Trying To Explain The Economics Of Abundance In Two Minutes Or Less With A Whiteboard
from the well,-it's-something... dept
UPS recently asked us to create a series of three videos, where we try to explain some of the stuff we talk about here on Techdirt in under two minutes, using a white board. You can check out the first video here, where I attempt to give a quick visual explanation of the economics of abundance. It’s a complicated topic — so narrowing it down to less than a minute obviously involves simplifying some of the concepts greatly, but it should kick off a fun discussion.
Filed Under: economics, economics of abundance
Comments on “Trying To Explain The Economics Of Abundance In Two Minutes Or Less With A Whiteboard”
Artists = scarcity
I think it is important in these models to always have the option for people to just be investing in the artist. Whether it be by providing a simple donation, set your own price download service or even a more proper investment model, such as the SellaBand service.
I believe this is important for the same reason it is important to not limit the number of business models you build around an artist, because people respond positively to choice. Traditional entertainment business has been about limiting choice to create demand. That makes sense to force people into parting with their money but can limit the amount people are willing to spend and certainly lowers the value of talent. Whereas I might be inclined to strictly budget my spending if I know I can only afford so much, if my spending power is unrestricted then the main driving force behind spending will be how much I like an artist.
But, you forgot to disclose which company paid you to shill for white boards! The black board lobby will be complaining.
I wonder how many of those brown markers UPS must have..
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I wonder how many of those brown markers UPS must have..
Actually, since you have to buy those markers in a package of all colors, the real question is how many other colored markers are left behind…
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I thought they would have their own special shade of brown most markers don’t come in or something.
I knew it
Mike was a shill for Big Package all along…
Seriously, though, very good vid. Kudos to UPS for sponsoring it. (Sorry about my dog, guys.)
Awesome job Mike. And it’s so cool that UPS was willing to pay for it.
http://www.amazon.com/Erase-Marker-Chisel-12-Count-83007/dp/B00006JNJV/ref=sr_1_5?ie=UTF8&s=office-products&qid=1256170389&sr=8-5
0
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that’s racist.
Very cool
See, I can say nice things. Well done, and a good example of parlaying your expertise into some combination of revenue and greater exposure. This kind of thing is why I’ve got Techdirt in my RSS reader.
Sadly, this is exactly the sort of post the FTC is looking for. Basically, UPS “bought” a post. Now, a moron in a hurry might not realize that it is a commercial, rather than a post.
Considering all the brains around here, it seems like such an easy concept, yet all we seem to get is arrogance.
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“Considering all the brains around here, it seems like such an easy concept, yet all we seem to get is arrogance.”
Well then, kindly direct Mike to the FTC standards that he has broken so that he can quickly fix the issue.
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Basically, you fail at reading comprehension.
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Are you serious? It was obvious that everything was disclosed. In fact, the post leads off with “UPS recently asked us to create a series of three videos…”
I don’t know if you can any more obvious by saying UPS helped produce the video even before you get into the main post content.
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“Now, a moron in a hurry might not realize that it is a commercial, rather than a post.’
Well, good, we need more commercials like this. It’s advertisement AS content. Nothing wrong with it.
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“Now, a moron in a hurry might not realize that it is a commercial, rather than a post.”
So basically if UPS did not disclose it it’s a violation of law. If they do then it’s an advertisement. No matter what promoting a veiwpoint that disagrees with you loses in your mind. Good thing others aren’t subject to your broken logic.
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Yeah, because of the part where he said he evaluated all the package livery companies, and decided UPS was the best, right?
Ladies and gents, I do believe we’ve found our you-know-what in a hurry!
Oh the Irony!
Does anyone else think it ironic that the song used is this UPS video is from a band called The Postal Service?
:-/
Seriously, though. This is a great video… I can’t wait to see the other two.
Re: I've always liked this song
My guess is they chose it with purpose 😉
BTW, it’s called “Such Great Hights”, check it out.
