The Power of Scarcity

Scarcity is not often viewed as something positive. When water is scarce, it's a drought. When time is scarce, it's often called stress.

That's one way to look at scarcity. The flip side is that you can arguably view it as a huge positive when the right things are scarce.

Reportedly, iPhones are going to be hard to come by when they launched. The same thing happened in other markets. Just look at toy crazes, like Tickle Me Elmo. When products are scarce, it drives demand.

Now think about media. If there's high interest, niche content that enough people desperately want, but is difficult to easily get anywhere else, it becomes scarce. This drives up the value of that site because your attention is scarce resource. It's simple supply and demand economics at work.

Lifehacker is scarcity at its best. There are tons of blogs that cover technology tricks and tips and techniques for being more productive. But Lifehacker aggregates the best content - and just the right amount of it - to make subscribing to others unnecessary.

Scarcity also works wonders in your career as well. Generalists are easy to find. Everyone wants the specialist - and the best in the world. This is something I learned from Seth Godin's terrific new book, The Dip. If you are positioned as a specialist and you possess a skill and track record for success, you're always going to be in demand.

Examples abound everywhere. Perhaps none more than in sports. A-Rod has had mixed success since joining the Yankees, but this year he may have found his scarcity niche. He's been consistently coming through in the clutch. If he can continue this, his value will increase (as if he need$ that).

The power of scarcity applies to companies, products, people, social networks and more. The formula is simple. Find a scarce niche (it needs to be something people want), build your expertise in this specialty, execute flawlessly and be willing to adapt if what you do becomes commodity.

Comments

[Tinu Abayomi-Paul]

Honestly, business is all about the perception of scarcity. Just just scarcity in fact but the perception of it.

When resources are perceived to be scarce, even if in reality they are not, prices go up (example: the diamond market). Expertise is a true scarcity, but the perception of expertise is changing rapidly with the advancement of user-generated content.

The educated end user is becoming the vocal majority, which is bringing about a change in how business is marketed. Hype is not enough anymore and fly-by-night companies can be researched at the click of a mouse. Yet when that information was hard to come by, that market thrived.

At the same time, while general information that is readily available to the public is decreasing in value, because of the massive influx of those tools, time is increasing in value. It seems like the fastest way to make money, particularly in B2B these days, is to be in a position to market to the scarce of time. I think I spent about $3K in personal concierge service in the last three months, and it was worth every penny to have the spare time.

Awesome article. I love how much you get me thinking on topics like these...

[Mike Keliher]

Good post. I have one issue, though.

You write: "When products are scarce, it drives demand." Perhaps more accurate is the idea that when products are scare, it *can help drive* demand. I think it's just as likely, if not more so, that scarcity can intensify desire for some but turn others off. Wasn't that what happened with the most recent PlayStation launch?

[John Blossom]

True enough, Steve, it's Economics 101. The problem is, though, that electronic networks and computers have broken through the basic rules of supply and demand for mass market goods. Any content can be delivered to any one anywhere in any reasonable quantity. Tinu's comment about perceived scarcity is somewhat to the point, but I think that there are two key components that correlate to this: perceived value and perceived uniqueness. What's the right content to look at? There is a limited supply of services that can help us to figure that out. In other words, the ability to create context for content creates a value point that oftentimes exceeds the value of owning the content itself because of the scarcity of contexts in which the content's value will be realized. If the tree falls in the woods, etc.

The other end of this - uniqueness - tends to favor social media in many ways. It's very difficult to replicate personal insights. It's not hard to replicate a White House press secretary putting out the party line. So in the electronic economy it's insight that creates scarcity, not a commodity such as a database or a natural resource. See more in this article on Content Nation.

All the best,
John Blossom
President
Shore Communications Inc.

[mythbuster]

"Generalists are easy to find. Everyone wants the specialist..."

Utter nonsense. Would you want your company to be led by Steve Jobs (quintessential generalist) or Steve Ballmer (specialist Sales Guy)? The results speak for themselves.

