A couple of days ago Ross Mayfield started a blog post entitled Abundance, and Five Years of Blogging with the following
When I sat down in my first economics class at UCLA, the professor
wrote on the blackboard all we would learn, in really big letters:
I've been blogging for five years as of this month, and here's what I've learned:
From this intro, he directs us to a blog post by David Hornik entitled Chris Anderson Strikes Again: The Economy of Abundance which contains the following excerpt
Continuing in his role as shirpa of the new economy, Chris has moved
on from the Long Tail to a related but distinct idea that he is calling
the Economy of Abundance. In a talk he just gave at the PopTech
conference (a fantastic event in the unbelievably beautiful but remote
town of Camden Maine), Chris described this new economy. The basic idea
is that incredible advances in technology have driven the cost of
things like transistors, storage, bandwidth, to zero. And when the
elements that make up a business are sufficiently abundant as to
approach free, companies appropriately should view their businesses
differently than when resources were scarce (the Economy of Scarcity).
They should use those resources with abandon, without concern for
waste. That is the overriding attitude of the Economy of Abundance --
don't do one thing, do it all; don't sell one piece of content, sell it
all; don't store one piece of data, store it all. The Economy of
Abundance is about doing everything and throwing away the stuff that
doesn't work. In the Economy of Abundance you can have it all.
The same businesses that are the poster children for the Long Tail,
are the poster children for the Economy of Abundance. And the same
businesses that are the victims of the Long Tail are the poster
children for the Economy of Scarcity. With bandwidth and storage
approaching free, iTunes can offer three million songs (P2P offers nine
million). In contrast, with limited shelf space, Tower Records can only
offer fifty- or sixty-thousand tracks. The end result, consumer choose
abundance over scarcity (something for everyone) -- Tower Records gets
liquidated while iTunes grows dramatically
All this talk of Abundance being the new Economy misses the point that Scarcity is still what drives all economic endeavors. What has happened with the advent of the Web is that certain things that were traditionally considered scarce are now abundant (e.g. shelf space, editorial content, software, etc) which means that the new economic lords are those that can exploit scarcity along another axis.
Most successful Web companies today are exploiting the scarcity of attention and time that plagues all humans. In a world where there a hundred million websites the problem isn't lack of content, it is finding the right content. Similarly, in a world where there are competing media for people's attention from television and radio to the Web and print magazines, advertisers need to be able to find the right audience and medium for their sales pitches. Both of these are examples of scarcity that companies like Google have exploited in the 'new economy'. Scarcity of attention also points to how companies like eBay and Amazon have risen to the top not 'abundance of shelf space' because simply having infinite shelf space doesn't explain why eBay and Amazon have been more successful than Yahoo! Auctions and Barnes & Noble online.
Even the example of the iTunes Music Store is another story of the economics of scarcity. The key to its success has been the fact that it is tied to the iPod and is the only music store that is tied to the world's most successful portable music player. The economics of abundance is a good fairy tale to scare people in traditional bricks & mortar businesses like Tower Records but at the end of the day simply moving online does not change the fact that you are always battling scarcity when you are engaging in business. Just ask the folks at MSN Music how the economy of abundance worked out for them.