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Scarcity ≠ Value? October 6, 2009

Posted by Graham Pingree in As The Future Catches You.
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I was particularly interested by Enriquez’ points about how the information/knowledge economies have challenged the traditional economic model of ‘scarcity = value.’ He suggests that in the new knowledge economy, a product/idea is only valuable if it is shared (he uses the fax machine example – it is only useful as it proliferates). The ‘network effect’ he describes is not a new phenomenon – a car/phone/newspaper is clearly more valuable with the infrastructure that comes with universal adoption too – but seems to be much more crucial in service-based businesses. It got me thinking about social networking, though. Enriquez says “what matters most is that the purchaser becomes part of a network, and that network keeps growing,” but what if there is no “purchaser”, and the service is provided for free? In this case, it is harder to me to understand if there is any inherent value (at least in terms of wealth creation, which is what the author is talking about in this section) to a having a large network – presuming no alternative revenue model like advertising. It seems to me that the economics of businesses haven’t changed that much: the widest distribution is desirable, as long as people are willing to pay something for your product/service.
Another observation (pardon my cynicism) was that much of the change that Enriquez forecasts has some scary implications for global security in the future. As wealth disparity between and within nations increases, as social and religious mores are challenged by innovations in genetics, as technological advancements generate potentially dangerous “second uses”, it would appear the world will become even less geopolitically stable. The author acknowledges some of these risks, but spends most of the book describing the opportunities incumbent in genomics and other changes – I couldn’t help think that more vigilance is required about all of the accompanying pitfalls as well…

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1. Ben - October 9, 2009

Chris Anderson, author of The Long Tail, has a new book related to this topic, although I still haven’t finished it so I can’t say yet whether he has anything particularly insightful to say. At the least it is an interesting ramble through the history and implications of free. The book is aptly titled Free: The Future of a Radical Price, and it’s available through Audible.com for, you guessed it, free.


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