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Bill Gates Argues 'Supply and Demand' Doesn't Apply To Software (gatesnotes.com)
"Not enough people are paying attention to this economic trend," writes Bill Gates, challenging the widespread use of forecasts and policies based on a "supply and demand" economic model. An anonymous reader quotes the Gates Notes blog:
Software doesn't work like this. Microsoft might spend a lot of money to develop the first unit of a new program, but every unit after that is virtually free to produce. Unlike the goods that powered our economy in the past, software is an intangible asset. And software isn't the only example: data, insurance, e-books, even movies work in similar ways.
The portion of the world's economy that doesn't fit the old model just keeps getting larger. That has major implications for everything from tax law to economic policy to which cities thrive and which cities fall behind, but in general, the rules that govern the economy haven't kept up. This is one of the biggest trends in the global economy that isn't getting enough attention. If you want to understand why this matters, the brilliant new book Capitalism Without Capital by Jonathan Haskel and Stian Westlake is about as good an explanation as I've seen.... They don't act like there's something evil about the trend or prescribe hard policy solutions. Instead they take the time to convince you why this transition is important and offer broad ideas about what countries can do to keep up in a world where the "Ec 10" supply and demand chart is increasingly irrelevant.
"What the book reinforced for me is that lawmakers need to adjust their economic policymaking to reflect these new realities," Gates writes, adding "a lot has changed since the 1980s. It's time the way we think about the economy does, too."
The portion of the world's economy that doesn't fit the old model just keeps getting larger. That has major implications for everything from tax law to economic policy to which cities thrive and which cities fall behind, but in general, the rules that govern the economy haven't kept up. This is one of the biggest trends in the global economy that isn't getting enough attention. If you want to understand why this matters, the brilliant new book Capitalism Without Capital by Jonathan Haskel and Stian Westlake is about as good an explanation as I've seen.... They don't act like there's something evil about the trend or prescribe hard policy solutions. Instead they take the time to convince you why this transition is important and offer broad ideas about what countries can do to keep up in a world where the "Ec 10" supply and demand chart is increasingly irrelevant.
"What the book reinforced for me is that lawmakers need to adjust their economic policymaking to reflect these new realities," Gates writes, adding "a lot has changed since the 1980s. It's time the way we think about the economy does, too."
The problem is that companies are not sharing the cost benefits of technology, period. Case in point, eBooks are less expensive to produce, yet they usually cost more than the real book.
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
The thing people have wrong about software is that it's not the copy of the executable that is the scarce and valuable resources - it's the programmers (although, decreasingly so; actual coding is indeed becoming a commodity) and, more importantly, the expertise of knowing what kind of software to make and the knowledge of how to best use that software.
There is still supply and demand in an "information economy" - it's just that people tend to misidentify the thing that is scarce.
"There are a dozen opinions on a matter until you know the truth. Then there is only one." - CS Lewis (paraprhase)
You just explained what we obviously knew for at the very least 120 years, since it's basically the reason behind the Berne Convention.
Did you just run out of stuff to say, or what's the motivation behind it?
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Prices are controlled in many cases by the whims of the copyright owners. If Microsoft says you have to pay them $200 (hypothetically) for a (legal) copy of Windows or Office, that is so. But if the difference to alternatives gets too large, people might accept the effort to switch to something else. A case of price elastic demand, quite well known in traditional economy.
Some anecdotal evidence about myself:
I have switched to Libre office myself for private use, partly for financial reasons, partly for political ones (I really don't want to feed Microsoft money). Also planning to use Linux when support for Win7 runs out.
But if Microsoft were to drop the price of Windows to $20, laziness might win out and keep me on Windows. On Libre Office they have lost me permanently, as I already have put in that effort to get familiar with the new tool. Wasn't much effort either, only inserting images into documents is still a bit cumbersome and annoying.
Where Bill Gates is right are those cases where a satisfactory free alternative already exists and people can adopt it effortlessly. In those cases, the opportunity to make money from the main product is gone. Perhaps you can still earn money from add-ons to the free product.
C - the footgun of programming languages
Big pharma is only able to overcharge because the FDA creates a virtual monopoly, through its costly and lengthy process at the end of which very few companies are allowed to make a drug. Try to make an Epi-pen and sell it, it only costs like $30 to make. Auto-injectors were created in the 1970's and the patents on it has expired a long time ago. We have no overcharge issues with non-prescription (non-FDA monopoly) drugs.
https://mises.org/wire/lack-ep...
https://www.cnbc.com/2018/08/1...
Everyone contributes what they want, everyone takes what they need and the world improves over it.
You can only have that with digital goods that can be multiplied instantaniously with basically zero cost.
