Value Flows from Abundance
Plentitude, not scarcity, governs the network economy. Duplication,
replication, and copies run in excess. Whatever can be made, can be made
in abundance. This plentitude:
- drives value
to open up closed systems
- spins off immense numbers of opportunities
first modern fax machine that rolled off the conveyor belt around 1965.
Despite millions of dollars spent on its R&D, it was worth nothing.
Zero. The second fax machine to be made immediately made the first one
worth something. There was someone to fax to. Because fax machines are
linked into a network, each additional fax machine that is shipped
increases the value of all the fax machines operating before it.
This is called the fax effect. The fax effect dictates that
plentitude generates value.
So strong is this power of
plentitude that anyone purchasing a fax machine becomes an evangelist
for the fax network. "Do you have a fax?" fax owners ask you.
"You should get one." Why? Because your purchase increases the
worth of their machine. And once you join the network, youll begin
to ask others, "Do you have a fax (or email, or Acrobat software,
etc.)?" Each additional account you can persuade to join the
network substantially increases the value of your account.
When you buy a fax machine, you are not merely buying a $200 box. Your
$200 purchases the entire network of all other fax machines in the world
and the connections among thema value far greater than the cost of
all the separate machines. Indeed, the first fax machines cost several
thousands of dollars and connected to only a few other machines, and
thus were not worth much. Today $200 will buy you a fax network worth $3
The low price of a fax machine today buys you an entire network,
consisting of eighteen million machines. Each additional unit sold
increases the value of your machine.
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
First hoary axiom: Value comes from
scarcity. Take the icons of wealth in the industrial agediamonds,
gold, oil, and college degrees. These were deemed precious because they
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
machines value increases as fax machines become ubiquitous. Power
comes from abundance. Copies are cheap. Let them proliferate.
Ever since Gutenberg made the first commoditycheaply
duplicated wordswe have realized that intangible things can easily
be copied. This lowers the value per copy. What becomes valuable is the
relationshipssparked by the copiesthat 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, RealAudioall born deep in the network
economyadhere 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
Proprietary, or "closed," systems
were once rare because industrial systems were relatively uncomplicated.
Proprietary systems rose in popularity as advancing technology made it
difficult to replicate a system without assistance or encroaching on
patents. The creators of a closed system made a nice living. When the
information economy was first launched several decades ago, the dream
was to own and operate a proprietary systemone that no one else
could copyand then let the money roll in. To a degree that can
still be done, at least for short period, if the system is significantly
superior. Bloomberg terminals in Wall Street traders offices is
one current example. But the network economy rewards the plentitude of
open systems more than the scarcity of closed systems. It is a bit of a
cliche now to blame Apples misfortunes on its insistence that its
operating systems be treated as a scarce resource but its true.
Apple had more than one opportunity to license its particularly
wonderful interfacethe now familiar desktop and windows
designbut backed off each time, thereby guaranteeing its eventual
eclipse by the relatively more open DOS and Windows systems.
There is a place for isolation in the infancy of systems, but
openness is needed for growth because it taps into a larger wealth.
Citibank pioneered the use of 24-hour instant cash at ATMs in the 1970s.
They blanketed New York City with their proprietary machines, and at
first this strategy was highly successful. Smaller competing banks
started their own tiny and proprietary ATM networks, but they
couldnt compete against the high penetration of Citibank machines.
Then, led by Chemical Bank, these smaller banks banded together to form
an open ATM network called Plus. The power of n2 kicked in.
Suddenly any ATM was your ATM. Citibank was invited to join the open
Plus network but declined. Following the principle of increasing
returns, the handy Plus system attracted more and more customers, and
soon overwhelmed the once dominant Citibank. Eventually the open factor
forced Citibank to forgo their proprietary ways and join.
Every time a closed system opens, it begins to interact more
directly with other existing systems, and therefore acquires all the
value of those systems.
