Superstar bias means we need to restructure economy
Categories: digital prosperity
So although the overall pie is getting a lot bigger, many people aren't sharing it. In fact, the majority of Americans aren't sharing in it.
This isn't necessarily bad news insofar as the pie is getting bigger, and if we think of ways of restructuring the economy, I think ultimately everybody ultimately will be able to share in it. But over the past 10 years it's been very disruptive, and in fact, most of the gains have gone to a relatively small group of people. Andrew McAfee call this 'superstar bias technical change'. It stems from the fact that once you digitise a process, you can replicate it, and you can make a copy, ten copies, one hundred million copies. Each of those copies can be made at almost zero cost, each of them is a perfect replica of the original. Each of them can be transmitted anywhere in the world almost instantaneously.
Free, perfect and instant are three characteristics we haven't had for most goods and services before. They lead to great bounty, and the ability to access goods and services much more cheaply, whether it's Wikipedia or GPS systems, or medical diagnoses.
They also changed the distribution of income. When someone is buying a tax preparation program, they might only be interested in looking at the best program, or maybe the best two or three programs, you don't need tens of thousands of different tax preparation programs. So that means that a small number of people, or ever one person, can capture the majority of many of these digital markets. In contrast, with traditional goods and services, you usually have lots more sellers and lots more widespread distribution of income. So digital goods tend to often lead to winner take all, or winner take most markets, and a greater concentration of income, even though they make the overall pie bigger.