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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 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)
A bit of a background on book prices. The bottomline is that they are far too low.
Apart from a few very prolific and highly advertised best-seller authors, for most authors book prices are way too low in comparison to the amount of work that goes into writing a book. To me as a hobby author writing a novel takes 1-2 years of full spare time dedication - basically all the time during every weekend. (That's about equivalent to 1/2 year as a full-time author, which is often stretched to a year for better quality control.) Publishing at Amazon, which everybody hates and despises but is the only place where you can actually make sales, at a competitive price gives me a profit of about 80 cents per book. You can calculate yourself how many sales I'd have to make in order to make a living of that, and authors at publishers get much less per book, of course.
Add to this that everybody hates Amazon and that ebooks are inferior in terms of anything that is part of the art of book-making but not content (typography, page geometry, design, cover design, illustrations), and it should become obvious why nobody who writes or publishes books has a particular interest in making ebooks super-cheap. Books are already much too cheap in general if you look at their production from a business point of view. That's also the reason why small publishers die and only large ones like Random House prevail. I'm not making any claims about whether that's good or bad, I'm just saying that's the way it is.
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...