Five Changes Being Driven By Zero Marginal Cost

My partner Albert gave this ten minute talk yesterday at DLD

#VC & Technology

Comments (Archived):

  1. pointsnfigures

    Intellectually stimulating in a lot of ways. I might ask a question on zero marginal costs. There is the cost of allocation of time. I can choose to allocate to this or that depending on the way I value each. Time isn’t free, there is a cost to time. So, MC isn’t exactly equal to 0, but I don’t think that upsets the idea Albert’s talking about.

    1. LE

      There is the cost of allocation of time.People will value time typically only if there is a frame of reference. If you remove the frame of reference they won’t do that.A classic example is a person shopping for a car, say a friend of yours. The “average” person will drive all over the place wasting time (and spending money to drive around) to save let’s say $300. However if you ask the same person “I want you to go and drive around on Saturday and I’ll pay you $300 to run errands” (and let’s assume they are not difficult on unpleasant in any way) you know what the answer will be. Rationally this doesn’t make sense. Of course it’s justified (and can be) in many different ways.

  2. JimHirshfield

    YES! Video of the Week. I love Saturdays.

    1. Brandon Burns

      The real question is: will we get a non-video, long-form written post on Saturday?

      1. JimHirshfield

        Oh paaaaaa-leeese. Dream on. Dream on.

        1. Brandon Burns

          Hahahaha. Fred gets to phone it in twice this week?! NO FAIR! STANDARDS!!!!:-P

          1. fredwilson

            i thought about holding this for saturday but i liked it so much i just couldn’t do that.

          2. Brandon Burns

            Oh man. Now I have to watch it again and not get distracted this time!

          3. William Mougayar

            His TEDx NY video is pretty good too. I think they both go hand in hand.

  3. awaldstein

    Albert just prods me.-sometimes intellectually stimulating-sometimes challenging where it touches my own expertise.-always one of the two.

    1. fredwilson

      me too Arnold. its fun working with him because he always makes me think

  4. John Furrier

    Margin cost to zero is great but the real action is where does the value shift to?? That is the billion dollar question

    1. fredwilson

      power laws suggest that it goes to a small cohort. which is why albert is suggesting a universal basic income system.

      1. John Furrier

        very interesting conversation to keep alive and robust. there will be oppty for many to facilitate new tools and value creation activities (not mutually exclusive).

      2. LE

        a universal basic income system.Albert should spend time around more of the types of people that will fall further into decline if a universal basic income system is ever seriously considered. I am 100% against that type of thing (but open to a good argument which I haven’t heard yet..)

        1. SubstrateUndertow

          Given the trajectory of automation/information and the fact that the disenfranchised masses are becoming evermore unwilling/unlikely to continue sitting quietly/peacefully in the marginalized/poverty corner what other alliterative outcome are you suggesting/imagining is ultimately possible.

          1. LE

            Birth control. And the good news is the Pope actually said that Catholics shouldn’t feel that they need to just have more babies than they can afford to support (or something like that).Quantify. By the way what is the actual amount % wise of the “disenfranchised masses” in our country? Is this something actual or something that is just the story of the decade in the media? (A serious question). I also see all the stories overseas (I actually watch the Nightly News) but as with anything I want actual quantification of the problem. Just because there are a small group of people that are occupying wall street in a metro area of 18 million doesn’t indicate that there is a big problem. A very very small amount are willing to do that. And just because reporters go out and get video clips of a unhappy people doesn’t indicate that there is a revolution that is definitely going to happen.Like with crime in our country you are always going to have crime you are never going to eliminate it. The question is how controlled is it and how many people does it actually touch?

          2. pointsnfigures

            I have come around to Albert’s idea of uniform basic income. My conditions around it are this: End the entire welfare state apparatus at the federal level. All bureaucracies dismantled, and employees let go. All office space put on the market. No strings attached on the transfer payment from the government to the individuals receiving it.The federal budget would be better off. Currently 63% consumed by entitlement spending. It’s unsustainable.

