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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.
While I agree that FOSS has its place, I think you are overestimating its capabilities. There are many closed source programs that will never be made FOSS for various reasons. As an example my day job involves writing code for GE Rx3i PLCs using GE's Proficy Machine Edition. This is a closed source IDE targeting a specific companies custom hardware. And while it keeps me busy I know that GE only has a small market share - meaning that there is no huge demand to replicate its code (even if possible) so there will never be any FOSS version. And from an end user business sense the IDE is basically a tool of the trade that can be easily written off in the process of using it to generate revenue.
I am Slashdot. Are you Slashdot as well?
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
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.
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.