In the first post of this three-part series we have focused on the transformation from a production society to a digital society. Now we have a look at the situation in the US.
Can America be a role model?
Why the perspective on the structure of « digital products » is that important may become obvious when we look at the American market. At first glance a « money machine » when it comes to digitalization and fintechs. In Silicon Valley millions of dollars are being invested in even the smallest start-up’s because for many venture capital funds the only reason of existence is to invest in the next « Unicorn » (= market capitalization > 1 Billion USD) and prepare it for an IPO.
What does it look like outside of Silicon Valley?
But what does it look like outside of Silicon Valley – which only accounts for 3% of the US-American economic power? US economy stagnates, productivity has declined continuously over the last 3 quarters. Additionally a study conducted by the Kauffmann Foundation [1] revealed that in the last 30 years the number of start-up’s in the USA have nearly halved and the amount of young founders has even decreased relatively. This suggests a significant decline of innovation capacity.
Loss of the individual’s autonomy
Market observers start to interpret this as a sign of the changed education paradigm in the US which shifts more and more from the « Young man, go west! » towards one of fear and excessive control. Children can no longer test the limits on their own and unattended. Because of the rising need for protection evoked by their parents their creativity is suffocated in such a way that later in their lives they do not explore their freedom but rather capitulate to a consumption society. By doing this they defenselessly surrender themselves to digital manipulation. [2]
When looking at the most start-up’s in Silicon Valley they develop wonderful models exactly for this type of crowd. The consumer is controlled and gives up all the information about his wishes quickly and without thinking. Alone with the functionality of Tinder and the evaluation possibilities of artificial intelligence logic by Google one could create a detailed personality profile in no time and capitalize on it, which is the actual core of such business models.
The autonomy of the individual when using systems like that has been limited for quite some time [3]. This could be seen as a reaction of capitalism [4] to the trend towards a self-determined consumer.
The unabated permitting of such business models (i.e. without a discussion about data security and privacy, since up to today the internet as is well known does not forget anything) is so far a valid strategy. If we continue to permit this strategy in an unregulated manner we settle for the fact that the biggest global power entities in the future will be « Apple, Alphabet (Google), Microsoft, Amazon and Uber ».
The conclusion therefore has to read: We can learn from America, but it should not be a role model to us.
(In the next blog post we will look at Germany’s opportunities and how it should make us of them)
Reactions, comments and suggestions to this article are welcome: zenke@strategy-and-finance.de.
[1] Kauffmann study on startup activity
[2] The currently most interesting and intelligent protest against this system is certainly the movie « Captain Fantastic » of 2016
[3] See the explanation regarding this matter in den first part of this article
[4] At this point it has to be noted that the author makes an important distinction between capitalism and « market mechanisms under competition ».
Author
Harald Zenke, Owner of Strategy & Finance Advisory
Strategy & Finance Advisory is an owner-managed consulting company which sees itself as a developer and implementation guide of product and process innovations as well as new business models in the financial services sector. Harald Zenke has more than 15 years of experience in the field of renewable energies and project finance, amongst others as CEO of KfW IPEX bank and EVP Corporate Finance of LBBW. www.strategy-and-finance.de
