Inventing Our Next Great Scarcities

Article excerpt

Scarcity is defined as an economic condition that arises when people have far greater wants than the available resources. Most often we think about the limited supplies of natural resources, but it includes far more than that.

As an example, in September 2010 China decided to block shipments of rare earth minerals to Japan. Rare earth minerals are used in manufacturing everything from consumer electronics to batteries to defense systems. China only has about 30% of the known supply of rare earth deposits but accounts for about 95% of global production.

While momentarily shaken by this political posturing, Japan quickly reassessed its situation, launched a global search for new rare deposits, established recycling centers to extract the metals from old electronics gear, and cut a deal with Australia, who ramped up their supply of the minerals to meet Japan's needs.

As a result, the demand for China's rare earth minerals has plummeted as they instantly branded themselves as the "untrusted supplier of last resort."

The scarcity in this situation wasn't the supply of minerals. Rather, it was a momentary shortage of creative problem solving, something the Japanese are very good at.

Even though the Internet has turned the world of scarcity on its head, there are tons of imbalances yet to be mined and turned into profitable businesses. These imbalances are what gives society its forward motion, turning problems into opportunities.

Historical View of Scarcity

To understand the scarcity-abundance phenomenon, it helps to look at historically scarce products that somehow lost their pricing advantage.

* Salt: Many battles were fought throughout history over what was considered to be the most valuable of spices, salt. One of the more recent examples is the Salt Satyagraha, a Gandhi-led nonviolent protest against the British salt tax in colonial India, which began with the Salt March to Dandi on March 12, 1930. Hundreds of protesters were beaten in this battlefield directed toward breaking down the walls of scarcity. Today, salt is an abundant product, available everywhere for mere pennies.

* Pearls: Because they were difficult to find, and divers had to spend countless hours under water to find one, ancient societies dubbed pearls to be some of the rarest of stones. This rarity also made it one of the most expensive pieces of jewelry. But that all changed in 1916 when Japanese researchers Mise and Nishikawa patented their now famous process for making cultured pearls.

* Telephone service: An industry that was built on the scarce one-wire-to-the-home option has been replaced with an abundance of wireless and voice over Internet protocol telephone options.

* Classified ads: A business invented by newspaper publishers became a cash-rich industry and the lifeblood for newspapers. Print advertising had the rug pulled out from under it when Craig Newmark created the free self-organizing craigslist. The scarcity-abundance shift only happened on rare occasions up until the advent of the Internet and electronic commerce. Over the past decade, the World Wide Web has caused this type of shift to happen on a far more frequent basis. Startup visionaries are now scouring the entrepreneurial landscape daily to see where the next great imbalance may occur. …