It's very easy to find, say, specialist programmers or media buyers, but very hard to find generalists who can create the appropriate design and architecture in the context of a business solution, considering multiple views, stakeholders, risk factors, outcomes, etc. Generalists frame the problem. Specialists don't design the solution space, they optimize it. Contextually appropriate framing trumps optimization any day.

[Michael A. Banks]

Interesting to note that many of the most successful literary agents have a similar perspective; they prefer to work with writers who specialize in one area, as opposed to, say, someone who writes novels, textbooks, and essay collections.
--Mike
http://www.michaelabanks.com

[Recruiting Animal]

Lifehacker isn't an example of scarcity. It's editing.

Also, what about when something isn't scarce -- a TV show like Seinfeld --but everyone wants to watch it because it's good. And everyone else is watching it. Scarcity is not a factor then at all. Unless it's in the larger picture -- the lack of funny shows.

[wow powerleveling]

I have to wonder if one of the reasons we haven't seen as much progress as we'd like in achieving our various nonprofit missions is because of this scarcity mindset. Scarcity thinking allows us to make excuses for poor performance ("We don't have the time or the money or the people to do this!"). It isolates us, not only from other nonprofits with whom we might share resources and ideas, but from each other and from our clients. We're so busy maintaining our slice of the pie, we fail to see the ways in which we should be working on makingwow powerleveling the pie bigger. This scarcity mode is divisive and keeps us focused on the wrong things--on the problems and the barriers rather than on the opportunities and the solutions.

[Mark]

WELCOME BACK to Micro Blogging, Steve Rubel! It was tough living without your fascinating commentary, but I (barely) survived!!
I love your blog posts, I have been tracking your posts for well over a year! Keep up all your great work Steve!! Hope you enjoyed your vacation! :)

[publius]

Imagine if Apple only supplied 1,000 iPhones. Demand would be through the roof!

[Justin Davey]

I've never thought to look at personal branding from a "supply and demand" perspective. Find a high-demand, low-supply market niche, market yourself as an expert and as supply increases adapt your brand. This is actually a more efficient way of looking at branding than a marketing perspective would allow. Specializing and finding a market niche requires so much time to narrow down, while an economic perspective starts right at the top of the pyramid. It definitely allows for more clarity.

[Tinu]

@ mythbuster :

a- the decaffeinated brands are just as flavorful. :)
b- that just means they picked the wrong speciality, or are picking the wrong area to specialize in - specialty is in regards to Marketing was the point I think, not in regards to training...

[Chris Capehart]

Thats a great post. I think a great example of this principle comes from facebook. I'm not sure if they knew this was what they were doing or not, but I remember when there were only a handful of schools that could use facebook. Friends of mine were emailing facebook constantly trying to get the site opened at their respective schools.

But facebook would not open up to a school unless they had a certain number of people email them. Thats what I call supply and demand at work in the companies favor.

[Jeremy Pepper]

Cute, Steve. But, you seem to miss what's wrong and happening in PR: the generalists are gone, replaced by practice groups and specialists. And, that's not good for PR as a whole.

Yes, some people - you - can milk the specialist for a while, but when that practice becomes mainstream, it does you no good and you are then the specialist with no marketable skill.

But, well, that does work in the favor of some people, and helps them promote themselves above the agency or the good of the client.

[Manny]

Regarding scarcity, it is possible to widen that definition a bit, so that not everyone may need to be the best in the world. In “The Millionaire Mind”, author Thomas Stanley mentioned that many millionaires had a particular niche in their own geography (the best motor rebuilder in West Tennessee, etc). In my previous field, a lot of our advertising clients tended to work far away from our base in Chicago…until Labor Day, Thanksgiving, Fourth of July, etc. Then they needed “the best supplier that I can get to and still get home to my family”. Besides location, time is also a key niche. The best hamburger in town may be at one location at 7pm and another location at 4:30 am. Alas, neither one may be anywhere near the best in the world.