Marko Islamovic, Founder @ Gigrove
I’m writing this post from my home while seeing the news how vaccines for Covid19 are being rapidly distributed in many countries around the world. 2020 was a weird year, and although it brought us many challenges and hardships, I am more than ever impressed by the human ingenuity. Just within a couple of months, super smart people teamed up and made the cure for what we could call one of the major human crisis in the known history.
As the time went by during 2020, politics, culture, economy went in many weird directions. Like for the most of the people, I was trying to make sense out of those things, for which I didn’t really have all the answers. This has brought me to a famous historical heuristic, which goes something like this: “You don’t need to know all the answers, just the direction”.
Economy: the now and the future
When we think about economy today, we mostly have an idea about the products that are solving the problems in our everyday lives, and these products are more than often physical in nature. They are manufactured and outsourced all over the world, and as the time goes by, these physical products are becoming better and cheaper to produce, mostly due to scarcity dynamics . Producers today are able to see what works in the markets around the world, and they can pretty much copy the entire production and distribution process. On the internet, a set of different rules apply. Although physical goods like clothing, food, etc. are more important than ever, with manufacturing becoming more automatized, human role in the production and distribution process of physical products is dramatically changing in a direction where a person’s unique knowledge and abilities are becoming that of a higher economic value, resulting in the increasing need for the knowledge economy. Think of the service-based approach, where specialization is set to rule the production and the distribution process.
Digital, professional and custom-made services are essentially the economy for the people by the people. Service economy, aka “economy by the people for the people”, exclusively values one’s knowledge, experience and time. You can copy the product, but you can’t copy one’s entire unique map of knowledge or unique customer experience. Contrary to the skepticism of the AI’s implications on the economies, something that will always continue to provide most of the value in the market economies are human time and human ingenuity. Service-based economies are geometrically flexible with the help of technology and internet. What I mean by this is that perception and source of knowledge can be indefinitely reshaped & improved through practice and, with a bit of enthusiasm, creators can arrive at the place where their work finds the service-market fit, similar to the dynamics of Marc Andreessen’s “product-market fit“. Of course, offering services is not exclusive to the work on the internet — but for sure it advances one’s productive momentum. Internet allows us to carefully construct knowledge which then makes it easy to apply it into different shapes and sizes and form numerous approaches to a commercial world.
Getting back to the center
Increasing talk about AI’s and marketplaces’ influence on the world economies has created an interesting dichotomy for me: internet economy vs marketplace economy. Within the last few years, the definition of e-commerce is kind of changing. For most people, when they think about e-commerce, they think about marketplaces like Amazon or eBay. We can see that online marketplaces are increasingly acting like governments, with a set of rules and regulations, that are applied to keep the communities efficient and in the same time, to create the largest network effects as possible. We are also seeing an increasing talk about AI’s involvement in the manufacturing and implications on daily jobs. For this reason, I would argue that there is a huge difference between marketplace commerce and internet commerce. With the involvement in manufacturing, we shouldn’t be surprised if we see the marketplaces like Amazon actually offering more of their in-house products. This could possibly create marketplace inflation, which very few economists are talking about. Marketplace products are standardized and cannot respond to an increasingly service-based economy, which is more focused on specialization, and unique approaches to marketing and offerings.
Being the kid that grew up on the internet, like many of you that are reading this, it gave me the sense that internet offers limitlessness when it comes to imagination and possibilities. Now, when I’m reaching 30s, I am, more than sure that there is an obvious need to serve the larger part of the internet economy, in a freer and a more just way for small businesses. In a way where modern small businesses can grow on the internet, with unique knowledge and expertise. Internet economy is giving us examples of human ingenuity all the time. Something that just can’t be standardized and manufactured so easily. It may sound optimistic, but we have the tools to participate in the economy for people, by the people. Internet economy, with all its power, has the ability to get back to the center: to the human ingenuity.
Pro-tip: specialization and customization will help you rule over elasticity
An elastic good is defined as one where a change in price leads to a significant shift in demand. In general, the more substitutes there are for an item, the more elastic demand for it will be. For example, a change in the price of a luxury car can cause a change in the quantity demanded. With specialization through e-commerce and the ability to customize unique products and services, with unique pricing structures and marketing, new-age small businesses on the internet can avoid the trap of the old economy, which is largely based on these kinds of dynamics. That being said, for small businesses that want to participate in the internet economy: leave the elasticity to marketplaces and try to put focus on designing products and services that are inherently growing your brand and your online business.
Value creation based on the e-commerce infrastructure
Very few people in the past had the ability to use “public goods” (e.g. roads, healthcare, etc) to create additional products and services on top of the same. The government would basically invest in such projects, without being really open to allow any outsiders to use those goods in order to create additional values for the market and themselves. At least never on the large scale. We can view e-commerce infrastructures, like Gigrove, as “public goods”. The only difference is that these kinds of public goods enable you infinite space for value creation and value-added services. E-commerce infrastructure, in Gigrove’s terms, means “expenditure with incentivized transactional technology”. The idea is to enable you better business transactions online, regardless if you have the technical knowledge or not. With better online business transactions, we are creating a more robust environment for small businesses and their clients, where they can create and design great products.
Better ecology, for everyone
Mass-manufacturing did the job in the past: it helped raise people out of extreme poverty. Today, we have all the tools to make the internet economy the front-runner for the ecological change. The way we produce and consume things can dramatically change with the help of e-commerce. Although it is well known that more manufacturing creates more money for the economy, the way we do manufacturing and consume things needs to change. Gigrove is one of the front-runners in promoting service-based approaches with many of our e-commerce tools, in specific, instead of buying and collecting goods, Gigrove promotes the ability for small businesses to rent out products and services – and ultimately create less consumption waste. Renting out will not only create more access to products for the consumers and create more profits for small businesses, but it can dramatically bring a cleaner environment for everyone.