The old economy is based on the assumption that affairs can be organized so that energy and most materials are available in relative abundance, and that human productivity is the main limiting factor.
But the new economy is grounded in the fact that this assumption is no longer valid. In the new economy energy and materials are, for a fact, expensive and hard to get.
So in the new economy performance improvements in human labor and in materials and energy are valued and sought, with the emphasis on continually getting more and more from less and less – especially with respect to energy and materials, because we have barely begun to realize the possible improvements in this area.
In fact, most new growth in the new economy will derive from activities that either discover and disseminate improvements in materials and energy performance, or from activities that use such discoveries to dramatically shrink the energy and material used to things done. For example, in architecture this trend is now called ‘dematerialization,’ and it is rapidly rising in significance as a concern for design.
This trend has, of course, actually been with us for all time. More and more with less and less has always been a good core strategy for making money. But now we recognize that the accepted facts that underlie and drive most business decisions include the realization that energy and materials resources are expensive and scarce.
What we see happening in this new environment is the progressive substitution of knowledge and human capital for energy and materials. This often shows up as effort to use know how and knowledge producing social networks to reduce costs, i.e. – to substitute knowledge and human capital for finance capital. And it works.
Indeed, the fundamental capital of the old economy was finance capital, with access to finance acting as the primary lever controling growth in the economy. But in the new economy the fundamental capital is human and knowledge capital, with access to information and communications resources, i.e. – to the converged digital media, and with participation in emerging new social networks platformed in the converged digital media, acting as the primary lever controling growth in the new economy.
And the focus of this new capital base is, of course, access to and use of the internet. It is migration of all processes of coordination, communication and control onto the internet, and participation in and use of the emerging new internet-based social media through the creation and operation of digital media based social networks. And I note here that social netorks of various forms have always been the primary engine for the production of both human and knowledge capital, with significant historical examples being the networks of conversation in the coffee houses of Old Amsterdam and London in the 15th and 16th centuries, or the networks of authors and subscribers to scientific and technical journals in the ’70s and ’80s, etc.
So exactly at the moment the investment banks and stock exchanges are failing all around us, as the old economy gives way, the new digital converged media are giving birth to incredible new leveraged means for generating human and knowledge capital, including: crowd sourced instant access to knowledge thru tools like Google and Wikipedia; twitter-based communities of shared interest that emerge, function and dissolve in hours, migration of all business operating processes into the computing cloud, and the accelerating migration of our interface with all this media onto iPhone-like devices that give us continual participation in a globally based engine of social network production.
One big point here is that the actual global economy is not failing or faltering. It is instead – transforming, shifting from the old finance capital base to the new social media base. And those clear headed enough to see the new way are going to prosper.
Another give point is this leaves us with entirely new questions, new lines of enquiry we desperately need to explore:
- How are knowledge and human capital generated? How destroyed?
- What are the implications for capital formation given all the converged media are pull, not push-based?
- How can we mitigate the dislocations of the transformation from the old to the new economic base?