The Future of Success (3 page)

Nimble businesses now jump into new markets, because they don’t need large production scale to succeed. Musicians connect up with individual listeners directly over the Web, circumventing the high-volume record companies that used to intercede between them. Sellers of antiques and junk and items in between find buyers through e-auction houses. E-traders circumvent stock exchanges and brokers and, if they wish, trade online twenty-four hours a day, withdrawing from the rest of the human race. Magazines exist for every taste, a number of them utterly tasteless, almost three new ones launched
every day.
And you can find a vast array of one-of-a-kind products designed to order: the music of Wales or eastern Kentucky or eighteenth-century Korea, love poems of the Renaissance containing the name Clare. I recently read of a Web site featuring photographs of comely models who were auctioning off their eggs to the highest bidders (federal law prohibits trafficking in human organs, but not in eggs, at least not yet).

Micro-businesses hire Web designers to set up sites and pay an Internet service provider a monthly fee to house them; rent software for ordering and billing; contract for shipping and delivery; rent a secure-server line for credit-card transactions, and have a bank manage them. If such businesses need it, they can tap into a global reservoir of expertise. They can find all these services on the Internet, where they find their customers as well.

Regulatory barriers have been disappearing largely because upstart businesses and leading-edge innovators want in—and are gaining enough economic muscle to open the regulatory gates, or hop over them. Feisty discount airlines, innovative banks and financial institutions, and entrepreneurial telecommunications cable and wireless companies have all seen opportunities to profit. The old walls are tumbling.

This is not to argue that all large-scale commodity businesses will vanish and all the routine work that supports them will disappear. My claim is about the direction of change. One of the major effects of the new communication, transportation, and information technologies is to alter the terms of competition—reducing the advantages of mere production scale, and rewarding producers who can quickly improve products and services and invent new ones that delight customers even more. Buyers are getting far better access to exactly what they want.

Distance used to be the second big constraint. Most of what people used came from nearby, and if they lived far from others, they had to do most things for themselves. In the eighteenth century, as Adam Smith observed, “[i]n the lone houses and very small villages which are scattered about in so desert a country as the Highlands of Scotland, every farmer must be butcher, baker, and brewer for his own family.”
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Even by the mid-nineteenth century, most economies were still local. Connections were difficult. A letter sent from New York arrived in Chicago ten days later.

Then came the modern industrial era of steam engines, railroads (along with refrigerated boxcars), and the telegraph. Food could be delivered at longer distances without perishing. Messages could be sent across the nation in minutes. Materials could be gathered from thousands of miles away; shipped to central locations, where they were processed, boiled, bent, or bolted in large quantity; and emerge as finished products to be sent to all corners.

The twentieth century added cargo ships, interstate highways pummeled by gigantic haulers, jumbo jets carrying freight in railroad-sized containers, overseas cables, and eventually fiber-optic cables and satellites bouncing electronic signals from one continent to another. Giant factories could be placed anywhere labor was cheap and transportation adequate. Mom-and-pop shops gave way to department stores, followed by large chains, giant discount houses, “super stores,” and 1-800 numbers attached to sprightly catalogues whose sundries arrive on doorsteps—overnight if required—via United Parcel Service or Federal Express.

In the emerging global bazaar, distance itself is on the way to all but vanishing. The economy is moving away from things toward weightless services that can be transmitted anywhere around the world at almost no cost. More of the market value of almost everything bounces off satellites or moves through fiber-optic cables at the speed of light. In 1984, about 80 percent of the cost of a new computer was hardware, 20 percent software. Now the ratio is reversed, and it keeps widening. Eventually hardware will all but vanish too, replaced by wafer-thin devices that are little more than software downloaded and upgraded from anywhere.

The real value of my shirt-and-trouser order lies in the system that translates it into digital instructions along the way, monitors every step to make sure it’s done quickly and correctly, and then speeds it back to me. The apparel industry that departed New England in the first half of the twentieth century in pursuit of cheaper labor in the South, and then promptly moved on to Southeast Asia, where labor was even cheaper, is being transformed largely into design, marketing, and software systems located wherever the designers, marketers, and software engineers reside. Only a small fraction of the price of a final garment has anything to do with routine sewing and cutting. I’m mostly buying intangible services.
⁸

With everything a click away, there’s less reason to shop locally. Local economies won’t vanish any time soon, but the Internet will steadily erode them. Your selection of books used to be limited by what the local bookstore had in stock or could order for you; then came the giant chains with more selection, discounts, and speedier special orders; then, Internet e-tailers like Amazon.com, from which you can get virtually any book in print within a few days even if you live a hundred miles from a bookstore. Now, “e-books” can go directly from the author to your computer. Soon, the contents of books will be downloaded off the Web into your own digital book device. You’ll be able to curl up at night with a good byte.

You no longer need the local pharmacist to fill your prescription, or even a local doctor to give you one. Web-based cyber-docs advise and dispense more cheaply (though they’re sometimes less interested in your medical condition than in the condition of your credit card). And if your cyber-doc won’t cooperate, you can get hormone supplements, steroids, aphrodisiacs, and almost any other pill your mind or body desires over the Web without a presciption, from anywhere around the world (a prospect that should thrill neither the Food and Drug Administration nor the parents of rebellious teenagers).

Films and videos will go directly from editing rooms to your home screen by way of the Internet; they’re already starting to go to movie theaters this way. Educational lectures, seminars, books, materials, and tests will emanate from learning centers located anywhere, delivered to students residing anywhere.

