Making The 'Significant Objects' Project... Even More Significant

from the recycling-for-profit dept

Back in July, we commented on the Significant Objects project where 100 authors are writing up 100 stories involving 100 various trinkets -- and then selling those stories along with the associated items on eBay for a tidy profit. (The project originally struck me as an experiment to see if the one red paperclip stunt could be mass produced in some way as a sustainable publishing business.) Now, just a few months later, Slate has teamed up with the Significant Objects folks with a contest for Slate readers to submit their own 500-word stories about a cheap tchotchke -- a BBQ sauce jar bought at a thrift store for $0.75. The contest attracted over 600 stories to be judged by Slate and the Significant Objects founders, and the winner gets the honor of being picked as well as the proceeds from its eBay auction -- which has a current bid (and profit) of about $20.

This contest is brilliant in that it not only highlights the concept that every product is a bundle of scarce and infinite goods, but it also demonstrates that content can be used to engage with an audience as a form of entertaining advertising. For the price of a bauble and some editorial judging, Slate connected with its fans and gathered a bit of demographic information on its readers who sent in a story (submissions had to be accompanied by an email address and location). Imagine if Slate had instead put a banner ad on its website with a form to fill out for personal information, the response rate for that would likely be much much lower. But with this contest, the cost of the BBQ jar was negligible, and Slate editors spent their time reading stories and got a peek into the creative minds of its readership. Okay, the drawback is that the submission judging process is actually not a trivial task, especially when there are more than a handful of entries (and more than a couple judges). Even Google hasn't exactly figured out how to judge its own Project 10¹⁰⁰ contest. However, the search giant opened up the judging to let anyone vote on winners to help narrow down the selection. (And there are other examples of crowdsourced judging processes like Threadless's tshirt designs.) So I envision the next generation of advertising contests reaching out to audiences, calling upon more volunteers, and trying more and more creative campaigns to produce scarce goods out of thin air.

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Revisiting The Replicator Analogy: How Infinite Goods Create More Jobs

from the bring-in-the-tomatoes dept

Recently, in writing about a DRM scheme, I used the analogy of the Star Trek food replicator to explain why it made no sense to turn infinite goods, like content, into artificially scarce goods. There was a lot of back and forth in the comments about the appropriateness of the analogy, though I still think the basic point stands: it makes no sense to artificially limit an infinitely available resource. In fact, it only leads to bad things. However, one of our readers has written up a fantastic blog post where he tries to present a similar, but much, much better analogy:

A better analogy would be if the replicator only made tomatoes. You could have as many tomatoes as you wanted, they'd always be perfect and delicious, and they'd always be free. This would put tomato farmers out of business. But these tomato farmers could likely start growing something else instead. And what happens to the rest of the economy? Pizza and pasta restaurants suddenly find that a major ingredient in many of their dishes just became free. Now, for the same dish, they can charge less, or buy higher quality ingredients, or make more profit. And if you're a really talented cook specializing in tomatoes? Your skills are now in very high demand.

And there is still a demand for the people who bring the tomatoes from the replicator to your table. There is still a demand for the person who stews and cans the tomatoes, or dices and seasons them. And all the other food items, the ones that aren't in infitnite supply, still need people to produce, process, and distribute them.

This is what's happening in the music industry, and starting to happen in the publishing industry. Some parts of the industries are finding their functions obsolete. Instead of looking at the money they could save with electronic distribution, and what good use they could put that money to, the industry is seeking new laws and regulations to limit the infinite supply so business can continue as usual.

Even if every single song, book, and movie was distributed digitally for free, there would still be a need for the music, publishing, and movie industries. There would still be demand for editors, producers, marketers, and all sorts of other services that these industries have always provided.

Reasonable people aren't calling for the abolition of the music, publishing, and movie industries. They're just asking these industries to look to the future, and stop trying to limit supply to protect obsolete business models.

Read that over a few times. It's about the best description/analogy of what we've been trying to say here that I've ever heard.

