Maybe It Isn't Such A Paradox
Congratulations on your excellent and thought-provoking story "The Technology Paradox" (Cover Story, Mar. 6). Your article describes market events that would be predicted by an economic theory known as "increasing returns" economics. This theory, pioneered by Stanford University professor Brian Arthur, is associated with the broader discipline of complexity theory. Increasing-returns economics predicts the seeming paradox of rational companies "giving away" new products and services. A quote from Arthur in M. Mitchell Waldrop's 1992 book, Complexity, describes the motive: "Once a new technology starts opening up new niches for goods and services, the people who fill those niches have every incentive to help that technology grow and prosper." The "hockey stick" growth patterns of online services described in your article have been fueled by the support of ancillary businesses (such as BUSINESS WEEK), which have an incentive to see them reach as many consumers as possible.
Moreover, increasing-returns economics also predicts that entrenched technologies are only supplanted by technologies that offer radical improvements to new adopters. Marginal improvements will not displace leading technologies that have been locked in by the sheer mass of the market for ancillary goods and services.
Timothy Breed Jenkins