You’ll circumvent local car dealers and garage mechanics. Already much of the value of a new car lies in the tiny electronic devices that tell it how best to follow your instructions when you innocently press on the accelerator or turn the wheel. The rest is a plastic-and-steel container—a body without a brain. In a few years, technicians will be able to repair these tiny car brains from anywhere, much as telephone-company technicians can now fix your line from remote locations. You’ll be able to upgrade your car’s brain—getting more power, better fuel economy, higher performance overall—without even taking it to a shop for a brain transplant. You’ll get a menu of new functions over the Internet, click on the ones you want, and—presto—a functionally new car will be waiting in your driveway. It may look like your old one, but its upgraded brain will make it perform better. The cost of shipping it to you, from anywhere, will be minuscule.

Similarly, refrigerators eventually will emit tiny electronic pleas for help when something goes wrong, and will then be repaired on-line. Computer systems will be repaired, reconfigured, and upgraded through the Internet. The readouts from tiny electrocardiogram devices implanted in your chest will be checked by online doctors.

Once, people lent money to one another within the same town or city. Remember the scene in
It’s a Wonderful Life
when Jimmy Stewart tries to explain to panicked depositors who want to withdraw their money that their savings aren’t in the bank but are financing one another’s homes and businesses? “The money’s not here! Your money’s in Joe’s house .         .         . next to yours!” That was then. Now, the residents of Bedford Falls are putting their savings into a vast reservoir of global capital that sloshes this way and that, seeking the highest return at the lowest risk all over the world. In recent years, the volume of global trading in financial securities has grown much faster than the national products of rich nations. The biggest profit comes from correctly guessing where all this money will slosh to next.

T
RADE BARRIERS
have been falling for decades, but the bigger trend is that fewer things are being traded relative to intangibles. An ever-larger portion of international commerce comes in the form of videos, music, film, television shows, news, designs, software, and business services (management consulting, marketing, financial, legal, engineering) that no longer need be located near their clients.
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By the end of the twentieth century, a dollar’s worth of imports and exports weighed, on average, only about 30 percent of what it did thirty years before,
¹⁰
and the weight loss is accelerating.

You often hear about technology and globalization as if they are separate trends, but they are becoming one and the same. Global trade and finance depend on technological advances that can move digital symbols instantly; and technologies are advancing because of intensifying competition from all over the world to do all sorts of things better, faster, and cheaper. Both the English language and widely utilized software standards are emerging as universal systems of worldwide communication because so many new technologies depend on them.

That people in an advanced economy spend more on weightless intangibles than on three-dimensional objects causes some folks of literal bent to feel vaguely uncomfortable, but the trend should be of no concern. The vast majority of those living in the midst of advanced economies don’t have serious difficulty acquiring adequate food, clothing, shelter, and the other tangible necessities of life. The greater value, and more eager expenditure, comes in the psychological domain: speed and convenience, entertainment, intellectual stimulation, feelings of well-being, and financial security. It’s the rare human being who can obtain enough of these; greater wealth only whets the appetite for more.

A neighbor of mine with a satellite dish atop her garage now claims to receive 1,500 television channels. I don’t know how she manages. It must take her several days just to surf through them, and the better part of a day just to read through a schedule of what’s showing. She seems delighted with her acquisition nonetheless. At this writing, there are 2.8 million Web sites, totaling 800 million pages. The most sophisticated search engine plumbs no more than 16 percent of them.
¹¹
By the time you read this, the number of sites may have tripled. Anyone who attempts to surf this ocean risks drowning. Yet my younger son and his teenage friends spend several hours every day exploring it, downloading music, trading video clips, chatting endlessly to one another—all of these operations occurring simultaneously, at a switching speed so fast as to be incomprehensible to anyone over the age of thirty.

AT THE BEST PRICE AND HIGHEST QUALITY

The third old constraint, also disappearing, is lack of information about where a better deal can be found. Comparison shopping used to be a hassle. I remember traipsing after my parents around Peekskill, New York, on a hot summer Saturday afternoon in the early 1950s as they went from one car dealer to the next, seeking the best possible deal on a sedan. Whenever they had almost reached a decision, my father would want to check “one last time” with a competing dealer to see if he could get a better price. By the end of the afternoon, my parents were confused and exhausted, and I had a headache. Everyone knew that the “manufacturer’s list” price was only a starting-place for haggling, and that the dealer’s lament—“Sorry, that’s the best I can do”—got you only halfway to a final offer. For less pricey items—home appliances, hardware, white goods—you could rely on ads in the local newspaper announcing special sales, but they lasted only a “limited time” and were for a “limited supply.” Big discounters swore they wouldn’t be “underpriced” and would match any deal you could get anywhere else, but to hold them to that bargain, you had to find that better deal somewhere else.

Comparing quality was even more of a challenge. Big-ticket items were alike in many respects, thanks to mass production and oligopolies. But items often came with different frills, add-ons, and options. Automobile dealers were known to advertise sales on cars stripped down to almost a bare chassis. A “vacation package” including five nights at a “luxury” resort in Bermuda turned out to be less than anticipated: the flight was in an ancient DC-9 that had to be refueled twice on the way, the resort was last refurbished in 1948, and the bedsprings were shot. More recently, the HMO that looked like health-care heaven in the brochure was less than heavenly once you enrolled: The doctors had the bedside manners of short-order cooks, and they wouldn’t refer you to a specialist until you showed signs of imminent demise.

Not even a diligent buyer could comparison-shop among more than a handful of sellers—usually those in the vicinity that advertised in the local newspaper or were listed in the Yellow Pages, or were known to neighbors and friends. You knew that if you stuck with familiar national brands, you wouldn’t go far wrong. But if your search involved products or services that were complicated, or unique, or to which people were likely to react differently depending on their tastes and temperaments, you stayed close to home, where you could inspect it for yourself and get information firsthand.