Industry CaseWhen Shawn Fanning dropped out of Northeastern University in January to work full-time on his idea of developing an online service that allowed Internet users to search for digital music and then share that music with other users, his parents and many of his friends were skeptical of his career choice. However, when 3,000 copies of the program had been downloaded within a few days of the programs June 1, 1999 release Fanning, nicknamed “Napster” for his curly or “nappy” hair, knew he was onto something. However, even in Fannings most optimistic scenarios he did not foresee that his creation would revolutionize the digital music industry resulting in $270 million digital music sales in 2004, including both online subscription services and downloads, and spawn sales of 24 million MP3 players worldwide that amounted to $3 billion in 2003.
f these labels was protecting their artists intellectual property and the labels were hesitant to make their music available online unless they could ensure strong digital rights management (DRM). To ensure DRM the industry had recognized that any legal music files would need to be encoded in such a way that the consumer had to pay for the file in order to be allowed to play the file on a computer, burn the file to a CD that was readable in a traditional CD player, or copy the file to an MP3 player. The slow adoption of the early legitimate online digital music services forced industry members to realize that any successful fee-based service would have to contain features that were similar those of the enormously popular file-sharing software including a wide selection of music, a relatively easy-to-use interface, the ability to burn CDs, and the a
b>ability to be used by most people as a means to distribute all of the content made available online. Finally, one might even argue that many the major online music companies were still concerned about the rise of DRM.
A decade later, in 1996, the term “Rational Digital Economy” was coined to describe what R&D might be like in the future. At that time, the term actually reflected the ideas and interests of an extremely diverse group of innovators, most obviously technology designers, architects, and musicians. But it can also refer to some ideas for other industries, particularly the Internet of Things.
Rational Digital Economy
The current term has one striking element in common with R&D: that many are focused on a single idea, rather than on a broad set of options.
Rational digital economies were first implemented in the U.S. during the early 1990’s. This included the “Bincoin-as-Bitcoin”-inventor concept. Bincoins were, as it was considered by some to be a new, digital currency. They were created by Adam Backer, who designed an open digital ledger that allowed for the first transaction in a digital medium, which was called “digital gold.” Bincoins were pegged up against an asset (like Bitcoin) which is issued by a trusted third party. The value of the bitcoins is, in practice, just a small fraction of what the money is worth. This was often interpreted as a cost incurred by investors, and the developers were always looking to maximize profits. To put that in context, the “gold” in Bitcoin is simply the price of a single Bitcoin. “Rational” digital currencies often include the “Ripple” concept, which aims to create a virtual currency in which the transactions are done digitally by the network, while the value of the digital asset is held only by the network.
In 2006, when Goldman Sachs was in the process of laying off about 50 people, Robert Lott decided to start a company that would integrate his ideas into a distributed ledger of assets. Lott is currently leading a consortium that builds distributed ledger technologies designed to provide a model of transactions that was then used in many projects as a way to integrate with some of the current and emerging systems of software, including Bitcoin.
What’s interesting about the term “Rational Digital Economy” lies in the idea that it has not been invented until after the original concept of the concept had been established, and the concept itself was not invented until after all. This is quite remarkable since it is widely believed that people are simply more interested in a given concept and market in comparison to the actual market performance of that concept. This is reflected in the fact that it is very frequently not true for the rest of digital economy.
This concept of scarcity or market exhaustion has been used to explain the way in which people are willing to accept alternative solutions to existing problems. For example, in order to pay off a loan that was never fully repaid, the person who received the loan simply moved on and purchased a new, higher-priced loan at great expense. The people who paid those people off usually preferred those higher-rate loans over their own.
It is in this way that Rational is different from R&D and is a direct reflection of the nature of digital markets and the people seeking to participate in such markets. Rationally, the idea