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Publishers Succeeding With Free eBooks Driving Sales For Other Books

from the there-we-go-again dept

While I'm no fan of the Kindle for a variety of reasons (DRM, lack of real ownership of the books, etc.), it has to be admitted that the device has made ebooks a lot more mainstream than before. And, along with ebooks comes the realization to some publishers that it's now possible to give away some ebooks for free, and use them to promote other books (thanks to William C Bonner for sending this in). What the publishers are discovering is that they can offer up older books that have lost much of their commercial value for free, and it helps drive sales of newer books by the same author. In some cases, they give away the first in a series of books, which has proven to be quite effective. What the publishers are really realizing is that thanks to digital distribution, they can suddenly use the "free" cost of the book to hook people and get them to purchase later books in a series. This is hardly a new idea, of course, but it's great to see more book publishers figuring it out.

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How 'Free' Economics Are Going To Impact The Video Game Market

from the it's-coming... dept

Reader Ben points us to a well done article over at GameIndustry.biz warning the industry to start understanding how "free" plays a role in digital economics. It does a great job summarizing the key points associated with "free" infinite goods, such as the fact that it really has little to do with "piracy," though the "piracy" may be an early indicator of where the market is heading:

The notion of Free isn't new in economics, of course. It's well understood that as a commodity becomes less rare, its value tends towards zero. When something becomes sufficiently commonplace, you can no longer charge a notable price for it - unless you artificially create a market based around image and prestige (bottled water) or find a way to add value (pure oxygen canisters, flavoured water).

You can also create artificial scarcity to keep prices high, although there are obvious moral problems with doing that with anything other than luxury items - and markets, like networks, interpret this kind of interference as damage, and usually find a route around it.

The whole thing is worth reading, and does a good job laying out the issues. It doesn't, however, suggest much of a solution -- though, there are plenty of potential solutions for the video gaming industry, focusing on finding scarcities to provide that can't be had for free. So, for example, giving away the core game for free, but charging to play multiplayer versions on an authorized server. As many are finding, that can be quite a nice business. Unfortunately, it does seem like some think the answer is to sell virtual goods within a game, but that has the potential to face the same eventual issue (the goods are really infinite, and will face the same deflationary economic pressure). But the fact is there are always additional scarcities created, which will present opportunities.

Figuring out just how to break out those scarcities from the infinite goods was the point of that economic series I wrote up a few years ago, which we're now offering nicely packaged as the Approaching Infinity book (as a part of our CwF+RtB experiment) -- which actually helps demonstrate the point. You can read most of the basic content for free online in the series, or you can buy the physical (scarce) book in a nice readable package which has been updated and expanded with more material and edited to better flow as a book (and you get a t-shirt as well). You can always take infinite goods and find a scarcity... whether it's with blog posts or with video games. So, yes, free is important to understand, but equally as important is understanding how to use it to your advantage, rather than just worrying about how it may hurt your old business model.

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Using Creative Fiction To Increase Value Of Trinkets On eBay

from the using-infinite-goods... dept

When we talk about understanding how to embrace the economics of infinite goods, one of the key points I've tried to make is that every product is a bundle of scarce and infinite goods. That's a point that some people have a lot of trouble with at times, insisting that some people who create infinite goods have no scarcities to sell... and, conversely, that those who make scarce goods, sometimes have no infinite goods to give away with them. While it may be a bit more complicated to separate out the scarce and infinite goods, it doesn't mean they don't exist.

Parker writes in to point out a fascinating example. Apparently a group of fiction writers are experimenting with selling physical goods on eBay with fictional stories given away "free" in the description. The project is called Significant Objects, and involves a bunch of fiction writers purchasing random trinkets, and then coming up with a neat story to go with them. The post at io9 notes that some stories seem better than others at increasing the auction bids, but points out that: "If Rosenfeld's success is any indication, these authors may actually get paid more for short fiction on eBay than they would at most publications."