That's why proprietary software always dies out in the long run and loses over to FOSS eventually.
We suffer more in our imagination than in reality. - Seneca
Right now, Windows 10 Pro costs around 120 Euros in Germany (System Builder which is legal to unbundle here, no dubious ESD key). That's around $140.
I am neither a student nor employed in a company that has something like a HUP going, so for me it would be the full price of the SB edition. It seems that Microsoft think they have piracy mostly under control and Linux is not a threat.
For now, they might even be right about the latter. Linux is running on a lot servers, embedded and mobile devices (low level basis of Android), but on the desktop the market share remains small. The desktop and part of the server market happens to be where Microsoft earns most of its money.
C - the footgun of programming languages
Ethics Violation via - How to become wealthy is make people need you - bill gates.
How did he do that? He cheated the users by not providing the three primary user interfaces and yelling piracy as well as getting the rest of the software industry to do the same with the money he was making with the cheat, they wanted to make the money gobs too.
Cheat the users and now the AI industry needs the users but the users don't care and they don't even know it and this extends to a software industry slowly crashing like how to cook a frog, turn up the heat slow, but here its crashing slow, and they don't even know it too..
http://3seas.org/EAD-RFI-respo... making it obvious the long-running ethics violation - Can AI ever become ethical. NOT while built on a ethics violation foundation.
So what is going on now to promote AI? The struggle to figure out what abstract sequences to use in marketing to bait and switch get the general public to buy while forcing AI on the consumers/users where ever they can, and behind their backs.
If there is anything simple and accurate to say about the tech industry it is this: It is a very self-serving industry that will blame its customers for its failures. It is why software licenses are in essence, use at your own risk, but pay us over and over while we sell you a way to better compete until we sell to everyone then we will sell you the next version - rinse and repeat.
The proven BS of an industry that is heading to be the next government of the people. From the Churchs of various types of governance to the government of governance of various types to the coming AI directed governance of the people and all have in common corruption.
see/read/do http://3seas.org/ for a clue and verification.
Obviously software doesn't follow the old rules of supply and demand. Going back to the invention of copyright, the idea was to allow authors to create artificial scarcity of something that could be easily replicated. It was to take a thing of virtually unlimited supply, and shoehorn it into the model of supply and demand.
And though it's not really a "software" problem, the copyright system stops working when the cost of replication goes from "extremely cheap" to "virtually free". We've tried to keep the shoehorn by inventing DRM and making new laws, but it's not really working.
Worse, it's detrimental to society. The indefinite extension of copyright, combined with DRM and incompatibilities, means that we're going to lose the history of our intellectual works. You can still look at a 500 year old painting or read a 500 year old book, but it's not clear whether you'll be able to try current software or play current video games 500 years from now. It's a problem that, unfortunately, it doesn't seem to be a problem that people are considering when they create DRM or modify copyright law.
And then you click the Amazon link and you see these prices:
Capitalism without Capital: The Rise of the Intangible Economy
Hardcover $29.95 (physical copy)
Paperback $18.95 (physical copy)
Kindle $23.79 (digital copy)
#DeleteFacebook
For now, they might even be right about the latter. Linux is running on a lot servers, embedded and mobile devices (low level basis of Android), but on the desktop the market share remains small. The desktop and part of the server market happens to be where Microsoft earns most of its money.
I think Linux is the only reason they still support windows 7 the little bit that they do. They realized cutting XP support didn't get everybody to switch to even 7, and there is testimony all over the internet and /. of people even putting their parents and other family on linux once windows 7 support ends. So I think that there is a chance we either see Windows 7 live on another decade, or they lose a decent chunk of their windows base to Linux and leave the other chunk vulnerable.
On the contrary. Support is where you should be making your money.
On the other hand, when support is you main income then you'll do everything you can to make your software complicated and hard to use.
#DeleteFacebook
every maker of a piece of proprietary software has a monopoly on that software
It's called rent seeking. And I don't think Gates really missed it. He just tip-toed around his industries need to control supplies so as to maintain profits. Lest some governments wake up to that and implement taxes and regulations to discourage it beyond a reasonable return on investment
Heaven forbid we go to a VAT tax, where companies with zero cost products end up paying stiff taxes. Or patent/copyright terms are reduced to encourage competition. Or 'intellectual property' is assessed actual property taxes.
Have gnu, will travel.
Seriously half the commenters are so wrapped up in virtue signalling that they didn't even bother to try and understand what has been said. Two points were made:
1)The marginal cost to software (and books, and movies and some financial services) is almost zero. Yes, there is some small cost to produce a physical copy and licensing might cost pennies. Patches are not a marginal cost, you create the patch whether you sell one or one million copies. Customer support is customer support it is separate and most software I use, I've never used any support for.