          3. LE

            All bureaucracies dismantled, and employees let go.Ok so what happens to all the families that are fed as a result of that current legacy system?And what happens to the supply chain to that system. Let’s say the person who works for the company that services the copier that is in an office for the bureaucrats to use…when the federal contract is not renewed and/or that copier doesn’t have to be serviced anymore?This is quite similar to “why didn’t we just outlaw cigarettes”? Why? Because tobacco feeds more than those that farm it or the companies that sell cigarettes (so it would take many years for all of that to get worked out slowly over time not all at once). There is also by the way a guy who makes a living emptying the cigarette machine in the bar. [1]This is one of the reasons that places like the Port Authority (of NY and NJ) and all the crap that goes on there isn’t actually so bad. It’s like a tax that keeps certain people employed that if they didn’t have those patronage jobs would be a burden on society. Similar in a way to what happens with many union jobs. Really a tax in a way. [2][1] You are seeing the reverse of that in Colorado with legal pot by the way.[2] If my father in law (teacher who got to retire literally in his 50’s) didn’t have that juicy teacher’s pension (and benefits) he would be a burden on me potentially. Of course whether this is sustainable is another question.

          4. Matt Zagaja

            If my Facebook feed ads are any indication they all become Uber drivers.

          5. Robert

            And it probably won’t be too long before the Uber drivers will be replaced by driverless cars.

          6. Vasudev Ram

            But then your earlier argument against basic income (in this post) seems on the other side of the fence from what you are arguing in this current comment – or so it seems to me? maybe they are not contradictory – interested to know.

          7. LE

            Basic income is a handout for doing nothing. A patronage job is getting paid (or perhaps overpaid) for doing something. That’s the difference.

          8. Vasudev Ram

            Ah, got it now. However, to nuance it a bit, those in patronage jobs can have a tendency to slack off or not do what they are supposed to do (though getting paid for it), and also have a sense of entitlement – we see it happening, at least in India.

          9. SubstrateUndertow

            A network-economy is inherently a global-economy so an isolated US perspective will become ever more irrelevant as time passes.

    2. Richard

      The mover of private wealth is primarily publicly traded equities. The driver of equity prices is earnings. This is not a private club.

      1. Twain Twain

        In June 2014, BIS provided this bit of data:OTC Derivatives Market Notional Tops $700 trillion. A few years ago it was estimated to be $1.2 QUADRILLION.Meanwhile, the global equities market is approx $65 trillion.

        1. Richard

          This number includes untold numbers of contracts which cancelled each other out years ago, and it’s based on something called “notional amount” which is vastly larger than the actual sums of money changing hands. An interest-rate swap, for example, might pay out the difference between a fixed rate of 6% and a floating rate of 5%. On a notional $1 million swap, the total payment is just $10,000 per year.

          1. Twain Twain

            Yes, the BIS data’s just provided as a contrast to publicly traded market. There’s the opaque “dark pools” where private wealth is moved — albeit bundled up as derivatives.Total AUM in private wealth accounts is projected to be $80 trillion in 2016 by McKinsey.

  5. JimHirshfield

    “Kittens….everyone wants kittens.” 1B phones sold last year…more than number of PCs every sold. Holy shit.

  6. LE

    possible because we are in a world of zero marginal costThe other really important factor in achieving zero marginal cost which can’t be ignored is the tendency for people (enhanced by the internet’s reach) to not value their time and to do things for free that they wouldn’t do if they were actually paid a nominal or small amount of money.In other words someone will do for $0, say contribute to open source [1] or create “help” videos, labor and creativity they wouldn’t do if you paid them $10 per hour “my time is worth more than that”. (Important concept and proven although I can’t find the links right now..)The thing that the internet has allowed people to do (because there is no cost in doing so) is getting your message out to a large enough group of people that there will be those who will be willing to help at no cost. Prior to the internet there was no practical way of doing this type of thing. In other words being able to take advantage of people’s tendency to want to feel good about themselves by helping others in some way.[1] Pre internet examples would be: An attorney doing pro bono work, help clean up the park on Saturday, help your friend move for only pizza and so on

    1. fredwilson


    2. JimHirshfield

      TIL[1] there were no volunteers before the internet came along.#sarcasm[1] Today I Learned

      1. LE

        Internet revealed more suckers born every minute than P.T. Barnum ever could. [1][1] Like Albert’s “professor in lecture hall” example.

        1. JimHirshfield

          “Without promotion, something terrible happens…nothing”-P.T. Barnum

          1. LE

            Je suis plus que je ne suis PT Charlie. En fait, je ne suis pas du tout Charlie.

          2. JimHirshfield

            Google Translate #fail

    3. Rick

      What everyone seems to be forgetting is that humans only *need* – food, shelter, and clothing to survive. Moving to a world where humans don’t work is simply a matter of growing enough food, shelter, and clothing. Computers are not needed. Bits are not needed. Money is not needed..So now I wonder… Why are people working towards full-automation that provides abundance when walking away from automation is what will provide the abundance?

