Will Near-Zero Pricing Happen with Medical and Legal Advice?

Legendary venture capitalist Vinod Khosla predicts free medical and legal advice in about a decade, because of artificial intelligence. Some will dismiss the prediction as fanciful, given many similar predictions in the past. 

As outlandish as that might appear, it is a common belief or prediction in the digital era, though there were some predictions that electricity, for example, would be “free” in the older analog world. 

There were inaccurate predictions that nuclear power, for example, would be so cheap it would not be worth metering its use. 

Study Title/Publication	Prediction	Date of Prediction	Publisher	Reason for Inaccuracy
"The Promise of Nuclear Power" by Lewis Strauss, Chairman of the U.S. Atomic Energy Commission	Predicts that nuclear power will become so cheap that it will be "too cheap to meter."	1954	U.S. Atomic Energy Commission	Underestimated the costs of constructing and maintaining nuclear power plants, as well as the risks associated with nuclear accidents.
"Nuclear Power: The Answer to the Energy Crisis" by Alvin Weinberg, Director of the Oak Ridge National Laboratory	Predicts that nuclear power will make electricity "too cheap to meter" by 1969.	1960	Public Affairs Press	Overestimated the rate at which nuclear power plants would be built and underestimated the costs of building and operating them.
"Nuclear Energy and the Future of Power" by David Lilienthal, former Chairman of the U.S. Atomic Energy Commission	Predicts that nuclear power will provide "a virtually inexhaustible supply" of electricity at "extremely low cost."	1967	Basic Books	Underestimated the environmental and safety concerns associated with nuclear power.

In recent decades, predictions of dramatically-lower product pricing--essentially free or near zero--have been made in a variety of areas where digital technology was expected to operate. In virtually all cases, assumptions were made about substitute products that would operate so affordably that existing products would not be attractive. 

Study Title/Publication	Prediction	Date of Prediction	Publisher	Reason for Inaccuracy
"The World Without Cars" by Peter Newman and Jeff Kenworthy	Predicts that cars will become obsolete in cities by 2030.	1989	Pluto Press	Underestimated the continued popularity of cars and the challenges of transitioning to car-free cities.
"The Information Economy: How Digital Networks Will Transform the World" by Manuel Castells	Predicts that the information economy will lead to a more equitable society.	1996	Blackwell Publishers	Overestimated the potential of the information economy to reduce inequality.
"The Long Tail: Why the Future of Business Is Selling Less of More" by Chris Anderson	Predicts that the internet will allow niche products to become more profitable than mass-market products.	2006	Hyperion	Underestimated the power of marketing and branding in the digital age.
"The Second Machine Age: Work, Progress, and the Future of Mankind" by Erik Brynjolfsson and Andrew McAfee	Predicts that automation will lead to widespread unemployment.	2011	W. W. Norton & Company	Overestimated the speed at which automation will replace human workers.
"The Rise of the Robots: Automation and the Future of Work" by Martin Ford	Predicts that robots will eventually replace most human workers.	2015	Basic Books	Overestimated the capabilities of robots and underestimated the adaptability of human labor.

All that noted, predictions about near-zero pricing for any variety of products continue to be made. It might be too soon to know whether such predictions will prove incorrect. And relative abundance, in some instances, might have outcomes largely indistinguishable from predictions of absolute abundance. 

Internet access is not “free,” for example, but its price is low enough that usage is not a barrier. Many other products, such as search, shopping, social media and some forms of content cost so little that consumption can be subsidized fairly easy by advertising or low usage fees. 

Study/Story	Prediction	Date of Prediction	Publisher
"The Age of Free: Why We'll Soon Pay Nothing for Most of What We Use"	"Within the next two decades, many of the things we now pay for—electricity, food, transportation, housing, healthcare—will become essentially free."	2014	Jeremy Rifkin
"The Free Economy: When Everything's Free"	"In the future, we will be able to produce goods and services in great abundance at very low cost, or even for free."	2016	Tom Slee
"The Future of Abundance: How the Products of Human Ingenuity Will Make the World a Better Place"	"The abundance created by technology will eventually lead to a world where everyone has access to the basic necessities of life."	2019	Peter Diamandis and Steven Kotler
"Radical Abundance: How to Create a World of More Than Enough"	"The potential for abundance exists in every sector of the economy."	2020	Marianne Williamson
"The World We Made: How Our Future Will Be Shaped by Technology - For Better or for Worse"	"We are on the cusp of a new era of abundance, in which the cost of producing goods and services will continue to decline, and the potential for human flourishing will expand."	2021	Michael J. Sandel
"The Future of Electricity: Scenarios and Forecasts to 2040" by the International Energy Agency (IEA)	Electricity prices will fall significantly in the coming decades, with the average price in industrialized countries expected to be about 50% lower in 2040 than in 2018.	2019	IEA
"The Free Economy" by Jeremy Rifkin	The marginal cost of producing and delivering many goods and services, including electricity, information, and transportation, is approaching zero. This will lead to a new era of economic prosperity in which many products and services will be essentially free to consumers.	2014	Jeremy Rifkin
"The Zero Marginal Cost Society" by Thomas Philippon	The marginal cost of producing and delivering many goods and services, including electricity, information, and transportation, is approaching zero. This will lead to a new era of economic inequality in which a small number of companies will control the vast majority of wealth.	2019	Thomas Philippon
"The Rise of the Sharing Economy" by Rachel Botsman	The rise of digital technologies is making it easier for people to share goods and services, such as cars, homes, and clothes. This will lead to a new era of economic prosperity in which many products and services will be essentially free to consumers.	2013	Rachel Botsman
"The Age of Disruption" by Geoffrey G. Parker	The rise of digital technologies is disrupting many industries, including the energy, telecommunications, and transportation industries. This will lead to a new era of economic uncertainty in which many companies will struggle to survive.	2014	Geoffrey G. Parker
"The Economics of Energy" by Jeremy Rifkin	Predicts that solar power will become so abundant and inexpensive that it will be essentially free for consumers.	2014	Jeremy Rifkin
"The Future of Work" by Martin Ford	Predicts that automation will eventually make many jobs obsolete, leading to a situation where governments provide a universal basic income to all citizens.	2016	Basic Books
"The Age of Surveillance Capitalism" by Shoshana Zuboff	Predicts that data will become the most valuable resource in the world, and that companies will be able to extract immense profits from it by selling it to advertisers and other third parties.	2019	PublicAffairs
"The Next Revolution: Work, Wealth, and the Future of Capitalism" by Nathan Myhrvold	Predicts that artificial intelligence will eventually surpass human intelligence, leading to a new era of unprecedented economic prosperity.	2022	Crown Business
"The 21st Century Revolution: A New Economic Vision" by Jeremy Rifkin	Predicts that a third industrial revolution, based on renewable energy and distributed manufacturing, will eventually replace the fossil fuel-based industrial economy.	2021	St. Martin's Press

