November 21, 2005

A Future So Bright You'll Need to Wear Sunglasses

Just remembered this Philip Greenspun chapter against selling packaged software.

Meanwhile I'm arguing with Umair that price can never carry meaningful information about information products.

Perhaps a better way of putting my point is this. Price is a single scalar value. But needs to carry more than one piece of information. Even with scarce resources, price reflects business model as well as value and demand for a product. For example, if my strategy is to give away razors and sell razor-blades, the price of the razor doesn't accurately reflect the cost of manufacture or the quality. That information is swamped by the information that this is a loss-leader.

But at least there are some constraints on price from material costs, and demand. In the case of information products, the constraints are much weakened, particularly the constraint that if X has the thing, then Y can't have it.

What this means is that the space of possible business models or institutional logics which determine the price is far greater than for non-scarce resources. Information sellers have a lot of freedom to experiment with different structures, bundling and unbundling etc. And the meaningful information about demand or quality which you can derive from the price is much lower.

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