Sixteen years ago, Clayton Christensen laid out his theory of ‘disruption’ in the book The Innovator’s Dilemma. From steel mills to floppy disk drives, he saw innovation led by small players trying, failing, trying again and eventually creating products that superseded the market leaders. The book became a bible of Silicon Valley. Last month, in an interview with Wired, he proposed that, having changed the way we shop and communicate, the internet is moving into a new phase – disrupting essential industries like education and healthcare.
Christensen’s right, but he’s missing a far deeper change. It is the disruption of some of our most fundamental notions: value, ownership, and attachment to place. In the past fortnight, we’ve seen the price of Bitcoin (a new online-only ‘cryptocurrency’) skyrocket while gold – traditionally a safe investment in times of crisis – hit a 30-year low. In the workplace, more and more people are shunning office-based roles in place of bespoke careers, requiring only a Wi-fi connection. And an increasing number of our assets – music, films, documents - are not just intangible but notionally are not even in our possession, existing instead "in the cloud".
The music industry is a prime victim of internet disruption. People now expect to pay close to nothing for content, and the old structures must adapt or implode. In response, many artists charge little for their music and make their money through expensive tour tickets; Prince gave away his 2007 album Planet Earth free in the Mail on Sunday and netted $18.8 million from 21 nights at the O2. This separation of ‘experiential’ from ownership is characteristic of the younger generation, known as ‘digital natives’. Marketers and forward-looking brands like Red Bull have been quick to capitalise on this, with an emphasis on sponsorship of gigs and extreme sports events.
Apple is in the docks with parents of digital natives, angry that their children have spent thousands on items in internet games – in one case £3,700 on digital gems. A highly cultivated avatar in these games can change hands for tens of thousands of dollars, while people have made millions selling digital goods, such as flowers and home furnishings, in MMO’s (Massively Multiplayer Online games). This may seem preposterous to many who grew up in a world of bricks, mortar, and solid investments, but for the natives this is serious – and very real - business.
A shifting sense of value could have contributed to the noughties seeing the first drop in home ownership and rise in rental of the last century. Property is the preserve of the pre-digital generation and the few that do find their way on to the ladder have their sense of ownership diluted by government-subsidised schemes and mortgages backed by parental equity. Meanwhile the internet has allowed us a more participatory relationship with property through couch surfing, air b’n’b and easy-to-access subletting.
And why tie yourself to one location, when your work doesn’t necessitate it? A series of articles in The Atlantic last year, looking at the US, compared the rise of the freelancer to the industrial revolution. The internet allows us to develop a range of skills and gives us a marketplace in which to monetize them. “We're no longer simply lawyers, or photographers, or writers.” It read. “Instead, we're part-time lawyers-cum-amateur photographers who write on the side.”
Every time you walk into a coffee shop full of caffeinated hipsters tapping away on Macs, you could well be looking at the future. Last year, Google opened Campus, a co-working space in Old Street, providing all the resources needed (ie. roof, internet connection, vending machines) to work online. With money pumping into ‘tech hubs’ across the UK, we’re sure to see more of the same. Where the States lead, we tend to follow; but when Google goes, we’re there.
Economics has always been a nebulous thing: a belief system rather than a science or even an art, based on notions of interest, loans, capital and deeper still on belief and trust. Much of this can be traced back to the advent of Protestantism and the removal of the sin of usury under Henry VIII, allowing money lending. Perhaps, decades from now, when the dust of this disruption has settled, we will look back and agree with Silicon Valley that The Innovator’s Dilemma was a book deserving of the highest possible reverence.