Are you a Digital Revolutionary?

The Disappointment of the Digital Revolution

• In 2011, Marc Andreessen declared that software is eating the world, but recent events have shown that this euphoria may have been misplaced.
• Most of the value in the world is still created by making physical things that we live in, wear, eat, and ride in.
• Silicon Valley's way of doing business got its start in 1968 when venture capitalists began to decide which technology companies got funded.
• While traditional industrial companies were subject to diminishing returns, software companies with negligible marginal costs could achieve increasing returns powered by network effects.
• However, many came to believe that the Silicon Valley model could be applied to any business, leading to an underlying myth that software would eat the world.
• A longstanding productivity paradox existed throughout the 1970s and 80s, where business investment in computer technology increased while productivity growth diminished.
• The trend reversed itself in the late 90s, and productivity began to soar, but this trend has since disappeared.
• Pundits tout the new rosy scenario of platform-based businesses, but they have three inherent weaknesses: lack of barriers to entry, "winner-take-all" markets, and high costs due to rabid competition.
• Platform businesses eventually need to invest in real assets to become profitable, as seen with Amazon.
• The digital revolution has been somewhat of a disappointment, with less than ten years of elevated productivity growth since personal computers first became available in the 1970s.
• Information and communication technologies only make up about 6% of GDP in advanced economies, not enough to swallow the world.
• The future will not be digital, but rather, we will need to learn how to integrate a diverse set of technologies to reimagine atoms in the physical world.