Again, some will incorrectly claim that we're saying that fiction writers should start selling crap on eBay, but that's not it at all. This is just one (fun) example of many of content creators smartly using infinite goods (the stories) to make a scarce good (the trinket) more valuable, and putting in place a business model to profit from it. Once again, we learn that creativity knows no bounds, not just in creating content, but in playing around with new business models.

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Turns Out There's Lottttttttssss Of Money To Be Made In T-Shirts

from the who-knew? dept

We've pointed out in the past that folks who don't want to understand the economics of scarce and infinite goods often falsely claim that the business model we suggest is all about selling lots of t-shirts. Or, more specifically, when they comment in a mocking fashion, it's usually something like "lotttttttttttttttttttttsssssssssssssssssss of t-shirts."

The truth is that the business models we've shown usually have little to nothing to do with t-shirts. There are tons of scarcities that have nothing to do with t-shirts, and often aren't even physical goods (another mistake people make is assuming that scarce means physical). Usually we're talking about things like access and attention as valuable scarce goods. However, perhaps we were being a bit too flip in ignoring t-shirts ourselves.

Clive Thompson has a short article over at Wired looking at "the t-shirt economy," noting that it's actually a pretty big business: on the order of $40 billion in branded or decorated apparel (by comparison, the worldwide market for recorded music was supposedly $31.8 billion in 2006), and some of that definitely comes from content providers who are providing content for free and making money selling t-shirts. I still don't think it's the greatest business model out there (despite what some of my critics like to claim I've said), but I have to admit I'm rather amused by the fact that the "t-shirt economy" is actually getting some attention.

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You Don't Have To Sell Software

from the seriously dept

Reader Philip writes in to ask about our thoughts on a commentary on News.com by Dave Rosenberg concerning Sun's open source strategy. Rosenberg seems very concerned that Sun has decided to forego trying to sell software directly:

Sun's approach--at least the way I'm reading it from Jonathan Schwartz's statements, is about making the software totally free and trying to sell support and hardware. This clearly diminishes the value of the products and doesn't offer a mechanism that encourages people to pay for software.

It's difficult to see what Rosenberg is worked up about here. Sun seems to be following pretty closely an economically sound approach to a market: using infinite goods (software) to make scarce goods (hardware and services) more valuable. That's a lot more reasonable than using infinite goods to try to get people to pay for more infinite goods. There's no reason why Sun needs to encourage people to pay for software, and there are many reasons why they should not try to make people pay for software.

Yet, for some reason, Rosenberg seems to think that this strategy is somehow damaging to the open source movement:

It also puts an unnecessary burden on the notion of open source--such that if Sun is wrong, everyone else will look wrong too.

Why? If, as Rosenberg notes elsewhere in the article, Sun's open source strategy is different than other companies', then such a failure should be seen as a failure of Sun's model, not a strategy of embracing open source. There are plenty of reasons why Sun may (or even is likely to) fail in this endeavor. The Sun brand name has been tarnished. People may not find the hardware or services Sun is selling as providing enough value compared to alternatives (even with the software included). On the whole, it's not clear what's compelling about Sun's offer compared to the alternatives, and that's its biggest challenge. But that hardly reflects poorly on open source software or on the idea of not selling software.

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A Few Extra Virtual Maps Isn't A Real Reason To Buy A Video Game

from the it's-about-the-scarcity dept

There's definitely been an ongoing battle in the video game world from some executives complaining about used game sales for console games (there's been a bit of confusion in the past tying this to video game DRM -- which is more focused on PC games). We noted that EA was among those concerned, but was hoping to give people more reasons to buy new, rather than second hand. However, some folks in the comments complained about the methods EA was using, and that's worth a further discussion, especially as other examples are being shown. Reader DEF points out that another video game company, Epic, is trying to encourage original purchases by giving buyers a free voucher for certain in-game items, such as special maps. Such vouchers would only work for the initial buyer, thus, in theory increasing the value of the initial purchase.

