Still no bail out

No Bail Out

I really don’t feel sorry for companies that screwed up.  Maybe the economy needs a good kick in the groin so that certain people will stop playing money games and get on with life.

On a slight tangent: why is consumer spending the main indicator of a healthy economy?  Why isn’t it consumer savings?

» Seth's Blog: The $8 billion story/scam

Why gift cards might not be the best gift…

Save Some Bucks - Kill the Economy?

A Tale of Supply and Demand

Many years ago, Edgar made money distributing copies. He was the only one with access to the original work and had total control of the copies (the number of copies, their quality, etc.). All he needed was the right marketing to make certain that there was demand for the copies he could provide. Life was good for Edgar.

The march of technology started catching up with Edgar. People could start making copies of Edgar’s copy. Sure, the copies were never as good as the original, but for most people, they were close enough. People started sharing copies (of Edgar’s copy) with their friends and family. Edgar felt threatened…but the threat was somewhat contained…making copies was time intensive (and many cases, the people who received a copy eventually purchased a better quality copy from him). Then the internet happened.

Now, instead of having a limited distribution, copies of Edgar’s copy were made available to everyone (technology kept marching on, making copies became quick and easy). Edgar had no way to control the situation. He started labeling this sharing as piracy (they were robbing him of potential (not guaranteed) income). He spent a lot of money to convince everyone that it was wrong. Quite a few people agreed (although their perception was that they were robbing the creator of the original work, not Edgar).

Along came Steve. He had an idea. Steve could set up a virtual store for Edgar. They could change the distribution model so that people had a way to pay for those copies that Edgar wanted to distribute. In order to appease Edgar, Steve would add some controls to the store so that people were limited in how they could distribute their copies.

Steve did a lot of research. He determined a fair price for Edgar’s copies. People seemed to agree (buying tons of copies in a short period of time). Edgar was now making some money from those people who were previously sharing copies. Edgar started seeing money again. Then Edgar started thinking about growing this money pile. Why not charge more for those copies that people wanted most?

Steve tried to convince Edgar that he shouldn’t try to get greedy. Steve tried to remind Edgar of the research. Edgar didn’t seem to care…he hinted that he might take his copies out of Steve’s store unless he could charge what he wanted. Edgar had forgotten the rules about supply and demand. Edgar hadn’t taken into account that supply was infinity. He didn’t think about how that might impact things. He just thought that if people were willing to pay one price at Steve’s store today, than surely they would pay a little more for certain copies tomorrow.

Steve went on to point out that limiting how people use their copies was hurting Edgar. If the people were content with their copies and felt that they were paying a fair price, even more people would become customers if there weren’t any limits. Edgar thought that this was insane.

Edgar thought wrong. Steve refused to change prices. Steve decided to remove limits. Edgar took his copies and attempted to open his own virtual store. People started going back to getting their copies for free from the internet…that is until Steve announced a deal with a certain record company. Steve’s company would now become an original distributor of original copies…the creators of the originals flocked to Steve’s company. Edgar, the middle man, was now out of a job.

If only Edgar wasn’t worried about control and greed…

The End