by  Russ Penlington

The new economy is an evolving system and strategic planning to position within it can help both businesses and consumers to prosper under the changing economic landscape. Increasing occurrences of systematic failure in the global monetary and economic infrastructure has invoked a growing desire for alternative methods for conducting business and consumer transactions. As the global economy advances through technological innovations, businesses and individuals can leverage from opportunities that arise if appropriate strategies are considered.

The Future New Economy

The new economy has been often described as a state of functioning whereby capital has transitioned from manufacturing to service based industries.  The new economy can also be considered as a fluid system constantly changing and adapting to market, environmental and political dynamics. This future new economy is likely to also challenge some fundamental economic principles that have been the basis for decision making since a long time.

The global economy is able to evolve over time as technology opens the way for new and alternative avenues for the flow of capital. The shift from manufacturing to service based activity has been greatly assisted by the ability to more easily communicate and share data remotely via the internet. Cross border capital flows are further facilitated as antiquated fiscal regulation fails to adapt to technological innovations in transaction payment methods. As a result, niche markets emerge and transform rapidly to meet trending demand and alternative investment opportunities.

A Radically Different Global Monetary System

The current monetary system has been in place for many generations and, therefore, often viewed as the reliable norm. In recent history, however, we have seen the system fail and more frequently show serious signs of fracturing. Control of the system has moved progressively to centralized self-governance and away from any real form of underlying stability. The decoupling of the US dollar from the gold standard in 1971 and the relaxing of reserve requirements for bank lending in the 1990s were key catalysts to this instability in recent history.

The system is based entirely on trust as money itself is created from nothing and injected into the economy as debt with the bold assumption of infinite economic growth to repay obligations.

This has more or less worked under the Keynesian economics multiplier effect except that the gaps have widened to an extreme extent between saving reserves and debt outstanding for consumers, businesses, banks and even entire countries. It is accepted for individuals and private businesses to declare bankruptcy, but a country unable to pay sovereign debt obligations brings the entire down.

The internet enables alternative forms of transaction processing and financing that fall outside of many of the pitfalls of the established monetary system. Several evolving approaches are worth noting.

• Point system bartering platforms revive ancient trading systems whereby services are exchanged without any form of monetary currency changing hands.
• Geolocation of operations can leverage from favorable sales and income tax regimes as well as available consumer mobile and online payment mechanisms.
• Alternative currencies emerge as a method of exchange outside of the established banking system.

Philosophical questions arise around ethics, morality and even legality of business conduct outside of institutionally controlled systems.  A common example of this is the tax evasive behavior of moving business capital through low tax geographical locations. However, in a free market economy it should be governing authorities that adapt to changing dynamics and not economic evolution that is hindered by bureaucratic resistance to change.
Virtual forms of exchange are attractive for both businesses and consumers due to very low transaction costs, speed and security.  It is not particularly relevant as to what form virtual exchange of value prevails in the future economy, so long as the supply from which it based is finite. Under the current system, the departure from a finite base value has resulted in boom and recession cycles as well as ballooning of debt levels. Bitcoinis worth mentioning as a viable virtual method of value exchange and is growing in both popularity and unpopularity depending on the standpoint.

The Struggle for Change

The established closed circuit system between government, banking institutions and big business have vested interested in keeping the old system of money supply and transaction processing. The reason is simply that control is centralized to ensure profitability for a select few. The desire to cling to old ideals is not limited to institutions as we see factions of national populations also oppose change under the new economic dynamics driven by fear of losing control. This phenomena is by no means new and can also manifest to xenophobic tendencies as we observe often in national politics.

On the flipside, new generation thinking is pushing for change through new and future economy innovations that will take control away from the established system. This movement is not simply an idea but a reality for many new business models and Fintech startups that are embracing alternative transaction methods in new economy innovations. Individuals locked into perpetuating repressive debt structures and subject to unjustified banking fees also seek alternative systems for managing personal finances.

The struggle between the old school system control and new economy desire for change relies primarily on the development of critical mass. Moving to the future new economy does not have to mean a collapse of the current system, even though that is also a possible scenario. As businesses and consumers move to alternative forms of value transfer and establish critical mass, outmoded institutional systems can choose to adapt and introduce new mechanisms for the evolving system. The extent in which this can happen will rely on the willingness of traditional bodies to view new economy trends as an opportunity rather than threat.

A similar example can be likened to the postal service transformation. Many national and state run postal organizations fail to operate without the support of increasing taxpayer subsidies. As electronic messaging replaced traditional paper mail, many postal services were unable to envisage the offset growth of parcel delivery through e-commerce and subsequently missed the opportunity to compete effectively with private logistics businesses.

Strategic Opportunities for Businesses

Businesses can leverage opportunities from the new and future economy by analyzing viable options and alternatives for process management and sales channel growth. Several aspects of the new economy can be considered for business:

• Operating and administrative costs can be lowered by outsourcing to cross-border and online freelance services. High skilled and competitive online marketplaces provide the ability to isolate relevant expertise to optimize the cost/benefit of business administration including IT, accounting, financial analysis and process management. Part fabrication to lower cost geographic locations is and will continue to be a driving factor of the future global economy.
• Transaction costs and banking fees can be lowered dramatically by restructuring internal payment methods via unilateral agreements with trading partners. Service and material part exchange systems remove monetary currency from internal systems thereby removing transaction costs.
• Targeting marketing efforts and retails points of sale to demographics that incline toward alternative payment methods can create new revenue stream opportunities. Accepting mobile payment methods and Bitcoin can open business to new consumer bases.
• Investment into new economy technology and business startups can offer opportunities and strategic advantages later on. Choosing new economy businesses that fit into a potential future operational advantage can provide critical options to adapt as economic dynamics evolve.

Analyzing and modeling strategic business opportunities requires the understanding and estimation of both future payoff and risk of future outcomes which can be assisted by real options valuation.

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