There are a couple of problems with this approach. While I do think it's better to come up with "reasons to buy" rather than trying to sue people or pass laws requiring a cut of the secondhand market, this approach may get it backwards. Effectively, they're selling "infinite goods" rather than scarce goods, and that seems likely to backfire, for a few reasons. First, it actually diminishes the value of the game. One aspect that buyers take into account is the resale market. An active second hand market increases how much people are willing to pay for the original product, because they recognize that they can sell it later.

Second, when the focus is on charging for infinite goods (or only promising them to those who buy first hand copies), the incentives get risky. Suddenly, gaming companies are put in a position of choosing what "virtual" items are allowed in the game for first hand buyers vs. second hand buyers, and that leads them to make bad decisions in locking up important aspects of a game, frustrating potential buyers.

Plenty of games have shown that money can be made in charging for the service (a scarce good) of connecting and accessing an online world or community. If video game makers focused on that, then the entire issue of the second hand market wouldn't be such an issue. In that case, they'd want to get the actual games distributed as widely as possible, with as many features enabled as possible, to make the idea of playing in the online environment even more appealing.

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Investors Recognizing How ProIP Is Bad For The Entertainment Industry

from the it's-not-a-bad-thing dept

Kevin Stapp writes in to point out an interesting article over at the Motley Fool, where the author, Anders Bylund, points out why the new ProIP law is bad for the big entertainment companies from the perspective of an investor in those companies. Basically, he recognizes what some of us have been saying for years. If you rely on stronger copyright as a crutch to protect an old business model, you're much slower to adopt newer business models that can greatly increase the size of your market. In other words, by denying the growth potential of infinite goods, you shrink the potential size of your market, and that's bad for the company and bad for investors:

As much as I love my Walt Disney investment and the great entertainment the company has created over the years, it's also part of a boneheaded industry that can't deal with the digital revolution.... Disney, Warner Music, and their colleagues could handle rampant piracy in a much more delicate manner and turn today's massive problem into free distribution and dirt cheap marketing. Yes, there are ways to make money when others copy your dearly beloved content for free. The PRO-IP Act is a step in exactly the wrong direction, though.

Exactly. And this reinforces the point that it's a mistake to keep trying to find the right "balance" between content producers and content consumers. There's no need for a balance if the content producers adopt business models that both expand their market (by properly defining the market) and leave consumers free to share and promote the content in a way that actually helps the bottom line of the content producer. It's quite rare to see short-term investor-types recognize such strategies, so it's quite interesting to see a discussion like this on a mainstream site like the Motley Fool. Hopefully others will start recognizing this reality soon as well.

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Rock Band Video Game Selling T-Shirts Of Fake Bands

from the lotttttts-of-t-shirts dept

When critics of our analysis of the economics of infinite and scarce goods want to mock our ideas or make fun of us, they often fall back on the false claim that the business model we advocate is "give away everything and make it up by selling t-shirts." Or, rather, if they're really in a mocking mood, they usually write "llllllloooooooooooooooooootttts of t-shirts." It's quite amusing, though, of course, it shows a fundamental misunderstanding of what we mean by scarce goods.

That said, t-shirts can make up one part of the scarce goods that someone sells, though, it will almost always be a small part of it. And, there's no reason to mock the contribution that selling t-shirts can make as part of a larger business model. Reader Aaron de Oliveira points us to the interesting news that the super popular video game Rock Band is now letting players who have uploaded their own fake rock band logo order t-shirts, keychains and other merchandise from their fake band. As de Oliveira correctly notes, not only does this make some money, but it also makes the gaming experience better, connects fans more closely to the game and their own fake rock band in the game:

The company realizes it's not in the music business or in the t-shirt business. Its business model is the custom experience and it uses music (fun & free or cheap) and t-shirts to improve that experience in such a way that people are willing to pay for it.

Bingo. So go buy llllllooooooooottts of t-shirts to make it work.

