Chapter 8: Friction-Free Capitalism

Capitalism, demonstrably the greatest of the constructed economic systems, has in the past decade clearly proved its advantages over the alternative systems. The information highway will magnify those advantages. It will allow those who produce goods to see, a lot more efficiently than ever before, what buyers want, and will allow potential consumers to buy those goods more efficiently. Adam Smith would be pleased. More important, consumers everywhere will enjoy the benefits.

Chapter 8: Friction-Free Capitalism

The highway, which will put an immense amount of information at anyoneÕs fingertips, will be an invaluable training tool. Someone who decides to change careers and go into computer consulting will have access to the best texts, the greatest lectures, and information about course requirements, exams and accreditation.

Chapter 8: Friction-Free Capitalism

Industry after industry will be changed, and change is unsettling. Some middlemen who handle information or product distribution will find they no longer add value and change fields, whereas others will rise to the competitive challenge. This is nearly infinite number of tasks left undone in services, education, and urban affairs, to say nothing of the workforce the highway itself will require. So this new efficiency will create all sorts of exciting employment opportunities … There will be dislocations. However, overall, society will benefit from these changes.

Chapter 8: Friction-Free Capitalism

As the information highway gains in efficiency, investment choices will proliferate. Stockbrokers, like other middlemen whose job has been merely to chaperon a transaction, will probably have to offer something beyond just purchasing securities. TheyÕll add value by being knowledgeable. Financial services companies will still thrive. The basic economics of the industry will change, but the volume of transactions will skyrocket as the information highway gives the average consumer direct access to financial markets.

Chapter 8: Friction-Free Capitalism

When the information highway makes geography less important, we will see electronic, on-line banks that have no branches – no bricks, no mortar, and low fees. These low-overhead electronic banks will be extremely competitive and transactions will be made through computer appliances. There will be less need for cash because most purchases will be handled with a wallet PC or an electronic “smart card” that will combine the features of a credit card, automatic teller machine card, and checkbook … Financial institutions will be able to specialize; one bank may choose only to make automobile loans, whereas another concentrates on boat loans. Fees will be generated for all of these services, but the fee structure will be based on broad, efficient competition.

Chapter 8: Friction-Free Capitalism

Videoconferences of all sorts will increasingly become alternatives to having to drive or fly to a meeting. When you do go somewhere, it will be because it is important that a particular meeting be face-to-face, or because something fun requires that you be there physically. Business travel may fall off, but leisure travel will rise because people be able to take working vacations, knowing they can stay connected to their offices and homes through the information highway.

Chapter 8: Friction-Free Capitalism

New copyright laws will be required to clarify the purchaserÕs rights to the content under different schemes. The highway will force us to think more explicitly about what rights users have to intellectual property.

Chapter 8: Friction-Free Capitalism

The information highway will allow the transfer of intellectual property rights from one person to another at the speed of light. Almost all the music, writing, or other intellectual properties stored on disks or in book sits unused most of the time. When youÕre not consuming your particular copy of “Thriller” or “Bonfire of the Vanities,” most likely no one else is, either. Publishers count on this. If the average buyer lent his or her albums and book frequently, fewer would be sold and prices would be higher. If we assume that an album is in use, say, 0.1 percent of the time, “light-speed” lending might cut the number of copies sold by a factor of 1,000. Lending will probably be restricted so users will only be allowed to lend a copy out perhaps up to 10 times a year.