But sometimes, intangible products and digital products do approach near-zero pricing levels, reducing barriers to usage. And that is the reason some believe AI is going to attack price levels for any number of intangible products including advice and diagnosis. 

Near-zero pricing might seem outlandish, but not for intangible products. We already have seen that impact in content delivery, shopping and information discovery, as well as social media. And advice based on experience might be the next large set of areas to be affected by the near-zero pricing trend.

Non-Linear Development and Even Near-Zero Pricing are Normal for Chip-Based Products

It is clear enough that Moore’s Law played a foundational role in the founding of Netflix, indirectly led to Microsoft and underpins the development of all things related to use of the internet and its lead applications. 

All consumer electronics, including smartphones, automotive features, GPS, location services; all leading apps, including  social media, search, shopping, video and audio entertainment; cloud computing, artificial intelligence and the internet of things are built on the foundation of ever-more-capable and cheaper computing, communications and storage costs. 

For connectivity service providers, the implications are similar to the questions others have asked. Reed Hastings asked whether enough home broadband speed would exist, and when, to allow Netflix to build a video streaming business. 

Microsoft essentially asked itself whether dramatically-lower hardware costs would create a new software business that did not formerly exist. 

In each case, the question is what business is possible if a key constraint is removed. For software, assume hardware is nearly free, or so affordable it poses no barrier to software use. For applications or computing instances, remove the cost of wide area network connections. For artificial intelligence, remove the cost of computing cycles.

In almost every case, Moore’s Law removes barriers to commercial use of technology and different business models. The fact that we now use millimeter wave radio spectrum to support 5G is precisely because cheap signal processing allows us to do so. We could not previously make use of radio signals that dropped to almost nothing after traveling less than a hundred feet. 

Reed Hastings, Netflix founder, based the viability of video streaming on Moore’s Law. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.

The point is that Moore’s Law enabled a product and a business model  that was not possible earlier, simply because computation and communications capabilities had not developed. 

Likewise, Microsoft was founded with an indirect reliance on what Moore’s Law meant for computing power. 

“As early as 1971, Paul (Allen) and I had talked about the microprocessor,” Bill Gates said in a 1993 interview for the Smithsonian Institution, in terms of what it would mean for the cost of computing. "Oh, exponential phenomena are pretty rare, pretty dramatic,” Gates recalls saying. 

“Are you serious about this? Because this means, in effect, we can think of computing as free," Gates recalled. 

That would have been an otherwise ludicrous assumption upon which to build a business. Back in 1970 a “computer” would have cost millions of dollars. 

source: AEI 

The original insight for Microsoft was essentially the answer to the question "What if computing were free?". Recall that Micro-Soft (later changed to MicroSoft before becoming today’s Microsoft) was founded in 1975, not long after Gates apparently began to ponder the question. 

Whether that was a formal acknowledgement about Moore’s Law or not is a question I’ve never been able to firmly pin down, but the salient point is that the microprocessor meant “personal” computing and computers were possible. 

A computer “in every house” meant appliances costing not millions of dollars but only thousands. So three orders of magnitude price improvements were required, in less than half a decade to a decade. 

“Paul had talked about the microprocessor and where that would go and so we had formulated this idea that everybody would have kind of a computer as a tool somehow,” said Gates.

Exponential change dramatically extends the possible pace of development of any technology trend. 

Each deployed use case, capability or function creates a greater surface for additional innovations. Futurist Ray Kurzweil called this the law of accelerating returns. Rates of change are not linear because positive feedback loops exist.

source: Ray Kurzweil  

Each innovation leads to further innovations and the cumulative effect is exponential. 

Think about ecosystems and network effects. Each new applied innovation becomes a new participant in an ecosystem. And as the number of participants grows, so do the possible interconnections between the discrete nodes.  

source: Linked Stars Blog 

 

So network effects underpin the difference in growth rates or cost reduction we tend to see in technology products over time, and make linear projections unreliable.