The customer is the scarcity

Every economic era is characterised by certain abundances and by certain scarcities; these change over time; yesterday’s abundances become today’s scarcities and vice versa. When I was a young child in India, cotton was plentiful and polyester scarce. People valued the scarce thing over the abundant thing: so the rich wore Terylene shirts and the poor wore cotton. Even though the Terylene shirts were overpriced uncomfortable non-absorbent non-breathable stick-to-your-back sweat producers.

Most of the time, the abundances and scarcities are natural, caused by explicable imbalances between supply and demand. So cotton was cheap in India and expensive in the UK, while polyester was cheap in the UK and expensive in India.

Sometimes the imbalances are artificial: monopolies and cartels and market power abuse and price-fixing and market-cornering are examples of such artificial imbalances. Most of these have been seen for what they are, and consequently declared illegal in most countries.

Not all artificial scarcities have been termed illegal as yet: the most glaring example is that of “intellectual property rights”, where something is made artificially scarce using the power of the state; no other rights depend exclusively on state intervention. Strange, that.

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The digital age has given rise to more and more artificial ways of creating and assuring scarcity. Computer ports are a classic example: when all the ports were hardware ports, scarcity was easy to understand. When the ports in question were software ports, the concept of scarcity was less easy to establish.

Analogue things are usually scarcer than digital things, since the cost of digital reproduction and transmission is extremely low. As Kevin Kelly said, the internet is one great copy machine. [if you’re a fan of KK, do take a look at some of his other essays in related areas: Better Than Owning is well worth a read, for example.

Two other Kevin Kelly essays stand out in this context: People Want to Pay and Why People Pirate Stuff. I quote from the Pirate essay:

[Game developer Cliff Harris asked the online world “Why do people pirate my games? And in the answers, …] He found patterns in the replies that surprised him. Chief among them was the common feeling that his games (and games in general) were overpriced for what buyers got — even at $20. Secondly, anything that made purchasing and starting to play difficult — like copy protection, DRM, two-step online purchasing routines — anything at all standing between the impulse to play and playing in the game itself was seen as a legitimate signal to take the free route. Harris also noted that ideological reasons (rants against capitalism, intellectual property, the man, or wanting to be outlaw) were a decided minority.

Similarly, one of the key points made in the Want to Pay essay is this:

People buy stuff, but what we all crave are relationships. Payment is an elemental type of relationship. Very primitive, but real.

There are some caveats in this urge to pay.

Paying has to be super easy, idiot-proof and frictionless. There can’t be hurdles. The easier it is to pay, the more eager people are to pay.

The price has to be reasonable. That means it has to be reasonable in relation to similar stuff that is free!

The benefits of paying have to be evident and transparent. This takes creativity to produce and work to convey simply. Unless the benefits of paying are obvious, paying is made difficult.

Every artificial scarcity will be met by an equal and opposite artificial abundance. Port vulnerabilities will be exploited, as Microsoft users have found out to their cost. DVD players will be “chipped” to overcome the insanity of region coding on DVDs (which, by the way, is one of the stupidest things I have ever seen done). Music and film and book DRM will be hacked, as Jon Lech Johansen showed elegantly.

When I was a child, “English” films (which included those of both US as well as UK origin) tended to come out a year to eighteen months after release abroad. Not surprising in an analogue world, with very high production and distribution costs and a scarcity of copies as a result. Today, when there is an artificial gap between US and Indian or Chinese release, the artificial abundance kicks in. Piracy.

Protecting artificial scarcity is an expensive proposition, and ultimately a losing proposition. More and more people will volunteer time to help correct artificial scarcity, because they see it as path pollution, the desecration of core values by profane behaviour.

People see DRM as something that is an irritant, a pollutant, a time waster. They want to pay, but not at the price of artificially imposed inconvenience. There is also a key trust issue here: similar to the issues related to identity, privacy and confidentiality, there is a pervasive belief that those who use DRM will act more and more unreasonably.

Take Amazon. I like much of what the company does and stands for. The recent incident with Amazon and 1984 may not dent the company’s reputation overall, but many people will not buy a Kindle as a result. And I am one of them. Remotely-managed deletion of electronic copies of 1984 from people’s Kindles, copies that were legitimately paid for, is a monstrous thing to do. Incidents like “1984” will spur the pushback against DRM even more.

This post is not about the 1984 incident; although we will see consequences, the incident will pass. This post is about something far more important.

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[My thanks to Bergen Moore for the photo above.]

This post is about the customer. Customers are creative people who transform scarcities and abundances in strange and beautiful ways. If two-wheelers are abundant and four-wheelers are scarce, then a way will be found to make a two-wheeler behave like a four-wheeler.

As Dan Bricklin pointed out wonderfully in his book Bricklin on Technology, we must always remember that the role of the technologist is to build tools for people to use, not to constrain them from doing things. [incidentally, Dan’s partner-in-crime during the VisiCalc days, Bob Frankston, is an excellent source of learning as well. I have had the joy of listening to him on many occasions, count both him and Dan as personal friends. If you get the chance, do read Bob on Zero Marginal Cost and on Assuring Scarcity.

People are incredibly creative. If you plan for ten uses of a tool while designing it, you can rest assured that they will find an eleventh use. Take cooking as an example. And the concept of recipes.

Recipes are tools for the transfer of cultural enjoyment. They show some classic opensource behaviours, to the extent that NEA applies. For most recipes you can say: Nobody owns them. Everyone can use them. Anyone can improve them.

