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Economic Difficulties Despite Innovation?

Posted on 10 April 2014 by Andrei

As domainers, we know perhaps more than almost anyone else just how important the appearance of the Internet is to humanity. I think it’s reasonable to compare the Internet to let’s say the car in terms of impact. The car eliminated a lot of physical boundaries by allowing us to travel much faster, whereas the Internet took things to the next level by allowing us to interact with one another effortlessly.

Alright then, so why are many countries struggling with unemployment and economic difficulties despite this huge step forward for humanity as a whole?

Well, there are a lot of reasons but today, I want to focus on just one: the effect of the Internet and of the IT industry.

The Internet and let’s say the IT industry in general had/has the exact opposite effect on employment than the auto industry.

Why?

Think about it.

Producing a car was a *highly* labor intensive activity.

You need tires (lots of job creation in that sector), you need all sorts of components (lots of job creation in that sector as well) and you need people to put everything together. You guessed, once again we’re talking about a lot of jobs.

It is an obvious fact that the auto industry created a huge number of jobs.

Of course, it also eliminated jobs. For example, anything that had to do with horses/carriages took a huge hit but all in all, the auto industry was without a doubt net positive in terms of job creation. In other words, it created considerably more jobs than it eliminated.

When it comes to the Internet and the IT industry, the exact opposite happened because they helped make everything considerably more efficient. Therefore, a job that required ten employees in the past might only require one or two at this point. All of a sudden, a lot of employers realized that they don’t need anywhere near the number of employees they needed in the past.

The result? Massive job elimination.

Now sure, the Internet also created jobs but the number pales in comparison to those it eliminated.

OK, programmers appeared for example but one such person with the proper technology at his disposal might be able to do a job for which 10x-20x more people were required in the past.

In other words, the Internet and the IT industry is net negative in terms of job creation and therein lies the fundamental difference compared to let’s say the auto industry.

So, is the Internet a bad thing?

Is the IT industry bad?

Of course not!

I think we’re in the “disruption” phase, to use a term that’s very popular in Silicon Valley nowadays.

In time, things will start being more clear and in the long run, the Internet and the IT industry will in my opinion provide even more benefits to humanity than the appearance of the automobile.

Economies as well as people will adapt and ultimately thrive if history is an indicator.

But it will take time.

Viewing IT/the Internet through the same glasses you used to analyze the auto industry is a huge mistake. We’re talking about fundamental difference which need to be taken into consideration because otherwise, you’re trying reach a conclusion without understanding the premises.

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2 Comments For This Post

  1. Scott Alliy Says:

    Interesting observation. Here is another major factor xkeeping the U.S. perhaps even world economy in a frozen state.

    This is the first time in memory that three generations are fighting for their rights n the workplace. Baby boomers, GenX, and Millennials.

    Each see the world and their place in it differently and like a tug of war each are pulling the rope in the direction that fits the narrative of operation and environment that ey feel comfortable in.

    As you pointed out this struggle for direction will work itself out and one of the three groups philosiphies will reign and become accepted norms of business behavior.

    When this finally occurs we will have clarity. Until then more stress and upset that comes from uncertainty.

    Not sure the time frame but we are approaching a lost decade IMO.

  2. Phil Says:

    Next thing Arnold from the future is going to appear. Man Vs Machine approaches, get ready for it folks.

    Jokes aside – Very thoughtful post, also been thinking allot about this lately considering how rough the world’s economy is at the moment, unfortunately “the lost generation” (ppl between 25-35 right now) are the ones that will feel these growing pains the most (and even long after), but eventually (hopefully) as you put it more jobs will appear once new spinoffs and industries are created through IT. If all else fails, it’s best we find John Connor and Catherine Bruster ASAP.

 
 
         
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