What Is the Weightless Economy?
The term "weightless economy" refers to the portion of the economy concerned with intangible products and services, such as software or professional services. Other terms, such as "post-industrial economy" or "new economy," are also used.
- A weightless economy is one that is characterized by intangible products and services. Similar terms include "post-industrial economy" and "new economy."
- The weightless economy is made possible by information technology and intellectual property laws. It enables new companies to bring products and services to market with relatively low upfront costs.
- For successful companies, the weightless economy can allow for very low marginal costs, which in turn allows for very high profit margins.
Understanding the Weightless Economy
The concept of the weightless economy is based on the following fact: due to the rise of information technology, it is now possible to deliver products and services to large numbers of customers, and across large distances, without needing to manufacture or distribute those products and services using physical labour and machines.
For example, until recently musicians and record labels needed to physically manufacture vinyl records and CDs, and then move them from factories to warehouses, and finally to record stores where they can be purchased by customers. All of these stages involve costs, in terms of both money and time.
Today, that same artist and record label can distribute their music online, through streaming services such as Spotify and online marketplaces such as the iTunes Store. Although the time needed to produce a song may be roughly the same as before, the time required to sell that song is practically instantaneous, regardless of whether you are selling that song to one customer or to one million.
An economist looking at this example would say that the musician has a marginal cost of production of nearly $0. Therefore, the marginal profit associated with selling each additional song is essentially 100%. Once you have already recorded the song and made it available for sale online, it costs you almost nothing to sell each additional unit.
This is the fundamental reason why it is possible for some technology companies to become so profitable in such relatively small amounts of time. In the weightless economy, there is almost nothing preventing a company from acquiring an arbitrarily large pool of customers if demand for their product or service takes off—assuming, of course, that they are not held back by their competitors.
Therefore, in situations where a given product or service has come to dominate its market, such as in the case of Microsoft's Windows operating system, Google's search engine or Android operating system, and Facebook's social network and advertising platform, firms in the weightless economy can achieve almost limitless growth and profitability.
By comparison, traditional firms such as manufacturing plants or brick-and-mortar retailers face more obstacles to growth and profitability. This is due to the higher costs and logistical hurdles they must overcome in order to make their sales.
Real World Example of the Weightless Economy
The weightless economy is characterized by information technology and is made possible by intellectual property rights. After all, an artist cannot make money selling songs online if their rights to those songs are not protected by copyright laws.
One of the consequences of the weightless economy is that it permits new entrepreneurs to offer products and services to a large potential customer base with relatively limited barriers to entry. For example, if coding is part of your skill set, you can create a smartphone application and sell it through the Apple and Android app stores. Although there are certainly costs involved in doing so, those costs pale in comparison to the cost of establishing a new factory, for example.
In 2011, Garrett Gee created a barcode scanning application called “Scan” while he was a student at Brigham Young University. In 2014, he sold the application to Snapchat for $54 million. Although Gee is an outlier in having achieved this level of success, his story is representative of the kind of success that is made possible by the weightless economy.