Sometime I wonder what our collective vision of the economy really is. Has it become completely divorced from reality? Take for example this story in the Washington Post that “Hurricane Sandy proves that an Internet economy is far from reality.” The story tried to make the point that the physical infrastructure still matters:
As far as the country has traveled toward online commerce, the economy still depends very much on physical highways, not just Internet highways, as well as century-old networks for physically moving people and goods.
Did anyone really think the physical infrastructure didn’t matter anymore? If so, that is news to companies like Amazon who have invested heavily in warehouses and “fulfillment centers” as well as “server farms.” As the story points out, people have gotten used to ordering goods online rather than going to the store. But that is the focus of the difference — going to the store or going to your computer. The goods still have to physically move somehow.
On the other side, there are examples of how the virtual world has changed. For example, as the Wall Street Journal reported (“Sandy–The Social-Media Phenomenon” and “Technology Softens Sandy’s Impact for Advisers, Clients“), millions relied on Facebook and Twitter for information on the storm — especially on smartphones and tablets as power went out. And companies used both mobile and shared (“cloud”) technologies to continue to conduct financial business even though the markets were closed. The Post story notes that the financial markets thought about trying to stay open electronically, but decided the infrastructure (including the supervision and regulatory infrastructure) were not yet adequate. I suspect that the lessons of Sandy will push the financial markets more toward virtual and away from physical.
The point here is simple: both virtual and physical are real. We are developing the an economy where each compliments the other. It is similar to the evolution of the economy to a fusion of “manufacturing” and “services” (but that is another story).
Once again, both/and is a better description of reality than either/or.