  7. Matt Zagaja

    I will be excited when there is zero-marginal cost to get new gadgets on the Internet. Right now there sort of is in certain contexts like adding something to WiFi at home or automobiles that include lifetime 4G service, but generally if you buy a $100 tablet (and they’re getting even cheaper than that!) you would have to pay a $100 marginal cost to get it online on a cell plan.

    1. JimHirshfield

      On the other hand, gadgets like the Xaomi phone and the OnePlus One phone are heading in the lower cost direction, yet have much higher quality specs.

      1. Matt Zagaja

        I definitely agree on that, I’m just not sure how we’re going to get the phone companies to play along with the economics. It’s interesting because Microsoft seems to be gifting windows licenses to the lower priced gadgets in order to hold the line on market share against chromebooks. But what competitive pressure exists on Verizon to put the thing online? Though maybe a better question for John Legere over at the uncarrier ;).

  8. Twain Twain

    What are the implications of zero marginal cost on….PROFITS?

    1. JimHirshfield

      Costs down; profits up. Perhaps.

      1. Twain Twain

        Haha, it’s a trick question.Yes if Profit = Revenue – Cost then if cost = 0 then revenue is all profit.However, pointsnfigures and LE rightly highlight about “There is the cost of allocation of time.”Zero marginal cost turns a lot of the Opportunity Cost of Time on its head.According to Kinvey survey in 20014: “56 percent of mobile leaders surveyed say it takes from 7 months to more than one year to build one app. 18 percent say they spend from $500,000 to over $1,000,000 per app, with an average of $270,000 per app.”So…when we read about those zero cost apps………we do have to factor in developer time.Here’s our hourly mobile developer rate in the US:Avg. 65hr (125k)Mid 40hrSenior 80hr Expert 150-200hrThis is why I’ve saved myself lots of $$$ by doing my own coding.

      2. Girish Mehta

        In a low-competition scenario, perhaps temporarily Jim (but capitalism also dictates that precisely for that reason it will not remain a low competition space for long if no artificial barriers to entry). For an interesting point of view on this subject – ‘The Zero Marginal Cost Society’ by Jeremy Rifkin. Thanks…

    2. SubstrateUndertow

      A redefinition of profit and how and to whom it accrues ?

    3. Matt Zagaja

      $0.99 and free apps. Free music on streaming. Go fourth to the app store and Spotify and enjoy your abundance. 🙂

    4. Richard

      Profits are at record highs

  9. JimHirshfield

    “Moving from a world of Scarcity to a world of Abundance” – Yessssss.

    1. Girish Mehta

      Yup. Has implications for how we think of economics (economics fundamentally a study of allocation of scarce resources)…thanks.

      1. JimHirshfield

        Agreed. I’ve been a big fan of this quote for a long time as it relates to sharing what you’ve got as opposed to withholding.

      1. JimHirshfield

        Nice post. Peace.

  10. Supratim Dasgupta

    Very interesting talk. I also want to watch the discussion on ‘The Future of Food’. Does anyone have the video link?

  11. JimHirshfield

    The cost to leave an additional comment has approached zero. On the other hand, I hope you just enjoyed my consumption of 10 seconds of your life.

    1. fredwilson

      i very much enjoyed it

      1. JimHirshfield


    2. Girish Mehta

      Opportunity Cost :-).Buffett: “Charlie and I view our cost of capital as what can be produced by our second best idea”.

  12. William Mougayar

    “What’s true for bits is true for atoms.” – I loved that quote, and it’s smack in the middle of the Internet of Things. Also, referred to as “De-materialization” of things, i.e. where something that used to be “physical” gets now embedded in software somewhere and looks more invisible. E.g. GPS going from a special-purpose device to being inside every smartphone.

    1. Twain Twain

      Not quite because there are currently huge debates in Quantum Information and Neuroscience circles about how bits are different from atoms.Bits originated because of Pascal’s Triangle (pls see graphic and the 1, 2, 4, 8. 16).Meanwhile, atoms have directional spins, energy potential, wave-particle properties, etc AND Max Tegmark of MIT has even postulated that atoms contain Perceptronium, the most general substance that feels subjectively self-aware.This has implications for how Quantum chips, servers and machine intelligence are modeled and built.Historically, all algorithms were bit (probability)-based.

      1. William Mougayar

        Would it be more accurate if we said “some atoms have another life if bits are added to them”? But sometimes, the bits are replacing atoms, at least for the user they only see the bits/apps and not the atoms inside.

