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The Learning Curve to Prosperity

Written by: Glen Morris

Article Overview: The research and development engine that created the Internet revolution could be applied to agriculture, housing and manufacturing to provide unprecedented prosperity.

The Learning Curve to Prosperity

In a recent interview the president of Sony said he considered himself to be, in effect, a transition president. He said his job to get Sony to the Information Age, but he had no idea what the world would be like when they got there. Then, running Sony would be someone else's job.

Advertising and marketing professionals have more reason to be jealous of Sony's president than just for his golden parachute. Most advertising and marketing professionals are scheduled to retire long after the president of Sony, and unfortunately they will not only have to survive getting to the Information Age, but they will also have to survive living in it.

If the president of one of the world's leading edge corporations can't imagine the world we're headed for, how can advertising and marketing professionals make business or career plans for it? Unfortunately, there's no simple answer. Understanding the age ahead of us is going to take some work.

In the past, people turned to advertising guru's like David Ogilvy, who could offer advice based on decades worth of experience in the industry. Times have changed. The Internet has caused more changes in the advertising industry in the past 24 months than happened in the previous 40 years. By definition, an industry barely two years old can't produce experts with more than two years of experience in the industry. When facing a new age, the only experts are the true visionaries.

Fortunately there are at least three visionary writers whose work offers insight into the transition we now face; Buckminster Fuller (especially in his books "Critical Path," "Cosmography," and the now out of print "Nine Chains to the Moon,") James Burke (in his recent bestseller "The Axemakers Gift,") and Marshall McLuhan (in "The Medium is the Message.")

Buckminster Fuller was a design scientist and philosopher who saw in the 1930's that humanity was on a learning curve which allowed it to do continually more with continually less. Sometime shortly after the turn of the millennium, he wrote, we will reach a point where we know enough to make everything everyone needs, and at affordable prices.

Fuller formalized and defined research and development in a way no one ever did before. The first large scale implementation of his principles was in Silicon Valley with the development of the personal computer. If you want proof his principles work, compare the costs and features of this year's computers against last year's.

In the early years of the personal computer, the PC was marketed as a premium item with a high profit margin, a strategy that maximized profits by minimizing market share. This was not the inventors' intention, it was a marketing decision, and it proved to be a bad one. It seems hard to believe, but Microsoft Word once went for $500.00, and so did Excel. In 1985 and 1986 just having a word processor and spreadsheet meant a one thousand dollar investment, not counting the computer system to run it. Today, you can buy a computer, with a word processor and spreadsheet included, for not much more than a thousand.

Business Week ran a cover story some months ago, headlined the "Technology Paradox," which covered the curious behavior of technology stocks which, contrary to the usual wisdom, generated maximum profits when their products became commodity priced, rather than when they were premium priced. The math is actually very simple; it is better to have ten percent of a hundred billion dollars, than to have a hundred percent of a hundred million dollars.

The benefits of giving high technology products commodity pricing are seen in the war between Apple and Windows/Intel for dominance of the world personal computer market. For years, Apple kept the price of Macintosh computers artificially high, giving them much better than average profit margins. This strategy worked well for a few years, but the Wintel strategy of lower pricing gave the Wintel platform a critical mass Apple couldn't acquire, and now may never have the chance to. While Apple used its high profits to give shareholders great dividends, Microsoft and Intel plowed money back into constant improvements in their products, and reductions in costs. Lowering the price of computer hardware and software, opened up a vast consumer market and profits went through the roof, even as prices dropped. Even more money became available for research and development, which further lowered prices and improved performance, which made even more money available for R&D, and so on, forever.

In the future this kind of R&D feedback loop will alter most industries, profoundly altering the standard pricing and marketing strategies of each industry as it rips through it. The post-Information Age world may seem much like the world Alice found when she went through the looking glass; it looks a lot like the previous world, but things are completely reversed, and different laws of economics seem to apply. Learning the realities of advertising and marketing in the post-Information Age will be a challenge.

The late Marshall McLuhan seems more timely than ever. His basic point, totally missed by most of his fans and critics, then and now, is that new technology can cause profound changes in society, and we ought to consider what those changes will be, very carefully, before we commit ourselves to them. Far from being an advocate of revolutionary technology, he was its ultimate critic. But McLuhan lived in a time when choice was still possible. We already committed to a technological revolution. The only question is whether we're committed to surviving it.

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Article Tags: bestseller, career plans, chains, cosmography, critical path, david ogilvy, design scientist, golden parachute, guru, information age, james burke, leading edge, learning curve, marshall mcluhan, medium is the message, new age, nine chains to the moon, philosopher, simple answer, true visionaries



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