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Books Are The Souvenir Edition For Your Idea

from the good-quotes dept

We've talked at length about the difference between infinite goods and scarce goods in various areas, and how you should spread the infinite ideas to make the scarce goods more valuable, but here's a great quote that puts that in perspective when it comes to books. Mathew Ingram points us to an interview with entrepreneur and author Seth Godin, where he notes:

"Books are souvenirs that hold ideas. Ideas are free. If no one knows about your idea, you fail. If your idea doesn't spread, you fail. If your idea spreads but no one wants to own the souvenir edition, you fail."

That's a beautifully succinct way of explaining the entire concept, though I think that the last bit (about getting people to own the souvenir edition) may be changing as well -- and other business models will start to show up.

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Yet Another Report On Why Forcing A La Carte Cable Is A Bad Idea

from the think-it-through dept

If there's one topic that we regularly discuss that many of our readers (even those who agree with us on most other things) disagree with us on, it would be mandatory a la carte cable. We've explained repeatedly why forcing cable companies to offer a la carte cable is a bad idea that would likely lead to higher prices and less choice. Yet people still argue against it, claiming (incorrectly) that they would just order a few channels and prices would decrease. Instead, those fewer channels would inevitably cost a lot more (if they were still available at all) because a la carte pricing for channels reduces demand for individual channels, resulting in higher (not lower) prices per channel. Jeff Eisenach and Adam Thierer have put together a short report looking at the problems of a la carte cable, and noting that even if the intentions of those supporting mandatory a la carte cable are strong, the end result isn't likely to be what they'd expect.

On top of that, it's probably worth pointing out that this debate may soon be moot anyway. As we move increasingly to a world where most TV programs are available online, the entire concept of the channel will go away. It won't matter what channel a particular program is on, because you'll just subscribe to that program, and it will get delivered over the internet. In the meantime, though, there's simply no reason to force cable companies into providing a la carte channel selections.

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Paul Krugman Joins The Infinite Goods Brigade

from the the-concept-is-getting-through dept

It looks like Paul Krugman is the latest economist to join the growing group of folks who recognize the impact of infinite goods on business models -- and how it's not a bad thing, just an inevitable shift in the market. Unfortunately, his writeup on the issue is a little weak. He references Esther Dyson's predictions about this from fourteen years ago and the recent Rolling Stone article we discussed last month. What's disappointing is that, as an economist, he should have been able to look at the fundamental economics and understand why this makes sense, but he chooses not to do so. That leaves him open to criticism. The next stage of this debate is going to be showing, fundamentally, why this inevitable change isn't a bad thing. Some people already recognize this, but it clearly is going to require a lot more convincing evidence.

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Advocates Of A La Carte Mandates Misunderstand Infinite Goods

from the bundling dept

Some minority organizations are making the case that a la carte mandates would destroy the market for niche channels. They point out that the market for minority programming like BET and Univision is relatively small, so they (and minority viewers) benefit from being able to tag along with channels that have broader interest. FCC chairman Kevin Martin disagrees, saying that "if a cable operator only wants to carry one channel, it should not be required to buy 10 or 20 channels in order to do so." Martin seems to be thinking of cable channels as tangible products like cars or toasters: if people are only "required" to buy the channels they really want, they'll save money because they won't be "forced" to waste money on other channels they're not interested in. But this argument ignores the fact that television content is an infinite good. The costs of delivering cable content is almost all fixed; once coax has been run to a customer's house, it costs almost exactly the same to provide a given customer with every channel on the cable network or with only one channel. As a result, bundling is economically efficient: throwing in additional channels increases the value of the cable service without imposing any extra costs on the system.

People imagine that an a la carte mandate would mean that if they're currently paying $50 per month for 50 channels, then they should be able to pay $1 per month for one channel. But that doesn't make any sense. Switching a given customer from 50 channels to 1 channel doesn't reduce costs (the other 49 channels would presumably still be produced for other viewers), so why should the customer expect a lower bill? If anything a switch to a la carte actually makes things more expensive because in some cases cable companies have to install new equipment and set up a more complicated ordering and billing system to keep track of who had signed up for which channels. In reality, what would happen is that the cost of each channel would go up a lot. Instead of $1/channel, cable companies might charge something like $8/channel, with each customer choosing 6 channels on average. The result would be that most people would pay about the same for a lot fewer channels.

