The Internet Economy - Then & Now
Meera BluePrint 10.01.2020
On the Invest Like the Best podcast, Patrick Collison (CEO of Stripe) stated that the internet economy only makes up 5-6% of GDP.
A bulls dream
That number is so shockingly low that your mind begins to race about the awesome power of tomorrow's internet economy
We wanted to look to the past
In 2001 the Brookings Institute published a report titled "The Economy and the Internet: What Lies Ahead?" As you can imagine, with no disrespect to a great institution, it’s pretty funny reading this only 19 years after its date of publication. To put that in perspective, many of you have probably read and learned from textbooks much older than that. This report is policy centric and tries to hone in on the productivity enhancements of the internet circa 2000, seven years after the invention of the browser. Measuring productivity is crucial for many things including economic forecasts and monetary policy.
Seems legit.
Our first eyebrow raise came from the sectors Brookings focused on; Auto manufacturing & sales, non-auto manufacturing, higher ed, financial services, gov't, health care, retail, and trucking. Massive industries at the time and still largely, today right? However, considering the fact that AWS is estimated to be worth over $500B today, Brookings failed to even consider the industry of internet productivity. The report goes on to state that "Official government forecasts anticipate that the recent rapid pace of productivity growth will not continue" and that it would slow to an average of 2% by 2010, slower than the "golden age" of 2.5% experienced from 1948-1973 (GOLDEN AGE?!?)
Let’s face it, the internet economy has created a tremendous amount of value over the last 20 years. The flood gates are open and it is extremely exciting. We believe digital assets and value creation will be the driving force of growth for GDP and the economy for many years to come. Our main takeaway from the article, 20 years after it was written, is really how robust the internet economy is. It wasn't possible to confine to a piece of paper in 2001 and it’s not possible to confine to a blog today.
For as much as the report seemed to get wrong (hindsight bias, not criticism - predicting the future is impossible) it got a lot right including;
Cheaper transactions
Increased efficiency
Increased competition
Increased consumer choice
Increased effectiveness
Learn Something
Internet Society – The Internet Economy
Internet Association – Refreshing Our Understanding of the Internet Economy
Organization for Economic Co-operation and Development – The Internet Economy on the Rise, Progress since the Seoul Declaration