The information economy

From How Google Works by Eric Schmidt and Jonathan Rosenberg

As much as technology has affected consumers, it has had an even bigger impact on businesses. In economic terms, when the cost curves shift downward on a primary factor of production in an industry, big-time change is in store for that industry. Today, three factors of production have become cheaper—information, connectivity, and computing power—affecting any cost curves in which those factors are involved. This can’t help but have disruptive effects. Many incumbents—aka pre-Internet companies—built their businesses based on assumptions of scarcity: scarce information, scarce distribution resources and market reach, or scarce choice and shelf space. Now, though, these factors are abundant, lowering or eliminating barriers to entry and making entire industries ripe for change. We saw this first in the media business, whose entire product can now be rendered digitally and sent around the world for free. But practically every industry is, at some level, information-driven. Media, marketing, retail, health care, government, education, financial services, transportation, defense, energy… We can’t think of an industry that will escape this era unchanged.

We’re not in Kansas anymore.

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