Increasing Returns and the New
World of Business
By W. Brain Arthur
Presented by:
Alexandra Mezhenina
Vladimir Fedotov
Yaroslav Pavlov
New reality of economy
 Transformation
from application of raw
energy to application of ideas, from
resources to information
Two economical worlds
 World
of diminishing returns
 World
of increasing returns
Diminishing-returns world
 Commodities
production depends heavily on
resources and lightly on know-how
 Diminishing
returns and nearly perfect
competition
 Still
exists in modern economy in bulk
processing
Increasing-returns world
 New
rules of the game
 Market
became unstable,
unpredictable…
The reasons of this phenomena
Up-front
cost
Network
effects
Customer
groove-in
Factors of new system
 Flat
hierarchy, mission orientation, flexibility in
strategy…
 Because:
adaptation never stops
 every participant of the process becomes
very important

Playing the high-tech casino
 Discount
strategy
 Psychological
positioning
 Cross-company
mutual feedback
Increasing returns in service-industries
 Services
can also be described in terms of this
phenomena
 Two
consequences:
 A lot of small companies concentrated on
one service
 Winner-take-most
Managing two economical worlds
 Do
I understand the feedback in my market?
 Which
 Do
ecologies I am in?
I have resources to play?
 What
games are coming next?
Thank you!
 Comments
 Questions
yaroslav.pavlov@gmail.com - Yaroslav Pavlov
sasha.gsom@gmail.com - Alexandra Mezhenina
vaavilen@yandex.ru - Vladimir Fedotov