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July 11, 2006
The power of information -- faster use of friction
This story today - Montreal man uses Internet to trade from paper clip to home - illustrates the power of faster communications:
Canadian Kyle MacDonald, 26, started with a simple online offer on July 12, 2005 to trade the paper clip, which sat on his desk next to his computer, for something a little bigger and better.
Fourteen online trades later, he becomes this week the proud owner of an unfurnished two-storey house on Main Street in the tiny agricultural town of Kipling in the province of Saskatchewan.
As MacDonald admits, the process is nothing new:
The idea was based on a child's game called 'Bigger and Better'," he said in a telephone interview. "You start with something small and trade around the neighborhood, knocking on doors. I think I may be the first to try it online."
What is new is the acceleration of the process because of advanced communications. As I mentioned in my last posting, advances in both transportation and communications are important to accelerating commerce. But this is not the "frictionless" commerce that everyone likes to tout. In fact, this is a classic example of arbitrage - where value is added (or in this case extracted) by playing on the asymmetries of consumer desires (and information). What advanced communications was able to do was magnify those small asymmetries quickly into a large total.
Information and value asymmetries will continue to exist in the I-Cubed Economy. Frictionless commerce is a chimera (in fact, if it wasn’t for economic friction, there would be no innovation). And now that Mr. MacDonald has show that it can be done, I expect more and more people to try the same strategy. Which opens up a whole new market for on-line trading companies, such as e-Bay?
Posted by Ken Jarboe at July 11, 2006 12:35 PM
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The Internet Scout Report (http://scout.wisc.edu) has a number of links on this story, including the beta version of a swap site and Kyle MacDonald's blog:
From paper-clip to house, in 14 trades
http://www.cbc.ca/story/canada/national/2006/07/07/paperclip-house.html
How to swap a paper clip for a house
http://www.timesonline.co.uk/article/0,,26909-2264564,00.html
one red paperclip
http://oneredpaperclip.blogspot.com/
Forty Media: Interview: Kyle MacDonald
http://www.fortymedia.com/blog/opinion/25/interview-kyle-macdonald
5 Questions for Kyle MacDonald
http://www.onedegree.ca/2006/03/20/5-questions-for-kyle-macdonald-one-red-paperclip
Swaptree (beta)
http://www.swaptree.com/
Posted by: Ken Jarboe ![[TypeKey Profile Page]](http://www.athenaalliance.org/weblog/nav-commenters.gif)
at July 14, 2006 10:06 AM
Web-bartering enters new era | csmonitor.com:
Next month, Boston-based entrepreneurs Greg Boesel and Mark Hexamer plan to launch Swaptree.com, a website to help consumers trade books, CDs, DVDs, and video games. Using complex algorithms, the site immediately calculates what traders can receive after they create "have" and "want" lists.
The idea of bartering over the Web isn't new. Many similar platforms appeared during the dot-com boom of the 1990s. But bartering websites including Swaprat.com, Webswap, and Intellibarter later failed for various reasons, including poor business models, low Web traffic, and intense competition.
Posted by: Ken Jarboe at July 27, 2006 5:36 PM