Nearly three billion people are now connected to the Internet, that’s more or less 40% of humanity, it is arguably the single greatest human achievement since electrification re-defined our society a hundred years ago. Those of us who lived through the tech bubble and bust of the late 90s could be forgiven for rolling our eyes when commentators expound on the impact of the continuing online revolution but the impact is real and much more wide-ranging than you perhaps might imagine.
The first ‘online revolution’ was actually a fairly superficial exercise which tended to focus on retail transactions moving from a physical location to online, the poster child for this was pets.com which achieved notoriety by establishing an absurd valuation just before going out of business. The migration of retail online has continued apace. Almost every good or service imaginable can now be ordered online however this is an example of how much deeper and wider the internet’s impact reaches. The product or service you ordered online is still manufactured in the conventional way, it’s delivered by drivers and trucks which earn wages and use gas. The customer service person who answers your questions is likewise employed although she may be working half a world away. The company making the product will likely be thriving in good part because the new economy allows them to market more efficiently and keep in close contact with existing and new clients. Although in countries where the internet is well ensconced like the US or UK the internet is directly responsible for approaching 10% of GDP the vast majority (in excess of 75%) of the economic impact the internet causes shows up in the non-internet economy.
The new internet driven economy has been widely criticized for causing job losses in some sectors, for example when was the last time you checked in at the airport or went to the bank and actually spoke to a human being? However a more careful study reveals that for every one job lost through this process nearly three jobs are created. These jobs tend to require a better educated labor force and in many cases they can be done from anywhere in the world, so speaking globally this is a strong net positive effect. The impact of these changes isn’t just felt in larger companies where dramatic improvements in efficiency have occurred through rapid growth through information and automation made possible by the internet. Small and mid-sized business have seen similar if not greater opportunities. The panoply of tools and access the internet generates means that almost anyone almost anywhere can start a business or grow their existing business. Small companies taking advantage of what the web offers have been shown to grow and export over twice as fast as their less tech engaged peers. Although small business has benefited from these changes they still have an enormous amount of as yet unrecognized online potential. The internet allows many businesses to do things which would have been unthinkable a decade or so ago. This leveling of the playing field has led to dramatic jobs growth, indeed over 60% of the jobs created in the last decade were created by small to mid-sized businesses more than compensating for jobs lost through globalization.
Across the world the impact of the information revolution has been dramatic. Areas which have never had access to the telephone or even roads can join the rest of humanity through a generator and a cell connection. Simple things like knowing which products to take to market to garner the best price can make dramatic changes to subsistence farmers. The ability to speak to a doctor or attend a virtual classroom can help drive change and even help reduce the impact of extremist world views. We have seem many revolutions against totalitarian regimes mediated by the internet and this is only going to grow more common.
In countries with well-established internet adoption in excess of 25% of GDP growth can be explicitly linked to the web. That’s a staggering statistic but in reality it’s probably a conservative number. It’s clear that infrastructure investments made by governments or the private sector act as access and wealth multipliers. Each area impacted by the internet generates its own opportunities and challenges. For example the rapid growth of Uber has led to loud complaints from the established taxi driver interest groups yet it has generated by some reports in excess of 20,000 new driver jobs per month.
The data clearly suggests that almost the single most important thing an economy can possess is a strong internet infrastructure and widespread online adoption. It offers communication, information, entertainment and access to the wisdom and experience of humanity. It mediates and enhances commerce frequently inventing entire new business sectors. It allows companies of all sizes to compete and market more effectively increasing the pace of development and discovery. In spite of the dramatic changes the internet has made to so many business sectors we are far from finished with this dramatic process. In economies with widespread adoption there are many sectors which remain almost untouched, as these areas become changed impacted in the near future massive new opportunities for wealth creation will continue to arise. In countries where adoption is less well established we can expect them to learn from the experience of more connected countries and make even more rapid progress as they deploy. It can even bring democracy and peace. The internet revolution continues with no end in sight and the only constant is change.