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Talkin' bout a Revolution
posted Sunday, 22 May 2005
The tricky thing about creating an entirely new industry is that it takes a while for your ideas to filter into the global consciousness. We are committed to our vision of how work and life will change in the Information Age (compared to the Industrial Age), but it is only recently that what we have been saying for the past 10 years is finally starting to get the mindshare that we've been waiting for.
We are on the cusp of another economic revolution. Despite the flame-outs of the dot-com bubble, the people who were talking about a New Economy were right... they just got some of the details wrong.
Just as we moved from an agrarian economy (where most of the population worked on a small farm) to an industrial economy (where most of the population worked away from the home in a factory or office), we are now moving towards an information economy. Once again, the costs of the means of production have changed and with that change, entire infrastructures must change as well.
Think about what a farmer in the agrarian economy needed to produce -- a piece of land, some farm equipment that he was able to make or purchase himself, possibly with the help of a loan, and livestock. Most farmers owned their means of production. This is because the agrarian economy was 'human-scaled.'
The industrial revolution took this notion of individually owned means of production and separated the owner from the worker. Owners provided the capital to acquire the much larger assets required to produce in the industrial age and hired workers to run and manage those assets. Workers had to congregate in locations outside the home so that they could all have access to these assets required for production.
In the information economy, the means of production have come back to being human-scale again. Productivity and technology gains are such that an individual can produce millions of dollars worth of value with the individually owned assets of their education and productivity tools such as a personal computer or a telephone.
Here's where the dot-com ebullience got it all wrong.
The information economy is as different from the industrial economy as the industrial economy was from the agrarian economy. This means that a fundamental change in culture, investment structures, government regulation, and other infrastructure is needed in order to make the information economy work.
The reason the dot-com bubble burst was due to a fundamental mismatch between the structure of investment and the nature of information-based business. The current investment structures are dandy for creating large industrial scale-based organizations that need expensive physical assets, but they don't make sense for intellectual property based ventures. The very thing that makes these companies valuable is that they do not need lots of employees and physical assets to be successful, and yet, this is exactly what the investors, the managers, and the market were forcing on to the company. Everyone wanted to have their cake and eat it too.
By creating new financial instruments for investing in intellectual property, we can give these information age companies the capital they do need without requiring them to take on assets that they don't need.
All this does not mean that manufacturing will go away. Just as there are still farms in industrialized countries, there will still be some factories and manufacturing in information economy based countries. The difference is that the industries that remain in these countries will most likely need some form of government subsidy and the choice of what remains will be a strategic choice on the part of the country. For example, it is unlikely that the United States will completely outsource the manufacture of high-technology weaponry, but it might be comfortable outsourcing all clothing manufacturing.
What does all this mean for the average worker? The importance of education becomes paramount. The information economy will be brutally competitive because, unlike in the industrial economy, workers will be unable to count on inefficiencies in transport or the location of natural resources to defend a competitive advantage over a worker in another country. The most valuable natural resource will become the ability to innovate. The more a country can empower its citizens with the knowledge, tools, and support they need to do this, the more competitive that country will be in the global marketplace.
We are on the cusp of another economic revolution. Despite the flame-outs of the dot-com bubble, the people who were talking about a New Economy were right... they just got some of the details wrong.
Just as we moved from an agrarian economy (where most of the population worked on a small farm) to an industrial economy (where most of the population worked away from the home in a factory or office), we are now moving towards an information economy. Once again, the costs of the means of production have changed and with that change, entire infrastructures must change as well.
Think about what a farmer in the agrarian economy needed to produce -- a piece of land, some farm equipment that he was able to make or purchase himself, possibly with the help of a loan, and livestock. Most farmers owned their means of production. This is because the agrarian economy was 'human-scaled.'
The industrial revolution took this notion of individually owned means of production and separated the owner from the worker. Owners provided the capital to acquire the much larger assets required to produce in the industrial age and hired workers to run and manage those assets. Workers had to congregate in locations outside the home so that they could all have access to these assets required for production.
In the information economy, the means of production have come back to being human-scale again. Productivity and technology gains are such that an individual can produce millions of dollars worth of value with the individually owned assets of their education and productivity tools such as a personal computer or a telephone.
Here's where the dot-com ebullience got it all wrong.
The information economy is as different from the industrial economy as the industrial economy was from the agrarian economy. This means that a fundamental change in culture, investment structures, government regulation, and other infrastructure is needed in order to make the information economy work.
The reason the dot-com bubble burst was due to a fundamental mismatch between the structure of investment and the nature of information-based business. The current investment structures are dandy for creating large industrial scale-based organizations that need expensive physical assets, but they don't make sense for intellectual property based ventures. The very thing that makes these companies valuable is that they do not need lots of employees and physical assets to be successful, and yet, this is exactly what the investors, the managers, and the market were forcing on to the company. Everyone wanted to have their cake and eat it too.
By creating new financial instruments for investing in intellectual property, we can give these information age companies the capital they do need without requiring them to take on assets that they don't need.
All this does not mean that manufacturing will go away. Just as there are still farms in industrialized countries, there will still be some factories and manufacturing in information economy based countries. The difference is that the industries that remain in these countries will most likely need some form of government subsidy and the choice of what remains will be a strategic choice on the part of the country. For example, it is unlikely that the United States will completely outsource the manufacture of high-technology weaponry, but it might be comfortable outsourcing all clothing manufacturing.
What does all this mean for the average worker? The importance of education becomes paramount. The information economy will be brutally competitive because, unlike in the industrial economy, workers will be unable to count on inefficiencies in transport or the location of natural resources to defend a competitive advantage over a worker in another country. The most valuable natural resource will become the ability to innovate. The more a country can empower its citizens with the knowledge, tools, and support they need to do this, the more competitive that country will be in the global marketplace.
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