Blog #4

Flat Earth 3.0

      I thought Dr. Friedman’s talk at MIT was extremely interesting. I did not fully expect to be so interested in the subject but before I knew it I had watched the entire speech. As Dr. Friedman explained the evolution of our world going from a “download” world into an “upload” world I realized I experienced that evolution but had not recognized it. He mentioned one of the turning points for our world becoming “flat” was in August of 1995 when Netscape introduced the first web browser. I was 11 years old and I can remember surfing the web at my dads office for the first time during this era. The evolution Dr. Friedman talks about has moved so quickly it has been difficult to recognize the changes that have occurred globally. He mentioned that in the three short years he stopped covering globalization to write about the Mideast he was astonished at the changes that happened in that short time span. 

       

    The new “flat” earth Dr. Friedman speaks about has given an individual with an internet connection the ability to share the content they created with the entire world. This idea was not possible a very short time ago when the were very few channels which connected the world. His experiences with people he has meet during his travels were very entertaining. His story about the driver who had his own website in multiple languages shows how if an individual has the imagination and ingenuity anything is possible. 

  

     As Dr. Friedman reached the 40 minute mark in his 47 minute speech was when he lost me. Obviously Dr. Friedman believes strongly in the theory of man made global warming and he spent the last part of his speech talking about the “green revolution”. I am not sure how this was related to the subject he spoke on for 40 minutes. Earlier in his talk he spoke about how important he thought free trade was but ended his speech with how we needed a real green revolution and the only way this could be done is with legislation, laws and taxes all of which hinder free trade. Obviously Dr. Friedman is a brilliant man but sometimes when a person is involved heavily in a cause they believe to be true they abandon common sense. I can only assume the reason he brought up this subject was to plug his next book about green technology. 

     Other than his off topic rant at the end I thought Dr. Friedman’s talk was brilliant. As a country we need to recognize how the world as flattened to remain the global leaders in trade and innovation. Individuals made this country great and now that we have access to the entire world as individuals we should be able to continue to climb as a country. We have some of the brightest minds on the planet and if we could get our Government out of the way or on board with this idea who knows how far we will be able to advance.

Dr. Friedman's talk at MIT can be seen here.

Blog #2

Is information technology a source of competitive advantage?

            I would argue yes. I think the biggest evidence of IT being a source for competitive advantage is within small business. Not too long ago a small business start-up required a good business plan and renting or buying a building in a high traffic location. Gone are the days of brick and mortar stores being a requirement to start a business. Information technology has allowed anyone with a work ethic and a good idea to become a business owner. There are thousands of successful businesses around the country that do not have a physical location for customers to visit and yet they are thriving because of the online market place.

            When I was 21 years old I opened my first business. I went to work straight out of high school and saved nearly every penny for four years. My brother in-law was one of the best local farmers in the area and I took on the challenge of selling his produce. I took the money I saved and rented a building, had a porch constructed and started advertising. We operated for almost a year without losing any money. I felt like we had established a customer base and were beginning to grow. I was looking forward to turning a larger profit and even hiring an employee to run the store so I could have a couple of days off a week. However, one day I learned the largest produce market in the area was building a new store down the road from me. This competitor was well established and had a large bank roll. I had zero competitive advantage. This news scared me and I decided to close my store instead of trying to take on the giant.

            I share my story because I believe if my business had been online I could have continued to operate by building a web presence and making transactions online. Information technology allows people from around the world to view and buy your product or service. A large part of my operating cost was rent, utilities and the time spent at the physical store. Not having all of these expenses could allow a business to have a competitive advantage. Also, automated transactions cut time and cost out of the buying process. I spent a large amount of time checking out my customers at the register and wasted a lot of time waiting for customers to enter my business. With an automated service customers can make transactions at any time of the day or night only requiring an employee to fill the orders.

            Information technology also allows a small business owner to forego the fear of sinking a large amount of cash into a start-up business. Anyone can create a website now days at little to no cost. This gives the owner the ability to focus on the product or service. If the business does not work out minimum loss was incurred by the owner.

            I hope to own another business one day and I believe having a store run by information technology will give me a competitive advantage that I did not have my first time around.

Blog #1 Increasing Returns

Over the past two decades we have seen an explosion of new technology around the world. With this new era has come the uprising of knowledge based industries. For so long the world has been accustomed to production being defined by physical goods like soy beans or lumber and with this the law of diminishing returns has applied. As the production of knowledge based products began to rise, it became apparent that the idea of diminishing returns could not be applied to this new area of production.

        The principle of increasing returns is the idea that a product will continue to profit as sales grow. Unlike a regular commodity, having to produce more because of increased sales does not hinder the producer. Also, a knowledge based product has the ability to keep consumers loyalty much easier because of the effort a user must put forth to become comfortable using that product. A product with diminishing returns could pull consumers loyal to other producers by simply lowering the price of their product. Fear of a new company emerging or a cheaper version being released is not as much of a concern for producers of knowledge based products like it is with a product under decreasing returns. A user exerts much effort and time to become familiar with a certain system; this investment is what keeps a consumer from jumping from one manufacture to another.

                Another large distinction between diminishing returns and increasing returns is with the production of new and better products. With a traditional product under diminishing returns, normally the newest and most improved product takes the place of older outdated products. This is not so with increasing returns. For example, if a new competitor to Twitter arises and it has a better layout, allows for the use of more characters, and is superior in every way, this does not guarantee success in the knowledge based market. According to NBCnews.com Twitter has 175 million users. This means that even if a superior “micro-blogging” site was created, no one would be using it and the chance that the new site would convert every Twitter user or reach 175 million new users is almost impossible. 

              Many believe this type of market creates a monopoly in every different sector. However, these “monopolies” are very different from the traditional monopolies of the past. A monopoly in an increasing return economy benefits the consumer but blocks new competition from creating a similar product. More options are available for the user but eventually competitors fade away because of lack of use. This is because the majority of consumers are using the dominate product. In a traditional monopoly the consumer only has one option which allows the business holding the monopoly to over charge and under deliver on service but in this situation the consumer has access to good pricing and quality products because the company on top wants to remain there.

                In conclusion, the landscape of products and the economy which surrounds them may be changing but in my opinion it is a welcomed one. While it is difficult to quantify an increasing returns market I don’t think that should be a reason to dismiss or fear this type of system. With the increase in technology and knowledge based systems comes uncharted territory but I think it also brings progression we should all embrace.

Caleb Wiles-