It's a mistake to think of bundling as being "forced" to pay for channels we don't want. After all, non-sports fans don't get outraged about the fact that they're "forced" to take the sports section with their morning paper. The right way to think about it is that you're paying for the parts of the bundle that interest you, and the rest of the paper is a freebie that doesn't cost you anything extra. It would be silly to demand that newspapers price each section of their paper separately and let you do without the sections you don't want. It's equally silly to demand that cable companies not show you channels you're not interested in watching, since those aren't costing you anything either.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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California Lawmaker Wants To Change Law To Tax iTunes; Pretending Infinite Goods Are Tangible

from the reality-is-meaningless-if-it-gets-in-the-way-of-tax-revenue dept

Slashdot points us to the news that a Los Angeles (surprise, surprise) area politician is pushing to change a California law that requires sales tax on the sale of tangible goods. He wants the law to be adjusted such that digital goods would be considered tangible goods so they can be taxed. Effectively, this is a way of applying a sales tax on iTunes downloads as a way to make up the California budget shortfall. Considering that the entertainment industry has been trying to convince the world that intellectual property is no different than tangible property, it's not surprising that a politician coming from LA would see no problem with pretending infinite goods are tangible goods. However, it seems likely that such a plan would backfire. If anything, it will push more people to look for alternatives (potentially unauthorized) alternatives if California forces an unwanted price increase on iTunes. Also, if the law starts treating digital goods as tangible goods, will that give people other rights -- such as the right to do what they want with the content after purchase? It looks like there's plenty of opposition to this plan, so it probably won't go very far. In the meantime, though, does someone want to explain the difference between tangible goods and infinite goods to Assemblyman Charles Calderon?

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Red Hat And The Power Of Infinite Goods

from the economics-of-free dept

The New York Times has a great write-up of the continued rapid growth of Red Hat. Despite the looming recession, Red Hat is predicting 30 percent revenue growth in the coming year, to more than half a billion dollars. For a few years, Mike has been talking about how to make money while giving away infinite goods, and Red Hat could probably be the poster child for his argument. Despite the fact that virtually all of its "products" are available for free on the Internet, Red Hat is still convincing companies to pay it hundreds of millions of dollars. Of course, the reason this works is that Red Hat's product isn't its operating system or other software. Red Hat's product is access to the time and expertise of its employees, and to Red Hat's extensive ecosystem of developers, hardware vendors, and others who have built atop the Red Hat platform. Because Red Hat stands at the center of this tight-knit web of relationships, their employees are better-positioned than anyone else to quickly solve customer problems. And it turns out that companies are willing to pay hundreds of millions of dollars for that assistance.

The most interesting part of the article is where it talks about Oracle's effort to undercut Red Hat by offering the same software at a lower cost. Apparently, as we predicted, it hasn't been going too well. And it's not too hard to see why: Larry Ellison doesn't seem to understand Red Hat's business model. What Red Hat is selling isn't software, but support. And the value of a support contract is a function of the expertise of the company providing it. Not only does Red Hat have a number of key Red Hat developers on staff, but it also has a ton of strong working relationships with developers and vendors elsewhere in the Linux community. That means that if a customer encounters a bug in its Red Hat Enterprise Linux installation, Red Hat will either have an engineer on staff who can fix it, or it will have a strong relationship with the outside developer who developed that piece of software or the firm that manufactured the hardware. That makes it more likely that it will be able to address the issue quickly and incorporate the fix into the software for future releases.

