Over on O'Reilly Radar, Jim Stogdill has a fabulous piece on the economic theory of rents as they apply to technology businesses, open source, cloud computing, spectrum auctions, and other chewy, boingy subjects. This is exactly the kind of economist talk I love: the stuff that makes you slap your forehead and say of course, that's how it works
Obviously digital distribution has also damaged the traditional channel model of the music, film, and photography markets. The impact of this is that the tail-end of the curve can probably shift business models and still make the same money (by touring, selling FLAC files, whatever). But the head -- where the record companies are -- will struggle to extract rents like they used to. As they realize this, they do what rent holders who are losing always do: dispense patronage from their existing franchise and try to influence the law to make their rents more permanent.
Points of control = Rents
Apple has historically lived on rents derived from superior design, which is a very hard thing to do consistently. So they've earned their rents so far. Recently, they've gotten even smarter. The App Store is an MBA's dream because it combines network effects with classic distribution channel control and slotting fees. It also has strong barriers to exit. Interestingly, Foxconn (and its employees) mostly continue to work at opportunity cost levels of renumeration. Rents stay with the leverage and are not evenly distributed through the supply chain.
Apple also finds itself in the odd position of Karmic enforcer. The software developers that once helped destroy content owners' iron-clad grip on distribution now find themselves selling their creations for 30 percent of $.99. Karma is a bitch.
Google extracts amazing rents through a combination of innovation and network effects, although they have really struggled to duplicate their core search / AdSense monopoly. Innovation is keeping Google ahead of Schumpeter for now, but hasn't yet created a second vortex of network effect monopoly. So Bing is an important threat if its share continues to grow. Emerging and effective competition in the area where you are extracting rents will have a non-linear impact on your bottom line. If all goes well (in a Schumpeterian sense), both Bing and Google's search franchises will be rent free in an economic sense. Good for people buying ads, bad for people that hope Google will keep taking the cash thrown off to innovate in other areas (like creating an Office rent-neutralizing alternative in the cloud). It's like watching a pair of Ultra Kaiju trying to choke each other out over Tokyo.
When estimating his net worth, Pepe the Cheeto is apt to include a multibillion dollar valuation for the “Trump” brand-name; but new Trump Hotels will be called “Scion” hotels, “a nod to the Trump family and to the tremendous success it has had with its businesses, including Trump Hotels, while allowing for a clear distinction […]
Facebook — which accounts for as much as 75% of the traffic to popular websites — tweaked its algorithm to downrank those same publishers, who had been engaged in an arms-race to dominate Facebook users’ feeds through techniques intended to gain high rank in Facebook’s secret scoring system.
Update: According to The Verge, Facebook has verified the authenticity of the screenshot below. In what appears to be an internal Facebook post, Zuckerberg defends his company’s ongoing association with Peter Thiel — Facebook investor/board member and major donor to white-supremacist/pro-rape presidential candidate Donald Trump.
Nothing is more frustrating than needing to edit or sign a PDF and not having access to the original document. That’s why PDFpenPRO is a must-have app in our books.With this extremely useful app, you can merge, markup, and create PDF documents without ever having to convert your PDFs into word processor file formats. Type directly onto […]
From self-driving cars to stock market predicting software to the recommendations you get on Amazon and Netflix, machine learning is at the core of modern technology. You could find yourself building technology that is literally changing the world with the skills you’ll learn in The Complete Machine Learning Bundle. This bundle of 10 courses includes 406 lessons that will teach […]
This Python Mega Course will help you learn to code by teaching you to build 10 real-world apps that each highlight a unique use of Python.Job prospects for coders are still growing steadily—and with Python being one of the most popular coding languages out there today, it’s important for job seekers to demonstrate a widespread understanding of the […]