RonAmok!

The adventures of an analog engineer and digital storyteller who studies emerging networks and their impact on the great game of business.
Sep 1, 2009

In 1985, my college economics professor taught that wealth is created through the strategic allocation of scarce resources. The theory being that if you controlled a scarce resource, you were on your way to building wealth.

A few years later, I read a book by Paul Zane Pilzer that not only disagreed with my college professor, but its concepts helped shape every career decision that I’ve made since.  The book, Unlimited Wealth: The Theory and Practice of Economic Alchemy, helped me understand that the pursuit of controlling scarce resources was futile because the technology-of-the-day defines what a resource is.

For example, oil was an annoyance until someone figured out that it was a rich source of energy. In an agrarian society, land was considered a scarce resource, until we developed new methods for significantly increasing the harvest per square acre. And if the laws of supply and demand proved correctly, sand, the most plentiful material on earth, should have no value at all–that is until someone discoverd its semiconductive properties and built an entire valley in Northern California based on the discovery.

The concept that yesterday’s scarce resources can become abundant today creates huge challenges to those who’ve built their businesses on the obsoleted resource. If technology determines what a resource is, and the rate of technological change is accelerating, then anyone in the business of controlling resources faces real-time financial ruin the moment someone invents a technology that transforms that scarce resource into an abundant one.

Fast forward to 2009, with a book that picks up where Unlimited Wealth left off: Chris Anderson‘s Free: The Future of a Radical Price.  Twenty years ago, there was no Google, WordPress, iTunes, Youtube, Facebook or Twitter–all technologies that transformed publishing from a scarce resource (printing presses and transmission towers) into an abundant one. Anderson takes a look at the ramifications that online technologies have had on driving the marginal cost of information delivery so low as to make it too small to measure.

While many businesses morn what has been lost through the cost marginalization of information delivery, Free focuses precicely on the abundance of opportunities that businesses have to choose from. The question (which I have posted in this blog on many occasions) is:  do business leaders have the intestinal fortitude required to reap the benefits of those opportunities? Anderson sums up the sentiment on page 233:

Free is not a magic bullet. Giving away what you do will not make you rich by itself. You have to think creatively about how to convert the reputation and attention you can get from Free into cash. Every person and every project will require a different answer to that challenge, and sometimes it won’t work at all. This is just like everything else in life–the only mystery is why people blame Free for their own poverty of imagination and intolerance for possible failure.

Every now and then, a book comes along that needs to be read multiple times to completely absorb its concepts. Not only have I’ve read Unlimited Wealth at least a half-dozen times, but I’ve purchased it at least that many times, as my copy always seems to be on someone else’s bookshelf.  More than likely I’ll be dong the same thing with Free.

During the next few weeks, I’ll be discussing specific things that companies must do (or avoid!) to benefit form the disruptive power of abundance vs. scarcity-based business thinking. Stay tuned.

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Comments

Now I know what I'm reading this weekend. Thanks for a great article Ron!

Corey
September 3, 2009

Thank you. I felt the same way when I heard my economics prof tell us the 'definition' of economics. I felt that was a simpleton (well, maybe not the best choice of a word) answer to a much larger topic. Now when you brought up that the technology of the day defines what a resource is, I feel like the conversation is exploring more under the surface. Maybe someday we will be able to do some quality measurements without 'holding all else constant?' Not to be an economics basher; I guess I just don't fully understand it.

I've been meaning to pick up 'Free' but have yet to do so.Thanks for sharing these two gems!

danronken
September 5, 2009

Dan, you hit the nail on the head when it comes to “holding all things constant.” History has shown us that the only constant is change, and since technology is driving change at an accelerating rate, new opportunities are appearing daily for both businesses and individuals. Most prefer to look backward at the change instead of forward to the opportunities:-(

And thanks for the tweet, too!

ronploof
September 6, 2009

Dan, you hit the nail on the head when it comes to “holding all things constant.” History has shown us that the only constant is change, and since technology is driving change at an accelerating rate, new opportunities are appearing daily for both businesses and individuals. Most prefer to look backward at the change instead of forward to the opportunities:-(

And thanks for the tweet, too!

ronploof
September 6, 2009

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