        1. Twain Twain

          Users just see the kitten pictures, video snippets and 140-characters in the appealing font, haha.It’s the Bitcoin miners who get all obsessional about the bits in the protocols and encryption keys.And the physicists, geneticists and bio-chemists who get all excited about the atoms.I was reading about ‘Models. Behaving. Badly’ by Emanuel Derman, former Head of Quantitative Finance at Goldman Sachs:”… I began to believe it was possible to apply the methods of physics successfully to economics and finance, perhaps even to build a grand unified theory of securities.After twenty years on Wall Street I’m a disbeliever. The similarity of physics and finance lies more in their syntax than their semantics. In physics you’re playing against God, and He doesn’t change His laws very often. In finance you’re playing against God’s creatures, agents who value assets based on their ephemeral opinions. The truth therefore is that there is no grand unified theory of everything in finance. There are only models of specific things.”Derman believes Wall Street has a blindspot that prevents it from recognizing that finance will never be physics and that it will never be possible to write down a model that encapsulates human behavior.So it’s a bit of a battle between bits (Pascal & Bayes probability) and atoms (Einstein’s relativity) and then the DNA of the way consumers think.That’s why it will be MOLTO INTERESTING to see how the economists deal with these dynamics — especially since economic models have borrowed from the mathematics and science for its empirical rigor.

          1. ShanaC

            economists like forgetting that they borrow

          2. Twain Twain

            Haha, here’s one for you. Economists like forgetting we’re round pegs with feeling and biases. They just want us to fit neatly into their magic Rubik cube models that assume we’re rational logic boxes.

          3. Twain Twain

            Also this one…

          4. SubstrateUndertow

            In physics you’re playing against God, and He doesn’t change His laws very often. In finance you’re playing against God’s creatures, agents who value assets based on their ephemeral opinions.Maybe that implies finance/economics should more closely resemble biological models where the platform building blocks are much more volitionally/adaptive/volatile as regards their systemic behaviours.Nevertheless even with such volitionally/adaptive participants some useful emergent organizing dynamics can be modelled.Even 1st order simplified models have utility if not pushed to far.

          5. Twain Twain

            So the connections between Mathematical Physics, Biochemistry, the Arts & Economics are where I constantly flex as I figure out how to craft & code my system.One of the advantages of being a maths graduate is that the idea of “Invention by first principles” is second nature. By first principles, we can systematically trace back to WHY finance and economics have been modeled as physics phenomena.Then we read Quantum Physicists like Professor Vlatko Vedral of Oxford University say things like: “Once you have a probability that something might happen, then you can define information. And it’s the same information in physics, in thermodynamics, in economics.”And first principles tells us that that assumption is fundamentally WRONG.Information is not all the same in physics, thermodynamics and economics. Information in the first two relate to matter with no mind, no language, no subjectivity, no feelings, no morals, no values and no social interactions. Meanwhile, information in economics is based on human thinking, language, subjectivity, choices, feelings, morals, values and social interactions. These are all BIOCHEMICAL rather than physics phenomena.Plus I studied physics in school, a year of chemistry at university (where they taught us Schrödinger’s entropic equations) worked in chemical industry and did economics+econometrics modeling in Mgmt School AND I’ve been coding since childhood, so I know not all information is the same and just because there’s a probability it exists does NOT make all the information the same.All information being the same and all we need is probability to define it is one of the biggest fallacies possible.So the question for me became, “What then is the Yin to the Yang of probability (as applied in Mathematics+Physics)? How would that code system be structured and work?”*

    2. SubstrateUndertow

      Bits can be said to replace atoms only because in many cases it is possible to replace the atoms that were previously required to carry that same information content with- more efficient- less costly- more functional fungible- more storable- more recombinant- more duplicatable- more instantly transportable/sharable- more synchronizable- more functionally transformativelow energy non-material bit-pattern storage/processing.Anything where the important value of the product is inherently representational information rather than an actual material product can be converted from atomic-information-carriers to bit-patern information-carriers. Ever then bit-pattern storage requires some small amount of material atoms for storage.Atoms can also be converted to bits, as a conceptual equivalency, when their instantly-fungible network-effetct characteristics can be leveraged to dis-intermediate the services of previously required material atoms as in when the sharing economy reduces material production requirements or when turn by turn directions reduces gas consumption.

