o Mainframes still have their uses.
They do. not the best of examples, but his point was that they once dominated the marketplace and were replaced by more open models. the PC is more open than the mainframe.
1) minor matters are pointed out because the "theory" of economic of infinite goods was so completely railed against. many naysayers said that it could never work in the real world. as one example after another is pointed out the theory gains it's proof.
2) as far as a "long standing system of law" patents and such are all relatively recent in human history. man has been creating art, literature, etc. since his birth. look at the great poets of yore. Longfellow, for example, was popular because people took his ideas and spread them far and wide. he did not fight to possess them, or if he did, he was not served by it. he became great because the ideas he gave birth to as a poet spread themselves into the hearts and minds of nations.
the point of this article is not that Lee has maximized his income earning potential by working for Microsoft.
the point is that Lee's work brought him a choice of all he could ever want. $$$ came to him, unsolicited. he didn't do anything directly to gather this money. he just disseminated his ideas. by doing so he got to write his own ticket.
if what he wanted had been cash money, could he not have asked for millions in signing bonuses, equity stakes, etc. he could have easily gone to the highest bidder.
in this case, Lee had other interests in mind when he made the decision. i imagine he has a great deal of freedom in projects he can pursue. and he said he decided to work for Microsoft because he saw the company as an avenue to help lots of people.
i like what he said. time is worth money. time is becoming more and more and more valuable in our day and age. as your ideas spread your time becomes demanded by millions.
think about the people on the top of heap already for other reasons. how much money do you think it would cost to buy unfettered access to Bill Gates and his time. What about Warren Buffett? How much would anyone pay for an hour, a day a week with those who are or were visionaries in our world? How much would you have to pay to convince them that it was worth it to give the time?
Having your ideas deseminate pushes you up to the top of the heap.
did no one catch all the offers he got? his sharing of ideas and his participation in the community have rocketed him into the top 1%. before the digital world, what would you have to achieve to have every major company in your field calling you unsolicited to have you come and work with them.
Lee basically got to write his own ticket. i don't think he's particularly exceptional in talent, charisma, or accomplishment. you could probably easily find hundreds if not thousands of people with his experience and credentials.
he rose to the top and and money calling him because he shared his idea and took an active role in the community.
$$$ was calling him. he could have taken it in any form he wanted. he could have been named VP of this or that with huge bonses and pensions.
he benifited in a huge way monitarily. he just chose a route that seemed more fulfilling to him.
The very first thing we need to do is distinguish between infinite and free. A lot of times in these kinds of discussions people use the 2 interchangeably. That's not quite correct to do so and often leads to confusion.
Let's define an infinite good. An infinite good is something that can be reproduced endlessly. Once it is created, it does not need any new inputs, resources, etc. The second property of an infinite good is that as many people that want it can have it. Both of us possessing the same infinite good allows up both to benefit from owning it and doesn't detract from the others use of it.
Here's an example of an infinite good. Before there was any electricity or computers or digital anything, there were infinite goods. Music is such a good. Once a song is created it can be reproduced endlessly with no new effort on the part of the creator. It can also be enjoyed by as many people as want it. When you learn a song you can sing it yourself. You singing it or sharing it does not prevent anyone else from singing or sharing it. Music is a good that does not take any more inputs to copy and allows as many people as want it to have it.
Before we tangent into incentives to create music or other infinite goods, lets save that for later in the discussion.
We need to take a slight tangent here to address the subject of zero. When it was first implemented throughout the world, it created a lot of confusion. It took societies ages to even recognize the number zero, it was considered heretical in some areas for a while. Zero caused all sorts of problems in that it didn't work like other numbers. It isn't a number. It's the absence of a number, and that screws up a lot of things. For thousands of years, it held back progress. You can't have advanced math or physics without an understanding of zero -- and the difficulty in accepting it was a real problem. Of course, for all of us who learned about zero in elementary school, this seems laughable. How could zero be such a difficult concept to understand? Except, as I read the book, it occurred to me that it's the exact same problem that was causing this breakdown in the discussion. It's incredibly easy to misunderstand zero in economics. That's because economics, we're often taught, is the "science of scarcity" or understanding resource allocation in the presence of scarcity. All too often, economics itself is defined by scarcity. The "zero" changes all of that. Plugging a zero into an equation that expects a non-zero sends it haywire (think of what happens when you divide by zero) -- and that leads people to think that the equation must be broken. So, for example, basic economics tells you that a free market will push prices towards their marginal costs. If their marginal costs are zero (as is the case with digital goods and intellectual property), then it says that price will get pushed towards zero. However, this makes people upset, and makes them suggest the model is broken when a zero is applied. They see a result where there is no scarcity, and it doesn't make sense to them since they've always understood economics in the context of scarcity.
