What would Adam Smith say about indienomics?

Adam SmithBefore I get into my Three Laws of Indienomicssome context is required. If you’re going to give gravitas to economic philosophising, who else to start with except Adam Smith? As you should know, Adam Smith is widely regarded as the founder of modern economic theory and capitalism. He wrote extensively on the topic in one of the most influential books of all time: The Wealth of Nations. He actually had quite a lot to say in the lesser known Theory of Modern Sentiments. If you’d like a condensed guide, try The Condensed Wealth of Nations from the Adam Smith Institute.

Adam Smith distilled

If you google for Three Laws of Economics or Adam Smith’s Laws of Economics you get a few ideas coming up (he didn’t tend to coin laws, but did have several principles):

  • Enlightened self-interest
  • Supply and demand
  • Division of labour
  • Accumulation of profits.

There are various ways to think of so-called free markets and the workings of what Adam Smith called The Invisible Hand. In a lot of ways it is possible to explain this with various engineering / systems dynamics concepts but lets focus on what Adam Smith was talking about.

Enlightened self-interest

This says people make goods or provide services that are useful to others because they want to make money. The motive is internal to the business, the outcome is benefit to others. This is a topic I will touch in several times in my Laws of Indienomics.

Supply and demand

This is at the centre of free market economics – if more people want a thing, more people will provide it. More choice means lower prices for the consumer. For the provider it is more of a challenge and they need to offer quality (or better service) to justify higher prices. In this world of cheap and free content, with low barriers to entry we indie authors are well aware that there is too much supply and it can be difficult to charge a sensible price for our work.

I often write short stories, and my first self-published piece The Golden Daemon takes maybe 10-15 minutes to read and costs less than £1 — if you buy a cup of coffee while shopping it can cost more than twice that and last just as long. The market doesn’t care — it begrudges paying for anything.

This is a topic much written about by many.

Division of labour

While visiting a pin factory, Adam Smith came to understand that a factory can be more effective than a group of individuals as people can get effective at one part of a process and produce a production line. Division of labour is an important concept for the indie publisher to understand — you want (I assume) to get most efficient at the writing part (or maybe the selling if you just want to make money) so how do you fit everything else in? Again I will return to this.

Accumulation of profits

Here the idea is that firms can re-invest to become more productive. The concept of re-investment is also important.

So what would Adam Smith have said?

I suspect the idea of the indie author would have been nothing new to Adam Smith. Any number of great works were self-published as pamphlets or short run books once the printing press emerged. You can imagine a cycle such as:

  • Publishing 1.0: the printing press enables to rich to mass produce their writing (and they had time to write. For most people literacy and writing were low on the scale of importance)
  • Publishing 2.0: publishers emerged and act as a gateway to the market by assuring the quality of their product and taking all the other tasks away from the writer. If you found a publisher you could do well
  • Publishing 3.0: publishers lose their control, small publishers flourish and individuals have access to tools (computers) and easy publishing, low barrier channels (eg Amazon).

So I think he would have a lot to tell us, and we might be surprised that however modern we try to be, the Laws of Indienomics in the case of Publishing 3.0 will not be as far removed from his original thinking as we might imagine.

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