In the mid 1980s I was
associated with a pioneering online community called the Well. You
dialed the Wells special modem, and once logged on you could chat,
post, and email anyone you wantedwithin the Well. All 2,000
members. Within a short time after start-up the Well made a big jump and
opened its mail service to the then-obscure internet. The value of the
Well suddenly skyrocketed in the view of its 2,000 or so members because
now they could email thousands of academic professors or corporate
nerds. A few years later, the Well further opened up its system to a
capability called ftp, which allowed Well users to grab files on other
internet servers and allowed others to grab files on the Well server.
Again, the value of the Well exploded; with only a small effort it
gained the tremendous value of the entire ftp network. Eventually the
Well opened up even further, allowing users to join the conversation via
the web, thereby acquiring all the value of the web.
was a cost in each step. With every inclusion there was less control of
the environment, more noise, more danger of disruption by accident or
hacker, and more worry that the business model would collapse. At the
same time it was obvious that a totally closed Well would have died.
The idea of plentitude is to create something that has as many
systems and standards flowing through it as possible. The more networks
a thing touches, the more valuable it becomes.
of an invention, company, or technology increases exponentially as the
number of systems it participates with increases linearly.
The law of plentitude is not about dominance. The self-interest of
ordinary business guarantees that every company in the world will strive
to get its product or service into every home, or into every store.
Popularity is an ancient goal. But that is not what network plentitude
The abundance upon which the network economy
is built is one of opportunity.
While it is true that
every additional email address in the world increases the value of all
previous email addresses (thats the primary effect of plentitude)
the increase in value happens because each email address is a node of
opportunity, not just an artifact. An email address is more than a way
to exchange memos. Because email is rooted in a network, opportunity
runs in several directions at once. For instance, once it was realized
that mail addresses could be archived easily (opportunity number one),
it occurred to someone that they could be collected automatically
(opportunity two). They could also be mailed to in bulk (opportunity
three). The domain part of the address could be analyzed and used to
detect patterns of usage (opportunity four). Addresses in a Rolodex
could be updated automatically by the addressee (opportunity five). The
address artifact itself could contain more than just a name; it could
also hold other facets of interests that the owner was willing to
exchange in certain circumstances (opportunity six).
A hammer is part of only a few networks, but a telephone is a
part of many. The more networks a product or service can join, the more
powerful it becomes.
Contrast this cascading
abundance of opportunities with almost any product of the industrial
agesay an electric rotary saw, or a color-fast dye, or a maplewood
chair. While some of these objects have a few dual uses (the chair could
be used as a step stool or to wedge a door open, and the saw motor could
be used to drive a drill), they are pretty much limited to their
designed intentions. There is no river of opportunities flowing from
them. So that even if chairs, dye, and saws were to become universally
abundant, their physical plentitude would not change the world much.
The power of the fax effectmore fax machines increasing
the value of all previous machinesdoes not rely on the
proliferation of Panasonic brand fax machines, or of any particular
machine. Since many faxes are sent from laptop computers, or from a
server somewhere, the power of plenty derives from opportunities rather
than lumps of matter.
As opportunities proliferate,
unintended uses take off. In the late 1970s, the Shah of Iran exiled his
rival, the Ayatollah Khomeini, to Paris. Since the Shah controlled his
countrys media he assumed Khomeini would not be able to reach the
Iranian people from France to stir up trouble. But sympathetic Iranian
clergy exploited an unsuspected technological opportunity: the cassette
tape. Every week in Paris Khomeinis friends recorded his
inflammatory speeches on cheap recorders and smuggled copies (easily
disguised as music tapes) into Iran, to be multiplied on $200
duplication machines and passed out to every mosque. On Fridays,
Khomeinis sermons were played throughout Iran on boomboxes. The
clerics turned the common tape deck into a broadcast network. Im
sure that not a single engineer who developed cassette tape technology
ever envisioned it being used for broadcasting. Electronic media,
because it is animated by electrons, is highly susceptible to being
subverted by new uses.
Recently Sprint, the
telecommunications company, pioneered flat cellular phone
pricingyou could make all the cell phone calls you want for a
fixed monthly fee. Within days of the pricing, the startled marketing
experts at Sprint heard reports that people were using the cell phones
as baby monitors. Parents would go into babys bedroom with a cell
phone, dial the kitchen, and then leave the line open. Voilà!
