The economics of this decade can be summed up as a fight between abundance and scarcity. (Pictured is the first oil well, courtesy the Paleontological Research Institute.)
Digital goods are abundant, their economics that of abundance. The time and attention of buyers is limited, the products on offer unlimited. So if you can monetize small slivers of that, as Google, YouTube and MySpace do, through truly deep personalization (it's all about you and what you want to know, see and feel) you're going to make money.
In contrast there is oil economics, which the current Administration has been making paramount. Oil is based on an economics of scarcity. The providers have the whip hand, and by manipulating supply they can maximize their value. OPEC does it, refiners do it, integrated oils do it by owning their own dealers.
The producers of "copyright" goods -- movies, TV, music, books, software, etc. -- all depend on an economics of scarcity. You've got to see that movie now, you've got to turn on the TV to this channel at this time, you've got to get the #1 hit and be the first on your street to read the #1 book. You want to run the new Windows applications, so you need Windows now, and new hardware to run it. This makes the supplier of the good king, able to name their own price by manipulating supply -- just like an oil company. And it's good to be the king.
Trouble is, it doesn't work anymore. The Internet provides too much
abundance for it to work. And thus we have business model problems.
Intractable ones. You can't turn a scarcity-based business model into
one based on abundance. It's impossible.
- Scarcity business models give the power to the intermediary who represents the seller.
- Abundance business models give the power to the intermediary who represents the buyer.
Open source software, too, takes advantage of the economics of abundance. Their business model is based on support, an assurance that what you have will work. Proprietary software, on the other hand, demands payment for features -- the money goes into what will come next.
This is what makes our time so similar, in my eye, to the 1890s.
It's because we're really facing a basic change in business economics that we have this crisis.
Back then we were moving to mass production, mass consumption and mass merchandising models, driven by new technologies that transcended time and space. The nation trumped the locality. The U.S. rose to economic leadership because it had the largest national market, and thus could supply the goods to dominate smaller national markets.
The move from an economics of scarcity to one of abundance is just as wrenching. And the resistance is greater. That's why we haven't seen many new technologies emerge this decade (the commercial Internet is over a decade old). Our policies favor scarcity over abundance. They even try to force scarcity (as in digital goods) where non exists.
In the end the people of the 1890s' crisis had no choice. The Uneeda biscuit in the airtight sanitary wrapper made the cracker barrel obsolete.
In the end we face the same reality. The planet must be saved or our
grandchildren will die. The future lies in the economics of abundance.
Resistance is futile.
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