The Digital Economist

Hi, I'm Sam Birmingham. I love startups, innovation and challenging the status quo.

For the vast majority of my years, economies have grown, companies have profited and people have got richer on the back of a once-in-a-lifetime demographic shift and debt-fuelled boom. Those days are through.

Economies must evolve beyond rampant consumerism and confront the demographic headwind that had been a tailwind until the Baby Boomers began retiring. Companies must become nimble, innovate and invent new products to address customers' ever-changing needs in this digitally-disrupted world. And as people, we must focus on solving problems and learn to do more with less.

These are the challenges that excite me. They are what I want to get out of bed each morning and be a part of. This is where I share my thoughts.

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5 posts tagged Digital Disruption

Fred Wilson at Le Web:

We don’t think about technologies, we think about trends…

When I think about the most important trends, I think of three:

  1. The transition from bureaucratic hierarchies to technology-driven networks;
  2. Unbundling… everything is getting unbundled. People are starting to deliver much more focused services, best-of-breed services, and you can buy them a la carte;
  3. We are all now personally a node on the network, because of smartphones.

Roughly speaking the world’s economy has always worked as a giant pass-along-game between the planet’s citizens. Person A needed stuff from person B and person B needed stuff from person C and person C needed stuff from person A. So everyone needed everybody. It has been a kind of giant circle of needs.

But as a smaller and smaller number of people are needed to make the basic things that people need for survival, from food to energy, to clothing and housing, the less likely it is that some people will be needed at all.

When you read in the press the oft-quoted concept that “those jobs aren’t coming back” this “reduction of need” is what underlies all of it. Technology has reduced the need for labour. And the labour that *is* needed can’t be done in more developed nations because there are people elsewhere who will happily provide that labour less expensively.

In the long term, technology is almost certainly the solution to the problem. When we create devices that individuals will be able to own that will be able to produce everything that we need, the solution will be at hand. This is *not* science fiction. We are starting to see that happen with energy with things like rooftop solar panels and less expensive wind turbines. We are nowhere near where we need to be, but it is obvious that eventually everyone will be able to produce his or her own energy.

The same will be true for clothing, where personal devices will be able to make our clothing in our homes on demand. Food will be commoditized in a similar way, making it possible to have the basic necessities of life with a few low cost source materials.

The problem is that we are in this awful in-between phase of our planets productivity curve. Technology has vastly reduced the number of workers and resources that are required to make what the planet needs. This means that a small number of people, the people in control of the creation of goods, get the benefit of the increased productivity. When we get to the end of this curve and everyone can, in essence, be their own manufacturer, things will be good again. But until we can ride this curve to its natural stopping point, there will be much suffering, as the jobs that technology kills are not replaced.

Union Square Ventures partner, Albert Wenger on technology, progress and the power of networks

Albert is a fascinating thinker. My favourite bit of this discussion comes at 12:15, when he is asked to ponder the future and technology’s place in it:

The thing I am most focused on right now is the future of how we organize ourselves and how we organize our social and economic activity; all this in the face of two very dramatic changes.

One – the Internet. It’s not like anything that has come before. For the first time it has put all of humanity in touch with each other instantaneously and for free. By free, I mean this call we are having right now is free on the margin.

Two – the incredible rate of progress (I disagree with Peter Thiel on this). It’s all around us and has resulted in our ability to supply anybody with food or facilities on the other side of the planet, for example. It does not exceed our technological capabilities and natural resources to provide living to everybody. If anything, that proves our capability for accelerating. 

A lot of the old ways for how we think economic activities are organized are breaking down. The thing that has worked very well for us is some form of capitalism. There are subtle differences between capitalism in Germany and the US. The basic idea that individuals have some kind of work through which they generate income – they spend that income on things and experiences. The problem with that model is that we are getting good at getting machines to do what we were doing historically. This machine is not human – it is not a buyer or consumer of the things it produces.

These twin forces – being able to communicate, share ideas, organize ourselves, and the force of technological acceleration are enablers. These seem good for the long run, but disruptive in the short run. People who had a job don’t have a job, hence falling incomes, etc. My interests are in using the internet to use this technological force for positive outcomes. That’s more of an outline of the forces I think we should think about.

Another choice excerpt at 17:43, on Hans Rosling’s prediction that global population will top out at 10 billion, and how we might employ all those people in a technological era where machines eliminate jobs:

If you’ve got population decelerating, and if you’ve got technology accelerating, it’s very clear what these two curves do to each other.

