Cheap Revolution

Rich Karlgaard, publisher of Forbes, also talked about how the speed with which our economy is changing is unnerving to many people. However, he said, “The rate of technological change is accelerating, driven by a Cheap Revolution. It is driven by technological evolution and the fact that suddenly ½ of the world population has been thrust into the world economy. When you marry these two factors you get a convulsive phenomenon taking place.”

He cited the example of Google, which in a seven-year period has become a $7 billion company with 4,000 employees ($1.7 million in sales/employee!) because the infrastructure is cheap. They run the company on 200,000 cheap Intel servers that cost them $2000 each. If one of the big firms (H-P, IBM, etc) had set up their systems, it would have cost them 15x as much.

China has gone from 7 million cell phone users in 1996 to 360 million today. They are graduating six times as many engineers as the USA, with more of them speaking English than what we graduate. Starting pay is $12,000/year. India is a similar model.

He observed that speed beats size. Big companies that aren’t adaptable are in trouble. Dell and Wal-Mart “get it” and have morphed into flexible companies.
“Private beats public companies. For regional economic development you need to focus upon smaller, private companies,” he said.

He believes that the added costs, especially housing, on what he calls the “coastal grid” puts them at a big disadvantage. “In the last 25 years the opportunity gap has shrunk to less than nothing.” He cited the examples of broadband, package delivery, cell phones and cable TV as all leveling the playing field in the USA. Lower costs in the non-coastal areas afford them a huge cost advantage moving forward.

But, while he is optimistic on the prospects for small and medium sized communities, he warned, “Not every small and medium sized town is going to take advantage of it.”

I hope that there are more that heed his words, taking advantage of some unique opportunities for small towns in today’s environment.