Because the cost of infinite goods is being driven toward zero it is disrupting several economic models. It is also creating several new and ultimately more profitable models. Economic models are configured in several different ways. Some economic models are designed to output a tangible good such as furniture, cars, etc. Other economic models are designed to output intangible goods such as music, software, etc. These intangible goods are also infinite goods. When you plug a zero into these economic models, things change radically. If you are producing a good that had an infinite good as an output such as music, software, etc. you are finding that all the money, time and resources you are spending is now returning zero. That is a broken economic model. That model has been disrupted.
So what should someone with such an economic model do? If they realize that an infinite good is driving toward zero it makes a great input for other products and services. Several economic models are being built with infinite goods as an input. Specifically for businesses built with music as an input like Harmonix, they are not in the 'music business'. They are not trying to use music as an output and sell it. Rather they are using it as in input that adds value to other things they can sell. Specifically for Harmonix, they are selling a customized experience. They are using an infinite good music and another infinite good, their software, to create a scare good - the experience. They are also using the same infinite goods to add value to the peripherals they are selling. The peripherals are near worthless on their own, but when they are coupled with the infinite goods of music & software as well as the scare good of the experience, they too become valuable and people are willing to pay for them.
Harmonix is also selling music as tracks for their software. They are able to sell music at a premium because they have bundled it with their other infinite good, the software. Record labels are having trouble commanding the same premium because they are selling music as a stand-alone output. Harmonix is giving people additional value for the music they purchase.
So now lets get down to the issue of t-shirts and what Harmonix is doing with them. At no time has it been said that creating, printing or delivering the t-shirts is free. What has been said is that these particular t-shirts have an additional input in them beyond the cloth, sewing, printing & delivery. They have a connection to the custom experience that Harmonix has built. T-shirts on their own have a specific value determined by the market. Usually you can pick up several t-shirts for a few bucks. You could even find a way to print your own logo on them. There is however a cost to doing so. Time and resources. You must find all the resources necessary, printing tools, imaging software, in order to produce the t-shirt. You must also spend the time to create the output - a tshirt with your Rock Band logo on it. Harmonix is able to sell their t-shirts at a premium because of 2 things. They have already gathered the resources necessary to produce the scarce tangible good, in this case a t-shirt. That is the same for any business model. The 2nd they have is the connection to their custom experience. Those willing to pay $24.99 for a t-shirt with their custom logo on it feel that Harmonix has provided sufficient value to justify the price they will pay.
And now to reply to some of your quotes specifically:
"I could understand the blog IF Rock Band was free or the keychains, tshirts, etc. were free, but clearly this is a case of opening a brand new business market."
You are entirely correct in your understanding of what is happening. Harmonix IS opening a brand new business market by selling key chains, t-shirts, etc. What is being pointed out is that this new business market is available to Harmonix because of their use of infinite goods. An economic model that uses infinite goods follows the same rules that other economic models follow. One of the major points in understand infinite goods is that they tend to open up multiple new markets and that incumbents should move to capture those new markets before they are disrupted by new entrants.
"In regard to Rock Band, they're making profits on these TShirts, etc., so why doesn't the cost of the game come down for new releases? (Not the price drop often seen later)"
Economic models vary. Introducing infinite goods does not change this. In Harmonix's case, they are using infinite goods, the free part, as an input. Their business model currently doesn't contemplate offering any outputs for free. Right now they are offering sufficient value to justify both the price of their software & peripherals as well as t-shirts. Lets look at some tangible goods for hypothetical examples. If there is a 2 star hotel offered and a 4 star hotel offered at the same price, most people would choose the 4 star hotel because it offers the better value at that particular price. Harmonix, and other companies that use infinite goods as an input have the ability to add more and more of the infinite good to their offerings of scare goods and increase the value of those scare goods. This will allow them to either command a premium price, like the t-shirts or better justify their current price.
