For all the changes brought about by the information technology, can its impact compare to the that of railways, telegrams and machinery? Many think not. But Tim Green has just had his brain scrambled by an argument that the digital era is set to overturn the ‘post war edifice’. Gulp…
A little while I ago I listened to a podcast on which an academic – Robert Gordon, an economist at Northwestern University – argued that the internet was not that big a deal.
Sure it had brought about some changes. But compared with the impact of electricity or steam or the railways? Small potatoes.
It made sense. After all, the railways made it possible for people to live miles from where they worked. That changed cities. Created suburbs. And electricity? Well, that gave us lighting. We didn’t have to go to bed when the sun went down.
Compared with all that, what has the ‘the third industrial revolution’ done? Changed the way we read newspapers? Helped us order print cartridges a bit quicker?
I’m being selective with my examples here. But you get the point.
Here’s how Gordon put it: “There’s nothing wrong with the Third Industrial Revolution (with) things as e-commerce and search engines and email and web browsing. But those inventions, as monumental as they were, were taking place just in a narrow slice of human life in terms of the economy.”
He went on to add that e-commerce still only accounts for six to seven per cent of total retail sales. Again, hardly a revolution.
I was convinced. But then – feather for every wind that I am – I had my head turned by another podcast conversation. This time, it came from Ben Thompson on The Exponent.
We’ve barely begun to comprehend the chaos about to be wrought by the digital era. The post-war ‘edifice’ is about to come crashing down.
Thompson is always fascinating to listen to/read. He has an excellent site called Stratechery with lots of interesting free articles.
His analysis is that we’ve barely begun to comprehend the chaos about to be wrought by the digital era. He argues that the post-war ‘edifice’ is about to come crashing down. And we lack the tools to see it.
“People say where are all the productivity gains? For me the changes are too big. They’re too big to be captured in standard measurements,” he says.
Let’s frame this argument in the real world. Thompson sites TV as a good example. Millions of people watch sports and reality shows, then see ads for cars and FMCG goods, and then drive to Walmart to buy these goods.
But they’re abandoning Walmart et al because of the infinite inventory on the internet. And their shopping is being delivered so they don’t need to drive. And even when they do need a car, they can order a ride from Uber or – ling term – dial up a self-driving vehicle.
When all those big industries start to die, what happens to TV?
Thompson likes to cite Dollar Shave Club as an example of more digital ‘chaos’. Dollar Shave Club delivers razors to customers on a subscription basis every month. Here’s a company that took just a few years to challenge Gillette et al without worrying about supermarkets, distribution or even product innovation.
Dollar Shave Club proves you can use the internet to disrupt any business now, not just those that can be digitised (like newspapers or music).
In August, Proctor & Gamble bought Dollar Shave Club for $1bn. Smart move. Thompson thinks it has a bargain. But does P&G also realise that what its new acquisition represents?
P&G is one of the world’s biggest and most respected companies. It’s achieved this status by creating enduring brands, mass marketing them and cultivating cherished relationships with giant retailers.
All of this is now under threat. Exciting and terrifying isn’t it?