(Stanford BUS-21)Martin Westhead

Mastering Marketing

Scarcity vs Abundance

How to make money by giving things away

Overview

Visions of abundance Wired for scarcity Waste is good Managing scarcity vs.

abundance

The best way to manage abundance is to relinquish control

Great things to come

1954 Lewis Strauss, head of the Atomic Energy Commission- Diseases and aging would be conquered- Effortless air travel- End of regional famines- “Electrical energy too cheap to meter”

Truly abundant electricity would have changed the world- Desalination to create fertile soil- No carbon emissions – no global warming issues- Never happened as foretold

Instead, information processing, storage and transmission are becoming too cheap to meter

Sometimes we miss abundance..

Email mailbox is full?- Storage costs are

falling- IT departments don’t

always keep up

Scarcity vs. Abundance

Mammals - Small numbers of babies- Loss of a single human is

tragic Compare with fish

- Loss of millions of fertilized eggs is the norm

Ehrlich’s bad bet

The cast- Paul Ehrlich population biologist- Julian Simon economist

The bet- $10,000 – price of raw minerals- Ehrlich – inherently scarce: would rise- Simon – replacement effect: would fall

Ehrlich chose: copper, chrome, nickel, tin, tungsten

The price of all fell over 10 years

Atoms to Bits

2001 Seth Goldin “Ideavirus”- 20 years ago top 100 companies Fortune 500 dug

something out of the ground or made something you could hold

- 2009 only 32 make things the rest deal in ideas There’s still a lot of money in commodities

- Highest margins are in ideas- Value moves upstream to the scarcity

Farmers and Miners Factory worker Knowledge

workers

Waste is good

“Wasted” CPU cycles on GUIs- Windows, Icons, Pointers- Animations- Variable width fonts

Led to the Apple Mac

Alto Workstation

Alan Kay

YouTube Wastes Video

No threat to TV because its “Full of Crap”- But what is “crap”?- Quality is subjective- E.g. Stop motion Lego Star Wars

Importance of relevance

Think Like a Dandelion

http://www.locusmag.com/Features/2008/05/cory-doctorow-think-like-dandelion.html

“…the disposition of each — or even most — of the seeds aren't the important thing, from a dandelion's point of view. The important thing is that every spring, every crack in every pavement is filled with dandelions. The dandelion doesn't want to nurse a single precious copy of itself in the hopes that it will leave the nest and carefully navigate its way to the optimum growing environment, there to perpetuate the line. The dandelion just wants to be sure that every single opportunity for reproduction is exploited!”

Local Maxima

Managing scarcity vs Abundance

Scarcity, magazine pages: Top down control- Mistakes are costly- Medium is scarce- Rigid hierarchical decision making- High bar

Abundance, online posts: Bottom up/chaos- Mistakes easy and cheap to fix- Medium unlimited- Some constraints but much more open

Scarcity vs Abundancesummary

Scarcity Abundance

Rules “Everything is forbidden unless its permitted”

“Everything is permitted unless its forbidden”

Social model Paternalism (“we know what’s best”)

Egalitarianism(“you know what’s best”)

Profit plan Business model We’ll figure it out

Decision process Top-down Bottom-up

Management style Command and control Out of control

Summary

Visions of abundance Wired for scarcity Waste is good Managing scarcity vs.

abundance

The best way to manage abundance is to relinquish control