Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Friday, July 09, 2004

Threadless & Distributed Economies of Scale

Threadless is phenomenally cool. I highly, highly recommend you check it out.

It's also a perfect example of why open-source is going to create massive disruption - far beyond what most suspect.

The economics behind this are what I call distributed economies of scale: it's cheaper to massively distribute production of a good than it is to massively specialize it. This happens when the opportunity cost for a large number of individual producers is far lower than for an equivalent firm (whose opportunity costs generally rises with production).

Add to that frictionless coordination costs courtesy of the Net, and what you've got are entire industries (or at least industry segments) waiting to be absolutely vaporized. Where will we see distributed economies of scale? Where the economics add up: low coordination costs, high opportunity costs for firms, and low aggregate opportunity costs for massively distributed producers (and, of course, cheap factors of production - which are what create lower distributed versus specialized opportunity costs). Xingtone (ringtones) is a great example.

But I like the Threadless example especially because it shows that distributed economies are not going to be confined to digital goods - the factors of T-shirt production are cheap, so the economics hold here as well.

-- umair // 3:40 PM // 1 comments


Even though I agree with you that Threadless is cool, they don't distribute production (at least not anymore... It would have been infinately cooler if they did!
// Blogger Ewout // 1:07 PM

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