Re: Re: I've always liked this song
That “Such Great Heights” music video needs to disclose that it’s just a long ad for promoting the Siemens chip making facility…. 😛
Re: Re: Re: I've always liked this song
I thought it was for M&Ms
mike stoned?
mike — is it me, or does you look a little stoned by some jamaican willy brand marijuana? maybe you should pop a red bull brand energy drink next time before you put a video on youtube brand video site.
It took two whole minutes? Huh. Try:
It’s easy to copy stuff, so everyone will, so one should totally ignore creation costs and instead try to sell t-shirts to people who only want to rip off the content…
That didn’t even take two minutes to write. (grin)
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Tell me you’re joking, and not just simpleminded.
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Dude, consumers ALWAYS ignore creation costs. They pay market value, NOT creation costs. That is not just the harsh reality of a free market, but it’s fair too.
If I spend 10 hours to bake a decent pizza and $15 on ingredients, and you spend 20 minutes and $10 on ingredients to bake your decent pizza, at what price can we each sell our pizzas to hungry customers? Answer: we will both sell our pizza at the market value, NOT at our costs.
Welcome to remedial econ.
“Looks like the band is ready to go, lets turn up the volume”
At that point Mike should’ve drew a few more stick men to the left and went “…and here comes ASCAP to remind the band that cover tunes need a licensing fee…..”
Presentation
Nice work, Mike. You even got some Fair Use out of that Postal Service song. 🙂
Hahaha
Mike… you’re such a geek.
No worries, though.
I’m a big fan.
How I would LOVE to see one of those “accidental” DMCA take downs from the something-something-something-‘A’ on this one…
Great video, excellent summary. I will do what I can to make sure people I know see this.
Bah! It looks photoshopped!
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Yes Mike looks disgustingly thin 😀
So far, I have shown the video to three MBAs and they all pretty much laughed. 2 out of three pointed out the very basic issue:
Music and movies are not an abundant resource, at least not at the quality levels the public expects. Pirated copies may be abundant, but that is a situation that even a first year business student knows is not supportable.
The other one hasn’t stopped laughing yet. I will see if he has anything else to say tomorrow.
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and why should we care what an mba thinks?
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Can most mba’s even do basic math? Do they know what lines intersecting is?
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So far, I have shown the video to three MBAs and they all pretty much laughed.
Glad I could amuse them.
Music and movies are not an abundant resource
Oops. Time to suggest they learn a bit of economics. If they think that’s true, they should not have passed their econ class — unless it was really, really basic level econ. Most first year econ courses these days at least spend some time on the concept of rivalrous and non-rivalrous goods. I’m surprised your friends went to school somewhere that doesn’t cover such concepts (or perhaps they got their degrees before 1990 or so, when such concepts weren’t quite as common in introductory economics (though, they were still covered in higher level econ).
Anyway, if they want some help with understanding abundance economics, please feel free to have them give me a call. It would be cheaper than their MBA degree.
Pirated copies may be abundant, but that is a situation that even a first year business student knows is not supportable.
You should talk to my first year business school econ professor who taught me this stuff. He disagrees.
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“Music and movies are not an abundant resource…”
Although true in that there are a limited number of Music Albums/Songs and Movies, the ability to replicate said movies makes it an abundant resource. When a company has the ability to take a movie such as ‘300’ and make it available to have an infinite number of copies then the movie itself is an abundant good; however the ability to see it in the theater once, twice, etc. is a limited good. Hopefully your MBA friends understand that simple explanation since they missed Mike’s.
“Pirated copies may be abundant, but that is a situation that even a first year business student knows is not supportable.”
Second, where in the video does Mike talk about Pirated copies? I thought he was talking about the ability of the companies themselves to release a digital form; for instance iTunes or did you forget that you can buy stuff through iTunes and the music could easily be free instead of charged. After all how much did you spend on that iPod or iPhone?
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Although true in that there are a limited number of Music Albums/Songs and Movies, the ability to replicate said movies makes it an abundant resource
That’s where the laughing sort of starts. Price is never set by the replication costs alone. The wide consumer user of and desire for music shows that demand isn’t a declining line, but rather one that is constant and increasing. Price zero only occurs naturally where there is no actual demand.
