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Trends versus hard core economic basics where do they meet?
By Venkatesh Subramanian on 13/2/2015
I am sure we have all wondered at times why some trends which do not seem to add much economic value somehow generate a lot of momentum and succeed and why some trends which add so much economic value but do not succeed.
Or is it because in our modern world any trend only when it reaches a certain mass (sometimes referred to as critical mass) starts to deliver economic value.
Take for instance, the basic office productivity software from Microsoft:
- Any office productivity software is much more economic value adding than the typewriters of the past and is sure to replace the typewriters eventually and will gain in popularity
- This alone does not explain the widespread prevalence of Microsoft office products
- The real power of these office software is when they are combined with other powerful trends such as the e-mail and when all of us collaborate using the same Microsoft products it produces a factor improvement in the overall economic output delivered. So it is this effect that is delivering the factor gain in economic value which we call the network multiplier effect
While Microsoft effectively managed to cross this hurdle and create the network multiplier effect, other set of companies that were in the internet and internet browser space failed to cross these hurdles. Off-course the huge expectations from these companies and technologies and the valuation and bets that were placed on these companies eventually led to the dot.com bust and the associated recession of the early 2000.
The globally interconnected world today mandates that any new technology or trend to produce lasting economic benefit must have a wide reach. This entails a level of investment whose outcome is entirely uncertain. And often when these huge investments fail to generate the returns to match the hype depending on the stage and level of investment we invariably end up in recessions.
If some companies manage to transition this hurdle, then we are left with vast monopolies to deal with which often stifles innovation that threatens their business.
How can we manage these challenges and introduce technology and changes in much more painless way. How should anti competition practices work in this environment? Should these practices start at creating a more open access environment in the very early stages of the technology or trends to ensure there are multiple players and we can still create the network multiplier effect?