Capitalism 2.0

Internet is changing the fundamental principles of our economy by providing an alternative way in which businesses are formed, run, and profit under the new principles that now we call Capitalism 2.0. The old rule of generating 'scarcity' under capitalism 1.0 has been replaced by managing 'abundance' under capitalism 2.0 made possible by the internet. This change, so far, is most evident in the media retailer industry. Traditional music, book, and dvd rental stores provide a finite amount of shelving spaces, limiting the amount of products each could carry in the store. This 'scarcity' drives the product prices high because the producers had to competitively bid and pay higher rent to get their products on the shelf. However, internet changed all that; music, books, and dvd's are now digitized into mp3, pdf, and mov which takes almost no physical space to store. This allows new generation of stores to carry much more music, books, and videos than their previous non-web based. Rhapsody, online music download store carries over 1.5 million tracks, that's 150 times more than a traditional cd store you see in the malls. Plus its price - $13/month for unlimited downloads, is equivalent to cost of a cd you buy at HMV. Amazon has over 3.7 million books and digital books, while hosts over 1.3 million misc. product sellers online. Netflix carries 55000 dvds through mail and 12,000 movies via online streaming. Customers can access all of these titles at $9/month, who would want to go to Blockbuster? With internet, stores like these become capable of storing infinite quantities of products catering to an extremely wide-range of global customers, at minimal prices (because inventory is no longer an issue). Being 'abundant' certainty is an advantage. Industries that are still operating under the 'scarcity' model by controlling quantities of supplies and access to them (newspapers, broadcasting co., movie industry) are doomed if they refuse to acknowledge and adapt to the new 'abundant' business model.

Capitalism 2.0 over Capitalism 1.0:

1. More: abundance - more (supply) yields more (profit), over Scarcity - less yields more. Learn from Amazon, Netflix, Rhapsody, itune Store.

2. Free: minimal entry & capital cost, over expensive entry & capital cost. Internet minimizes production, distribution, and inventory costs, thus the suppliers & could sell their products at lower capital cost. Internet allows businesses to profit from being cost "free." Learn from Asus - seling EeePC notebook at "$0."

3. Share: see 'sharing' as an intuitive human behavior by acknowledging the power (knowledge & labor) of the mass, over sharing that requires profit incentives. People love to share ideas, suggestions for free if there is a place for them to do so. Learn from NASA's clickworkers ,Wikipedia

4. Open: offer a platform that surrender authority to the mass, over authority reserved to the executives and specialists they hired. Learn from Dell's IdeaStorm and Starbucks' my starbucks idea.

5. Distribute: distribution model: network to as much as possible/ Exclusion model: network to selective/targeted public. Learn from Facebook, Google Adsense.

6. Meritocracy: promote a culture of merits where best ideas survive and get carried forth, regardless of where the ideas come from, could be executives, specialists, employees, customers, or public. Transparency and collaboration are keys in the process.

Imagine design business running under principles of Capitalism 2.0...