Economics of Scarcity

Chris Anderson points me to Ethan Zuckerman‘s excellent summary of a talk he gave last month: “What Happens When Things Get Free?” This is tres timely for me, as I’m talking to my class tomorrow night about how digital goods change the economic model of scarcity.

Broadcast media is a product of scarcity. Since there’s a limited
set of channels, you have to be very discriminating about what gets
out, releasing only things that have a very broad appeal. The emergence
of YouTube and others shows what happens when there’s an infinite set
of channels available…

Chris runs through a quick set of examples of the move from
economies of scarcity to economies to abundance: Walmart’s ability to
offer three colors of Kitchenaid blender, versus 57 on the Amazon site;
Blockbuster versus Netflix; Tower Records versus iTunes and peer to
peer networks…

Chris tells us that he’s trying a new management philosophy – “I do
whatever my interns tell me to do.” This is leading him towards
carrying out book signings in Second Life. He doesn’t know if it’s
really a good use of his time… but it’s what the grassroots are telling
him to do.

He closes with an excellent viral video, The Day of the Long Tail – always a good thing when you coin a term successful enough that folks will make videos for you.

long tail shot
Chris also points to Core77 for this image, and I like this encapsulation of the talk:

Instead, Anderson talked about "The Economics of Abundance,"
repackaging a bit of the old deck into new constructs, sure, but
impressing the audience with what is an undeniably powerful idea: What
happens when we move from models of scarcity to abundance; when we
"waste" transistors, waste storage, and waste bandwidth? Well, we get
our two paradigms: Amazon instead of Walmart, iTunes instead of Tower
Records, Netflix instead of Blockbuster, lonelygirl15 instead of
Raymond. And, he had the quote of the day: "Google is the world’s best
tail-finder." The audience went crazy.

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