“Pirated copies may be abundant, but that is a situation that even a first year business student knows is not supportable.”
Second, where in the video does Mike talk about Pirated copies? I thought he was talking about the ability of the companies themselves to release a digital form;
Since the cost of Itunes is more than zero, I look at the only place where music has zero cost: Piracy and other giveaways. Itunes doesn’t enter into a discussion of zero cost music.
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“The wide consumer user of and desire for music shows that demand isn’t a declining line, but rather one that is constant and increasing. Price zero only occurs naturally where there is no actual demand.”
Wow. Are you sure the MBAs were not laughing at you? Apparently you don’t know what a demand curve is. Perhaps you have your graph upside down?
“Since the cost of Itunes is more than zero, I look at the only place where music has zero cost: Piracy and other giveaways. Itunes doesn’t enter into a discussion of zero cost music.”
You either confuse cost with price or neglect the fact that the only costs iTunes has that aren’t artificially imposed by IP rights, are those that file sharing provides for free. Such as bandwidth.
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I’m not sure it’s worth replying but…
Price is never set by the replication costs alone.
Price in a competitive market tends toward marginal cost. In the case of digital content, zero, or so close as to not matter.
The wide consumer user of and desire for music shows that demand isn’t a declining line, but rather one that is constant and increasing.
I’m thinking you didn’t pay close attention to the chart. That was quantity vs. price, not quantity vs. time. As price goes up, quantity demanded goes down.
Price zero only occurs naturally where there is no actual demand.
Zero price occurs in two cases: zero demand, and infinite supply (think of air).
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Forgot this part.
Since the cost of Itunes is more than zero, I look at the only place where music has zero cost: Piracy and other giveaways.
There are musicians giving away their music for free, so this part is false too.
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“Price zero only occurs naturally where there is no actual demand.”
…Or when supply approaches infinity.
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“Price zero only occurs naturally where there is no actual demand.”
You are dead wrong here. An infinite supply has the exact same effect as zero demand. Because digital copies can be produced on the fly for no cost, the supply is not just effectively infinite; it IS infinite. Infinity divided by anything is still infinity, so demand is not longer an issue.
Re: Re: Re:2 Re:
I should qualify my “exact same effect” statement: it has the exact same effect ON PRICE, which will tend toward zero. Infinite supply has a much more beneficial effect on both supplier and consumer, however. The supplier gets exposure, recognition, and a platform upon which to build other, scarce, profitable products. The consumer gets a product they like affordably (or free). It is win-win, where a demand of zero is lose-lose. The current labels and associations tend toward the zero-demand end of the spectrum, by demanding insupportable, ever-increasing fees.
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Again, it’s the standard argument. The digital bytes are “infinite”, but the content itself is not. There are only so many new songs, only so many new albums, new movies. They have not reached any sort of infinite level.
By standing too closely to the subject and focusing on a single piece of standard economic theory, you can miss the slightly bigger picture just out of your peripheral vision. Once you step back, you can see that the only thing that is infinite is the hype.
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Again, it’s the standard argument. The digital bytes are “infinite”, but the content itself is not. There are only so many new songs, only so many new albums, new movies. They have not reached any sort of infinite level.
You are confusing two different issues. I’m pretty sure I’ve explained this to you in the past, so I’m not sure why you are still confusing them. The market for a single song is different from the market for all songs. I don’t see why you keep confusing those things.
But a single song, once completed is infinite. You admit that when you say the bytes are infinite. Good. We’re getting somewhere.
And you’re right that there are only so many new songs and new albums. Each of which is scarce until created. That’s a good thing… because remember to make these business models work, we’re looking for scarcities.
Your problem is you seem to think these two things are the same thing.
You are wrong. Again.
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“That’s where the laughing sort of starts. Price is never set by the replication costs alone. The wide consumer user of and desire for music shows that demand isn’t a declining line, but rather one that is constant and increasing. Price zero only occurs naturally where there is no actual demand.”
