Rethinking scarcity in an abundant world

Thomas Frey //February 25, 2010//

Rethinking scarcity in an abundant world

Thomas Frey //February 25, 2010//

Science fiction has long dreamed of a post-scarcity society, and it’s become quite common to hear discussions about transitioning from a world of scarcity to a world of abundance. But for all the good intentions and creative thinking, our limitations, both human and material, will be an ever-present force in society and a very necessary one. The trick is understanding which aspects of society will flow towards abundance and which ones will not.

Abundance as described by James Heskett, a professor emeritus at Harvard writing for Working Knowledge: “It is a world where everything digital is available at all times. And because of the very low cost of maintaining and distributing inventory, everything is likely to remain available forever. … It is a world of non-zero-sum thinking.”

The basic assumption – that all things scarce can somehow be magically transformed into all things abundant – is nonsense. Nothing could be further from the truth. Unless the laws of physics are rewritten, certain things will never reach the level of what is called abundant. That said, abundance is now happening in some very unusual ways.

Abundance theory falls apart when it contends with physical limitations. You can’t transform an SUV to digits and have one spit out of your printer, not yet anyway, and not one that is suitable for its intended purpose. Another example: When I drive to meetings in Denver, I sometimes choose the toll road because there are a limited number of commuting options for getting there. Should roads be more abundant? Yes, telecommuting options may void our need to be physically present. But if we need to personally travel across town, we are a long ways from reaching the point of abundant commuting options – at least, not until we create inexpensive flying cars (at which time toll roads will disappear).

A better way of discussing the changes upon us is to think in terms of which products and industries are about to lose their pricing advantage because of their inability to control the supply chain – not as sexy, but perhaps more useful for analysis.

Economies today are based on scarcity. It is necessary, then, to understand which products, services, and industries are about to lose their scarcity, and thereby lose their competitive pricing edge.

Historical View of Scarcity

To understand the scarcity-abundance phenomena, it helps to look at historically scarce products that somehow lost their price point advantage.

•Salt: Many battles were fought throughout history over what was considered to be the most valuable of spices, salt. One of the more recent examples is the Salt Satyagraha, a Gandhi-led non-violent protest against the British salt tax in colonial India, which began with the Salt March to Dandi on March 12, 1930. Hundreds of protesters were beaten in this battlefield directed toward breaking down the walls of scarcity. Today, salt is an abundant product, available everywhere for mere pennies.
•Pearls: Because they were difficult to find, and divers had to spend countless hours under water to find one, ancient societies dubbed pearls to be some of the rarest of stones. This rarity also made it one of the most expensive pieces of jewelry. But that all changed in 1916 when Japanese researchers Mise and Nishikawa patented their now famous process for making cultured pearls.
•Telephone Service: An industry that was built on the scarce one-wire-to-the-home option has been replaced with an abundance of wireless and VOIP telephony options.
•Classified Ads: A business invented by newspaper publishers became a cash-rich industry and the lifeblood for newspapers. Print advertising had the rug pulled out from under it when Craig Newmark created the free self-organizing craigslist.

The scarcity-abundance shift only happened on rare occasions up until the advent of Internet and electronic commerce. With over-night successes occurring with some regularity, the World Wide Web has become a platform for tectonic plate movements that tear down as well as build up. Well-managed corporate giants now have teams scouring the entrepreneurial landscape to see where the next disruption may occur.

The Next Targets of the Abundance Tidal Waves

Some of the targets are easy to spot, while others will be eviscerated through hard-to-quantify indirect means.

The best way to spot possible targets is to evaluate the size of an industry economically, and the level of discontent among customers. In the past, I’ve used what I call a “customer abuse index” to determine which industries have the least promising – or maybe the most abusive – relationships with their customers. A high customer abuse index indicates a company or industry begging to have its legs cut out from under it. Companies with labyrinthine phone trees immediately come to mind.

Another piece of the equation: Government will have far greater difficulty protecting industries the way it has in the past. As we continue to shift to a hyper-competitive global marketplace, the laws of an individual country will offer relatively poor security for staving off disruptive change.

