• The real economic impact of the internet has not been felt yet

    by  • September 6, 2010 • Everything Else • 0 Comments

    From the archives, an excerpt from an old blog post on miniconsulting on decision-making as a transformation in our economy. The basic thrust of this piece was quite simple. What is the economic benefit of having the best person in the world make each decision?

    That seems like the real economic impact of the internet in the long run – better decision-making by having real experts make decisions for us in areas where our resources are limited. From small things (“which monitor should I buy?”) to big things (“which solvent should we use in the new factory?”) we often make decisions on the best-available rather than best-possible basis. And the internet could change that.

    Miniconsulting on decisions seems like it has a lot of potential to make the world a better place.

    Accelerating to Real Prosperity, 2006-06-30.

    It’s going to take a shift as radical as the original Industrial Revolution on the social, cultural and business levels to pull us out of this hole we’ve dug ourselves into. It’s not about the machines but about the business and productivity revolution they enable.

    On this level, what is the Internet for? Two things:

    1. Finding a usable resource which solves a problem you have.
    2. If there is no such resource, finding somebody to make it for you.

    Usually those “resources” are facts or tools like software. You have a question, you look it up online, you proceed with your project. You can’t find an answer, but you can find an expert, so you make contact and ask. Sometimes you’ve got to pay them…

    Now, what happens when these “experts” are the best people in the field, rather than the best person locally available? Better information leading to better decision-making.

    How much is that worth nationally right now?

    How many dumb business decisions has Google saved companies from? So what if we generalize and accelerate the process further and really focus on trying to streamline the idiocy out of our fundamental business processes using the Internet’s ability to focus expertise on remote problems. Dumb? Dumb no longer.

    When we say “knowledge worker” what we really mean is a person who’s bored most of the time by the limited scope their own company gives them but can’t get paid to ply their expertise over the sea of problems out there they could be focusing on.. What’s the odds that Fred in Cubical Four is, right now, for the next few hours worth five times more to your competitors than to your own company?

    Let us say they have a problem. Fred has the knowledge to solve their problem easily but he doesn’t know they about it. The entire economy loses: this is a market failure if Fred is anything other than a replaceable cog. It’s a market failure caused by locking people up to jobs which almost always underutilize their real capabilities. Just like Ricardian advantage, everybody should do what they do best all of the time to get the maximum good for both the individuals and the whole. But our business models are still based on industrial systems where simply having a body stand by the machine was enough. A desk or a computer is not a machine in the same way a spinning jenny was and the fit between the thing that needs done and the person doing it is much, much more important in our highly complex and technical world.

    So let’s make Fred a freelance so that, in theory at least, he’s always working on things which are well suited to his talents rather than sitting around bored. Now we’ve got a Coaseian problem: the transaction costs of getting Fred to work on problems may exceed Fred’s actual contribution. Enter the Internet and better approaches to handling knowledge workers: reduce the transaction costs, fully utilize Fred’s expertise and brilliance, and the entire economy benefits.

    I’m picking this as a for-instance, but if we reorganized around the very best person available, nationally or globally, for each task is the person who does it rather than our current system, where limited knowledge often results in suboptimal employment of human intelligence?

    I’m serious here people. What’s the potential gain in national and global productivity from a realignment in the way we work along these lines.

    We need another Industrial Revolution. We haven’t even begun to see the social and business impact of the Internet yet.

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    Vinay Gupta is a consultant on disaster relief and risk management.


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