We are going to have to figure out how to use the resources wisely for all these people and stay above global warming. The social challenge would be around what we spend our time on; I think that will be the biggest challenge. I do think there are positive forces such as cultural production – ways to undo some of the damage we have done to the environment. Fundamentally though, our belief in the fact that we will strive to consume more, own more and have more seems broken.

Albert’s productivity hacks and habits are also worth taking in.

Respected academic and innovation expert, Clayton Christensen, makes some brilliant observations about digital disruption and education in this interview with Mark Suster.

From Suster’s notes:

He talked about how for centuries education had “no technological core” (meaning it was bound by physical locations) and thus disruption was very difficult. Obviously that barrier has been brought down with low-cost ability to capture, stream and distribute content over the Internet.

Today’s higher education is responding by making more courses online and available to people outside of physical boundaries.

But while universities are developing online content they are not fundamentally disrupting learning because the method of delivery is not a new business model. “Online education is truly going to kill us.” He talked about the need to have content delivered closer to those in the work force who could immediately apply what they’re taught and then immediately be back in the classroom to discuss the implementation.

Still on online learning, this time in Christensen’s own words (at 3:08):

The technology itself is not intrinsically sustaining or disruptive. It’s how it gets deployed that makes the difference.

Right now the Harvard Business School is investing millions of dollars in online learning, but it’s being developed to use in our existing business model… But there is a different business model that is disrupting us, and that’s on-the-job education… It’s a very different business model, and that’s what going to kill us (traditional universities).

And on another of universities’ great failings, the gap between graduates’ perceived skills and employers’ actual needs (at 6:05):

The employers want people who have the skills to do a job. The universities don’t understand that job, and the students are here to learn what we think they should know.

We invest and we subsidise their education in fields for which there are no jobs. I really do think that the more we could link the employers with the people online who provide the skills, it really will cause the world to flip.

The scary thing is that in 15 years from now, maybe half the universities will be in bankruptcy.

Ouch!

I love a good contrarian perspective and all things digital, so this article about the challenges facing traditional media companies was right up my alley:

The news market is undergoing an irreversible split. On one side, digital distribution (on web, mobile and tablets) will thrive through higher volumes and deeper penetration; revenue is not easy to squeeze out of digital subscribers and advertisers but, as some consolation, serving one or ten million customers costs about the same.

On the other side, print is built on a different equation: gaining audience is costly; every additional reader comes with tangible industrial costs (printing, shipping, home delivery). Having said that, each print reader carries a much better ARPU than its online counterpart (bet on a 5 to 15 times higher yield, depending on the product). And, for a long time, there will be a significant share of the audience that will favor the print version, regardless of  price (almost). Those are super loyal and super solvent readers…

Mainstream media think their mastheads and audience are their best assets, yet they drown them in tabloid noise interspersed with ads. Not only is that approach wrong, but they misunderstand exactly what their best assets are, and how to maximise their value.

  1. The shelf life of most “news” is measured in hours, if not minutes. That doesn’t give you long to generate a return, so cut the churn and focus on extending the shelf life of your content - quality not quantity. Directories are still valuable; press releases posing as “news” are not.
  2. You can’t have one without the other, but your journalists are still more valuable to you than your audience. Syndicate the “news” and focus on “opinion” - I would gladly pay $x/month to have the best minds curate my reading on topics of interest and inform my thinking with critical analysis.
  3. Since the birth of marketing, newspapers’ customers have been advertising companies, not the end users of their product. The ease with which digital content can be created and distributed has seen ad inventories balloon, putting pressure on prices and, more importantly, margins. The tired old approach is to create more content, attract more eyeballs, sell more ads… FAIL! What media companies need to do is flip their perspective - stop trying to find ads for content; try to find content for ads! A newspaper’s sales team knows every company advertising in their local area, who they want to reach and what they’ve got to spend - put your team to work connecting advertisers with the right eyeballs and you can start generating from content that you don’t even bear the cost of creating or distributing!

I somewhat agree with the proposition that “the print business is not your legacy, it’s your bank”, however I don’t necessarily accept that newspapers must raise their price to survive.

What they do need to do, though, is work smarter to serve their real customers - advertisers - and do more to align their value proposition with the interests of the end users of their product.

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