  13. LE

    “basic income guarantee” … “decouple income from work”I think if you look out your window in NYC you will see plenty of reasons why you can’t offer people a basic income guarantee and decouple income from work. For one thing there will always be atoms that are moved around and create objects that involve the physical world and marginal costs. Only a small amount of things have or can have zero marginal cost. So the idea that there will be no jobs in the future (or anything even remotely close to that) is ridiculous thinking. And unfortunately people need to work and be motivated for doing so. Holding out money (and the things that it buys) is the time proven way to get people off their ass.Unfortunately there are also corrective forces in the world which protect legacy interests and there is no “we” that can override that type of thing. (This is soviet central planning). Take Tesla and electric cars. At a certain price point in oil, seemed like a reasonable bet. Now given the price drop in oil [1] and how the he Saudis operate not such a sure thing, eh? We’ll see what happens with that giga factory to make batteries.[1] Wish JLM was around so I could find out what will happen in his wonderful state now that Oil drop might kill the Texas “Massachussets Miracle” that he was always attributing to great politics.

    1. Ben Kinnard

      Basic income gives you the minimum needed to survive – so you have money to eat and live and that’s about it. If you have enough to survive but that’s it, most people are still likely to want to work and earn more to enjoy the things they like (including living in NYC which would presumably be quite difficult on basic income alone).I don’t think it removes the motivation to work, and instead would provide people with greater safety, and therefore allow them to take greater risks (e.g. quit their job to become a full time entrepreneur which could create more wealth).

      1. LE

        I don’t think it removes the motivation to work, and instead would provide people with greater safety, and therefore allow them to take greater risks (e.g. quit their job to become a full time entrepreneur which could create more wealth).Quit their job to do a risky startup? Your kidding right? That makes about as much sense for the majority of people “majority” as quitting a job and following your passion to do “art” or “music” or “entertainment”.Ben, listen, stop the madness (as Kevin O’Leary says on Shark Tank). The whole world doesn’t center around entrepreneurs and startups. Not everyone can do a startup and not even close to everyone should be trying to do a startup. Startups are not the answer to everyone’s problem. And not everyone can be a Uber driver either.(including living in NYC which would presumably be quite difficult on basic income alone).Maybe if people can’t live in NYC they should consider moving elsewhere where the balance between wages and cost of living is more balanced. Oh, don’t want to move out of NYC metro because you like the city and/or your family lives there? To bad not my problem that you want to be in the city that never sleeps. Or you feel it necessary to visit with your sister for barbeques. I’d love to live in the city as well but for many reasons, get this, it doesn’t make practical sense economically.most people are still likely to want to work and earn more to enjoy the things they likeDrive through any poor neighborhood with people on welfare and tell me with a straight face that they fit this category that you speak of.Of course there are most certainly well meaning exceptions to the stereotypes however they are the exceptions and the basic income guarantee can’t be just for them it would have to be for everyone.

        1. Ben Kinnard

          I agree that startups are of course not the answer to everything (was simply meant as an example). But if there were more artists and musicians this isn’t necessarily a bad thing (promise I’m not as naive as I sound right now!)People not being able to afford to live in NYC was one of my points – the lure of NYC would still motivate people to work, so the basic income wouldn’t make much difference there (but might incentivize people to move to cheaper areas, creating better balance in the country).With welfare – basic income would replace this, so worst case example it wouldn’t make any difference in those neighbourhoods, best case some people would work harder (and avoid the poverty trap). Anyway, a basic income isn’t going to come anytime soon, but the Swiss vote will be interesting to monitor as they are having a referendum about it this year.

          1. LE

            promise I’m not as naive as I sound right now!(The first step in fixing a problem is recognizing that you have a problem!)Switzerland to me (the outcome) is of no consequence. They don’t even fight any wars. Plus only 8 million people and those people aren’t as diverse as the people in this country are. NYC has about the same population.So it sounds like you are supporting giving welfare to more people with the hope that that welfare motivates people? It won’t. You will have people sitting on their ass and perhaps simply supplementing their income. Why? Because they will now just be able to get by instead of hitting rock bottom and making drastic changes.

          2. Ben Kinnard

            Doesn’t seem like we’re going to find agreement here, but according to Albert Wenger in this other talk he says there is no evidence that it increases unemployment.…At the end of the day, ensuring that every person in the developed world has access to food and shelter is something that I think should be universal, and it sounds like you think otherwise – call me a commie if you want 🙂

    2. SubstrateUndertow

      I don’t think it is an all-or-nothing either/or situation.It is more of an incremental mother-of-necessity evolutionary solution-gradient process. At the end of the network-evolution day our traditional value systems around work and income will certainly be disrupted by a ubiquitous network-economy.Just thinking out loud here but:Maybe we could start by handing out foreign aid in the form of a minimum guaranteed income to crank start local upward mobility instead of top down corruption or at least a mix of top-down and bottom-up foreign aid ?