Wow. Just wow.
Price IS set by the replication costs alone in competitive markets. You are dead wrong on that point.
“demand isn’t a declining line, but rather one that is constant and increasing”
What? Demand IS a declining line, having a negative relation ship to Price. You are absolutely wrong about the simplest of economics. Bonus clueless points for calling a curve both “constant and increasing”.
“Price zero only occurs naturally where there is no actual demand”
You don’t get to just make up rules that sound good to you. In competitive markets, Price=Supply=MC=MR. The supply curve is a flat line at zero price. If MC=O, then price equals zero at any level of demand. Demand can shift up or shift down, it still intersects S at zero.
I appreciate that this bit of fact seems difficult for some, and can see that you are the type who just doesn’t seem to get it.
Sure, trust your MBA friends if you must. Sounds like they are drunk to me, what with all the laughing and lack of any sense. But note that Mike has an econ undergrad, gets his theories vetted by top econ professors, and also has his own crappy MBA from an Ivy League school. I have my econ degree from a top school in Canada. Believe me, we’re not dealing with cutting edge, fourth-year or graduate-level wacky econ theory here. This is first or second year, basic material. You need to consider that you may be wrong.
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When a product, such as a movie or music, can be copied infinitely, without degradation of the original or the copy, it is, by definition, an infinite good. Now I can’t speak for your computer’s abilities, or those of the MBA’s you mentioned, but my computer is capable of making exact copies of digitized movies and music, such as what is released on a cd or dvd. Since I believe this ability is common to pretty much all computers, please explain why your MBA friends say movies or music are not infinite goods. The major problem here is that piracy of these goods is a concept created by an industry that wants everyone to believe in their alternate reality.
Re: -- faulty misunderstanding on the part of the MBAs
The misconception lies in the fact that the PRODUCTION of music and movies are not abundant resources, and the MODES OF CERTAIN EXPERIENCES (concert, theatre, etc.) are also not abundant.
But the music and movies THEMSELVES are.
Once recorded digitally, they cost NOTHING to reproduce. That makes them abundant by definition. The fact that others artificially restrict them doesn’t prevent that.
Ha
WELL YOU BETTER BELIEVE IM GOING TO USE UPS FROM NOW ON CAUSE I SAW IT ON AN INTELLECTUAL PROPERTY SITE!!!!
Regardless of the merits of the video, UPS has managed to get me to see their logo and possibly associate it with something I view positively (techdirt) despite my use of adblock. They know how to market.
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Very good point! Nice work on UPS’s part. They chose a good effort to support, and now they’re getting mentioned, and creating content. Who would’a thought?
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The only problem is that UPS didn’t charge me to see it.
Seriously, if they keep giving away content like this, there’s no way their business can survive. I’m pretty sure a poster above who knows a guy with a MBA can explain that to you, if he ever stops laughing.
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If a massive package delivery service doesn’t stop sponsoring free videos, they won’t survive?
You lost me somewhere in there.
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You got lost at the point where the thread shifted to satire.
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I was hoping as much, but I don’t always give AC’s the benefit of the doubt… After all, most people’s serious arguments against “free” sound like ridiculous satire too.
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usually hard to tell. Best to roll in with a “Forgot your tags!”
I'm so glad Techdirt isn't all about copyright.
Because I’m going to borrow these videos and spread them as fast as possible.
This first video is priceless and breaks down a complex situation to a first grade level.
Kudos.
Now the question I should ask is: Should I copy the file and host elsewhere or link back to Techdirt?
I’d at least ask the creator first before I simply just grab it.
🙂
Looking forward to the next videos, which I hope expand on the “scarcity” side of the equation.
Business model of the ads
Mike – Great video. As a non-econ person it broke down a complex subject quite nicely. I am interested to know if you would share the business model around the ads as an example of how you’re monetizing the “free” website. Clearly, UPS paid you to do create the video, but how about some details? Was it a fee for hire where UPS controls the content or do you retain the rights? What was UPS’ goal beyond getting the readers of Techdirt to see their logo for 2 mins? Are they developing some sort of education program around economics?
