Why The Direct Economy Wins
Here’s why the direct economy will overwhelm the industrial/bureaucratic/market economy.
It accumulates innovation faster. It’s that simple. The direct economy enables levels of innovation that will make the old economy look static in comparison. Here’s a graphic that demonstrates the opportunity space. I snagged it from a Deloitte report.
This graph offers some good insight (as a generic proxy) into the gap between the potential of innovation and what is actually going on.As you can see, the productivity growth rate for the current economy is that line near zero. Why is it so slow?
The rigid structures that power it (bureaucracies, markets, legal system, finance, etc.) slow this rate of improvement down to a crawl. Worse, the fragility of the current system is increasing, making it vulnerable to rapid reversals that wipe out any progress (financial collapse, etc.).
The direct economy solves that. It makes it possible to actually hit the potential rates of innovation made possible by technological improvement.
The Replacement of the Feudal System
Has there been an historical precedent for this? Yes. We saw it in the replacement of a stable, agricultural feudal economy, starting in the 1500’s, by a new economy that was a combination of:
- a science that improved incrementally,
- entrepreneurial technologists that applied that technology, and
- markets and bureaucracies to allocate/organize/fund those applications.
In contrast to the dynamism made real by this new economy, the feudal economy was a slow moving, relatively sustainable (in the modern sense) system. While there was innovation in that system relative to tribalism — which is why it won that contest — it was slow and prone to frequent reversal.
The new economic system accumulated innovation faster with fewer reversals than the feudal system. Replacement was inevitable, although we can still see vestiges of it around today.