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One key point about the free and/or zero marginal cost "products" that I think economists haven't yet dealt with is: massive imbalances between revenue generate
by dalbasal 7y ago
One key point about the free and/or zero marginal cost "products" that I think economists haven't yet dealt with is: massive imbalances between revenue generated by a product and the cost of producing it.
Facebook is the cleanest example. Compare to BMW. If we cut BMW's annual budget by 50%, we'd get about 50% fewer cars. If we do the same to FB, we'd get approximately the same FB.
FB's revenue happens to be about $65bn per annum. But, the cost of making Facebook available to all its users is basically arbitrary. If Facebook had happened to produce just $6.5bn, I expect that the value/features users get would have been about the same.
A lot of the investment (eg uber) in such products goes towards pure (kinda zero-sum) competition. IE, a big chunk of the investment in Uber wasn't needed (or beneficial) for consumers to get the benefit of Uber. It was just needed to ensure Uber captured market share.
This has potentially worrying implications for economic efficiency.
- dillonmckay 7y agoThis has been the case since at least the 1990s, maybe earlier. That strategy has always emphasized market-share over profitability. It seems to work out better for software than physical produced goods.
- X6S1x6Okd1st 7y agoFocusing on Uber will give a particularly uncharitable view IMO. I work in tech and the majority of work we do is to either explore new products or increase the efficiency of the core business by a percentage. Neither of these are inherently aimed at competition.