FOLLOW THE FREE
The accelerating expansion of knowledge…
…and technology simultaneously pushes up the demand curve while pushing down the supply curve. One very potent force shifts both sides.
The effectiveness of technology in driving down prices is easy to appreciate. As stated at the beginning of this chapter, price drops have been going on for a while, although now it is accelerating. We know the outcome of this trend: lower prices everywhere. Consumers rejoice. But how are companies to make a profit in a world of constantly sinking prices? In the supply. Technology and knowledge are driving up demand faster than it is driving down prices. And demand, unlike prices, has no asymptote to limit it. The extent of human needs and desires is limited only by human imagination, which means, in practical terms, there is no limit.
Anything that can be replicated will have a price that will tend toward zero, or free. While the cost may never reach free, it approaches the free in a curve called an asymptote.
The quicker the price of transportation drops, the more quality and services and innovation are embedded into cars, planes, and trains, lifting the quality of the “wants” they satisfy.
Over time, any product is on a one-way trip over the cliff of inverted pricing and down the curve toward the free. As the network economy catches up to all manufactured items–from cell phones to sofas–they will all slide down this slope of decreasing price more rapidly than ever.