Posted on: Friday 2nd of September 2011
In her last blog, Liz suggested that the development of a new industry of Personal Information Management Services (PIMS) could be the way (or at least, one way) we avoid the prospect of decades of stagflation. Let’s flesh this argument out a little.
As often happens, when a massive untapped need meets a previously unrecognised economic potential, many people fail to see the scale of the opportunity. So I’ll stick my neck out. I think we on the foothills of the biggest ever consumer market and industry – an engine of innovation and growth that will keep firing for decades into the 21st century; the source of countless new jobs, firms, services and tax revenues. At the same time, it will also help eliminate vast swathes of waste from our current economic system, acting as a long-term driver of successful cost-cutting and improved efficiencies.
Why? Because it will achieve the great rebalancing our economy needs – from a 20th century economy focused almost exclusively on improving the mechanisms of supply to a 21st century economy which also improves the mechanisms of demand so that the two mesh together properly for the first time.
To get an introductory glimpse to the scale of this opportunity, let’s consider three things.
- Matching and connecting At the very top level, you can put all economic activity into one of two large buckets: making things (products and services), and matching and connecting – making sure the things you make are useful to people and connecting sources of supply with sources of demand so that this value is actually realised. Without matching and connecting, ‘making’ is actually wasting – using up precious resources making stuff that people don’t really want and can’t get access to.
At the beginning of the last century, making accounted for around 75% of all economic activity, and matching and connecting accounted for around 25%. By the beginning of this century, matching and connecting had overtaken making to account for over a half of all economic activity. In the course of 20th century in other words, improved efficiencies and productivities in matching and connecting lagged dramatically behind improved efficiencies and productivities on the making side of things.
That’s what I mean by rebalancing. PIMS – which help individuals gather, use and share the information they need to make and implement better decisions – are basically engines for improved productivity in matching and connecting. I will add more detail in a later blog, but the opportunities here are unthinkably vast.
- The market for better decisions Markets grow big when lots of people want what they offer, and want it often. The market for better decisions is universal and pervasive. It encompasses every human being, at every stage of their lives, across every aspect of their lives, virtually every hour they are awake. Yet, as I observed before, the 20th century economic mindset taught us to overlook the fact that any such demand exists.
Of course, firms were (and still are) very interested in ‘consumer decision-making’. But that’s because they want to influence consumers’ decisions so that consumers buy their products and services, rather than those of their competitors. As long as ‘persuasion’ and ‘influence’ is your agenda, it’s very hard to see that helping people make better decisions, as judged by their own goals and purposes, might be a market or industry in its own right. As I explained before, this market for better decisions – provided by specially designed decision support services – has a transformational characteristic: it changes the way all other markets work. That is why it is so uniquely important.
- Information logistics We now know that logistics is key to successful supply chains. If you don’t get the right thing to the right place at the right time, you either waste your resources (by investing in a product or service that ends up not meeting the need for which it was designed) or you create extra cost correcting the error – turning the wrong thing into the right thing, getting from the wrong place to the right place, incurring the costs of waiting and delay as the right time is missed.
If you think about it however, logistics is all about information. Without information about what the right thing, right place and right time are, high levels of waste are inevitable.
Thinking about it a little more, at best, 20th century supply chains only had half the information they needed. They knew about the requirements of supply (if they were lucky), but they knew very little about the requirements of demand because, at that time, all information flowed just one way: from the supplier to the customer. There was no operationally scalable way for consumers to say to suppliers “This is me. This is who I am, and right now, this is what I want”. So, when push came to shove, the operations of supply chains were driven by … guesswork. (Often it was very educated guesswork, but it was guesswork nevertheless.)
That’s the core economic contribution of PIMS. In the process of helping individuals research and make better decisions, they unleash the voice of the customer (‘this is me, this is what I want’) to deliver massively improved information logistics: they get the right information to, and from, the right people in the right forms at the right time. As we’ve just seen, that also happens to be the key to successful physical logistics too.
This is how decision-support services change the way other markets work – by transforming the underlying economics of matching and connecting. It’s why Ctrl-Shift has been banging on about the importance of Volunteered Personal Information (VPI) for so long – because VPI unlocks the key to new levels of wealth creation.
All of this is fine and dandy but you might have noticed that throughout this analysis I’ve never actually addressed the question ‘what does a better decision look like?’. That, it turns out, is a far from trivial question. I’ll turn to it next.