The more interconnected a technology is, the more
opportunities it spawns for both use and misuse.
the best video games of all time were elegant little programs that ran
on early computers such as the Commodore 64. Millions of C-64s were
sold during the early 1980s; most of them lie at the bottom of landfills
today. Their flealike memories and lack of disk space have been replaced
by Powerbooks and Pentiums. The few still working are sold at
collectors prices. But out on the web, filling niches no one could
have predicted, are a flock of emulators. You can download a Commodore
64 emulator onto your Powerbook. At the click of a button it will turn
your state-of-the-art workstation into a moronic C-64 (or one of 25
other golden oldies) so you can play an ancient version of Moondust, or
PacMan. This is equivalent to having a switch on the dashboard of your
Ferrari to make it run like a VW Bug.
street uses for technology stem from the plentitude of interactions.
Artifacts of the industrial economy yield limited potential for such
weird, tangential uses. The network economy, on the other hand, is a
cornucopia of products and innovations that cry out to be subverted in
new ways. Indeed, in a network, new opportunities arise primarily when
existing opportunities are seized. A business that successfully occupies
a niche immediately creates at least two new niches for other
businesses. There is, for example, no end to the number of companies
that will find a niche in email; the more wild ideas that are created,
the more wild ideas can be created. The arms race between spammers and
readers is only in its infancy.
The law of plentitude is
most accurately rendered thus: In a network, the more opportunities
that are taken, the faster new opportunities arise.
Furthermore, the number of new opportunities increases exponentially
as existing opportunities are seized. Networks spew fecundity because
by connecting everything to everything, they increase the number of
potential relationships, and out of relationships come products,
services, and intangibles.
A standalone object, no matter
how well designed, has limited potential for new weirdness. A connected
object, one that is a node in a network that interacts in some way with
other nodes, can give birth to a hundred unique relationships that it
never could do while unconnected. Out of this tangle of possible links
come myriad new niches for innovations and interactions.
A network is a possibility factory.
is the fount of plentitude in the network economy that having to deal
with nearly infinite choices and mushrooming possibilities may be the
limiting factor in the future. Navigating sanely through an expanding
ocean of options is already difficult. The typical supermarket in
America offers 30,000 to 40,000 products. The average shopper will zoom
through the store in 21 minutes, and select out of those 40,000 choices
about 18 items. This is an amazing feat of decision making. But it is
nothing compared to what happens on the web. There are one million
indexed web sites, containing 250 million pages. To be able to find the
right page out of that universe is astounding, and the number of pages
doubles every year. Dealing with this plentitude is critical because the
totals of everything we manufacture in the world are only compounding.
The total amount of information stored in the entire
worldthats counting all the libraries, film vaults, and data
archivesis estimated to be about 2,000 petabytes. (A petabyte is a
billion megabytes, or about a quadrillion books the size of this one.)
Thats a lot of bits.
Plentitude will soon reach the
level of zillionics. We know from mathematics that systems containing
very, very large numbers of parts behave significantly different from
systems with fewer than a million parts. Zillionics is the state of
supreme abundance, of parts in the many millions. The network economy
promises zillions of parts, zillions of artifacts, zillions of
documents, zillions of bots, zillions of network nodes, zillions of
connections, and zillions of combinations. Zillionics is a realm much
more at home in biologywhere there have been zillions of genes and
organisms for a long timethan in our recent manufactured world.
Living systems know how to handle zillionics. Our own methods of dealing
with zillionic plentitude will mimic biology.
economy runs with plentitude. It vastly expands the numbers of things,
increases the numbers of intangibles with ease, multiplies the numbers
of connections exponentially, and creates new opportunities without
Touch as many nets as you
can. Because the value of an action in the network economy
multiplies exponentially by the number of networks that action flows
through, you want to touch as many other networks as you can reach. This
is plentitude. You want to maximize the number of relations flowing to
and from you, or your service or product. Imagine your creation as being
born inert, like a door nail off a factory conveyor belt. The job in the
network economy is to link the nail to as many other systems as
possible. You want to adapt it to the contractor system by making it a
standard contractor size so that it fits into standard air-powered
hammers. You want to give it a SKU designation so it can be handled by
the retail sales network. It may want a bar code so it can be read by a
laser-read checkout system. Eventually, you want it to incorporate a
little bit of interacting silicon, so it can warn the door of breakage,
and take part in the smart house network. For every additional system
the nail is a part of, it gains in value. Best of all, the systems and
all their members also gain in value from every nail that joins.