I love cooking. I speak to chefs regularly in order to find out how to make what they made. Sometimes they have cookbooks, and sometimes I buy the cookbooks. Why? Because it is convenient, and I am happy to pay for that convenience, for that service. Content is a service business, as Andrew Savikas points out eloquently. Sometimes I get the book signed by the author, triggering some of Kevin Kelly’s Better Than Free generatives, especially those of authenticity and embodiment and patronage.

But what happens after I get the recipe verbally, or after I buy the book? I’ll tell you what happens. I do it my way.

I change things. I experiment with the ratios and quantities in the recipe; add ingredients, drop ingredients. Change the way it’s meant to be cooked. Pass on my learning, the comments of my guests. And learn from others as they do the same thing.

Can you imagine being told that you can’t share recipes with others? That you can’t change ingredients or quantities? That you can’t enrich, augment, mutate the ideas involved? In many ways that is what DRM and IPR is designed to do, prevent us from being creative. [Pharma and IPR is a whole separate subject, yet essentially related. I will cover that in a post on some other day].

Customers want to be creative, to experiment with things, to change things, to share what they learn, to learn by sharing.

We are fast approaching an age when many analogue things will become virtual, digital, easily copied.

We can choose to invest time and effort in making digital things harder to copy: we can choose to create artificial scarcity, and lose.

Or we can choose to invest time and effort in making digital things easier to consume, to share, to enrich. And to pay for.

The customer is willing to pay. If we get the consumption model, the paying model, the sharing model, right.

The customer is the scarcity. Let’s focus on valuing that scarcity, on giving the customer what she wants when, where and how she wants it. With the right consumption and payment and sharing models.

13 thoughts on “The customer is the scarcity”

  1. JP – Considering 1984 is in the public domain and has been distributed online through sites such as Project Gutenberg, can you comment on why people purchased DRM’d versions of that content in the first place. Actually, the issue of DRM’ing public domain content is surely an interesting one in its own right, don’t you think?

  2. JP – you say

    no other rights depend exclusively on state intervention

    I’m not sure what you’re saying here. Land property rights are only maintained or enforced with state intervention, whether in Hambledon or Hyderabad. But I have to stop reading your stuff. There’s too much about cooking and it makes me hungry…

  3. @William you can protect land rights in a number of ways. Hire guards. Erect fences and moats and drawbridges. Keep rabid dogs. Lock doors and windows.

    There are alternative ways to assert all rights bar intellectual property rights.

  4. Many, many threads cross in this post.

    To take up just one, IPR. I think some history is helpful. A hundred years ago, patents seemed a benign innovation, protecting the interests of the lone inventor at his humble workbench against the unscrupulous exploitation of his work by a streetwise imitator. However, patents and IPR have gradually moved to the dark side, becoming instruments of corporate hegemony – complex forms of market manipulation, often supported by asymmetric legal resources.

    However well-meant is the intention, the law, unfortunately, is always a blunt instrument. When the delicate and nuanced world of human curiosity and creativity is colonised and governed by ponderous litigation, many kinds of possibilities are forever lost.

    But throwing out the law is not enough. I still have a concern for that lonely inventor. For me, earning pennies from iPhone apps is a necessary but not sufficient alternative. We need to replace an adversarial inventor-exploiter construct with something new that has collaborative potential as its driving force.

  5. I agree wholeheartedly. Although it seems to me that the idea of satisfying your customer is not a revolutionary one – but something that has inexplicably got lost in the marketing mix.

    And I’m never entirely convinced that customers want a relationship in any traditional sense of that word – they just want to know that the supplier will be rapidly responsive whenever they want them to be. They’re less keen on the supplier having a relationship with them for fear that that leads to interruptive marketing.

  6. Thanks for the thought provoking ideas that is almost free.

    However, applying the benefits of ‘almost’ free cooking recipes to other intellectual rights may be simplistic. Balancing between ownership/control and the freedom of openness/creation may be the right recipe – the ‘middle path’…

  7. I don’t know how relevant this is but I have another reason to indulge in piracy. The artificial ‘buzz’. I went to watch the sixth Harry Potter movie yesterday, after reading decent reviews from the Indian press (ToI gave it 4 stars on 5), I was utterly disappointed by the movie which made me realize that I would rather screen the next movie privately and then decide whether it’s worth watching in a theatre (the experience is always better!) I feel lucky to have watched all the Lord of the Rings movies in a theatre, no wide screen TV would have done justice to it, and the buzz was justified.
    I as a consumer don’t want to be cheated and the only way to screen would be free (if only the critics weren’t such sell-outs).

  8. Thanks for all your comments.
    @anant interesting case study, hadn’t seen it before
    @srijith the hulu case is a classic artificial scarcity and just like DVD players got “chipped” there are artificial abundances available so that people do watch hulu here
    @mehul there will come a tme when people realise that digital is actually a great try before you buy medium, and that sales in box offices as well as DVDs will increase as a result. especially if releases were global simultaneous.
    @subhankar cooking pot and recipe theories are actually sophisticated and serious. see if you can get a copy of “CODE” edited by Rishab Ghosh
    @john glad to see the comment finally made it in!

  9. JP: Doing those things basically turns you into a state (and indeed, The State is a landlord writ large). William’s right: ownership of unimproved land and natural resources (I emphasize unimproved) does function like a monopoly, even though it’s divided up against many oligopolists, because in a pinch (namely when land prices rise) the landowners act as a natural cartel. Intellectual property, so-called, is even more fragmented in ownership, but the owners pull together against the rest of us.

Let me know what you think