Friday, February 29, 2008

The Future of Business - $0.00 enterprises

A really interesting article by the Editor in Chief at Wired magazine, Chris Anderson titled "Free! Why $0.00 Is the Future of Business" was the subject of much debate recently.

Accordingly to Chris, the economy of the brave new world is mainly driven by "scarcity" and "wastage" (as against to the old world concept of demand vs. supply). Out side of online business it may take a rather detailed and elaborate study to apply this new economy driver phenomenon to the world at large, such as manufacturing or airline industry.

Chris talks about six business models with examples that are used in the web2.0 economy, and goes on the indicate that all of them revolves around the concept of "Free!".

At the same time, he argues that less successful (or failed) ventures have not appreciated the psychological bearer called "penny gap" which separates the cheap from the free.

Talking about "Freeconomics", he says that what makes 'free' economically possible is known as externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we've always known about but have only recently been able to measure properly. The "attention economy" and "reputation economy" are too fuzzy to merit an academic department, but there's something real at the heart of both.

Some other interesting 'observations' include:
  • Forty years ago, the principal nutritional problem in America was hunger; now it's obesity, for which we have the Green Revolution to thank.
  • Going from tens of dollars in the 1960s the cost of a transistor is approximately 0.000001 cent today for each of the transistors in Intel's latest quad-core. This meant that we should start to "waste" transistors.
  • If the unitary cost of technology is halving every 18 months, when does it come close enough to zero to say that you've arrived and can safely round down to nothing? The answer: almost always sooner than you think.
  • In the Greek philosopher Zeno's dichotomy paradox, you run toward a wall. As you run, you halve the distance to the wall, then halve it again, and so on. But if you continue to subdivide space forever, how can you ever actually reach the wall?
  • Not too cheap to meter, as Atomic Energy Commission chief Lewis Strauss said in a different context, but too cheap to matter.

It would be interesting to look forward to his forthcoming book - "Free!".

Here is the link to the whole article.

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