This article isn’t about a company or sector but rather about a trend, about speed, an economy in massive transformation, and about strategic, financial and market reaction. The following statement is a symbol of these things, and is not about the company or the sector it describes: Amazon is not actually a retailer, but the retailers still are.
At the level of Economics, containing all the subjects referenced above, one senses a delayed reaction, (which is itself, perhaps, consistent with the symbol of the prior statement). This is understandable: (1) Everything is always in a state of evolution, and so it is relatively easy to dismiss the changes happening as merely that. (2) As a matter of velocity and degree, the transformations started gradually — widely, lightly, steadily — and then all of a sudden, as they say, and that has only been more recent. (3) The recent explosion of digital technology into all realms, embodied by some big elemental qualities (such as mobility, sophisticated data capture and processing, and lately the outgrowth of AI) can probably be traced back to one key milestone — the introduction of the iPhone in 2007 — which coincided with another large global event that may have for a long time camouflaged it. Reference is to the market meltdown of 2008 and the economic repercussions of the Great Recession that followed.
These years later — and as the iPhone (at this point of discussion also a symbol rather than the actual device) has directly or indirectly led to unprecedented changes in consumerism, business methods, and technology directions — the economic analysis of it all still seems in something of the fog created by that turbulent period and what preceded it in years and decades of standards that were set. At a high level, the arguments and studies, the data and market reactions, the focal points of analysts that watch and comment, still largely seem centered around conventional topics of growth and rates and margins and so on, without, as a matter of pointed observation, allowing for a drastic change in context.
Considering where we now stand, any argument still rooted in conventions from another time (even if not long ago) is at least incomplete, more than likely flawed, and in some cases entirely misguided. In short, a reconsideration is indicated, not only of the answers but some basic questions. Below is a list of such examples.
- Can economic growth be measured conventionally when the production unit (now network- and data-centric) is transformed?
- How is value preserved when commoditization is a given, in all business forms, happening more and more quickly?
- What will be the lasting difference between categories when bits of processed data and computing power dominate them all?
- What is portfolio diversification when the distinctions between categories start to fade?
- What are differences in risk when growth is essentially a running string of startups?
- What is an appropriate discount or risk premium if varying capital uses and structures become homogenized?
- What is the difference between investment and speculation, considering such circumstances?
- What is the meaning of employment when that of productivity is in flux?
- Could the low interest rate and inflation environment be the result of constant fundamental change, rather than low growth?
- Is a bubble still a bubble if it doesn’t pop; is a downturn cyclical if it doesn’t bounce; and how long is it reasonable to wait for the answer?
This article began with reference to one company that has adapted to the new environment quite well (and some would say has helped to shape it), in contrast with a broader sector that has helped make the company possible. The two were chosen for symbolic reasons, as mentioned, just as the iPhone was a symbol of the start of our new era. “Ten questions,” also symbolic, signifies that the list is not complete, and the selection almost arbitrary. These symbols, however, underpin realities that are quite material: (1) There is a new interconnection of causes and effects that impact all assets, markets, and economies; (2) these links are made more firm and form a denser network of associations in a digitized world that is evolving like an organism; (3) the study of this organism is important for the understanding of the whole, and all its interlinked components; (4) adapt or be adapted.
In inefficiency there is opportunity. Each sheds light on the other.