Economics Accelerating Wildly? Unpredictably?

By Shawn Smith,

Published on Nov 8, 2011   —   5 min read

Mark Pesce believes that the next billion seconds (roughly 30 years) will be the most transitional period of time our species will ever go through. Why? Because everything is becoming more and more connected, and it's happening at a faster and faster pace every day. Honestly, it wasn't that long ago when none of us had mobile phones, the Internet was in its infancy, and most people didn't have a personal computer in their home. Now we make important purchases straight from our mobile phones, have access to every book that was ever written (in our pockets), and we can even do video calls across the planet with our business partners.

How much does all of this change things? Quite dramatically. Pesce brings up the perfect example when he discusses the fishermen of the Indian state of Kerala. For thousands of years, their fishing practices hadn't changed. They faced a major inefficiency when selling their product. They had to choose who to sell it to, and trusting their gut, they often made the wrong decision and went to fish markets saturated with catches from other Keralan fishermen.

It wasn't until the arrival of the mobile phone that the fishermen were able to coordinate with their local markets to pick the ideal place to sell their fish once coming ashore. This lead to a boon in efficiency for them. No longer were they just barely scraping by. They could guarantee a profit for themselves on every catch they made.

Mark Pesce uses this as an example of what he likes to call the deterioration of marketplace friction, and it's quite striking. These fishermen went straight from blindly throwing darts to maximizing their profits on every day spent fishing. Fish markets no longer carried too much fish, and everyone enjoyed lower fish prices overall. The friction caused by the inability of the fishermen to communicate with the fish markets was gone, and everyone's lives improved.

I look around me, and I see these sorts of improvements happening everywhere. They might not be as black-and-white as the Kerala fishermen story, but they are very real. I remember going from store to store to see which one had the best price for a piece of camera gear. Now I just look it up while I'm at the store, and the clerk doesn't give me any flak for it. If I find I better price, I usually get it.

So it's very clear that our world is getting more frictionless, and it's happening as we develop more software platforms and APIs for our mobile devices. I can read a review for a restaurant when I'm just outside. I can stop and stay at someone's house with AirBnB and save money. I can do this all without lugging a laptop around. It is amazing.

Will we ever reach true market fluidity?

From these wonderful startups, Pesce believes we will enter a completely frictionless business world where customers gain unprecedented control over the means of production. It literally reads like some kind of futurist communist manifesto. Finally, due to technology, man and woman are liberated from the shackles of Big Business which has always decided what we want for us. It is Big Business which keeps putting up the barricades between us and what will make us happy. They are the inefficiency, or so it is implied.

I am a futurist. Don't get me wrong. It's just that I find Mark Pesce's reasoning and conclusion rather extreme. He goes from one excellent example of the fishermen to a slippery slope that leaves the government scraping for the last shred of legitimacy. His article on Hypereconomics reads more like a science fiction novel than a real prediction of what is to come in these next billion seconds.

There are things he says that I find outright distasteful and speculative beyond belief. As a result of these sweeping changes that are just around the corner, governments will not be able to tax -customs duties and user fees look to be the only ways governments can generate revenue. Courts will not be able to seize assets. The peculiar arrangement of laws and regulations which keep our economic system stable will grow increasingly meaningless. Governments will try to follow capital flows into hypereconomic zones, only to learn that their mechanisms of control and enforcement are poorly matched to such a fluid environment.

Down with the man!!!

You can just hear it in the background. But does Pesce acknowledge what happens when the government collapses as a result of hypereconomics gone… well… hyper? Let's give the government a little respect here. We need it today, and we're still going to need it a billion seconds from now. Because we have government, we don't have to worry about bands of marauders who want to do much worse to us than take down our Internet connections. A lack of government is not something to be applauded. At the very least, Pesce needs to carefully consider what will replace it.

Market frictions will always exist. It's a fundamental law of the universe.
There is one law I have wanted to repeal since the day I first learned about it, and that is the second law of thermodynamics. It sucks. I don't want the Universe to end. I don't want there to be a disproportionate amount of chaos created just so I can live in my little bubble of order. Sadly, there is nothing I can do about that law. It's just the cold hard reality of the cosmos we live in.

So it is with market friction and whatever thermodynamic laws there are that govern it. Our markets are getting increasingly frictionless, that's true, but there is a limit. At some point, I'm not sure when, we will hit a plateau. And humanity is pretty good at plateauing. We used the same stone tools for a million years straight. We had the dark ages. So I'm not going to sit around and assume that this great wave of progress is coming. It might not if I don't contribute.

Should companies open their APIs as Pesce suggests? Oh God yes! That would be awesome. It would lead to a boon of innovation. I just disagree with Pesce on how wild and out of control that innovation will be. Most consumers don't want to optimize their purchasing decisions. They want companies to make those decisions for them so they can spend more time with their families.

Real entrepreneurs are a rare breed. We will always have worker bees who are happy enough living just like everyone else.

The world a billion seconds from now will be much as it is today. It will be run by big companies deciding what products we're going to be using. It will be governed by the efficiencies of mass production and global distribution. It will be more open, but only a few people who are motivated enough to take advantage of it will. It will have less friction, and that will make us all more wealthy (relative to what we are now). It won't be hypereconomics, but I'll take it.

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