      1. LE

        Maybe we could start by handing out foreign aid in the form of a minimum guaranteed income to crank start local upward mobility instead of top down corruptionWon’t work same as the old boss.Exactly the type of plan that academics would devise who don’t have any experience with human nature and why there is corruption in the first place.(Watch the very excellent PBS Frontline on Putin).

        1. SubstrateUndertow

          Ok, so your take seems to be a total denial that network-economies will bring any fundamental disruption to classic patters of production/consumption distributional stasis ?

      2. @mikeriddell62

        On your thinking out loud comment: for me the better way to get the grass roots moving is a universal complementary currency that’s earned into existence for contribution to the common good (pro-social or pro-environmental work). Networked communities would stand guarantee for each other that the work has been carried out to an acceptable standard. Link the currency to a marketplace and you have an ethical sales channel for vendors to liquidate stock and gain a reputation for supporting socially responsible behaviour.

  14. SubstrateUndertow

    You know it is a great presentation when it instantly rewires your brains’s overview to a whole collection of concepts that you sort of already knew but in a way that makes their interplay more organized/accessible.Doesn’t the atoms-to-bits thing still have a substrate undertow that bottoms out in real tangible production/resource limits where making any serious progress towards 0 marginal costs pivots around our ability to deal with our addiction to built-in-obsolessence as our universal profit crutch ?

    1. fredwilson

      i think we need Albert to respond to this comment

    2. LE

      Doesn’t the atoms-to-bits thing still have a substrate undertow that bottoms out in real tangible production/resource limits where making any serious progress towards 0 marginal costs pivots around our ability to deal with our addiction to built-in-obsolessence as our universal profit crutch ?Can you restate that in simple terms? To complicated for my brain.

      1. Richard

        Reliability. But data shows things are more reliable not less.

        1. SubstrateUndertow

          What data would that be ?

      2. SubstrateUndertow

        You can optimize by converting atoms-to-bits but even after that optimization a planet with 7+ billon souls will still consume immense amounts of energy and resources.So we will still need to deal with our dependence on built-in-obsolessence as ubiquitous profit tool if we want to reduce our overall marginal cost in the direction of 0.I’m at a bit of a loss to see how the network-effect can be leveraged on that front even given an advanced digitally-adaptive network-nervous-system driven society.

        1. LE

          So we will still need to deal with our dependence on built-in-obsolessence as ubiquitous profit toolWho is the “we” in that statement exactly? Along with the car companies and the entire design industry I am perfectly happy with the pleasure that I get from things being outdated and having to replace them with newly designed things. (Nothing that a bathroom remodel as only one example will looked dated 10 years down the road if not sooner..)This is human nature and unfortunately you aren’t going to change that part of the demand curve.Separately I would add “why do we need so much new music and new video entertainment when there is a wealth of existing material that nobody would ever have enough time to consume?”. Why? Because no “central planning” controls the creation of things and the demand is obviously there.

          1. SubstrateUndertow

            “new music and new video entertainment”I’m all for that as it has low material resource overhead with high value pleasure returns that are universally shareable.I’m also onboard with innovative obsolescence as, in the long run, it generally produces more social/material efficiencies.As for the new cars/parts, new washers, new fridges etc. . . . . . . . . on multiple unnecessary replacement cycles, that is simply a first world material obsession provided by unsustainable consumer debut and outsourced costs born by the the larger global community and the deletion of the resource-carrying capacity of the planet.Of course here in the first world we assume a sacrosanct right to such consumptive obsession. Our great grandchildren will probably not look back on our presumptive materialism with out cursing our self-indugent folly.And no one, especially not me, is taking about “central planning controls”. I’m rather thinking that “organically distributive governance” by the many will ultimately be the mechanism that puts a stop to the self-indulgent excesses of the few.

    3. Richard

      One mans built in obsolescence as our universal profit crunch is another mans innovation. Compare the 2007 iphone with the iphone 6. That said, things have a way of reaching a local maximum. Look at a copper phone today with that of 20 years ago, same phone, cars today vs cars 20 years ago, basically same car but way more reliable.

      1. SubstrateUndertow

        Let’s not conflate the legitimate value of rapid technical iterations with the garden variety of shoddy built durables that create immense resource waste and pollution foot prints on a global-spaceship running low on a fixed resource base.

