The information highway changes that balance. For those who have a connection to it, the highway will substantially reduce the drawbacks of living outside a big city. As a consultant or employee involved in a service-related field, you will be able to collaborate easily from virtually anywhere. As a consumer, you will be able to get advice—financial, legal, even some medical—without leaving your house. Flexibility is going to be increasingly important as everyone tries to balance family life with work life. You won’t always have to travel to see friends and family or to play games. Cultural attractions will be available via the information highway, although I’m not suggesting that a Broadway or West End musical will be the same experience in your living room as it is in a New York or London theater. However, improvements in screen sizes and resolutions will enhance all video, including movies, in the home. Educational programming will be extensive. All of this will liberate those who would like to abandon city living.
The opening of the interstate highway system had a substantial effect on where in the United States people chose to settle. It made new suburbs accessible and contributed to the culture of the automobile. There will be significant implications for city planners, real estate developers, and school districts if the opening of the information highway also encourages people to move away from city centers. If large pools of talent disperse, companies will feel even more pressure to be creative about how to work with consultants and employees not located near their operations. This could set off a positive-feedback cycle, encouraging rural living.
If the population of a city were reduced by even 10 percent, the result would be a major difference in property values and wear and tear on transportation and other urban systems. If the average office worker in any major city stayed home one or two days a week, the decreases in gasoline consumption, air pollution, and traffic congestion would be significant. The net effect, however, is hard to foresee. If those who moved out of cities were mostly the affluent knowledge workers, the urban tax base would be reduced. This would aggravate the inner city’s woes and encourage other affluent people to leave. But at the same time, the urban infrastructure might be less heavily loaded. Rents would fall, creating opportunities for a better standard of living for some of those remaining in the cities.
It will take decades to implement all the major changes, because most people remain comfortable with whatever they learn early and are reluctant to alter familiar patterns. However, new generations will bring new perspectives. Our children will grow up comfortable with the idea of working with information tools across distances. These tools will be as natural to them as a telephone or a ballpoint pen is to us. But technology isn’t going to wait until people are ready for it. Within the next ten years we will start to see substantial shifts in how and where we work, the companies we work for, and the places we choose to live. My advice is to try to find out as much as possible about the technology that will touch you. The more you know about it, the less disconcerting it will seem. Technology’s role is to provide more flexibility and efficiency. Forward-looking business managers will have lots of opportunities to perform better in the years ahead.
8
FRICTION-FREE CAPITALISM
When Adam Smith described the concept of markets in The Wealth of Nations in 1776, he theorized that if every buyer knew every seller’s price, and every seller knew what every buyer was willing to pay, everyone in the “market” would be able to make fully informed decisions and society’s resources would be distributed efficiently. To date we haven’t achieved Smith’s ideal because would-be buyers and would-be sellers seldom have complete information about one another.
Not many consumers looking to buy a car stereo have the time or patience to canvass every dealer and thus are acting on imperfect and limited information. If you’ve bought a product for $500 and see it advertised in the paper for $300 a week or two later, you feel foolish for overpaying. But you feel a lot worse if you end up in the wrong job because you haven’t done thorough enough research.
A few markets are already working fairly close to Smith’s ideal. Investors buying and selling currency and certain other commodities participate in efficient electronic markets that provide nearly complete instantaneous information about worldwide supply, demand, and prices. Everyone gets pretty much the same deal because news about all offers, bids, and transactions speeds across wires to trading desks everywhere. However, most marketplaces are very inefficient. For instance, if you are trying to find a doctor, lawyer, accountant, or similar professional, or are buying a house, information is incomplete and comparisons are difficult to make.
The information highway will extend the electronic marketplace and make it the ultimate go-between, the universal middleman. Often the only humans involved in a transaction will be the actual buyer and seller. All the goods for sale in the world will be available for you to examine, compare, and, often, customize. When you want to buy something you’ll be able to tell your computer to find it for you at the best price offered by any acceptable source or ask your computer to “haggle” with the computers of various sellers. Information about vendors and their products and services will be available to any computer connected to the highway. Servers distributed worldwide will accept bids, resolve offers into completed transactions, control authentication and security, and handle all other aspects of the marketplace, including the transfer of funds. This will carry us into a new world of low-friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low. It will be a shopper’s heaven.
Every market, from a bazaar to the highway, facilitates competitive pricing and allows goods to move from seller to buyer efficiently with modest friction. This is thanks to the market makers—those whose job it is to bring buyers and sellers together. As the information highway assumes the role of market maker in realm after realm, traditional middlemen will have to contribute real value to a transaction to justify a commission. For example, stores and services that until now have profited just because they are “there"—in a particular geographic location may find they have lost that advantage. But those who provide added value will not only survive, they will thrive, because the information highway will let them make their services available to customers everywhere.
This idea will scare a lot of people. Most change feels a bit threatening, and I expect dramatic changes in the business of retailing as commerce flows across the highway. But, as with so many changes, I think once we get used to it we’ll wonder how we did without it. The consumer will get not only competitive cost savings, but also a much wider variety of products and services to choose from. Although there may be fewer stores, if people continue to enjoy shopping in today’s outlets, as many stores as their demand justifies will remain available. And because the highway will simplify and standardize shopping, it will also save time. If you are buying a gift for a loved one, you will be able to consider more choices and often you will find something more imaginative. You could use the time saved from shopping to think up a fun clue to put on the package, or create a personalized card. Or you could spend the time you save with the recipient.
We all recognize the value of a knowledgeable salesperson when we are shopping for insurance, clothes, investments, jewelry, a camera, a home appliance, or a home. We also know the salesperson’s advice is sometimes biased because he or she is ultimately hoping to make a sale from a particular inventory.
On the information highway lots of product information will be available directly from manufacturers. As they do today, vendors will use a variety of entertaining and provocative techniques to attract us. Advertising will evolve into a hybrid, combining today’s television commercials, magazine ads, and a detailed sales brochure. If an ad catches your attention, you’ll be able to request additional information directly and very easily. Links will let you navigate through whatever information the advertiser has made available, which might be product manuals consisting of video, audio, and text. Vendors will make getting information about their products as simple as possible.