Jack,
Fundamentally, the higher growth rate in the "new economy" is due to the high demand for productivity improvement and cost reduction available from new technologies.
There's a limit to how much technology can do to eek productivity gains out of the system. Productivity gains don't have to stop or reverse for them to be a concern to the powers that be... the mere slowing of productivity growth can be an alarm itself.
I'm in the IT biz. I see productivity enhancing solutions all over the place. But labour remains a big cost and technology is not impacting labour as much as anyone may think.
The "old economy" is between a rock and a hard spot. If they want to survive, they have to adopt more efficient technology and processes. The most cost-effective way to do that is buy them from the new economy. The cost of debt is going up because of rising interest rates, but the cost on not investing is much higher--those who do invest will gobble up the market share of those who don't.
Improving the buying and selling of services again has a finite limit to it. Have a tour through some large corporations and look at all the places where there are inefficiencies, and ask yourself how much an ARBA or CMNT is going to help in these areas. What percentage?
Its pretty small in the grand scheme of things. The things that make the world go round run on the backs of people and will for some time. People are a funny thing, they don't change that fast and can only move so fast.
reduce the need to hire new employees
Please explain how this will happen. I am seeing no staffing reductions at my clients, in fact, quite the opposite. They are hiring more and spending more on them. The jobless numbers are testimony to this reality.
If productivity is high enough, prices can even drop while interest rates go up
Goods that are produced may be produced at marginally more efficient costs thanks to the internet, but lets get real here. Just in time manufacturing has been in existance for a long time. EDI networks make this possible. Internet replacements of EDI technology make it more cost effective for smaller organizations to participate in buying networks, but they don't make the machine that stamps the bumpers or the Barbie (tm) doll more efficient at all. How much of what you spend your money on is a hard good vs a service?
My neighbours that are margined to the hilt, bought houses four sizes too big for them, have more cars than people -- they will be paying much much more for these products as rates climb.
but the cost on not investing is much higher--those who do invest will gobble up the market share of those who don't.
A good point, but the dream is being funded by bagholders... stocks being bid up to incredible valuations based on nothing more than the promise of a dream. This is emotion to the extreme, and when the tide of emotion turns, things will fall apart.
The insiders make their money; some folks will make some off of it; and a whole generation of "investors" will know what it feels like to hold the "bag" as things tank.
if they tank.
And if they tank, it will make Bre*X look like a dime store robbery...
But I'm not bearish.
Just realistic. |
