Sorry, but I find that hard to believe. I'm sure that $amount per knife isn't that bad. No one would produce a knife if they will be loosing money on it. Their margin might get low if there will be too many Blemishes that they would have to sell below the target price. And I'm sure that the perfection that Kershaw is trying to bring to their customers does cost them money, and I'm thankful for Kershaw dedication. I myself owned couple of those factory seconds. On one I couldn't even find the blemish.
So again, ZT0770 is just a rough and tough combat knife? Really? So all those damascus lamination, 3D milling of handle and pocket clip, carbon fiber are there to make knife better for combat and tough use. Sure there are plenty of people here that say that every knife is meant to be used (even if you paid $10K for it), but I will bet you that more than 50% (probably a lot more that that) of those ZT0770 will be just safe queens.
That's the thing. Many of us (including you I'm sure) want something better than "regular production Kershaw".
First, Thomas has posted before that many sprint runs and boutique designs (including many models put up for Knife of the Year) have not been money makers.
Knives like this are designed to push the envelope and show what Kershaw is capable of. Initially knives like this are meant to be showpieces to get attention. This isn't to say that they aren't excellent or practical knives. All the exotic high end materials are there help get the word out about new design features and technologies. If they put the adjustable subframe lock on a $40 knife it wouldn't get the attention. On the 0777 it is hard to miss.
The Devin Thomas Stainless Damascus and N360 help show the amazing things that can be done with composite blade technology and really showcases that the blade is mad of two separate materials.
If ZT sells the 0777 for what most of us would be willing to pay it seems pretty unlikely that they would make a profit. Especially if you consider how many mid-priced Kershaws could probably be built out in the same amount of time as one 0777 will likely take.
Try to remember that a run of even 1000 knives is a pretty insignificant number, think about it, there are over 8,400 Walmart operated stores worldwide. How many knives do you think it takes to keep them stocked? And that is just one vendor. Any distractions from those levels of production is unlikely to help the bottom line.
So why do it? Like I said things like this are showpieces, they get us drooling, they get us fired up about the brand. They help push everyone on their team to do new and amazing things. If the new developments are successful and popular, they can be refined and work their way down the line (I think the adjustable subframe lock will be one of those things).
What did all that have to do with making this knife smaller in the first place? Like I said this is a showpiece (even if it ends up being a regular production piece). It needs not to just stand out, it needs to jump up slap you in the face, and tell you that you damn well better not leave without one (just looking at the pictures, I think the 0777 does this). It is meant to be a flagship knife. When you get your hands on one you are meant to desire it. If you are going to go through all this trouble to make it, it should be big enough to have some physical presence.
If the design is practical to produce and there is demand, smaller sizes might happen.
Look at the Speedform and the Speedform II. The Speedform is a pretty amazing knife, and from what I've seen the Speedform II looks to be better than a "regular" production knife. If it sells incredibly well, and enough people scream for sprint runs are always possible.
Another example might be the 0300 series, definitely popular for such a big knife.
Enough people bough them AND said "this is a great knife, I'd love a smaller version too", resulting in the 0350.
If we buy every 0777 ZT can make, maybe they'll think about a smaller version. Who knows?
In the meantime please appreciate every sprint, boutique and just plain crazy knife Kershaw does, appreciate all the early info they share with us and stop second guessing.