2) And this is the big point. The part of the economy that works on this new model of low or almost zero marginal cost is now significant.
2 is new and it has significant impact on how the economy will function and we need to change regulations and other behaviours because of this.
Yes of course supply and demand applies unless you have a monopoly.
It's why I use an opensource stack on Windows and when windows goes to a subscription based operating system where they are the owners, I'll go to linux 100%. I may go sooner than that actually.
I *OWN* my computer damn it.
So while I have a bright shiny Windows 2010 full Office install DVD, it sits unopened and i use Libreoffice writer, calc, etc. And Gimp. And Audacity, VLC.
Anyone who would like to recommend any other good open source cheap/free software let me know.
I don't mind paying a couple bucks but I want to *own* the thing. Not *rent* it.
Once you start renting it, they can raise the price any time they want. They can delete content (ala Amazon) anytime they want.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Capitalism can be immoral. There's not an issue with having somewhat higher prices. The issue is having high prices for a captive market.
Usually from a monopoly or duopoly.
Say you can dance. And you want $50 an hour.
Is it moral for everyone else to say, "Nope $10 is fair and you *must* dance 40 hours a week to entertain us as long as it doesn't hurt you physically"? I don't think so- that's a form of slavery which is also immoral.
Capitalism breaks down when individual actors get too big. As long as you have 10 people competing then some will overcharge and some will undercharge. Once you get to one to three people, then capitalism often breaks down.
OTH, if some idiot wants to pay $750 to see a concert from the front row middle seat or a basketball game from half court center, I don't think it's moral to stop them.
There is truth in what you are saying but it's also simplistic. i get that- it's the internet. I hope that in real life you are a little more nuanced and realistic tho.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
Interesting story. I wish the Slashdot discussion lived up to it, but so far I haven't found any trace. Usual searches, etc.
It would be nice to blame this opening post. Too bad it buries the actual insight, notwithstanding the typical first-post mod. The value and price of the ebook reflects supply and demand, but these are not the supplies and demands you are looking for.
The suckers... Er, Of course I mean the customers are paying extra for the convenience. Same as it ever was if you think about it wrong. (Searching on "convenience", I discovered a couple of relevant thoughts, but not moderated appropriately. Again the Slashdot moderation is failing to do its job.)
What is actually important is the TIME spent reading those books, and economists don't care because time is so hard to count compared to money. On one hand, we all live it and experience it exactly the same way. On the second hand, no one knows how much they really have. On the third hand, not all uses of time are equal in the pursuit of happiness, but on the fourth hand, we all value time quite highly. Lots more hands to go, but my main point is that the best new way to think about the economy that I've found involves putting the cart of money BEHIND the horse of time.
Now about that Capitalism without Capital book... Ah, I see a copy in a not so local library, but I can make the journey soon enough. I hate being an early adopter, but I'm happy to be an early rejecter of Amazon. Almost two decades of being Amazon-cancer free.
Other references? Most relevant one seems to be The Zero Marginal Cost Society by Jeremy Rifkin. Or perhaps Doing Nothing by Tom Lutz?
*DING* That must mean it's time for Ekronomics 101 yet again, but I've about run out of the time I want to spend on this reply. If anyone is interested, I might continue later--hopefully within the strict time limits of stories on Slashdot.
Freedom = (Meaningful - Coerced) Choice != (Speech | Beer^2), and sad sock puppets' bad mods avail them naught.
Big pharma is only able to overcharge because the FDA creates a virtual monopoly, through its costly and lengthy process at the end of which very few companies are allowed to make a drug.
Remove the "virtual" and "costly and lengthly", substitute "no other" for "very few", and you've described the relevant characteristics of copyright. So it looks to me like the grandfather post is non-hooey.
Try to make an Epi-pen and sell it, it only costs like $30 to make [and patents have expired]
Aside: There is now an approved generic Epi-pen at a more reasonable price. The timing looks like the manufacturer started the development and approval process about the day the price-gouger announced the price hike. The inisible hand strikes as usual, the FDA approval process just delayed it.
I totally agree with the bulk of your post. But I agree completely with its predecessor.
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
Haskel and Westlake outline four reasons why intangible investment behaves differently: It’s a sunk cost. If your investment doesn’t pan out, you don’t have physical assets like machinery that you can sell off to recoup some of your money. It tends to create spillovers that can be taken advantage of by rival companies. Uber’s biggest strength is its network of drivers, but it’s not uncommon to meet an Uber driver who also picks up rides for Lyft. It’s more scalable than a physical asset. After the initial expense of the first unit, products can be replicated ad infinitum for next to nothing.