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Comment by davidw | Hacker News Reader

He's wrong. We got there because of economics: the marginal costs of digital products are essentially zero, and so tend towards free:

http://www.squeezedbooks.com/book/show/7/information-rules-a...

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They do, but only if they are commoditized. Once you get a sufficient amount of differentiation, you can (and should) "price information according to its value, not its cost".

Good point, but if it's big enough to interest VC's, it's big enough to attract interest in an open source or free version (Linux, Wikipedia). I can't think of VC's driving the price to zero in niches, as per his thesis that it's VC's driving the price of things to zero.

I should add that there's also certainly space between a new product's entry into the market, and when it becomes commoditized. If you're doing something that's not easy to replicate, even if people do start trying, you might have a number of years to make some money at it.

I agree (in that the article is weak). He breaks down a incredibly complex economic model with a painfully crude analysis. If that's his hunch fine, but to assert it like it's a dissertation is almost shameful.

This type of article is a complete waste of space, other than it serves as an example of how not to deconstruct a type of behavior.

What an interesting read! It was published in 98. I wish there was a newer version including all lessons learned in the last 10 years.

> the marginal costs of digital products are essentially zero

Assuming you can scale. ;-)

Well, assuming you can scale past one. "Marginal" cost is the cost of, for example, serving 100 pages instead of 99. It's tiny for Internet media companies; probably a bit higher for manufacturers. Some service businesses are basically all marginal cost. Scaling up or down is easy, but getting a competitive advantage is not.

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