Oracle has made comparatively little effort to either hire Linux developers or foster strong relationships with the broader free software community. As a result, Oracle isn't able to provide the same kind of value that Red Hat can. Yes, Oracle tech support can fix straightforward problems, but if they need to make changes to the code, they'll often need to go to a Red Hat engineer for help getting it fixed. And not surprisingly, most customers would rather cut out the middleman and go to Red Hat directly, even if it costs a little more.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Can Someone Teach The New Malthusians About Infinite Goods?

from the well-here-we-go dept

When we talk about economics and business models concerning "infinite goods" it may seem like we focus almost entirely on the entertainment industry. However, the reason for doing so isn't an infatuation with that particular industry, but simply the fact that it's the best "natural experiment" for showing how these infinite goods work to grow a market. But "infinite goods" impact every market and help them grow. Yet, every time there's some sort of larger financial crisis, people spring up and deny that economic growth can occur any more. It dates back to Malthus' incorrect belief that people were growing exponentially while food supplies grew linearly -- meaning we'd run out of food. The problem, of course, was that he failed to take into account economic growth. That economic growth came from new ideas and new technologies (infinite goods) that made the production of food much more efficient.

The Wall Street Journal at least admits that every previous "Malthusian" has been proved wrong (other than very limited, pre-technology societies) before diving headlong into a discussion of whether or not the latest generation of Malthusians might just have a point this time. The article includes lots of fear mongering about various resources running out -- but those were the same fears that proved overblown in past Malthusian outbursts. My favorite example of this is William Stanley Jevons, who predicted the end of British economic growth thanks to coal running out (four years before oil was discovered) and when he died, his study was found filled stacked high with scrap paper -- since he believed that the country was running out.

That isn't to say things just "work out," but that it's these new ideas and new technologies -- these "infinite goods" -- that help to solve the problems. But they can only do so if they aren't locked down and artificially limited. Every time we lock down these ideas, we cause more problems and actually limit growth. If you could invent a solution to creating drinkable water (which the article frets about, but which Dean Kamen believes he's done), you could patent it and make it expensive. Or you could give it away, and recognize how you've just created a booming market for goods in places previously decimated by drought and disease. Rather than selling the water cleaning device, I would think there's a much bigger market in giving it away free to trouble spots and then helping to sell everything else that a healthy population would then want. Unfortunately, it's not clear that this is what Kamen will do. He is, after all, one of the folks protesting against any kind of patent reform in Congress.

So, again, this isn't to brush off the concerns of the Wall Street Journal piece. The environmental and resource challenges described are real challenges. But resource constraints can be solved through growth, and that growth is supplied by new ideas (new infinite goods) that increase the pie by creating resources that are infinite, and which make other scarce goods more valuable. We've pointed to Paul Romer's excellent explanation of economic growth before, but it bears repeating:

Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen. To create valuable final products, we mix inexpensive ingredients together according to a recipe. The cooking one can do is limited by the supply of ingredients, and most cooking in the economy produces undesirable side effects. If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials and suffer from unacceptable levels of pollution and nuisance. Human history teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.

Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new recipes or ideas were discovered. And every generation has underestimated the potential for finding new recipes and ideas. We consistently fail to grasp how many ideas remain to be discovered. The difficulty is the same one we have with compounding. Possibilities do not add up. They multiply.

So, when we're discussing infinite goods, and using the entertainment industry as a model, it's not just about entertainment. It's about dealing with all kinds of challenges that the world faces, and doing so through spreading infinite goods that multiply and make existing resources more valuable.

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EA Boss Recognizes The Economic Trends Of Infinite Goods

from the don't-hear-that-every-day dept

At this point, we're so used to execs from big entertainment firms denying the existence of the inevitable trends impacting their industry, that it's truly a surprise when someone appears to clearly understand what's happening. Slashdot points us to the shocking news that EA's CEO knows that the business model for his industry is changing, and that the current one is becoming obsolete:

"In the next five years, we're all going to have to deal with this. In China, they're giving games away for free. People who benefit from the current model will need to embrace a new revenue model, or wait for others to disrupt."

Can you imagine hearing the same thing from the head of a movie studio or record label? It's nice to finally see a CEO who recognizes the economics at hand -- even if it means his former cash cow will be obsolete and his company will need to embrace entirely new business models.

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