Welcome to the Digital Economy

The innovation files 5

Imagine you suddenly had to pay 10 cents per message you post on WhatsApp. It would stop the continuous flow of movies, memes, photos, video and voice calls, activity updates and group chats. Wouldn’t it? But how is WhatsApp making money? And why paid Facebook $19 billion in 2014 when they acquire it? At that moment, the revenue stream was close to zero. Currently, they have found some ways to make money. But again, 19 billion? Welcome to the digital economy.
Let me give you another example. Imagine you are at the bank office, a client comes in and asks you for a loan of 1 million. Sure, you say. You turn your chair, switch on your terminal, enter 1 million in the designated input field and voila, 1 million is created. You turn your chair. Here is your million, you have to pay it back in 10 years with an additional rent of 300.000, i.e. 2.500 a month. OK, says the client, no problem. Hereby you added 300.000 to your income. You now have a security of 1,3 million. You take this to a stockbroker and say: Listen, here’s 1,3 million. I want to buy stocks for it and pay you in 10 years, and we split the profit. Ok, says the stockbroker and buys 1,3 million worth of stocks. End of the story, everyone happy. Then your client misses his first monthly payment, then the second, the third and so on till he goes bankrupt. In the meanwhile, the purchased shares are worth 1,1 million. Ai. And if one person did this, no problem, but many financial institutions in the world are doing this. Welcome to the digital economy.

The real, the digital and the promise
The digital economy works slightly different than that good old-fashioned chap focussing on revenue, income, outcome, profit, CAPEX, OPEX and shareholder value. At least, now you know why your savings are worth shit. Banks used it to give loans to other people, but they don't need it anymore since they can create money with a few keystrokes. Since the 1990s, the financial industry created a new shielded hardly to understand universe only accessible by computers where money breeds like rabbits with once in a while a myxomatosis outbreak, vaporising a great part of the inhabitants. But again, what artificial is created, burnt down to the ground, can be artificially recreated. Where are the days of the gold standard and governments printing money…