Axiom: Excess Margin

Axiom: In the Answers Economy, the cost of uncertainty is passed along to in the form of excess margin, generally about 40% of the final cost of the typical commodity. Hence, there is at least 40% inefficiency in the current economy.

Marx referred to the inherent unfairness of the economy in terms of the labor value expropriated from the worker, failing to recognize the value of coordination in the capitalist economy. Excess Margin places the onus back on the producer-network, which does not know how to price for an optimum market of perfect knowledge.

The essential error in capitalist thought is the notion of perfect information, which we can never achieve because we value answers over questions. We do this by ignoring most of the information about consumers, formulating offers (potential products) and attempting to “market to” consumers in order to make them accept the difference between what they want and what is available. In other words, we provide a limited set of answers and expect the demand-side of the market to compromise with their true desires and accept an inferior but partial answer.

Perfect knowledge in a world where we create answers and then invest in defending them rather than asking new questions that produce increasingly differentiated value is an impossibility in the Answers Economy, because it is predicated on mining the value in the delta between what is wanted and what can be produced. That requires ongoing consumer acceptance of what they largely do not want.

Author: Mitch Ratcliffe

Mitch Ratcliffe is a veteran entrepreneur, journalist and business model hacker. He operates this site, which is a collection of the blogs he's published over the years, as well as an archive of his professional publishing record. As always, this is a work in progress. Such is life.

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