Platt Perspective on Business and Technology

Connecting economies with shared metrics – putting this question into context

Posted in business and convergent technologies, macroeconomics by Timothy Platt on January 7, 2010

In an earlier posting, Monetizing and Setting Valuations on Information – the crucial question I outlined a fundamental feature of information as a monetizable product, that causes it to be left out of accounting and fiscal analysis for many purposes, just beginning with determining valuation of businesses and their collective assets. Much of our economic and valuation modeling is based on rivalrous goods, with their fundamental properties creating supply and demand systems. Information per se is non-rivalrous and cannot fit that model.

I raised a very fundamental question in that posting that I have touched upon from several perspectives in my Macroeconomics and Business series and also in Ubiquitous Computing and Communications – everywhere all the time. One point I have raised several times in this context is that a truly successful disruptive technology in the information economy is going to have to be coupled with a business model that can help to bridge the gap between rivalrous economic and monetization models of traditional goods and services, and non-rivalrous economic and monetization models for information and knowledge per se, stripped of rivalrous packaging (e.g. without the need for conversion of information to rivalrous form by packaging it into forms such as copyright protected CD’s and DVD’s.)

This has left me with a problem that I have been thinking about and that I want to share some thoughts on here. And I come back to a fundamental point I raise in my postings about business operations and strategy – the need for commonly held, shared metrics for performance and value. In that context, this is an issue of coordinating between the metrics used in Marketing and Communications, and Information Technology, Human Resources and Finance and all of the other functional areas within the organization. That, at the very least requires an ability to unequivocally translate value measures so everyone understands what their colleagues mean and according to a single shared scale. In this case I look at the disconnect of having what could be viewed as dual and mutually incommensurable economies for traditional goods and services on the one hand and for raw information and knowledge with an information economy on the other. Just as is the case with business organization with its need for metrics alignment, this type of dual economic modeling cannot work as a sustained effort. Ultimately, economies of rivalrous and non-rivalrous good have to come together according to a shared economics system and with shared metrics.

• Businesses have to be able to determine unequivocal valuation of their proprietary information resources and according to principles as standardized as the generally accepted accounting principles (GAAP) used for their rivalrous resources.
• Information products have to be monetizable without ad hoc or one-off qualifiers or determinants, and in ways consistent with the rest of the overall economy and marketplace.

I would suggest a good starting point for resolving this is to examine more precisely how non-rivalrous goods such as information products fail to mesh with rivalrous goods monetization models and I would argue the point that this is largely a matter of some key uncertainties. At least for an initial analysis it could be argued that when information products offer no exclusivity to the purchaser or holder as is the case with rivalrous goods, there is increased uncertainty in determining anything like value added advantage for having them. I would argue, however, that any effective alignment of economic and monetization models here has to start from a different point – replacement costs versus potential benefits from using information, and perhaps within a proprietary and less easily shared or duplicated context.

• I determine the value of a computer as a piece of desktop hardware according to what it would cost to replace it if someone were to pour their cup of coffee into it when on. This is a valuation of the rivalrous item almost as if in vacuo – picking up one fried computer from the desk, wiping up the coffee spill around it and putting a new computer down on the desk to replace it, hopefully coupled with some directions about not leaving your coffee on top of the CPU as a resting place for snacks and beverages.
• I determine the value of the information in that computer in context and its value has meaning from its context with other information. This context, I add is where raw data is converted to actionable knowledge and that is where actualized value is created from it.
• Reconciling rivalrous goods financial metrics with non-rivalrous goods financials has to be based at least in significant part on reconciling these more context-free and context-defined approaches.

This posting seeks to reframe the issue of information valuation and its relationship with rivalrous goods and services valuation. I am planning on looking into ways to address this reframed difference in future postings.

3 Responses

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  1. roulettstrategi said, on January 8, 2010 at 7:02 pm

    Great idea, thanks for this tip!

  2. cna training said, on January 20, 2010 at 12:47 am

    What a great resource!

  3. […] 7, 2010 On January 7, 2010 I posted a continuation note in my Macroeconomics and Business series, Connecting Economies with Shared Metrics – Putting this Question into Context that left open questions I have wanted to go back to. Yesterday I posted a note on business […]

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