2 The Law of Plentitude

More gives more

Curious things happen when you connect all to all. Mathematicians have proven that the sum of a network increases as the square of the number of members. In other words, as the number of nodes in a network increases arithmetically, the value of the network increases exponentially. Adding a few more members can dramatically increase the value for all members.

Consider the 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 roll off 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 sliding down the chute increases the value of all the fax machines operating before it.

So strong is this network value 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? Your purchase increases the worth of their machine. And once you join the network, you’ll begin to ask others, “Do you have a fax (or email, or Acrobat software, etc)?” Each additional account you can persuade onto the network substantially increases the value of your account.

When you go to Office Depot to buy a fax machine, you are not just buying a US$200 box. You are purchasing for $200 the entire network of all other fax machines and the connections between them – a value far greater than the cost of all the separate machines.

The fax effect suggests that the more plentiful things become, the more valuable they become. But this notion directly contradicts two of the most fundamental axioms we attribute to the industrial age.

First hoary axiom: Value came from scarcity; diamonds, gold, oil, and college degrees were precious because they were scarce.

Second hoary axiom: When things were made plentiful, they became devalued; carpets no longer indicated status when they could be woven by the thousands on machines.

The logic of the network flips these industrial lessons upside down. In a Network Economy, value is derived from plentitude, just as a fax machine’s value increases in ubiquity. Power comes from abundance. Copies (even physical copies) are cheap. Therefore, let them proliferate.

Instead, what is valuable is the scattered relationships – sparked by the copies – that become tangled up in the network itself. And 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.

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, while the value of the network that invents, manufactures, and distributes them increases.

In the Network Economy, scarcity is overwhelmed by shrinking marginal costs. Where 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 Network Economy, more gives more.

Рубрики: | Дата публикации: 12.07.2010

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