We are witnessing a tectonic shift in economic value creation. We can attribute this to various things, but it is fundamental and real. Let me walk you through a simple example of my father-in-law, he has been an employee of an organization for over 35 years. The organization through its employees solved a problem and created economic value. This structure is how we had always thought about value creation. He is planning to retire from service in the next 2 years, he has been working on his hobby of Whittling for sometime now and he has gotten very good at it. He whittles all the time now a days, actually he has converted his garage into a workshop for machines and tools and showcase for all his work. What is fascinating is that, I pointed him to Etsy and he has become very intrigued about the prospects of actually creating some economic value for his hobby. He was even surprised to find out that similar work of arts on Etsy were fetching as much as $45/piece… whether he will be able to sell his goods for that price is yet to be seen but he now has a platform that would allow him to display, market and sell his work of art. I am not sure how much money he could potentially make but he has hundreds of pieces of grumpy old men, vikings and santa clauses carved from wood and I am sure there is a niche market for his stuff. What has this got to do with Tectonic Shifts? well, think about it, someone who is retiring is actually embarking on a new entrepreneurial role of selling things that he does for passion, if this is not value creation I don’t know what is. The story is but a small sample of a much larger trend that is starting to happen all over the western world. What is the implication of this? well, it is quite possible that many of the established industrial, hierarchical and inefficient businesses are going to be disrupted by efficient smaller teams that leverage the new communication and device technologies. I think Clay Christensen has written a lot about it starting with his book The Innovators Dilemma.
We are starting to see the established hierarchical organizations fighting back with road blocks to innovation, SOPA, PIPA, ACTA and CISPA are some if not the last of the regulatory walls being raised so far to stop innovation that could break the traditional business models of Hollywood, the music industry and the Media business etc The Hoteliers association trying to prevent Airbnb to expand in NYC, Taxi Drivers of New York protesting against Uber… We have already witnessed the demise of one of the Industry giants, Kodak, killed by Instagram, iPhone, Android and Facebook. In addition to that the traditional publishing industry which was very inefficient is being destroyed by the e-reader and e-book revolution. So, what are the next industries? I don’t know but I am not waiting to find out.
The biggest risk in this transition is that the new generation wants to embrace this freedom to innovate through Life, Liberty and Blazing Broadband and the previous generation wants to hold on to the stability of their jobs, social security, healthcare and retirement. How do we transition smoothly from one way of economic value creation to another without any revolution or blood shed? I think, there is a solution… India, China and most of the new emerging and emerging markets still function under the old regime, I think the experience of the older generation in the western world could be very useful in the emerging markets. We should find a way to transfer that experience, where the older generation from the west is able to contribute to the development of the current generation in the emerging markets and the new generation in the western world is allowed to innovate freely and disrupt any industry. There is only a small problem the younger generation in the emerging markets have once again grown up with Facebook, Twitter, iPhone and Android, they may want to leap frog, just like the entire country of India skipped the whole land phone line to start using the mobile phones. I don’t have an answer but this is happening right in front of our eyes, what should we do about it? embrace the change? allow this tsunami to change our world? I think those countries that embrace this would lead the next millenium. This transition is not dis-similar to what happened during the Trade revolution 200 or 300 years back, America and Britain innovated by allowing trade and commerce in their economies, whereas India, China and Latin America due to established kingdoms, feudal, land lord systems resisted that innovation wherein they lost out on a tremendous economic value creation. So which country is going to innovate faster? I believe Iceland has an important role to play in this transition.