Pop

I suspect that there are two types of economic bubbles.

The first is where a totally false market opportunity is promoted as real. Tulip bulbs in 17th century Holland come to mind. Enough bulbs were traded to stuff every house in Europe full with tulips.

The second is where an accelerated market take-up is promoted. Fiber Optics in 1999 was one example; the next 15 years worth of growth in bandwidth needs was supposedly going to happen in 3 years. Which it didn’t – it took 15 years.

Just lately I have seen people asking whether IT is going through another bubble. If so, it’s the second sort of bubble. We will probably under-estimate how long it takes for each stage of the inevitable disintermediation of just about all services.

This will give the nay-sayers a very silly reason to believe that they are right and that the past will be preserved. It will not.

While I am at it. Australia has 70% of its GDP in the services sector. That’s big.

The big end of the services sector are the banks, financial services, supermarkets and the like. These guys are all in oligarchies and they rely on their influence over government to prevent external competition. Every time they get the government to help them out our services get more expensive than overseas competitors and this flows through our supply chains and makes our exporters just that much less competitive. These guys are also anti-innovation by culture – so they won’t respond to the big disintermediation until it’s way too late.

The rest of the services sector have no such government protection – they are the SMEs. These guys are too small to innovate and will not disintermediate themselves, so they will get disintermediated by overseas virtual service providers. Think Uber – it will happen to every segment. Why can’t they innovate? They are too small. They can’t raise capital via debt or equity because they hate risk and they hate losing ‘control’ of their businesses. And they don’t have the skills in any case.

What will happen is that the big disintermediation will cause direct job losses as key functions become more automated. We in Australia will also lose jobs to overseas disintermediators whose products will be delivered on the web. As job losses stack up there will be much less money in the services sector so they will all suffer terribly and this is 70% of our economy. It won’t be pretty.

Already the big guys in this sector panic when government does something silly and upsets consumer sentiment, Imagine when there is nothing that can be done about it. You can’t put a ban on the web.

So we need to find novel ways to force our services sector into major investment into risky disintermediation business plans and technologies, with an eye on global domination of each and every services sector.

I have a couple of ideas. But where is the will?