Mon, Oct 24, 2016
When a technology becomes digitized two interesting things happen: (1) The technology starts to move on an exponential curve. And (2) what has been a scarce resource in the past, becomes abundantly available — as the cost of duplication/replication and distribution drop close to zero.
Take music: Pre-digital you had to use a scarce resource (oil) to create records and CDs out of plastic, put those records/CDs into a truck; ship them to a physical store front to sell them. Once we turned music into a digital good (MP3s), the cost to make a copy dropped close to zero as did the cost of distribution. Which in turn created Spotify: 140 million songs in your pocket for $9.99 per month.
Now the common mistake people make is to believe that once a good becomes digitized, the price drops to zero (the Napster-effect in music). Which is typically not true — all that happens is that the old business models, which are built on scarcity, crumble and disappear and give rise to new models.
These are some of the biggest opportunities you can find nowadays — find a business you turn from analog to digital and create a new business model based on abundance where the price of duplication and distribution drop close to zero.