In the network economy, the more plentiful...

...things become, the more valuable they become.

This notion directly contradicts two of the most fundamental axioms we inherited from the industrial age.

First hoary axiom: Value comes from scarcity. Take the icons of wealth in the industrial age--diamonds, gold, oil, and college degrees. These were deemed precious because they were scarce.

Second hoary axiom: When things are made plentiful, they become devalued. For instance, carpets. They were once rare handmade items found only in houses of the rich. They ceased to be status symbols when they could be woven by the thousands on machines. The traditional law was fulfilled: commonness reduces value.

The logic of the network flips this industrial lesson upside down. In a network economy, value is derived from plentitude, just as a fax machine's value increases as fax machines become ubiquitous. Power comes from abundance. Copies are cheap. Let them proliferate.

Ever since Gutenberg made the first commodity--cheaply duplicated words--we have realized that intangible things can easily be copied. This lowers the value per copy. What becomes valuable is the relationships--sparked by the copies--that tangle up in the network itself. The relationships rocket upward in value as the parts increase in number even slightly.

Windows NT, fax machines, TCP/IP, GIF images, RealAudio--all born deep in the network economy--adhere to this logic. But so do metric wrenches, triple-A batteries, and other devices that rely on universal standards. The more common they are, the more it pays you to stick to that standard. We have an even older example in the English language. Wherever the expense of churning out another copy becomes trivial (and this is happening in more than software), the value of standards and the network booms.

In the future, cotton shirts, bottles of vitamins, chain saws, and the rest of the industrial objects in the world will also obey the law of plentitude as the cost of producing an additional copy of them falls steeply.



Archives - This site operates under a Creative Commons License.

This is a blog version of a book of mine first published in 1998. I am re-issuing it (two posts per week) unaltered on its 10th anniversary. Comments welcomed. More details here.
-- KK