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Price, production, and revenue

We’ve been missing out on a lot of innovation, but there’s one

sector where We’ve had more innovation than almost anyone

had expected, and that is the internet. Very rapidly, the internet

gets a lot better, a lot faster, and a lot more interesting. That

happens through a mix of Moore’s Law and some ultimately

simple conceptual ideas about how to link human beings

together through this new medium. It’s hard to measure the

productivity of the internet, but twenty years ago—or less—we

did not have Google, browsers, blogs, Facebook, Twitter, or

Craigslist, among other major innovations, all now used by

many millions. It is no accident that our most revolutionary

sector is still one where “amateurs”—that’s what Mark

Zuckerberg was—can make a major impact. In this regard, the

internet is very much like the early years of the British industrial

revolution.

Unlike electricity, the internet hasn’t changed everyone’s life,

but it has changed a lot of lives, and its influence will be even

stronger for the next generation. It’s especially beneficial for

those who are intellectually curious, those who wish to manage

large networks of loose acquaintances, and those who wish to

absorb lots of information at phenomenally fast rates; those

categories probably cover a lot of readers of this book.

The funny thing about the internet, from an economic point of

view, is that so many of the products are free. In a typical day, I

might write two tweets, read twenty blogs, track down a few

movie reviews, browse on eBay, and watch Clarence White play

guitar on YouTube. None of this costs me a penny, and I am

interested and amused the entire time.

More and more, “production”—that word my fellow economists

have been using for generations—has become interior to the

human mind rather than set on a factory floor. Maybe a tweet

doesn’t look like much, but its value lies in the mental

dimension. We use Twitter, Facebook, MySpace, and other Web

services to construct a complex meld of stories, images, and

feelings in our minds. No single bit from the Web seems so

weighty on its own, but the resulting blend is rich in joy,

emotion, and suspense. Furthermore, using this stuff isn’t hard

—just buy a Web connection, turn on your computer, create a

few passwords, and you’re set to go.

In other words, the new low-hanging fruit is in our minds and in

our laptops and not so much in the revenue-generating sector of

the economy.