Digitization: Moving Towards Zero Marginal CoststeemCreated with Sketch.

in future •  8 months ago 

This is a concept that I do not see get a lot of attention yet it is something that is going to change our world over the next decade or two.

Zero marginal costs basically is the idea that it takes no additional cost to create each additional unit. An example of this is a photograph in the digital age. How much does it cost to create each copy of a photos once it is digital form? Basically it is zero since, each time we share it, it is duplicated.

Obviously, everything is not going to reach this point but a lot of things are moving towards it. Digitization leads to demonetization. It is simply unavoidable.


The classic example is music. In the days of records or cds, to create another unit had a cost to it. There were materials along with labor. Plus, we had fixed costs such as the plant and machinery that had useful lives. Hence, there was a true cost to each unit.

Today, with streaming, there is no additional cost to have 100 "copies" or 10,000. Once it is produced, it is easy to duplicate.

With technologies such as 3D printing just around the corner, it is possible that we start to reproduce products for pennies on the dollar. Instead of paying for finished products, we are going to just have the cost of raw materials. Having a digital scans which then are converted to physical projects in the home will really reduce costs.

What other industries is this going to affect? Manufacturing is obviously going to be radically altered. Anything that gets converted to data is instantly pushed to zero margin cost.

This is something we should be excited about. Unfortunately, we live in a world where copyrights and patents make it expensive to reproduce different items and information. The system is in place to protect the creators. However, this is rarely who benefits from these legal barriers.

Ultimately, we should see to shift to a knowledge basis. We want to expand human knowledge as much as possible. For this to happen, we need to open as much as we can. Open source software is a prime example. There are no rights or fees since the software belongs to "everyone". Thus, each "copy" costs nothing to create.

We are going to see a great many conflicts with many holding onto the old system. There are many who benefit from things remaining as they are. Nevertheless, progress cannot be stopped, only delayed.

One advantage that humanity has going for it is the fact that technology can be moved anywhere. This only grows as more sign onto the Internet. Couple this with massive digitization and it is easy to see how progress is going to happen regardless of what the existing structure wants.

There was a time when photographs costs a great deal of money. I can still remember when you took the film to a photomat and had it developed. There was a cost to get 32 pictures, regardless how they turned out.

How did things change with digitization? Obviously, it harmed companies such as Kodak. The decrease in size and cost of camera meant they could end up in our phones. And what was the result of this?

In 2017, there were 7.5 TRILLION photos taken globally.


Thus, we see how when something is digitized and democratized, it ends up abundant.

Things get really interesting when we consider the idea that the creation of even the original brings us to near zero cost. This is where artificial intelligence comes in.

Consider this site where AI produces original music. This, once the software is coded, it means there is no cost to the amount of original music that is generated.


Which brings us to cryptocurrency?

The barrier to creating a token is nearing zero. This means that we can generate thousands of different currencies for almost no cost. Thus, we will see an abundant amount of money produced.

Of course many worry about the value. The key to remember is that if there is almost no cost to the creation, as long as the total exceeds zero, it is a net positive.

Compare this to the era when plates had to be produced and specialized paper was used to make the money. Then consider the cost of distribution in armored cars.

All this is gone in an instant. We can create a currency and it can be distributed the second the blockhain starts issuing it.

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Yea money is just a commodity for exchange of value, its the value and satisfaction we receive that matters the most that is why there is no fix price for any commodity it all depend on the end users and market factors like demand and supply.