In 1971, Intel built the first microprocessor, the 4004. It was the birth of what Don Tapscott called in 1995 the ‘Digital Economy’, and it has transformed the world irrevocably.
The digital economy is driven by the internet. Today, 54.4% of the world’s population is online, 42% use at least one social network and 68% are on mobile. The internet provides an unlimited supply of knowledge and intuitive devices and it brings together a vast community. It enables greater connectivity and easier transactions between consumers and business. It has wrought the demise of many traditional industries, replacing them with new ones now integral to our daily lives.
We are now set to see the digital economy take a new direction, one possibly even more transformative than anything that has come before it. This is because of blockchain.
The digital economy refers to a broad range of activities which include: the use of knowledge and information as factors in production, information networks as a platform for action and how the information and communication technology (ICT) sector spurs economic growth. It is worth almost 30% of the S&P 500, six times the U.S.’ annual trade deficit or more than the GDP of the United Kingdom.
Currently, 90% of revenue created in the digital economy is done so by nine companies. These are Apple, Google, Facebook, Amazon, Microsoft, Baidu, Alibaba, Tencent and Xiaomi. They are entirely unlike any businesses we have seen before.
As TechCrunch notes, “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
The internet is the Gutenberg printing press of the 21st century. It gives everyone access to information, carrying innovations and new ideas around the globe.
This has caused humans to become more connected on a international level. This was evidenced in a recent study that showed millennials, the generation born between the early 1980s and early 2000s, have more in common among themselves than with other age groups from their respective countries.
The internet has already transformed the society we live in as a result of the shift in our habits that this has caused, and it continues to do so. One recent example is grocery shopping, where you can now shop in-store without having to queue or paying at the till. At Amazon Go, sensors and cameras register what the customer takes off the shelf. The rest is regulated by an app.
In the future, the whole process could be digitalised so that refrigerators at home could automatically inform retailers that they are running out of food and they will file the order automatically and most likely will do so using robots.
The digital economy has also given rise to megacities like London, Singapore, Hong Kong and New York that drive the global economy. A recent McKinsey study indicates that over 60% of global GDP is being created in 600 cities around the world. 136 new cities are expected to enter the top 600 by 2025 — all of them from the developing world and 100 new cities from China.
These cities are becoming smarter. Amsterdam is one example. Its digital infrastructure creates good connectivity between companies and people through extensive fibre connectivity and internet exchange points.
The rest of Europe has also made a great effort to become more digitalised. The Finnish government, for example, has invested heavily in the C-Lion 1 cable system between Finland and Germany, which securely connects natural data centers in the Nordics with both businesses and people in continental Europe. Estonia has introduced the idea of digital citizenship. Germany, with its strong economic performance and experience in creating industrial growth, will also benefit from the fourth industrial revolution.
