Lack of Scarcity?
Eric Norlin is working on a thought piece that suggests that abundance on the Internet in its totality drives goods towards the public domain and makes it hard to make money. This piece with which Doc agrees that Identity could deal with the "scarcity problem" as quoted in the previous post.
Eric, in his 3rd point, comments in his draft: [this point needs work: specifically, *how* it is that a lack of scarcity drives something toward the public domain.] David Weinberger comments in his post: That seems intuitively right. But the question is: what on the Net is in such abundance that it drives goods thusly? It's not the abundance of goods but the abundance of access to goods: you don't need a lot of capital to create and/or distribute digital stuff. (BTW, in such an environment, what is the remaining virtue of capitalism?)
I am a believer in Says Law, back from your Econ 101 classes, in which the market flocks to extreme abundance or scarcity. Says Law provides a natural equilibrium for all markets. If something is abundant and cheap, it is consumed until it is in equilibrium or even tips to scarcity. But let me try to help Eric with his draft.
The Internet in totality has three significant emergent properties:
- Low transaction costs: this accelerates Says Law
- Inherent optionality: The Net is the most option rich medium, primarily because of its openness (free options create more free options). Every layer in the OSI networking model creates options for use by the above layers. As David Reed says in That Sneaky Exponential, "The value of potential connectivity is the value of the set of optional transactions that are afforded by the system or network." When assets have economies of scope properties (high optionality) in a low transaction cost environment it further accelerates Says Law.
- Commoditization: All goods trend towards commoditization. On the Net, the scale and span of the network and diversity of interests allow otherwise fragmented markets to be pooled, further accelerating the process of commoditization. All commodities prices also trend toward zero, as markets become more efficient in how they commonly define goods and contracts as well as develop mechanisms to transact them.
- Rapid Obsolecense: The openness of the Net fosters innovation. That, combined with the above, results in shorter lifecyles and rapid depreciation.
For information goods, including software, the above implies a turbulent search for equilibrium that eventually tips to the public domain. For infrastructure, the above implies a volatile physical commodity market in backwardation (future prices are lower than spot prices).