WILL WE BENEFIT FROM A CONNECTED WORLD?

John Maynard Keynes described the opportunities available for an inhabitant of London prior to 1914 with characteristic discernment:

Escape was possible, for any man of capacity or character at all exceeding the average, into the middle and upper classes, for whom life offered, at a low cost and with the least trouble, conveniences, comforts, and amenities beyond the compass of the richest and most powerful monarchs of other ages. The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; … But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper.

Unfortunately for such an inhabitant, and for the larger world, these improvements did not sustain after 1914 when Europe went into war and such progress was halted. The world after the war was riven by communism and fascism, and equally wretchedly for this resident, an end to imperialism. Subsequently the Great Depression, followed by the Second World War, would remove every pretention of prosperity and progress, and people would be forced to hunker down from the confident and optimistic bearing described in the passage.

Now hundred years later, many illustrations of progress can equally dazzle, and it is obtainable today to inhabitants far and wide. Roughly half the citizens of Kenya pay and receive money through their mobile phone, eliminating the peril of carrying cash and alleviating a long trudge and lengthy application in a bank. Citizens of San Francisco were the first to enjoy tapping their phones and having a chauffer drive them to their destination within a few minutes, all without having to carry money in their person.  The amenity has spread, and is now available to residents of Kolkata.

Further enhancements hold promise. Experts polled last month by The Atlantic forecast driverless cars to be operational by 2020. As wearable technology spreads, soon the doctor may call patients after being alerted of their blood pressure or temperature, and prescribe medicines that, rather than being blockbuster drugs, are personalized based on the person’s genome sequence.

The delivery of education is witnessing the most sweeping makeover in centuries. The traditional model of teaching in classes for a three or four year degree is expensive, and students are sometimes saddled with debt while struggling to find jobs. MOOCs, delivered by portals like EdX, deliver world-class courses through video, audio, presentations and quizzes by distinguished faculty that supplant or at least enrich learning.

In the business world, examples abound. You’ve Got Mail, a popular Hollywood film, related how a neighborhood bookstore run by Meg Ryan was ousted by a large behemoth. Today, those large stores have been brought to their knees, first by online book delivery, and then by e-books. Movies have gone from being rented as cassettes to being streamed. Photo imaging, long dominated by Kodak during the film era, was first replaced by digital camera, and now is usually clicked by phone and uploaded on Instagram.

From furniture to groceries, industries have altered their retail format, extinguishing fabled corporations and spawning upstart entrants.  Some products, like fountain pens and wristwatches have survived by evolving from being an essential accessory to jewelry.  Occasionally, unexpected sources of competition emerge. The hotel industry in India was mostly independently owned and operated. Some chains such as Taj and Oberoi were built up for over a century across several tony properties through the country. Lately, new chains, comprising Ginger, Marriott and Sheraton, entered the segment with management of hotels decoupled from ownership of the real estate, which resided with local promoters. This innovation reduced capital investments of the brand and propelled growth in the industry. There are many such hotel chains coming up in Kolkata. In the meantime, Airbnb, founded in 2008 by two roommates to list and rent out beds at one’s home, is valued at $10B and has housed more than 11 million guests, surpassing some of the biggest names in the global hotel industry.

Perhaps boardrooms of reputed companies in several industries are dwelling on such existential questions: how should large automobile firms react, for instance, if customers of driverless cars care more about software applications driving the vehicles rather than the make of the cars?  Will Toyota and Honda adapt, and what will adaptation entail, or will they essentially become OEMs of firms like Google, much like the personal computer business in 1990s when value, and profitability, migrated from giants like IBM to fledgling outfits like Microsoft.

For a government further problems emerge when a service or a product is designed and delivered involving diverse participants, sometimes across geographies. These may involve incidence of taxability, as recent tax inversion cases and establishment of registered offices in tax havens have documented. Rapid innovation also causes infrastructure, built at great cost, to become obsolete. In the resultant flux, valuable assets emerge unnoticed and justification of windfall gains from zoning rights and telephone spectrum are disputed in hindsight. How will the state machinery, with its laws and processes developed under a more serene environment, effectively evolve?

These advances, some inchoate and some established, will perhaps expand conveniences, but like Keynes described in a world of 1914, they may also stifle public policy, business and jobs that may yet overwhelm any progress that we make.

For instance, when hotel rooms are rented out on Airbnb, provisions of Sarai Act of 1867 and Trade License procedures are applicable. To establish mobile banking, or to crowd-fund an entrepreneurial venture, banking licenses and public listing guidelines may need to be consulted. A student may be attracted by the value of MOOCs, and may wish to study from home if their local college isn’t providing comparable education, but she will not qualify from pursuing further education without a UGC certified degree. Incumbent players in each industry, who enjoy protection due to the regulation, will likely encourage strict enforcement.

In 1589 William Lee, a Cambridge educated pastor invented the stocking frame knitting machine that sped weaving, but was refused a patent by Queen Elizabeth I due to opposition of a hosiers’ guilds who were concerned how the devise would impact their craft. Knitting machines finally took off a century later, initiating the industrial revolution, but this story shows how government, and incumbent institutions, can repel transformations that new formats bring about.

There are of course serious concerns motivating such resistance. For instance, in our earlier example of photo imaging, how will the many employees who contributed in the multinational factories of the now defunct Kodak be employed? Instagram, when it was sold to Facebook for $1B, engaged thirteen people. Advancements, while productivity enhancing, are labour saving, and rewards the few whose skills are relevant. This exacerbates inequality, and the governments are confounded on how to respond.

For regions such as West Bengal, there is as much hope as concern. It certainly requires us to skill ourselves to benefit from a world where skill is at a premium, and our laws must adapt to a climate where the nature and pace of change is unexpected. One may be informed by the shale gas revolution in the United States that has recently showered the world with cheaper energy. Technology certainly played a part in identifying and drawing out energy through techniques such as hydraulic fracturing, but laws of eminent domain and venturesome financial markets powered the innovation into fruition.

The opportunities of nurturing our region to profit from this environment is substantial. For long, we have been challenged with delivering healthcare and education, and adopting new formats early may leapfrog existing infrastructure where we have traditionally underinvested. India’s experience with the emergence of mobile telephony that obviated shortcomings of our landline network is telling. Perhaps the same may occur in fields of financial inclusion, education and health where adopting the new paradigm shifts us to a higher plane of achievement, while regions saddled with legacy costs find it harder to catch up.