And thats just for a stick of iron. More complex objects
and services are capable of permeating far more systems and networks,
thus greatly boosting their own value and the plentiful value of all the
systems they touch.
Maximize the opportunities of others.
In every aspect of your business (and personal life) try to allow
others to build their success around your own success. If you run a
hotel, what can you do to permit othersairlines, luggage
retailers, tour guidesto be part of your network? Rather than
viewing their dependency on your success as a form of parasitism, or
worse, as a rip-off, understand this tight coupling as sustenance. You
want to entice others to create services centered around the customer
attention you have won, or to supply add-ons to your product, or even,
if it is a new-fangled idea, to create legal imitations. This is a
counter-intuitive stance at first, but it plays right into the logic of
the net. A small piece of an expanding pie is the biggest piece of all.
Software is especially primed to work this way. The programmers who
created the hit game Doom deliberately made it easy to modify.
The results: Hundreds of other gamers issued versions of Doom
that were vastly better than the original, but that ran on the
Doom system. Doom boomed and so did some of the
derivatives. The software economy is full of such examples. Third-party
templates for spreadsheets, word processors, and browsers make profits
for both the third-party vendor and the host system. It takes only a bit
of imagination to see how the leveraging of opportunities also works in
domains outside of software. When confronted with a fork in the road, if
all things are equal, go down the path that makes the opportunities of
Dont pamper commodities; let them
flow. The cost of replicating anything will continue to go down. As
it does, the primary cost will be developing the first copy, and then
getting attention to it. No longer will it be necessary to coddle most
products. Instead they should be liberated to flow everywhere.
Lets take pharmaceuticals, especially genetically bio-engineered
pharmaceuticals. The cost of little pills in the drug store can be
hundreds of times greater than what they cost to produce in quantity,
yet many drugs are priced expensively in order to recoup their
astronomical development costs. Pharmaceutical companies treat and
price their drugs as scarcities. One can expect, however, that in the
future, as drug design becomes more networked, more data-driven, more
computer mediated, and as drugs themselves become smarter, more
adaptive, more animated, the competitive advantage will go to those
companies that let "copies" of the drug flow in plentitude.
For example, a highly evolved bioengineered headache relief drug may be
sold for a few dollars on a "take as much as you need" basis.
The company makes its profits when you pay it handsomely for tailoring
that drug specifically for your DNA and your body. Once designed, you
pay almost nothing for additional refills. Indeed there are already a
few start-up biotech companies headed this way. The field is called
parmacogenomics. They are heeding the call of plentitude.
Avoid proprietary systems. Sooner or later closed systems have
to open up, or die. If an online service requires dialing a special
phone number to reach it, its moribund. If it needs a special
gizmo to read it, its kaput. If it cant share what it knows
with competing goods, its a loser. Closed systems close off
opportunities for others, making leverage points scarce. This is why the
network economywhich is biased toward plentyroutes around
closed systems. One could safely bet that America Online, WebTV, and
Microsoft Network (MSN)three somewhat closed systemswill
eventually go entirely onto the open web, or disappear. The key issue in
closed-versus-open isnt private versus public, or who owns a
system; often private ownership can encourage innovation. The issue is
whether it is easy or difficult for others to invent something that
plays off your invention. The strategic question is simple: How easy is
it for someone outside of the host company to contribute an advance to
their system or product or service? Are the opportunities for
participating in your own network scarce or plentiful?
Dont seek refuge in scarcity. Every era is marked by the
wealth of those who figure out what the new scarcity is. There will
certainly be scarcities in the network economy. But far greater wealth
will be made by exploiting the plentitude. To make sure you are not
seeking refuge in scarcity, ask yourself this question: Will your
creation thrive if it becomes ubiquitous? If its value depends on only a
few using it, you should reconsider it in light of the new rules.