Information is more valuable than what it describes
“Information about money has become almost as important as money itself.” — Walter Wriston, former Chairman of Citicorp
“Some firms believe that in 10 years half their business will come from moving information about goods, rather than moving the goods themselves.” — The 20-Ton Packet, Wired 7.10
Information has always been valuable, but it’s only in the last decade that has it become so dramatically cheap — to store, to move, and to process. But it’s still not “too cheap to meter” (Stewart Brand’s phrase) and probably never will be.
Yet despite this dramatic drop in cost, the real value of information, by any measure, has not diminished. And because the costs of other goods — whether shipping containers, materials, or home furnishings — have fallen more slowly, information contributes an ever larger fraction of a firm’s profits.
A corollary to the falling cost of information, and its persistent value, is that as more kinds of information comes online, more of this data is worth keeping. Even data whose value is metered in cents per terabyte is increasingly worth storing, and eventually analyzing, as it may yield several cents profit.
As industries evolve and their products become commodities, raw goods prices are driven down, tipping the balance further in favor of information as a source of profit. Firms become information enterprises first, with actual goods being only ancillary.
Nowhere is this more apparent than with the evolution of Amazon.com in the last decade. Amazon began as a retailer of books, became a retailer of consumer goods (abstracting away books), then expanded to be a retailer of retailers (abstracting away goods), and now with its S3 initiative, Amazon is attempting to become a seller of information services (abstracting away retailing at all). Perhaps Amazon’s goal is to become a purely abstract entity, managing information (software) about information (marketplaces) for retailers who sell goods.
Wriston’s quote was prescient because he foresaw this change occurring in the consumer banking and finance world, long before Capital One took advantage of vast troves of consumer credit information to individually tailor its credit cards for maximum profit. But his observation is true today in its more general form: information about goods is almost as important as goods themselves.
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