How To Understand The Economics Of The Information Business

Sunday, 9.53pm

Sheffield, U.K.

Information technology and business are becoming inextricably interwoven. I don’t think anybody can talk meaningfully about one without talking about the other. – Bill Gates

Recently a German supermarket removed all non-German products from its shelves – leaving them almost bare.

It was trying to draw attention to just how many products come from outside the country – the result of a globalised economy – and how sparse life would be if we could only have things that were made by others like us.

If you walk down any high street in the UK you’ll see a lot of stuff for sale and much of it is made in China.

You know it is, because it says so on the label.

It’s the information on the product that tells you what to think – whether you see it as an expensive high end gadget or a cheap throwaway.

If you walk through a factory it’s quite possible that you’ll see the same product going into different packaging and being sold for different prices, with one perhaps three times as much, just because of the information content on the packet.

Bill Gates was really focused on the technology part of Information Technology when he talked about its relationship with business.

But what is information doing to businesses around us and how can you make it work for you?

Information is weird – as Wikipedia explains – it’s easy to create but hard to trust. Easy to spread but hard to control.

You or I can now write what we think and publish it without needing agents, publishers, printing technology or much capital.

Whether people read what we write is a different story.

Why should anyone take anything we write more seriously than anything else that gets in front of them.

The fake news industry, with people engaged full time in creating stories with catchy headlines so they can surf the traffic monetisation wave is probably going to beat the pants off you.

Mainly because they give people what they wish was true.

Let’s say you make something using a 3-D printer – now technology that you can have at home.

If you use a set of plans provided by the manufacturer does the thing you make have value?

Could you go down to the market and sell it to someone passing by?

Probably, but not for much, as if you were able to do that others would use the same plans to try and get some of that profit you’re raking in.

So is the value in the thing you’ve made or the ideas and designs you used to make it in the first place?

The thing with ideas is that they don’t really have intrinsic value – not in the way a gold mine does.

Ideas are precious and valuable but it’s not obvious how they are economically precious and valuable.

That’s because once you’ve had an idea it costs nothing to make copies of that idea.

If you give your idea to one person, nothing stops you from giving it to someone else, or for the first person to pass it on in turn.

In fact, once the idea is out in the open, it’s quite hard to keep it secret.

Finally, you could tell someone that you have a great idea but unless you tell them the idea they have no way of telling whether you’re right or wrong.

Ideas then are great to have. When they’re expressed as books and art and music they make society better.

Imagine just how joyless your life would be if you didn’t have music and colour and books.

So, things like copyright law were created, not to protect businesses, but to give authors and artists a way to make money from their ideas.

And that’s a confusing things for businesses and people who have, for a few millenia, made their money from controlling property.

Now property is only worth what you get from the information about it.

A house in a good school area is worth more than one that is not – and you know the good schools and bad schools because of the information available to you.

You start to see the way people are dealing with this as the new titans of the information business emerge.

Tim Ferriss, for example, has written about he stopped worrying about his books being stolen and pirated and focused instead on giving his readers the best experience he could.

It just makes sense because while some people will steal your stuff it costs you nothing. It’s not like they’ve stolen your TV or car. Instead of letting that worry you focus on the tens, thousands or millions of consumers who do business with you.

The challenge for us is being able to figure out a way to work in this new economy where what you do is worth something between zero and a lot.

Cheers,

Karthik Suresh