A few of the major industries on the verge of revolution/disruption:

1.Education: The basic components of the education system haven’t changed in the past century. As discontent and costs grow, the declining student performance scores in global competition make this a prime area for upheaval. Estimated time frame – five years.
2.Power: Energy today is generated by burning things and sending the resulting power through wires. Disruptions in the future will come through non-destructive forms of energy creation, and power transmitted both wirelessly and abundantly. Estimated time frame – 15 years.
3.Credit Cards: What’s in your wallet is about to come out of the Middle Ages. With little accountability for the fees and interest charged and consumer dissatisfaction verging on violence, the credit card industry is primed for revolt. Existing laws may have to change, but the penalty-here, fee-there days of cannibalizing their consumers will come to an end. Estimated time frame – five years.
4.Real Estate: The recent chink delivered to the armor can barely be heard over the sickening thud of an industry that has fallen flat on its face. Real estate had a lock on the marketplace called the Multiple Listing Service until a recent antitrust lawsuit. The outlook is not a good a one. Expensive services such as appraisals, inspections, title and mortgage insurance face unusual forms of competition. Estimated time frame – five years.
5.Book Publishing: When book readers, such as the Amazon Kindle, drop in price to $20 and begin to appear ubiquitously across the landscape, the economics will drop out of the publishing world. Estimated time frame – 10 years.
6.Cable Television: Equipped with the most archaic menu systems possible, our entertainment systems today are insanely complicated to operate. Look for giant screen computer systems to replace cable boxes. Touch-screen and laser remotes will emerge along with a host of other interface options. Estimated time frame – five years.

The Last Bastion of Scarcity

So the question remains: What areas of life will be able to maintain their pricing integrity and remain “abundance proof?”

In producing this list, it became apparent that most of the scarcity staples are staples for the reason humans have built-in limitations. Understanding these limitations is key to understanding the marketplace of tomorrow.

•Time: Time is a perfect example. We run up against some hard barriers when it comes to increasing the available amount of time we have in a single day. Yes, we can make ourselves far more efficient and squeeze in a few more accomplishments, and maybe someday we’ll be able to clone ourselves, but we still have temporal barriers we cannot ignore.
•Natural Resources: If we are making products out of steel or aluminum, we once again run into serious limitations. Mineral extraction and refinement processes can be significantly improved. With the ability to project life-like images into our surroundings, we can eliminate the need for many physical objects, but we still exist in a world where there are hard limits on the availability of certain natural resources.
•Intellectual Bandwidth: We are bound by the limits of the human brain. It may be possible to conceive of technologies that can bridge this limit, but it still seems to be a safe bet to say that minds will be immune to abundance.
•Talent: We all may have our own talents, but the truly gifted are still a rare commodity. Talented people will have a way of creating their own economies.
•Fame: Because of limits in intellectual bandwidth, we have limited attention to pay to the world around us. There are natural limits to the number of people who can be famous at any given time.
•Novelty: The concept of novelty is by definition, rare. While products may lose their initial novelty quickly, it seems safe to say that there will always be a market for the rare and unusual commodities and service.
•Motivation: Similar to fame, we can only care about so many things at once. Our motivations are finite and necessarily limited.
•Personal Health: One of our most precious commodities is our health. While it may be possible to commoditize certain aspects of our health, but there won’t be abundance for everything healthy.
•Experiences: Yes, there may be an abundance of experience options for us to consider, but our limitations on time and attention get in the way. We will be willing to pay a premium for great experiences, like brief ventures into space.
•Money: Trading and exchange can become abundant, and money systems have long been an impediment to some of the needed change in the world. But money itself ceases to function and have value without scarcity. As one of society’s greatest tools for motivating people and driving change, our money systems today are solidly locked in the scarcity camp.

The list above is certainly not exhaustive, but it is designed to help frame the thinking around which businesses will transition in the future. Many of these changes will come quickly, disrupting the lives of countless millions.

At the same time, industries producing abundance will benefit exponentially as cost of living indexes plummet.

The scarcity-abundance shift does not ignore the laws of supply and demand – it somehow changes them. Perhaps new laws are in order.

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