  15. Twain Twain

    The age of abundance. Hope the gif animation works. The last guy reminds us of the people on the spaceship in ‘Wall-E’……*

    1. JamesHRH

      It is the age of information and communication abundance.Hard goods are getting scarce. During the Bubble, Jim Rogers went to invest in commodities and could not find a major Wall Street bank that had a commodities trading desk……he eventually set up a fund and the Rogers Index – http://www.rogersrawmateria…That’s the next Kondratieff wave – the need for energy and material reabundance.

      1. Twain Twain

        Did you read “A 30-meter long (98-foot) asteroid can hold as much as $25 billion to $50 billion worth of platinum at today’s prices, Peter Diamandis said.”*…VoilĂ  ABUNDANCE!That’s why everyone wants to invest in Elon Musk’s Space X.

        1. Elia Freedman

          I always thought the irony of that statement is that if that much additional platinum appeared on Earth, the price would drop substantially and it wouldn’t be worth $25 to $50B.

          1. Twain Twain

            Somewhere the Bond writers are wondering if their story lines of resource control may have subconsciously affected today’s $illionaires……..That or ‘Armageddon’ where Bruce Willis and the next Batman drilled away at the asteroids.

          2. JamesHRH

            Welcome to the Zero Sum commodities game.

      2. Robert Metcalf

        Absolutely. In the renewable energy world, the “experts” forget that you have to actually build this stuff, which is a much harder problem than the ones that can be solved by the internet at zero marginal cost.Oh, and there’s a big difference between zero marginal cost (in terms of fuel) and free. Need to decouple the ideas of free and zero marginal cost when it comes to renewable energy. You can’t get there from here if everyone expects it to be free…

      3. ShanaC

        there still is yet a way to deal with communication as a commodity

    2. William Mougayar

      great one. what is the source?

  16. Richard

    The zero marginal cost story comes around every 30 years or so. But its an oversimplification of what’s going on. It’s also about lower fixed and variable costs. It’s also about better precision and reliability.

  17. Emmanuel Bellity

    Great talk ! I love the idea of “the right to be represented by a bot”.

  18. Jorge M. Torres

    Glad to see Albert balanced his utopian-sounding notion of greater abundance with the idea that we should consider de-coupling work from income. Experience teaches that abundance may increase over time, but it’s almost always unevenly distributed. Robert Schiller touches on this decoupling in one of his recent books, where he argues for state-sponsored inequality insurance.I’m not convinced that there is going to be a shortage of work in the coming decades. There actually might be a shortage of workers, as the boomers start to retire en masse. Japan and Western Europe are already experiencing this. Not sure how zero marginal cost vs. demographics will net out at the end of the day when it comes to supply and demand for labor.

  19. Kirsten Lambertsen

    Man, Albert has a knack for making things easy to understand.

  20. @mikeriddell62

    What is the marginal cost for selling theatre seats or sports tickets at a fraction of face value, assuming they remain unsold up till the event begins?Zero.Why not convert them into an incentive to contribute to communities that solve their own problems?And in the process earn a reputation for being one of the good guys in business.At zero marginal cost.Cheaper than advertising?

    1. LE

      What is the marginal cost for selling theatre seats or sports tickets at a fraction of face value, assuming they remain unsold?There is a cost to someone occupying a seat even though there may not be a cost of giving away that seat. More security guards, wear and tear, there is a marginal cost to people attending (which of course could be in theory made up by sellling popcorn but that wasn’t your point).And in the process earn a reputation for being one of the good guys in business.I love all this “be a good guy” talk. The truth is consumers are brutal and they will switch to a competitor if your product and/or pricing is not good or if you do them wrong (in their eyes). People are mercurial. You are only as good as your last “solid”.Cheaper than advertising?Good short term pr perhaps (notwithstanding what I said above). However if everyone does it then the benefit gets cancelled out.

      1. @mikeriddell62

        The security guards will be there if the lights are on. And let’s face it, that’s not the fixed cost I’m referring to. The players wages, the repayments on the stadium etc. Those costs are all sunk so the marginal cost of sale remains more or less zero.As far as consumers are concerned, I think you’re behind the curve. For example:72% of consumers believe business is failing to take care of the planetand society (The UN Global Compact-Accenture CEO Study on Sustainability (2014)86% believe that business needs to place at least equal weight onsociety’s interest as on business interest (EdelmanGoodpurpose Report)93% would buy a product associated with a cause (Cone/ Echo Global CR Opportunity Study)There are lots more examples pointing to the fact that consumer demand is there to prove business gives back to society.

