Today I was reading a really good post by Evan Davis.
He raises the point that huge events such as the upcoming Glastonbury festival etc create huge cashflows, and when that starts happening, though the cash may be flowing in externally, and then flowing out, the community as a whole, gains incredibly, though most of the gains go elsewhere.
And this got me thinking about a lot of successful businesses kicking around today such as EBay, Amazon, Youtube, or even Google and countless others. What do all these have in common? The main part of their business depends on external sources inputting for their own gain, yet the "hoster" which in a sense is the website, get a cut of the profits - the crumbs. Only Amazon actually sells its own stuff, the rest of them just depend on other people. But the point is, that if a million people come to buy someone else's stuff on your site, chances are that a considerable amount buy from you too.
This leads onto a topic Adam Smith discusses in his Fait Principal , "The Wealth of Nations". Here he highlights that protectionist, isolationist policies are not good for the economic well being of a country. He used the example of China, who only had one port open to other nations to trade, and as a result the economy was stagnant.
An example of why this isn't successful: China is good at making toys. Switzerland is good at making chocolate. If the Chinese chocolate makers get advantages over the Swiss from the government, this would mean, due to the lesser number of chocolate makers in China, and due to the lesser quality, the Chinese masses get a raw deal. And vice versa for Swiss people with the toys. This means that no fresh money is coming into the countries and people are spending more than they need on everything.
However if both countries kept their borders open, everyone would be better off as to the price of toys and chocolate, and at the same time, foreign investment would start flowing into them, as people spot that these countries are sitting on quite a lucrative business, and as the money flows in, invariably some of it is going to leak down to the masses, the result of which is a better economy.
Amazon do this too, as, rather than being in direct competition with these other sellers, they just say "Hey, just sell at our place instead". This is a pretty good advertisement for capitalism and the free-market world economy, as really when we consider, the overall benefit to everyone, this is the way forward.
Its like the shops we see, all selling the same kind of stuff, all lined up together. Ever wondered why they are together, thinking that wouldn't it be better for each shop to be away from each other and not have competition? Wonder no more.
The Internet, is the perfect testing ground for the free-market economy - where there are no restrictions, tariffs etc. Where you have access to all the "prices" of different products at the same time, which would naturally stimulate sales of the lowest, and thus drive prices down.
Price doesn't have to refer to the actual price, it could be quality too. So a good quality information website would be placed higher than a worse one, and thus the quality is driven up as the one that's 2ND improves to be first and the first works hard to remain first etc. And the place where all this comparison takes place....the search engine - the ultimate crumb-earning cash-cow.
