To what degree is the economy digitized?

Paul Tero a member of our Emerging Fellows program investigates the concept of digitized economy in his first blog post in 2019. The views expressed are those of the author and not necessarily those of the APF or its other members.

Let’s explore the digital economy that we currently experience.

Consider how ubiquitous digital technology is in our daily retail transactions. Recently I was on assignment to a far-flung Pacific Island. During my time there I enjoyed a latte at a cafe. The ease with which I paid for my beverage with a common payment card through an electronic terminal at this very remote establishment is a wonder of modern technology. Years ago this story would have been much different. Different, for example, in the planning for this most prosaic of first world transactions. This planning in years past would have included making sure I had enough of the local currency by actually visiting a banking outlet, during office hours, and conversing with real people behind a physical counter! No doubt you have similar stories to this.

Consider too, the actual things that we purchase. No longer common, for example, is the youthful experience of excitedly carrying home the latest 12-inch vinyl disk. Now, we enter into some form of electronic agreement to gain access to artists that please our ears.

I could continue. But now, wherever we are on Earth and whatever sector we can think of, we intuitively grasp that so much of today’s economy, so much of what is produced, traded, and consumed, has digital written all over it.

What is the digital economy? Building on the foundational understanding that an economy is comprised of the production of, the trade in, and the use of goods and services, we can add digitisation to each of these three factors. For example, the digitisation of labour, of transactions, of decisions, and of value. The list goes on. We have indeed shifted from the economics of atoms to the economics of bits.

The digital economy is this. It is the economic and social activities that information and communication technologies deliver. Yes, it is about how the internet has changed business, but the digital economy is about so much more. Various estimates put the value of the digital economy at about $5 trillion. Considering that the global economy as a whole is worth more than $80 trillion. This growth in the digital economy is from a standing start twenty years ago. What we are witnessing is no doubt historically significant.

The componentsof this phenomena include, for example, ICT hardware, software, and services at over $3 trillion (the enablers of this revolution) and electronic games at over $100 Billion (its fruits). For some countries, up to 10% of their GDP relies upon the ICT sector (its importance). The impact of this phenomena is witnessed in the speed at which companies of scale are built. Harley Davidson took 86 years to get to a billion-dollar valuation, Twitter just 3 years. The ease at which we can find answers to almost any question (40,000 questions are asked of Google every second), and in the explosion of data (90% of the world’s new data is only 2 years old).

The journey over this series of articles is one of exploration and prospection. Both discovering the pervasiveness of digitisation of our economy and contemplating that which could appear.

A journey that is supported by two purposes. The first: reflections upon the opportunities and costs of a fully digital economy at personal, business and government levels. The second: considerations of contemporary economic themes using the lenses of established strategic foresight models.

A journey with a vista of the world that today’s teenagers will experience during their later life. A time when their own grandchildren are in their teenage years.

A journey that will be worthwhile.

© Paul Tero 2019