Afn
August 18th, 2004, 06:35 PM
I found this interesting:
Some real trends worth following:
Too cheap to bill
More things are becoming too cheap to bill for. Or, more specifically, the costs of accounting, marketing, billing, and support functions exceed the cost of the delivered product or service. This happened to the Internet some time back. It happened to long distance calls a decade ago. It's happening to telephony, much to the pain of the telecom industry.
This isn't a new phenomenon. There are many tangible products where the manufacturing cost is a tiny fraction of the retail price. Soft drinks, for example. Bottled water. Jeans. Batteries. Printer ink. There are successful business strategies for pushing the price up, ranging from heavy brand promotion to lock-in. Just because it could be cheap doesn't mean it will be.
We're starting to see these strategies applied to the Internet. "SBC Yahoo DSL", and "AOL for Broadband" are examples.
Unstable markets
Some markets are unstable. Electric power. North Atlantic airline tickets. Some commodities. This annoys free-market fanatics no end, but is unsurprising to anyone who understands feedback control system instability. Just because there's an equilibrium point doesn't guarantee the system will settle there. Nor does improving information or reducing delays necessarily improve stability.
Electric power is a striking example of an unstable market. There's no inventory. Demand is relatively inelastic. Producers have high fixed costs. The result is prices that change by three orders of magnitude within a single day. This huge volatility can be exploited by traders, which makes things worse.
There's much economic theology around this issue, and not enough theory with predictive power. This area needs more simulation and less pontification.
The attention shortage
There's a major shortage of attention to advertising messages. Advertising people call this "clutter". Advertising has become a near zero sum game, where vast efforts are made to be more visible than competitors. Advertising cost per unit of product climbs until the product is barely affordable. Neither the buyer nor the seller profits from this; it's a pure cost of competition.
The futility of education
Education can be viewed as a way to increase one's value relative to others. As a larger fraction of the population is educated, the relative value of education declines. It may decline to a level below the price of the education. This has already happened with much "job retraining" and computer-related "certifications", and is happening for many fields of higher education. This calls into question the basic concept that higher education is a social good.
The race for the bottom
You know this one. Work moves to very low cost areas. Eventually, those areas do become wealthier, and in theory, everybody wins. But that takes decades. Moving work to low-cost areas now takes only months. This speedup has produced the offshoring movement.
Now these are the real issues in postmodern capitalism. Not peer to peer networking.
Peer to peer networking includes race for the bottom, attention shortage and too cheap to bill issues.
Some real trends worth following:
Too cheap to bill
More things are becoming too cheap to bill for. Or, more specifically, the costs of accounting, marketing, billing, and support functions exceed the cost of the delivered product or service. This happened to the Internet some time back. It happened to long distance calls a decade ago. It's happening to telephony, much to the pain of the telecom industry.
This isn't a new phenomenon. There are many tangible products where the manufacturing cost is a tiny fraction of the retail price. Soft drinks, for example. Bottled water. Jeans. Batteries. Printer ink. There are successful business strategies for pushing the price up, ranging from heavy brand promotion to lock-in. Just because it could be cheap doesn't mean it will be.
We're starting to see these strategies applied to the Internet. "SBC Yahoo DSL", and "AOL for Broadband" are examples.
Unstable markets
Some markets are unstable. Electric power. North Atlantic airline tickets. Some commodities. This annoys free-market fanatics no end, but is unsurprising to anyone who understands feedback control system instability. Just because there's an equilibrium point doesn't guarantee the system will settle there. Nor does improving information or reducing delays necessarily improve stability.
Electric power is a striking example of an unstable market. There's no inventory. Demand is relatively inelastic. Producers have high fixed costs. The result is prices that change by three orders of magnitude within a single day. This huge volatility can be exploited by traders, which makes things worse.
There's much economic theology around this issue, and not enough theory with predictive power. This area needs more simulation and less pontification.
The attention shortage
There's a major shortage of attention to advertising messages. Advertising people call this "clutter". Advertising has become a near zero sum game, where vast efforts are made to be more visible than competitors. Advertising cost per unit of product climbs until the product is barely affordable. Neither the buyer nor the seller profits from this; it's a pure cost of competition.
The futility of education
Education can be viewed as a way to increase one's value relative to others. As a larger fraction of the population is educated, the relative value of education declines. It may decline to a level below the price of the education. This has already happened with much "job retraining" and computer-related "certifications", and is happening for many fields of higher education. This calls into question the basic concept that higher education is a social good.
The race for the bottom
You know this one. Work moves to very low cost areas. Eventually, those areas do become wealthier, and in theory, everybody wins. But that takes decades. Moving work to low-cost areas now takes only months. This speedup has produced the offshoring movement.
Now these are the real issues in postmodern capitalism. Not peer to peer networking.
Peer to peer networking includes race for the bottom, attention shortage and too cheap to bill issues.