Canada 3.0 And The Illusion Of Scarcity

Canada 3.0 Conference LogoThe other night I was having dinner with a friend and her teen-aged daughter who – not unlike many of her age – was struggling with the idea that some people, specifically those of a ‘wiser’ generation, just didn’t understand things like the Internet, Facebook, iPods, and the like. We tried to explain to her that, as someone who had never spent a day in her life “un-connected” from the always-on global network, she looked at the world through a radically different lens than many of her elders, and that different point of view represented a massive shift in perspective.  She remained unconvinced until a hypothetical was posed…

“What if” her mother asked, “tomorrow there was no Internet, and no cellphones… how would your life be different?”

Ashen panic crossed the youngster’s face… “Don’t – I mean… you can’t!”

That existentialist crisis is at the root of the unsettling feelings that consumed me as I emerged from Canada 3.0 a few weeks ago: That while there is a digerati (the digital-minded ‘elite’) in Canada that live and breathe the digital lifestyle every day, they are largely unable to guide the rest of the population, including those in industry, government, and even academia, towards a digital future because the digerati – the early adopters – and the non-digerati – the mid-to-late adopters – are looking at the world through radically different, fundamentally incompatible lenses.

Digital Beings

Being Digital, as Nicholas Negroponte so articulately expressed in his thusly titled seminal book, is a wholesale paradigm shift  – it is, as its name implies, an all or nothing proposition; a binary code – a 1 or a 0. One either thinks digitally, or one doesn’t – there is rarely a middle ground that can be found.  The inherent challenge that emerges as a direct result of this polarization is at the root of the crisis we Canadians face if we’re to catch up with much of the rest of the developed world, digitally speaking, and this challenge was the core conceit of Canada 3.0.

Yet, to borrow a phrase from the great Leonard Cohen, there is a crack in everything… where the light gets in, and this circumstance is no different.  Despite the black-and-white chasm between digerati and non-digerati, there is a massive grey area when it comes to consumerism and technology adoption.   For technology to be adopted, even by the digerati, it needs to be both useful and valuable.  When we reflect on the digital technologies that have achieved wide adoption – and I’m specifically thinking of digital cameras, iPods and e-Mail – there has always been a clear analog and an established use that the digital realm, also known as bits, simply did a better job at accomplishing for the user than its meatspace counterpart… commonly referred to as atoms.  Indeed, with each leap from atoms to bits – truly a black and white distinction, there’s been a shallow pool for non-digerati to dip their toe in – a comfortable, easy-to-use, familiar killer app that’s driven broader adoption.

For example, E-mail, widely considered the killer app of web 1.0 Internet adoption, has a natural analogy to paper snail mail. To, From, Subject and Signature are all remnants of dead-tree letter writing… even “CC” and “BCC” (carbon copy and blind carbon copy, respectively) are remnants of this atom-based communication methodology. Napster and YouTube, while relatively new, are still familiar ways to consume familiar content (linear, non-interactive music and video), and each has, in its own way, driven broadband adoption and demand.  Finally, Facebook, by using us and our friends as a familiar source of valuable content, is actually driving much of the adoption of mobile digital technology (AKA web 3.0), and is even furthering much of the understanding and adoption of web 2.0 sharing practices among non-digerati.

The Slow Tectonic Shift

If consumers are slow to adopt, then it serves to follow that industry, too, is slow to change. While there are many risk-takers, the vast majority of those in business are risk-averse and protectionist – a completely understandable practice given the pressures of having to be responsible for the massive volume of livelihoods and standards of living that are at stake. Businesses people, especially those in big business know that when new threats or opportunities emerge, play to your strengths and shore up your weaknesses — trust your instincts, work with what you know, and above all when drafting a strategy: Stick to the fundamentals.

While much of the strategic thinking – and the tactics they produced – may have worked in a pre-digital era, there has been one, fundamental shift that is causing tremendous disruptions in the strategic planning process across a variety of industries.  It’s a big, lumbering shift that is causing all manner of headaches and keeps executives and politicians lying awake at night. Simply put, the shift is that our newly minted digital economy is moving us from being driven by scarcity to being founded on abundance.

Buh-bye Scarcity, Hulllllloooo Abundance

Scarcity, as Chris Anderson has discussed in not one, but two significant tomes (The Long Tail and Free: The Future of a Radical Price), is a venerable concept that has served our economic thinking for literally thousands of years. Trade and markets are governed by it: Scarcity of commodities such as oil and agriculture drives the price of said items up… abundance drives the price down. Consider the final scene of “Trading Places” where Dan Ackroyd and Eddie Murphy make a killing by convincing the marketplace (illegaly, mind you) that there wouldn’t be enough oranges to fulfil demand for the world’s yen for frozen concentrated orange juice. The presumed scarcity drove the price of orange futures sky high, and when the price had gone as high as it could go, it was revealed that there would be an abundance of oranges that would easily meet demand and the price bottomed out faster than you can say frozen concentrated orange juice.  Summary: Few oranges – high price.  Lots of oranges – low price.

