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Musings Report #7 2-13-16 How Do We Create Value When Knowledge Is Almost Free?
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
How Do We Create Value When Knowledge Is Almost Free?
How do we create value in an economy that is increasingly dependent on knowledge (including expertise that can be digitized)? The answer is complicated by the reality that knowledge is increasingly digital and "unownable" and therefore almost free.
The crony-capitalist answer is always the same, of course: bribe the government to create and enforce private monopolies. This process has many variations, but a favored one is to deepen the regulatory moat around an industry to the point that competition is virtually eliminated.
Businesses protected by the regulatory moat can charge whatever they wish, becoming monopolistic rentiers that act as a tax on the consumer and economy.
This process destroys democracy, capitalism and the economic vitality of the nation. I've covered this many times, and there is no solution to this oppressive marriage of state and wealth other than innovations that open wormholes in the monopoly.
This is where knowledge comes in, as new forms of knowledge (not just technical innovations, but new business models), once digitized, can be distributed at near-zero cost.
This almost-free knowledge creates another problem: how do we create value in a knowledge economy when knowledge is increasingly free?
Correspondent Dave P. offered one answer: static knowledge is indeed increasingly free, but dynamic information (such as market conditions) generates value to those who need actionable, timely information.
One example of this might be a Bloomberg terminal, which delivers a flood of financial and economic information for a monthly fee.
Another source of value is generated by firms offering a warehouse of free knowledge--for example, YouTube. The instructional videos are free to the user, but YouTube skims an advertising income from every view.
I would add a third type of value: curation of almost-free knowledge/information. What is the value proposition in blogs and media outlets, when "news" is essentially free? The value is created by the curation of insightful commentary, charts, histories, etc.--the paring down of the flood to a tightly organized set of digestible tidbits.
Anyone who successfully curates the overwhelming torrent of free info/knowledge into useful, manageable troves has provided a very valuable service.
A fourth type of value is created by systems such as bitcoin which are structured to keep knowledge limited/scarce: there is a limited number of bitcoin that can be mined, and this digital information (the blockchain) is inherently limited and thus valuable--once the system garners a critical mass of users.
Correspondent Bart D. recently described another source of value in a world in which knowledge is nearly free: the social capital of who you know, and what all the people in your social-capital circle know. (I have described social capital in depth in my book "Get a Job".)
A person could perform well in school and obtain a university degree signifying acquisition of knowledge, but their successful leveraging of that new knowledge often boils down to the social capital they acquired in their home, neighborhood, city and wider social circles.
Poor people tend to stay poor not because of a lack of knowledge so much as a lack of social capital--habits of work and problem solving, and access to a successful circle of people who can act as mentors or collaborators in a knowledge-based economy.
How do we create value in an economy that is increasingly knowledge-based in which knowledge is increasingly free? That remains an open question I am actively exploring. The answers are of critical importance not just to jobseekers but to investors, savers, entrepreneurs and policy-makers.
Summary of the Blog This Past Week
Why NIRP (Negative Interest Rates) Will Fail Miserably 2/12/16
If You Want To Be Wealthy, Don't Focus on Owning a House--Build a Business 2/11/16
How Systems Break: First They Slow Down 2/10/16
If Knowledge Is Power, Is It Also Wealth? 2/9/16
The Increasingly Fragile Upper-Middle Class 2/8/16
Best Thing That Happened To Me This Week
Longtime correspondent Mark L. offered to produce an audiobook version of "A Radically Beneficial World." I was delighted to accept his offer.
Market Musings: Crash or New High?
Market seers have divided into two camps: those who see recession and financial crisis on the horizon, and those who are confident the stock market swoon is temporary and all is well.
In the bull's view, global markets are digesting the devaluation of China's yuan and lower oil prices. Once these structural adjustments have worked their way through the system, it's off to the races once again.
The bulls note the consumer has deleveraged (reduced debt), jobs are plentiful and low oil prices are handing consumers extra cash which they will soon start spending freely.
Bears have a simpler story: once credit expansion ceases, GDP will decline as households and businesses trim debt loads. the machine breaks down when credit ceases to expand.
Neither completely refutes the other, and each side can cherry-pick data to support their view.
Bulls point out that recessions result from rising oil prices, not declining energy prices, and that is a powerful point: even if weak producers go belly up and tens of thousands of oil-patch employees are laid off, in the larger economy, these blips are offset by the "tax cut" of lower energy costs.
My conclusion is that it would be unwise to bet big on either a new high or a crash, as the battle between bulls and bears will most likely play out in higher volatility and continued swings up and down.
It seems self-evident (at least to me) that the engine of global growth for the past decade, China, is slowing, and there is no replacement for that engine. It also seems self-evident that China's decade-long tear was largely funded by debt, a process that cannot run forever.
As China slows and deleverages its astounding debt load, its currency will lose value as capital flows out of China and the yuan.
These forces are essentially unstoppable. China has blown almost $1 trillion of its foreign exchange reserves in the past year attempting to control the yuan's devaluation.
These realities make the global economy increasingly vulnerable on a number of levels. That said, if nothing near-term upsets the apple cart, bulls may well manage a new high in U.S. stocks as they sound the all-clear.
From Left Field
Where’s the money in America? This 3D map will show you -- top 20 metro areas = 52% of all US GDP... financialization at work?
The Real Toy Story -- photos of toys being finished by Chinese factory workers -- not automated at all....
Artificial intelligence could leave half the world unemployed, says expert -- including experts on AI?
Chinese Start to Lose Confidence in Their Currency -- reality finally seeping into the MSM...
The Cathedral of Computation: We’re not living in an algorithmic culture so much as a computational theocracy.
In the forests of northern Ontario, a “strange phenomenon” of large natural rings occurs, where thousands of circles, as large as two kilometers in diameter, appear in the remote landscape. (via Lew G.)
Corvids could save forests from the effects of climate change: Crows, jays, and nutcrackers have co-evolved with trees for good reason. (via Lew G.)
Usually associated with a long-gone era, butlers are among Britain’s hottest commodities: half of those trained in the UK work abroad and the best easily earn $150,000 or more.
Sugata Mitra & The Hole In the Wall - 2013 TED Prize winner (2:01) (via Lew G.)
The unsexy truth about why the Arab Spring failed (via Lew G.) -- institutions matter...
Economic Worries and Payday Loans (via Joel M.) -- good overview of widespread economic anxiety...
Global Non-Renewable Natural Resource (NNR) Scarcity Analysis -- we're running out of rare and essential industrial metals.
"A great many people think they are thinking when they are merely rearranging their prejudices." Walter Lippman
Thanks for reading--
charles |
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