All Aboard the Covid Express…

By jer979!! | | 19 Aug 2020

tl;dr: Covid has driven a wedge between the notion that production and location are connected. In a digital, knowledge economy, location doesn’t matter. The implications are vast.

A few weeks ago, I wrote Internet Assumptions, Crypto Assumptions.

In that post, I referenced Ben Thompson’s analysis about how mindsets shift as new layers of technology (internet, mobile, social…then crypto) are built upon the previous layers.

It wasn’t so much that subsequent epochs arrive faster than previous ones. That is what Tom Friedman calls “the Age of Accelerations.”

Instead, it was a reference to the baseline set of assumptions that a company starting in 2010 had about its operational framework when compared to a company that began in 2000…or 2020.

If you don’t need to worry about having a server infrastructure because there are cloud service providers, there are things you can do better, faster, and cheaper.

Those are technology-driven assumption paradigm shifts.

For a while, we’ve looked at these as “waves” of tech companies.

Now, however, and in large part thanks to Covid, the wave has crashed on to the shore.

All Aboard for the Knowledge Economy

A recent study from a Stanford economist has some startling statistics.

We see an incredible 42 percent of the U.S. labor force now working from home full-time. About another 33 percent are not working – a testament to the savage impact of the lockdown recession. And the remaining 26 percent – mostly essential service workers – are working on their business premises. So, by sheer numbers, the U.S. is a working-from-home economy. Almost twice as many employees are working from home as at work.

More strikingly, if we consider the contribution to U.S. gross domestic product based on their earnings, this enlarged group of work-from-home employees now accounts for more than two-thirds of U.S. economic activity.

That last paragraph is what blew my mind.

42% of people are creating 67% of the GDP…from home. I would expect that number to grow.

But more important, I believe, is to recognize what that means.

For the first time since the first factory was created way back in (I don’t know when) the creation of goods/services for consumption has been completely divorced from the location where that creation occurs.

Actually, thats’ not accurate, now that I think about it.

It’s the first time ever…in human history, where the majority of an producer in an economy can literally be anywhere.

Blacksmiths, weavers, farmers…everyone had to be in a particular place to produce.

Today, and this has been coming for 20 years, a majority of people in advanced industrial economies realize that place and production are no longer conjoined.

Industrial Economy Assumptions and Knowledge Economy Assumptions

What this means for organizations, cities, and countries is anyone’s guess.

Estonia thinks it will lead to a group of digital nomads who want to travel and work in various locations, so they have a program for that.

The newfound mobility, decentralization of production if you will, will impact some for the better and some for the worse.

But at a high level…

  • genuine recognition that talent can reside anywhere with access
  • challenges in organizational structure to reflect more fluid teams
  • new ways of measuring organizational effectiveness, beyond unit economics, which have history based in materials-based production, not knowledge-based production
  • new leadership and organizational models

and I’m just getting started here.

Whatever they are, the assumption of a “Knowledge Economy” are different than an “Industrial Economy.” It’s not just for firms, but for things like taxation, employment, infrastructure and much more.

The change was coming anyway. Covid just hyper-spaced us there.

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