Your Economics Professor Was Wrong

Seth Godin has an interesting article in Fast Company this month called "The Scarcity Shortage."

"Scarcity, after all, is the cornerstone of our economy. The only way to make a profit is by trading in something that's scarce. This is why the music and movie industries are so terrified by the millions of people who download entertainment from the Internet every day. Downloading threatens to make supply virtually unlimited, and that could make their offerings about as valuable as those of some kids down my street who recently tried to run a stand selling freshly made mud.

The same thing is true for doctors, Web sites, T-shirt shops, sushi restaurants, thumbtack manufacturers, and brands of blank CD-ROM disks. There are 100 major brands of bottled water. Someone opened a fancy ice-cream parlor in Manhattan, and then there were six.

If it's remotely digital (like music), then it's easy to mimic. And if it's easy to mimic, someone wins if they can knock off the original--the sooner the better. "

Of course this topic is covered in business school, since it's the basis of the "demand curve" and the foundation of Macroeconomics. But what it doesn't take into account is technology.

Land is the classic example of scarcity: once it's gone, it's gone. But what if houses could be built five to an acre because of better water and sewer systems? Of what if farms can yield three times the crops due to better pesticides and lower fertilizer costs? What if land that was once useless could be used due to better water management, better irrigation?

Technology will always progress, allowing us to do more with less--breaking the laws of scarcity. And with the rapid adoption of technology, it's happening even faster.

So Seth's right: it's going to take smarter, more dedicated people to make real money, and the rest of the world is going to resort to operating on the razor-thin lines of zero profit due to perfect competition. What's really scarce? Wisdom. Courage. Honor. Relationships.