ASTOUNDING NEW AGE ECONOMICS  

As we move from the mechanical-hardware, assembly-line Industrial Age to the electronic-software and untethered-cyberspace world of the Communications Age, things are changing dramatically. The economics of the fading age seemed so comfortable compared to this unknown electronic/economic jungle we have just entered. Everything appears chaotic. Trepidation is normal under such circumstances. Under cyberspacial conditions the cost of creating any product or service bears no relation to its ultimate selling price. Once learned, not taught, the economic advantages of the new conditions are many.

Let's examine something mechanical, like a locomotive or a car, common products from the industrial past: one hundred thousand parts may have had to be designed, manufactured, tested, built, packaged, advertised, marketed and delivered.

Even before most of this process could start, a factory had to be sited, thousands of parts gathered, a building designed and erected, and all the required machinery purchased and installed. The investment was usually enormous.

Then large teams of prospective employees had to be found, interviewed, selected and then gathered together and trained. Subcontractors had to be found and interviewed, designs presented and production costs projected. Every step involved considerable costs, at least in the hundreds of thousands and perhaps even tens of millions of dollars.

Production of the mechanical system had to be planned well in advance (another expenditure, this one in time) and usually involved heavy hardware materials that required special handling equipment, which could be delayed or require redesigning or remanufacturing to fit close tolerances. Parts could be affected by temperature, humidity and vibration; some would create high noise levels, require heavy power usage and could fail temporarily or permanently. Parts had to be gathered, sometimes from distant points, assembled, and in such a manner that access was available for replacement parts. It was usually a relatively slow process, so labor costs, sometimes involving thousands, perhaps tens of thousands of employees, were high and continued until the unit was completed. When sold, it usually took weeks or months before the owner, say of a locomotive, car, taxi, truck or bus, received the vehicle, and then months and years before costs could be recouped from earnings. Once sold, that was the end of wealth creation on that particular unit for the original equipment manufacturer, even if the product had further commercial applications.

Compared to the hardware-oriented mechanical world, the software world is heaven. Systems utilizing software are much simpler to design, produce, package, advertise, market and deliver. However, they require higher-level knowledge and visionary perspectives. A program in this new world might contain 200,000 components, twice the number in the above mechanical example but all totalling only 50,000 lines of numbers. A team of from two-to fiveskilled programmers could weave such a concept together well within one year. The equipment required might cost $25,000 tops or it could even be leased at a lower monthly rate if necessary. Other costs, since such start-ups usually consist of the new company's "team" members, all of whom have decided to "go for broke" on this speculative venture, are relatively low. All they need is living expenses for the creative year. Perhaps as little as $50,000 for a two-person team or up to $150,000 for a five-person team. If this were a new project in some already established software operation, costs might be multiplied by a factor of two or three ... still nothing compared to the costs encountered in earlier times to bring a new product to market.

Up to 90 percent of software testing can almost always be completed on the same equipment that built the program. Software is cheap to manufacture. Until sales run into thousands of units, production can usually be done on the same machines that designed and tested the program. If huge numbers develop, outside sub-contracting can be easily arranged by industry "duplicators" that do just that type of work. No additional employees are required, so more salary expense and fringe benefits costs are not necessary.

Software "manufacturing" is, after all, simply electronic duplication. Product production cost of the "vehicle" (program) is usually less than the packaging. Packaging itself is simple, and advertising is directed along clean, already established relatively narrow corridors, as is marketing and delivery. The weight factor is hardly ever more than a large envelope or even zero when sent via phone or satellite links. The product can do so much for so little, even if it costs $50, $500 or $5,000, that it quickly pays for itself.

An automobile may take several hours or a day to gather the parts, weeks to make and assemble the parts. Yet it sells for only $15,000 to $30,000. Software programs, electronic books or magazines and audio and video cassettes can be manufactured at the rate of hundreds in less than a few minutes (high-speed dubbing is now also available for video), then packaged and delivered anywhere in the world in 24 hours.

The content of "hardware" sells once. Then the process, in all its complexity has to start over again to produce the next unit. Software, because it is easily convertible from one form, such as an electronic book on computer disc, to a CD-ROM or audio cassette can sell many times in each different medium. As a wealth generator, software is far superior to hardware. Why is Bill Gates, President and co-founder of Microsoft Software, now the richest man in America? And most of his wealth has been created during the last five years!

In an age of transition, those who grasp the concept of what is happening will end up among the 40 percent now shooting upscale (America now has more than 1.5 million millionaires). Those who didn't even have the skills to succeed and profit in the fading industrial age, will find themselves among that other 40 percent of the population who are rapidly moving downscale, usually due to lack of training, attitude or reluctance to change. The remaining 20 percent who are static at the moment will most likely also find themselves slipping into the bottom group unless they make radical changes in their lifestyles and obtain new age knowledge before they too become techno-peasants. These are evolutionary as well as revolutionary times.

Survival goes to the quick, not the dead.

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