I tend to tell everyone that the moment I decided to become an active investor was when I realised that the Internet would be its own economy separate from the real-world physical economy.
I am not an economist but here’s the definition of an economy from Investopedia: An economy is the large set of inter-related production, consumption, and exchange activities that aid in determining how scarce resources are allocated. The production, consumption, and distribution of goods and services are used to fulfil the needs of those living and operating within the economy, which is also referred to as an economic system.
Photo by Vlad Busuioc on Unsplash
In a world where bytes and algorithms dance to the rhythm of innovation, I found my calling as an active investor when I glimpsed the profound shift underway — the internet was evolving into its own economy, distinct from the traditional physical realm. While I may lack an economist’s credentials, the signs were too conspicuous to ignore.
Investopedia defines an economy as a vast network of interrelated production, consumption, and exchange activities that determine how scarce resources are allocated. Traditionally, this concept has been tied to the tangible world of goods and services, where production lines hum with activity and consumers navigate brick-and-mortar marketplaces. Yet, the dawn of the internet age has birthed a new economic landscape — one that transcends the limitations of the physical.
The internet economy is a digital symphony where information is the currency, and connectivity is the lifeline. In this virtual realm, production is measured in lines of code, consumption in clicks, and exchange in data points. The internet has become an economic system in its own right, reshaping the way we produce, consume, and distribute value.
Consider the production aspect — no longer confined to factories and workshops, it now thrives in the intangible realm of software development, content creation, and digital innovation. The internet has birthed a myriad of industries, from e-commerce and social media to cryptocurrency and artificial intelligence. The creation of value has transcended physical constraints, allowing ideas to morph into products and services with a global reach at unprecedented speed.
Consumption in the Internet economy is a departure from the traditional act of acquiring physical goods. Here, users consume digital content, online services, and virtual experiences. The currency of attention has become as valuable as traditional currencies, driving the success of businesses built on engagement and user experience. The rise of streaming platforms, online marketplaces, and subscription services exemplifies the profound shift in how we satisfy our needs and desires.
In the digital landscape, the distribution of goods and services is a borderless affair. E-commerce platforms connect buyers and sellers across continents, and the decentralized nature of the Internet enables instant global transactions. The Internet economy thrives on accessibility and inclusivity, breaking down geographical barriers and redefining the concept of a marketplace.
As I embarked on my journey as an active investor, I recognized that traditional economic models were insufficient to grasp the complexities of this new frontier. The Internet economy operates on its own set of rules, with data as its primary commodity and innovation as its driving force. The valuation of companies in this realm is often based on user engagement, data analytics, and disruptive potential rather than tangible assets.
In conclusion, the Internet has not merely become a part of the economy; it has birthed its own economic ecosystem. As an active investor navigating this digital frontier, the recognition of the internet as a separate and influential economy has become the compass guiding my investment decisions. The future belongs to those who understand the intricacies of this virtual realm, where scarcity is defined by attention, and value is created in the code that shapes our interconnected world.