INTERCONNECTEDNESS AND WEALTH

 

440px-metcalfe-network-effect-svgInterconnectedness is one of the big changes of our 21st Century transformation, also called the Space Renaissance, and its wealth is represented by the metropolitan “city that never sleeps” and the 24/7 (24 hours a day, 7 days a week) connected individual, business, and financial system.

This interconnectedness is a great source of wealth because it allows people separated by distance, time zones, language, and sleep cycles to participate in all sorts of commercial transactions and work.  Interconnectedness also increases productivity py reduces inactive periods for equipment, buildings, people, and even things and ideas. Better yet, according to some economists, it follows Metcalfe’s Law, according to which “the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2).”, as described by Wikipedia.

When we think of the Payments and Commerce monetary ecosystem, we can often identify businesses and individuals who only use a few hours a day for producing products and wealth. Their office hours limit their productivity and their opportunities to generate wealth.  Yet it is only in the past 50 years that the productivity of automation and technology has been extended to many global human activities, including transportation, marketing, communications, administration, manufacturing and commerce, to mention a few.  In the past, financial systems often followed the same pattern of activity and inactivity as the people of their communities.   This is still the case for many places, especially when laws force businesses to shut down regularly, but this is changing rapidly as global businesses coordinate activities in different time zones to create virtual 24/7 operations, and local businesses are adapting in order to compete with them!   Even health institutions are adapting to use expensive medical equipment on a 24/7 schedule so as to maximize return on investment and bring down their operating costs.   The Internet, of course, has allowed people to coordinate activities on a global scale, and the individual’s physical location is becoming less important in determining opportunities for commerce and for creating wealth.

Of course, this increased productivity first became possible thanks to the benefits of the present renaissance, including lighting, relatively inexpensive electric power networks, global transportation, telecommunications and data processing networks, satellites, and a global legal and financial structure that ensures contracts, value and agreements have the force of law around the world.  International commerce is a direct beneficiary of this 24/7  ethos, which allows multinational organizations (public, private, nonprofit, religious and even criminal)  to work efficiently throughout all time zones, languages and regulations, with and without human intervention.

I propose that all of these advances are, in good part, the result of interconnectedness of individuals, innovators, students, educators, organizations, equipment, and basically all the productive elements of the global community. Now consumers connect constantly to global services in new and disruptive ways, creating new markets and fortunes by doing so.

On the other hand, countries whose populations are not freely connected to the world’s financial and telecommunications networks are at a disadvantage, be it accidental or part of a government’s policy.  Wealth is generated through international and regional commerce, and also needs accessible financial systems and legal guarantees for investors and entrepreneurs. Sadly, it seems that unconnected regions and countries also tend to be more highly restrictive towards entrepreneurs and innovators, and under these conditions, prosperity is difficult to achieve and their populations must accept many unsatisfied needs or generate illegal alternatives to satisfy them.

Of course, Interconnectedness alone does not generate national wealth: it is easy for some countries to take on huge loans for short term gains and other activities that do not accumulate nor leverage future wealth creation. And, thanks to interconnectedness, some countries may even rely on other countries’ monetary systems instead of their own, which in time reduces their opportunity for financial leverage of their own markets. Capital flight is much easier in this interconnected world, though the impact of, for example, corporate tax evading “capital flight” from the USA in the last decades has not been studied, though the US economic engine still seems to be quite strong.  In addition, new forms of money, cryptocurrency, allows for simple peer to peer movement of value outside of government and regulatory controls, which has caused alarm among governments who are afraid of this economic activity.

As I see it, The nation that does not plan for the wealth created via international commerce and communications, is destined to lose wealth due to short term policy decisions that push local investors to disdain their own industrial and commercial structures and invest in other lands. This true capital flight joins the brain drain in taking away much wealth from the restrictive nation.  Certainly, the short term return on investment via isolationism is popular among some politicians, but the long term wealth of a nation requires years, if not decades, of establishing trust and reliability. Individuals and corporations consider the future of their investments carefully, and news of confiscation or arbitraty restrictions is quickly communicated, and this can severely restrict the ability of a government to care for and protect its people, businesses, industry, financial sector, and sovereignty.

Reality, as usual, is much more complex than what I describe above:  economists have many theories as to  what makes up the wealth of a civilization or nation, and all governments try to demonstrate that their policies generate well-being.  To add to te  confusion, we must also consider that globalization tries to fit everyone into the same mold which is clearly restrictive and abusive, and does not promote interconnectedness.    Wealth creation requires every sector of the population, including the poor, to accumulate wealth.  And the wealth they accumulate must be capable of generating even greater wealth – as capital, as infrastructure, and as opportunity. 

Interconnectedness itself, then, is a new form of wealth: one that falls into the realm of opportunity.  New York City, London, Tokyo and other financial centers demonstrate the value of being a communications hub for investors and bankers in their regions, and many small communities have also generated wealth by becoming specialized communications hubs – even for unethical activities.  Individuals can do the same

To conclude, then, I propose that we see interconnectedness as a resource and investment,  one that must be planned for and maintained so that it generates wealth for us, instead of being a distraction.  In future articles I will look at other areas in which Interconnectedness impacts modern societies, including sovereignty, citizenship and even space development.

Manny Perez, MPA, CAMS           Jan. 6, 2017

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About Manny Perez

President of Space Renaissance USA Co-Chair of the Cryptocurrency Standards Association, CRYPSA, Certified Professional Coach, with Coaching Hispano USA Certified AML and Compliance Specialist. I promote success and empowerment of entrepreneurs and leaders, including those of new technology. devs.
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