#192 In this episode we explore scarcity. Artificial scarcity created by laws and real scarcity created by our evolving lifestyles and economy. We'll see that most physical products, with drinking water being an exception, are becoming less scarce while trust and attention are becoming more scarce. More information, including show notes, can be found here. Episode Summary – Is Anything Scarce Anymore? Scarce goods and services have been a topic of debate since the original intellectual property (IP) laws were created. Products are getting cheaper to produce, but high-quality services are still in demand. On this episode of Money For the Rest of Us, David tackles the issue of scarcity with clear explanations and timely resources that are sure to help you understand this complex idea. You don’t want to miss his insights, so be sure to listen to this episode. The history of economics, scarcity, and why intellectual property laws are outdated David explains on this episode that the original purpose for IP laws was to ensure people would continue to create quality ideas and content. While these laws worked in theory, they created a level of artificial scarcity. Mark Lemley of Stanford Law, explains that “IP rights are designed to artificially replicate scarcity where it would not otherwise exist. In its simplest form, IP law takes public goods that would otherwise be available to all and artificially restricts their distribution. It makes ideas scarce because then we can bring them into the economy and charge for them, and economics knows how to deal with scarce things.” While certain protections should be given to creators, scarcity needs to occur in an organic way in order for it to be effective. David illuminates this concept through the lens of TED talks and conferences. TED is able to publish all of their talks online – with full audio, video, and transcripts – because tickets to the physical conference cost hundreds or thousands of dollars. How free content can still be turned into a money-making venture David features Cory Doctorow’s work on scarcity on this episode, and quotes him as saying “Although it’s hard to turn fame into money in the arts, it’s impossible to turn obscurity into money in the arts.” Essentially, even if a creator produces exceptional content, no one will know about it if they’re 100% obscure and protected. Technically speaking, this aversion to positive externalities permits the creator to live in fear of someone benefiting from their work for free. Without digital and word-of-mouth exposure, you won’t make money – period. Thus, the free content you produce and distribute can drive interested parties towards your other content, such as books or fee-for-service courses. There will always be paying customers for quality work, even if you have to get them to the door with free content. What elements are actually scarce in the 21st-century marketplace? While physical goods and products aren’t as scarce as they once were, scarcity is still widely prevalent in intangible elements such as trust, attention, and time. David features Seth Godin’s work on this episode of Money For the Rest of Us as he explains, “Trust is scarce because it’s not a simple instinct and it’s incredibly fragile, disappearing often in the face of greed, shortcuts or ignorance. And attention is scarce because it doesn’t scale. We can’t do more than one thing at a time, and the number of organizations and ideas that are competing for our attention grows daily.” The connections between automation, scarcity, and value in today’s society It’s much easier to automate a vehicle assembly line than it is teaching a child to read. This simple idea of product versus service connects to the broader idea of scarcity because even though it’s much easier to produce goods efficiently and cheaply, most services could never attain that level of automation. David explains that for each episode of Money For the Rest of Us, he spends 8 to 10 hours in pre-production, recording, and post-production work. For as long as he’s been podcasting, this timeframe has not considerably shrunk. This is because quality services and products that require human creativity cannot be automated. Scarcity is found in these areas, and it’s not going anywhere. The solution to true scarcity is simple: create something unique, it will earn attention and trust organically, and that’s how you grow your customer base and build a business in the 21st century. Episode Chronology [0:11] David introduces the topic for this episode, “Is anything scarce anymore?” [3:30] The history of economics and scarcity viewed through a TED talk lens [6:01] How “free stuff” can still be turned into a money-making venture [8:07] What elements are actually scarce in today’s market [10:43] Why there’s always an audience that’s willing to pay for quality content [13:20] How automation is determining scarcity and value in today’s society [21:08] The true scarce physical item – drinking water [22:30] The delicate dance between trust and attention [24:19] Net neutrality as it relates to scarcity See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

#190 What investments are best for maintaining purchasing power relative to inflation. Using the pencil as an example, how inflationary and deflationary forces work together over decades to determine the price of product. More information, including show notes, can be found here. Episode Summary – How To Keep Up With Inflation Businesses and individuals are asking questions such as “How can we protect our earnings and purchasing power? How do we invest smartly while keeping inflation in mind?” On this episode of Money for the Rest of Us, David Stein takes an in-depth look at inflation and the causes behind it by examining the issue through the lens of a case study on pencils. You don’t want to miss out on his thorough explanation, so be sure to listen to this episode. Forces that contribute to inflation and deflation as viewed through a case study on pencils The simple pencil is an extraordinary example of the inflationary and deflationary factors that influence nearly every aspect of consumerism. In 1844, U.S. made pencils sold for $0.75/dozen, or $6.25/dozen in today’s dollars, but pencil costs did not keep up with overall inflation rates. With the invention of pencil-making machines, the world soon saw a drastic increase in the number of pencils being produced, but consumers already had an “anchored price point” in their minds. Their understanding of what a pencil was valued at and what it should cost did not reflect the actual costs. Essentially, cost savings were not passed onto consumers. Why great selling environments for pencil manufacturers didn’t last long Even though the demand for pencils was drastically increasing in the early 20th century, manufacturers were quickly plagued with a number of issues: decreasing amounts of American red cedar wood, a large influx in foreign orders, and a variety of other capacity constraints. As the industry began to examine the possibility of using secondary wood sources and increasing the productivity power of machines, price points for pencils continued to shift. Additional inflationary and deflationary factors that impacted pencil production As the pencil industry began to move into the 21st century, there were many factors that greatly influenced its path. Deflationary pressures such as imports from low cost countries and quality and productivity improvements led to lower pencil prices. However inflationary factors such as rising raw material costs, capacity constraints due to increased demand, and higher wages also greatly impacted the industry. Consumer behavior as it relates to inflation and investment suggestions to combat inflation rates With the story of the pencil’s journey in mind, David shares his top suggestions for ways to invest to keep pace with inflation. Inflation not only affects hard facts and figures but influences the mindset of American consumers and businesses. Because there is no guarantee that current inflation rates will stay low, having inflation hedges in your portfolio can be helpful, including stocks, real estate, raw land and gold. Inflation indexed bonds such as treasury inflation protected securities (TIPS) are also good options even though they currently have low yields. Exchange traded funds that invest in commodities should ideally also keep up with inflation, but in the episode David explains some of the drawbacks to investing in commodity futures via ETFs. Episode Chronology [0:15] David introduces the topic for this episode, how to keep up with inflation [4:02] Forces that contribute to inflation and deflation viewed through a pencil case study [13:58] How a quality improvement to pencils changed the mindset on cost, value, and inflation [17:34] Why good times for pencil manufacturers didn’t last for long, due to capacity constraints and rising commodity prices [20:10] How the pencil cost continued to decrease because of additional wood sources [22:15] Why cheap imports continued to impact the industry [23:31] Summary of the deflationary and inflationary pressures [24:35] Consumer behavior as it relates to inflation [28:16] How stocks can be an effective inflation hedge See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.