Just One Question...
Why is a company like UPS sponsoring this kind of thing? Why do they care about infinite goods? Ok, that was two questions. Not a big deal, just curious as to their interest in this subject.
Great video by the way.
Re: Just One Question...
The finite goods need to get shipped somehow, and I’ll choose a company that is in the know over one with their head stuck in the sand.
Fewer deliveries of tangible goods
I wonder why UPS would sponsor something like this considering things that were once physical products can now be distributed instantly and electronically, are they going to open UPStunes or something? Maybe they are looking forward to shipping loooots of T Shirts.
loved it
yes, very simplified but also accurate enough and clear enough for such a short video – great work, mike.
Mikey is a BS artist
Wow Mikey what a bunch of horseshit
BTW you are getting out of shape
Diet and exersise my friend
Re: Mikey is a BS artist
You might wanna change your nick to “stupid dude”. Sounds way more fitting.
Re: Mikey is a BS artist
Nice. You make two basic arguments.
One is ad hominem, cruel and irrelevant.
The other is wrong.
Anger management, my friend.
Love this video and the full disclosure Mike. Congrats to you and to UPS for pulling together a compelling video that I actually found useful and worthy of sharing. I’m tempted to make my own…
none of it is somehow "influenced" by UPS.
Great article (as usual) and good presentation; but sneaking in a purely deductive argument (I can show you ONE example of X, therefore X is universal) is not persuasive (and doesn’t belong in the article).
Re: none of it is somehow "influenced" by UPS.
I would be really grateful if you could point out what the deductive argument was.
zero price
zero price?
There’s a problem with your demand and supply diagram. You draw a horizontal line above the Q-axis and therefore at price greater than zero, and yet you say that price equals zero. It will be hard for others to take the video seriously, if you make such elementary mistakes.
In fact, I would agree that a good can be abundant, even when its price is not zero, as long as it is low enough that everyone can afford all the quantity they want.
Greetings,
Re: zero price?
There’s a problem with your demand and supply diagram. You draw a horizontal line above the Q-axis and therefore at price greater than zero, and yet you say that price equals zero. It will be hard for others to take the video seriously, if you make such elementary mistakes.
You can have price less than zero (i.e., you can pay people to take your product). The Q axis need not be the zero point.
In fact, I would agree that a good can be abundant, even when its price is not zero, as long as it is low enough that everyone can afford all the quantity they want.
Except, in such a market the incentive is for someone else (a competitor) to come in and offer it cheaper. And cheaper. Until someone offers it for free.
zero price?
There’s a problem with your demand and supply diagram. You draw a horizontal line above the Q-axis and therefore at price greater than zero, and yet you say that price equals zero. It will be hard for others to take the video seriously, if you make such elementary mistakes.
In fact, I would agree that a good can be abundant, even when its price is not zero, as long as it is low enough that everyone can afford all the quantity they want.
Greetings,
nice theory but ...
This is a nice theory so let us see if it applies to myself as a consumer:
I am interested in recordings: YES
I am interested in related merchandise: NO
I am interested in live shows: yes but my wife is not so we go very rarely, so in practical terms this is a NO.
Net result: with recordings costing $0, music artists will get $0 from my wallet.
This is a reality your theory seem to ignore.
Re: nice theory but ...
the reality is that the theory need not apply to every individual, but the aggregate. So you dont want a t shirt and your wife likes to stay home, that doesnt mean that someone else wont buy 2 t shirts and go to 2 shows vicariously making up for you being a cheapskate
If you like an artist, or an album that you got for free, odds are that you will tell someone about it and they might want a t-shirt or concert tickets. So, even if you don’t trade any money for the album you can still trade your opinion and influence to the artist in return for the “free” album. It’s called advertising and it is extremely valuable.
https://www.youtube.com/watch?v=2CwEZiUzJzU