"Mike specifically stated this was a jab at those who "mocked" him during his discussions of freeconomics, which is totally outside the scope of this particular blog regarding tshirts."
Mike was pointing out the irony of the situation. Mike had early on used t-shirts as an example of a scare good that could be made more valuable by being bundled with an infinite good such as music. He was mocked by people claiming that all businesses that were being disrupted by infinite goods couldn't rely only on t-shirts. They said that these companies would have to sell 'lots of t-shirts'. Mike and others have gone on to show numerous examples of how infinite goods work inside the economic models people already accept. When this article was posted, showing that Harmonix was in fact selling t-shirts much the way others had mocked earlier, Mike found it ironic that Harmonix was doing what others had said couldn't be done. Specifically make money selling t-shirts. Mike pointed out that it was also ironic because Harmonix's business is not dependant on selling t-shirts. Rather, the t-shirts are an additional revenue stream. Mike made a joke saying that Harmonix better sell 'lots of t-shirts' in order to stay in business. That was his jab.
"In regard to the career fair offerings (or any other public outing), "swag" is advertising and its sole purpose is to get you to look. That's a given. But the swag isn't free (my original debate). Sure, you could take the swag, walk away, and never look back and you can claim it's free, but ask the consumers if they enjoy paying for your free swag with overpriced goods."
I like the way you put it: "get you to look". Attention is a very, very valuable scare good in our day and age. Giving away swag to get attention is exactly what they're doing. In this particular model, there is a cost involved in giving away tangible goods for free. What happens when you introduce a zero into that model by replacing the tangible goods with infinite goods? Now you can give away as much as you want and little to no cost. Your input is infinite goods which can be free and your output is attention which is very valuable. There are several companies that are now figuring this out.
"The consumers of the company has paid for that swag, so enjoy it for "free". You'll be paying for someone's free swag in the future."
You are entirely correct. You will be paying for someone's free swag in the future. The point is to realize that this is not a problem. It is something to be embraced and capitalized on. Mike has gone over numerous examples of this on previous posts. I will give you won more. I recently attend the Texas Renaissance Festival. One of the acts that perform there is 2 singers called Iris & Rose. Before we were married, my wife had been a fan of them for years. She purchased all 6 of their CDs. While we were dating and through our marriage, I've been introduced to their music by my wife and become a huge fan. In this case because my wife already paid for all of their music and "shared" it with me, I will never purchase any of their products simply because I acquired them all when my wife shared with me. They will probably never make a dime off me directly. However, during this trip the to the Texas Renaissance Fair we go and attend all their shows. We're big fans. These shows are free. They make their money selling CDs and are paid a fee by the fair for their performances. So there I was watching the performance with several other people who had obviously never seen or heard them before. I was really into the show. I was singing along to all the music and since it was a live show, responding to what was happening onstage at the appropriate times for an audience response. I noticed that because I was so into it that it rubbed off on several of the people around me and they got into it as well. They were really enjoying themselves. When Iris & Rose announced that they had CDs for sale, these same people that I had just influenced immediately whipped out their wallets to purchase the CDs. Several of them purchased multiple CDs. I was not the only cause for their CD purchase, but my being a fan and having fun increased the value of the CDs to those that purchased them. Specifically they were able to experience Iris & Roses music and see it's effect. I have never paid a cent for any of Iris & Roses music, but they will profit from my continued attendance at all their shows. Now imagine that since it cost them nothing to promote themselves to me and if there were millions of people like me, how much more valuable would the music be to those who wanted to acquire it?
"Think about this: Take the number of McDonald's commercials you see every day and multiply by $250,000 (the average cost of a 30 second commercial). Now, assume this commercial runs 7 days a week, 365 days a year. Sum it up. Now price a filet-o-fish sandwich. The ad to you was free, but to those buying a fish sandwich, that's a pricey "free" product. Imagine, now, what the price of that sandwich would be if McDonald's quit running ads altogether, especially given they're one of the most recognized business on the globe."
You make your point correctly. Given the parameters you pointed out they would have the effect that you observed. The massive expense in this case is the advertising. McDonald's is paying for ad agencies time & expertise as well as paying for air time all over world. What would happen if because of infinite goods, McDonald's could have all of their advertising without having to pay for it. There are numerous examples on TechDirt of advertising and content being the same thing and engaging your customers to help create that advertising as well as help distribute. You correctly identified that right now advertising is a huge cost center for McDonald's. Their future use of infinite goods could change that.
