Don't Despair, A Changing Economy Is On the Rebound

As smart-phones and their sensors become ever more sophisticated so will the apps to exploit them. It is an opportunity rich environment for entrepreneurs to remix and reboot the American economy.

By Ashby Foote | June 13, 2014 | RealClearMarkkets.com

June 2014 marks five years since the Great Recession officially ended and, despite the frenetic and sometimes imaginative (remember ‘Cash for Clunkers’) lever pulling by policy makers in Washington, the recovery has been anything but great.

But don’t despair. For all the legitimate concerns over the lack of good paying jobs, there are some very positive things happening at the grass roots that augur hope for America’s economic future. In fact, a healthy reboot and remix of the U.S. economy has already started. It won’t be your father’s economy, but then – it never is.

 To find where the real action is, look no further than your smart-phone. But first some history – the advent 50 years ago of the transistor and its progeny, themicroprocessor, changed just about everything to include the vector of economic progress. Prior to the 1960’s progress was all about making things bigger – bigger buildings, bigger ships, bigger planes – greater scale meant greater efficiency and greater profit margins. Such was the nature of industrial age economics.

Not so any more. The microprocessorwas a game changer and tipping point, all in one. It revolutionized computing, communications and in due course flipped the focus of progress from bigger and bigger to smaller and smaller. Less is more, thin is in and nano-technology is the next big thing. Check with today’s Pentagon and you’ll find more excitement over unmanned drones than B-52s, main battle tanks or aircraft carriers.

As the microprocessor got smaller, cheaper and more powerful the U.S. economy boomed especially in computing and communications. Each shift in the computing paradigm from the mainframe to the minicomputer to the PC was accompanied by big surges in entrepreneurial activity creating new businesses, new industries, millions of jobs and billions in new wealth.

The latest data on smart-phone adoption suggest we are at the forefront of another momentous shift in the computing paradigm. Since the introduction of the iPhone in 2007, the market penetration of smart-phones in the U.S. has zoomed from 4% to 69% and is still climbing. That equates to 166 million U.S. users. Users world wide have reached 1.2 billion. iTunes now offers 1.2 million different apps(software application program) and in the past seven years iTunes customers have downloaded 75 billion apps. Such extraordinary growth only happens with a virtuous cycle, where improved functionality attracts more users, which attracts more engineers and software developers, which improves performance, which attracts more users and on and on.

The smart-phone is now poised to eclipse the PC as the primary interface to the global computing and communication network. If history is a guide this portends another boom of entrepreneurial wealth and job creation for the U.S. economy.

An anecdote of the smart-phone paradigm remixing a mundane old business is found in Lyft and Uber. These two start-ups out of San Francisco are app-based transportation companies operating in the centuries old taxi and limo industry. The heart of their business is sophisticated software applications that exploit the functionality of today’s smart-phone to include geo-location, mapping and payment fulfillment. The drivers for Lyft and Uber are independent contractors using their own vehicles and setting their schedules based on what works for them. A city the size of Portland might have 300 drivers per company. The customer experience is very user friendly and low hassle. They can summon a ride with one swipe and a click. No need to explain where they are the smart-phone handles that as well as payment and a review of their driver and experience back to the company should they choose to respond.

Two features of the smart-phone make it an especially potent agent of economic change: First is the rich array of functionality such as the features utilized by Lyft and Uber to enable and enhance the customer experience. Second, and perhaps most important is the 24/7 inseparable bond that users have with their smart-phones.

Disruption of the taxi and limo businesses is low hanging fruit. As smart-phones and their sensors become ever more sophisticated so will the apps to exploit them. It is an opportunity rich environment for entrepreneurs to remix and reboot the American economy. Stay tuned.

Ashby M. Foote III is president of Vector Money Management in Jackson, MS. Contact him at ashby@vectormm.com.

PHoto Image by: bit.blogs.nytimes.com

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