In the digital age, scarcity of many products – largely media related, but certainly not limited to that arena – is, by-and-large, a non-issue. With concepts such as the limitless shelf space of iTunes, and emerging business practices like on-demand production techniques at LuLu.com, we are continuing to make great strides towards abundance.  Yet the vast majority of industry – certainly here in Canada – is determined to try to preserve scarcity as the arbiter of its pricing and economic models, even if they need to artificially create it.

The Illusion of Scarcity

In order to acheive this illusion of scarcity, Canadian media (content) and ICT (Information & Communication Technologies — i.e. conduit) industry veterans are looking to government to aid them in this effort.  These providers need things like digital locks on devices that are protected by ‘copyright law’ – not so they can stop piracy, although that’s part of it – but so that they can continue to be the exclusive purveyors of narrowly licensed content.  They also want government to let them continue to ‘manage’ the Internet (that, by the way, the government has subsidized with our tax dollars) so that it is not a level playing field, but rather resembles the way our Cable and satellite TV packages are productized today.  The natural evolution of this practice will end, not with a freely accessible abundance of content and Websites, but rather with a programmed, pay-per-service or pay-per-tier productization (i.e. scarcity) of content (startling thought experiment example here).

If this seems silly and impossible, consider how we Canadians access our Internet, our media content, and our mobile telecommunications currently:

  • Internet: We choose from a dog’s breakfast of plans, each with bandwidth caps and speed limits. While Internet access is actually abundant, the big 3 networks keep telling us (without providing the documentation) that network capacity is perilously close to failing, and thus they need to ‘manage’ the access to the network by limiting speeds on specific types of files, and the source of those files, that we transfer over the Internet. More importantly, the artificially scarce marketplace is anti-competitive, and as the upstream providers control the marketplace under an oligopoly, there is limited opportunity for new entrants and competitors to level the marketplace and provide a so-called neutral net.
  • Media Content: Most people, digerati included, are still very much in an un-digital mindset for the content we consume, even if the content is delivered digitally. We still “move” the content around from device to device (i.e. CD to computer to iPod), rather than recognizing that every piece of digital content is always available virtually anywhere. Additionally, for the most part, the content is hardened, meaning that producers rarely sell or otherwise provide the components of a work (e.g. unmixed tracks or unedited scenes) so that consumers and others in their industry can remix it to their liking (or play it in the default setting).
  • Mobile Telecommunications: Rather than paying for wireless network access that we can do with as we please, we’re offered plans that create an artificial limit on voice minutes, texts, data, and even certain content types. As a particularly dangerous example of this mode of artificial scarcity, consider this promotion for Rogers Wireless which promises “…free, unlimited access to the most popular social networking sites and more.” for only 50$ per month. Consider what that would mean if one was on the Internet – Pay 50$ per month for free, unlimited access to Facebook, otherwise it’ll cost 99¢ every time you view it (or be entirely inaccessible until you subscribe to Roger’s ‘Facebook channel’ – again, thought experiment here). Even today, Rogers, Bell and Telus are using exclusive content (and using digital locks to secure it) to differentiate their products, rather than fundamental value propositions like speed, price, or quality of service.

In each case, there is a demonstrable illusion of scarcity, and to be fair, in the short term, this artificial scarcity will protect profits and jobs… but in the long run, as the world around us moves with the digital shift from scarcity to abundance, Canada will be left with precisely what scarcity promises: very little.

New Technologies, New Monetization Models

The ironic thing is that there is arguably a lot more money to be made in exploiting abundance, and certainly more ability to influence the consumption behavior of your customers. When you combine abundance with disintermediation – the act of removing steps between consumers and producers – you end up with a need for filters and aggregators that can help consumers navigate the abundance of content. More choice equals more value to the consumer in helping them find what they want… Less choice means that consumers will find alternate ways to access the plethora of content, even if that means turning to illegal means to get the content they want the way that they want it.  It’s also cheaper to deliver to them, and you can charge (yes, charge) content producers for introducing their wares to your customers.  You also get to learn a lot about your customers and can start to curate not only content, but products, services, and even other people for them; BUT, in order to accomplish this, you must start from a place of abundance, and not from a place of scarcity.

At Canada 3.0, digerati and industry squared off, but neither was really listening to the other. The content stream (that I participated in), had a number of digerati, but was largely influenced by and populated with members from traditional industry; However, far from reaching consensus, the digerati and non-digerati communities were staunchly holding to their 1’s and their 0’s, and rather than focus on mechanisms for adoption of digital tools to support abundance – the only grey area in the discourse – the dialogue became increasingly polarized.  In the end, what emerged after two days of discussing Canada’s ‘Moonshot’ – our national digital strategy – was ultimately tilted towards the protection of the illusion of scarcity rather than the exploitation of abundance.

While my friend’s daughter may never wake up in a world without an abundant Internet and her mobile phone, the rest of Canada may one day wake up to what a lot of the rest world already knows – there’s no future in scarcity.

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