        1. LE

          The security guards will be there if the lights are on. More people in attendance means more security people needed at the arena and yes you do need more security with more people (as only one example). You can scan the same number bags with 5000 in attendance or 20000? Ever been to a supermarket when it’s busy? Or a restaurant? For that matter in the summer time your HVAC costs would be higher as well as water used (bathrooms) and so on. HVAC higher because each body gives off 2000 BTU’s (or whatever the factor is). More people also means more potential liability. More people means more toilet paper. And so on.And let’s face it, that’s not the fixed cost I’m referring to. The players wages, the repayments on the stadium etc. Those costs are all sunk so the marginal cost of sale remains more or less zero.Different end of the horse and different part of the business. You are taking from one person’s pocket what belongs to another person.93% would buy a product associated with a cause (Cone/ Echo Global CR Opportunity Study)Great tell me the next time that Joanne and Fred choose a restaurant and continue going back to it because it’s associated with a good cause. Also doesn’t seem to be front and center with either Amazon (which is crushing retail by losing money spending on distribution because that is what gets customers along with low prices and other gimmicks) or Apple which has really almost none of that touch feely shit. Or LL Bean or Walmart and so on. Or an Oil company.No question that some people care about that. And that it can differentiate you in some way. Just not to the extent that you think it’s some kind of thing that will levitate you above the standard things people care about in business.

          1. @mikeriddell62

            May I ask where you work out of?

          2. LE


        2. SubstrateUndertow

          Adding to that:A network-society inherently forces commercial institutions to more fully integrate their profit-interests with the interests of the overall community by universally accelerating the adaptive-interlay feedback-loop gradient of everything in the direction of best-fit coherence.A network-society is an AI-society drive by a digitally adaptive nervous-system that heavily favours/accelerates that best-fit coherence gradient.The net-work society is just an accelerated instantiation/extension of the evolutionary natural/statistical selection process.

  21. Sam

    I love that Albert is asking the big questions at the end of the talk. Oxfam reports that the wealthiest 1% globally now own 48% of the world’s wealth, and that concentration is increasing. In a zero marginal cost world this trend will continue absent structural changes (changes to technology regulation, to market regulation, to social policy, to global trade, to taxes). Very difficult to have an intellectually honest debate about this topic, but it’s the debate we need to have.

  22. iggyfanlo

    Fantastic… more vivid description of Albert’s post on Continuations

  23. iggyfanlo

    Albert … combination of Adam Smith and Che Guevara

  24. Bobby Reardon

    Is it technically correct to say bitcoin has one DB if each user has a repository on their local?

    1. falicon

      It has one valid Blockchain – not really a db. Copies of that Blockchain are replicated across most of the network (some clients actually only contain part of the Blockchain).

  25. Nneko Branche

    Trend towards zero marginal cost certainly exists. However, it will lead to a future of possibilities but abundance for all? No. Disassociating income from value generation sounds problematic and unlikely. As it relates to bots acting on our behalf? That already exists just ask the spammers and hackers controlling botnets 🙂

  26. kenberger

    I was there, Albert gave an awesome speech very much playing upon the conference’s theme “It’s only the beginning”.He slickly incorporated that phrase more times than any other speaker.

  27. DJL

    I loved this speech! (Until the “policy” suggestions.) decoupling work from income = laziness + loss of dignity + declining ecomony. But we already have these policies in place! They are called welfare and foodstamps and dozens of other government programs that keep people in perpetual poverty. I would focus on the bot legislation. (But then my bot certainly needs guaranteed food, shelter, cell phone and free healtcare courtesy of the collective.)

    1. fredwilson

      you are misunderstanding Albert’s suggestion. it is very different from are some posts you can read to understand the difference…

      1. DJL

        Okay – I read nearly all of these posts and I sitll don’t get it. I’m not sure how paying people not to work is going to advance society. But I am open to anything that would replace existing welfare systems. I would propose that if the idea is to gain traction with non “technical elites” – the message might need to be simplified so lame-brains like me can understand it.

  28. sofiafenichell

    I am curious – does anyone believe that the ability to make hardware (smart devices) will continue to get cheaper and easier until we commoditise it in the same way we did the app ecosystem as a result of zero marginal cost? And if so, how far off do you think that is?

  29. M Allan

    Anyone who things the cost of support 2B video views is approx. zero has never been a SysAdmin (-;