"Same concept. The cost is just different."
Correct. correct. correct. None of the concepts change. Just the way business have to approach them does. Things like supply and demand are still in effect. The question is what happens when the supply becomes infinite?
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.
in freeconomics or infinite goods. there is no one right way to do things. it is rather a recognition of 2 things. that infinite goods can make scare goods more profitable and that infinite goods create value in new places in your market to be captured.
harmonix, the makers of rock band, a building a ton of value on top of something that is very easy to distribute. in this case music. there is only a very small cost difference between selling the same music to 1 person as 10,000 people. yes there is still a cost involved, but it is of such a negligible nature, that the music they sell could be called 'infinite'. another reason it's called infinite is that whether they sell it to one person or one million people it doesn't run out. they don't have to spend any more time producing said good.
so back to how they're using music as an infinite good. they add value on top of the music, specifically in their unique experience. people are willing to pay for the game and the peripherals not just because they like the music, but because of the experience. the music adds value to all of the peripherals, which are scare goods, and gives people a reason to buy them.
an infinite good like music has also created value in another part of the market that harmonix is now trying to capture. part of their experience is the 'cool factor' of having/being your own band. they offer other scare goods, key chains, t shirts, figurines which capture this value that is created by the infinite good music. harmonix can continue to collect revenue by selling an infinite good, it's software. another infinite good, music within the game, a scare good, the peripherals and now they've found another place to capture value from their customers by selling customized scare goods like t-shirts & key chains.
as far as whether they should charge $24.99 for a t-shirt. i imagine you'll find lots of real bands t-shirts out and about in the world. i have a Reba McEntire & and a MegaDeath t-shirt in my closet. as far as the utility these shirts, they could probably not command a premium like $24.99. they are no different than your average t-shirt you can get from wal-mart. what adds value to the shirt and makes it worth it to someone is the association with performer.
specifically on the $24.99 rock band t-shirts. rock band is offering a service. any player could probably find their own way of producing any of the goods being offered, t-shirts, key chains even the figurines. the reason they would pay rock band is that it would be extremely time consuming and costly, probably more than the $24.99 cost to purchase one from Rock Band. harmonix has added value to a plain t-shirt by offering a connection to the players own user experience, as well as offering a bit of convenience in the customization. harmonix has done all the leg work for the customer.
i think the point of the infinite goods isn't that there is a magic pill cure all for every market. rather, by adding value to a scare good (t-shirts, figurines, etc.) with an infinite good (music, 3-D digital models, etc.) you give your customer a reason to buy. you can also add value to an infinite good to give your customers a reason to buy.
i think a very early example of this was the advent of coupons. this may be an old wives tale as i can't find the reference to cite, but it makes my point. soap sellers began wrapping their soaps in paper. women who where buying it expressed concern that they were paying more for the paper when it was the soap they wanted. to alleviate their concerns, the soap seller began printing coupons on the paper for soap to give the women added value to the purchase.
Jake's right. two benifits that free content producers can profit from is that their content eventually becomes unweildly as a whole. if you have 500+ comic strips it becomes difficult to consume. there is now value in reducing a piece of it to print format.
Another way they make money is offering extended story lines in print only formats. Order of the Stick is a good example of this.
to poke further holes in the analogy. aren't most surgeries these days performed by teams of surgeons rather than one individual? i'd imagine a team of surgeons would perform the same basic "group think" functions as wikipedia.
also, the whole of wikipedia isn't edited by every user. the amount of information is too vast. if i understand correctly, there are pockets of experts that gravitate to subject matter that they care about.
one thing i've always wondered about these sites is what percentage of your available dating popluation is indexed on these sites. just for fun, i've looked for ex-s on these sites and haven't found a single one of them.
The law also introduces a small tax to be levied on all blank media --- from a blank CD to mobile phones and even a memory stick. Computer hard disks and ADSL lines have been left out of the legislation despite their widespread use for illegally copying music and films. The money collected will be paid back to the owner of the copyright.
Maybe I'm missing something here, but the owner of which copyright? Is the Spanish government going to hold the money in trust until someone is busted and then seek out all the labels, artists, other involved parties and pay them out of this pot.
It'll be interesting to see how easily money flows out of a governments coffers if it's keeping the interest on it.