(Stanford BUS-21)Martin Westhead
Mastering Marketing
Scarcity vs Abundance
How to make money by giving things away
Overview
Visions of abundance Wired for scarcity Waste is good Managing scarcity vs.
abundance
The best way to manage abundance is to relinquish control
Great things to come
1954 Lewis Strauss, head of the Atomic Energy Commission- Diseases and aging would be conquered- Effortless air travel- End of regional famines- “Electrical energy too cheap to meter”
Truly abundant electricity would have changed the world- Desalination to create fertile soil- No carbon emissions – no global warming issues- Never happened as foretold
Instead, information processing, storage and transmission are becoming too cheap to meter
Sometimes we miss abundance..
Email mailbox is full?- Storage costs are
falling- IT departments don’t
always keep up
Scarcity vs. Abundance
Mammals - Small numbers of babies- Loss of a single human is
tragic Compare with fish
- Loss of millions of fertilized eggs is the norm
Ehrlich’s bad bet
The cast- Paul Ehrlich population biologist- Julian Simon economist
The bet- $10,000 – price of raw minerals- Ehrlich – inherently scarce: would rise- Simon – replacement effect: would fall
Ehrlich chose: copper, chrome, nickel, tin, tungsten
The price of all fell over 10 years
Atoms to Bits
2001 Seth Goldin “Ideavirus”- 20 years ago top 100 companies Fortune 500 dug
something out of the ground or made something you could hold
- 2009 only 32 make things the rest deal in ideas There’s still a lot of money in commodities
- Highest margins are in ideas- Value moves upstream to the scarcity
Farmers and Miners Factory worker Knowledge
workers
Waste is good
“Wasted” CPU cycles on GUIs- Windows, Icons, Pointers- Animations- Variable width fonts
Led to the Apple Mac
Alto Workstation
Alan Kay
YouTube Wastes Video
No threat to TV because its “Full of Crap”- But what is “crap”?- Quality is subjective- E.g. Stop motion Lego Star Wars
Importance of relevance
Think Like a Dandelion
http://www.locusmag.com/Features/2008/05/cory-doctorow-think-like-dandelion.html
“…the disposition of each — or even most — of the seeds aren't the important thing, from a dandelion's point of view. The important thing is that every spring, every crack in every pavement is filled with dandelions. The dandelion doesn't want to nurse a single precious copy of itself in the hopes that it will leave the nest and carefully navigate its way to the optimum growing environment, there to perpetuate the line. The dandelion just wants to be sure that every single opportunity for reproduction is exploited!”
Local Maxima
Managing scarcity vs Abundance
Scarcity, magazine pages: Top down control- Mistakes are costly- Medium is scarce- Rigid hierarchical decision making- High bar
Abundance, online posts: Bottom up/chaos- Mistakes easy and cheap to fix- Medium unlimited- Some constraints but much more open
Scarcity vs Abundancesummary
Scarcity Abundance
Rules “Everything is forbidden unless its permitted”
“Everything is permitted unless its forbidden”
Social model Paternalism (“we know what’s best”)
Egalitarianism(“you know what’s best”)
Profit plan Business model We’ll figure it out
Decision process Top-down Bottom-up
Management style Command and control Out of control
Summary
Visions of abundance Wired for scarcity Waste is good Managing scarcity vs.
abundance
The best way to manage abundance is to relinquish control