Well I am going to write about something from the latest/newest age which some would call the Information Age. With the world becoming “smaller” and the emergence of the global village, people need to find ways to get back from their product/service then what they put in, whatever the resources (Time, Money, Technology, Ideas, etc.) must be gained back.
I enjoyed thinking about the equation (1+1>2). Mathematically the equation does not make sense. One(1) plus(+) One(1) Equals(=) Two(2), but the “equation” is not being looked at in the mathematical tradition but from a synergy view. For example think about 3 trucks being used to haul material. 2 of the trucks are exactly the same and both of those trucks towing capacity combined are equal to the towing capacity of the much larger truck. In theory people would think that both of the smaller trucks and the 1 big truck would do the same amount of work due to towing capacities being equal. However people have to remember that the material being hauled may not always come in nice easy to put in loads. Sometimes the big truck can only carry a certain amount at once due to height/weight/shape/restrictions, the two smaller trucks might be able to carry more due to the them having two trucks. An example of this situation would be trying to transfer 2 certain kinds of materials say a large reserve of drinking water and explosive chemicals for a construction site. Sure the big truck may be able to carry both of those things but it would not be safe/ethical to have both of those in the same truck. It should only have 1 material at a time, now the other trucks may be smaller, they are just big enough to fit each material whether drinking water in one truck while chemicals in another truck, so the two smaller trucks are getting more work done despite the fact that the two smaller trucks towing capacity is equal to the one larger trucks towing capacity.
The idea of getting more than one puts in or getting more of something as one makes more of it, traditionally defies the law of equivalent exchange. Equivalent exchange is defined as “People cannot gain anything without sacrificing something. You must present something of equal value in order to gain something. That is the principle of equivalent exchange in alchemy”, which is true however I am not talking about the gaining more than what I put it in essence of equivalent exchange. I am talking about the Increasing returns.
Increasing returns again stems from the idea of as you make/do/invest more of something it will eventually give back more than what you put it. There are many ways in which Increasing returns is being used today, the most common are in service, certain kinds of products, and software.
The example I’m going to use for service is the insurance business particularly car insurance. In a nutshell car insurance is where customers pay a company a premium to obtain “protection” if something were to happen to the car. From the insurance company’s viewpoint, if the company does not have a lot of customers and has a small market share, paying for all of the repairs from such a small pool of customer loyalty will be extremely expensive. However when a company increases its customer base and gains a broader market share, this is where increasing returns comes into play. With more customers and more money coming into the company repairs for the customer’s cards will be more widespread on the whole and thus will be more economical.
The example I’m going to use for certain kinds of products would be a vaccine or some kind of medicine. For example pretend there a new sickness out called the Z-Virus which causes many unpleasant effects such as vomiting, temporary blindness, loss of hearing etc. The Z-Virus is spreading all over the world and the new medicine called the Z-Fighter would only treat the symptoms and not really cure the patient. Well as time goes on, Doctors all over the world share their data/information and work together to help better the Z-Fighter. A doctor in America may only contribute a little bit of information/research concerning the Z-Fighter but once that research is made known to another doctor in say Japan, the Japanese Doctor maybe be able to make a groundbreaking discovery with that research which could not only treat the symptom but slowdown the growth of the Z-Virus cells. Over time the Z-Fighter will progress to the point where the Z-Virus is no longer a threat and everyone in the world becomes immunized to it.
The example I’m going to use for software is the famous World of Warcraft MMORPG(Massive Multiplayer Online Role Playing Game) before the game was released the MMORPG market was filled with good but not great games. A lot of resources were put in the making of the World of Warcraft. However once the game was finally finished and the first copy was made the cycle of increasing returns begins. The way it works, is that sure the first disc(Master Copy) took so much time/money/resources to make but making the second copy is practically free. The second copy and the many other copies made from the master copy, allow for the makers of the game to see their efforts increasing as sales go up. Every single sale of the game will eventually cover the cost of making the first copy and eventually turn into mass profits. This of course takes into account that the price of the game stays constant, but even if the price drops, increasing returns is happened due to every sale of the game is covering the initial costs/making profits.
References:
http://softwaretimes.com/files/increasing%20returns.html
Arthur, Brian V. "Increasing Returns and the New Business World." Harvard Business Review, July-Aug. 1996. Web. 26 Jan. 2011.
http://www.au.af.mil/au/awc/awcgate/ndu/strat-ldr-dm/pt1ch3.html
http://www.urbandictionary.com/define.php?term=Equivalent%20exchange.
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