Loosen GDP Stranglehold with a UGC Index

Focus on GDP… has blocked entrepreneurs from nurturing the vastly more complex and valuable ecosystem of social capital.

GDP was created as a metric to guide industrial age investments — is it not time we create metrics to guide digital age investments?

Gross Domestic Product (GDP), originally developed as Gross National Product (GNP), is a measurement of national income. Invented in 1934 by economist Simon Kuznets GDP represents the monetary value of all goods and services provided in exchange for compensation over a specified period of time. However, GDP takes into account absolutely no other societal value creation and Kuznets in his own report warned that “The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income.”

Unfortunately despite the warning of Kuznets and many others, like Robert Kennedy in 1968, our global economy focuses almost entirely on this single anemic and grossly deficient metric. Focus on GDP and subsequently growth, especially by the finance and VC community, has blocked entrepreneurs from nurturing the vastly more complex and valuable ecosystem of social capital.

User Generated Content (UGC) serves as both social capital and currency in the digital economy. Companies accumulate and monetize UGC though customer engagement and digital advertising. According to the Interactive Advertising Bureau (IAB), “U.S. digital advertising revenues reached an all-time high of $59.6 billion in 2015… and represents the sixth year in a row of double-digit growth for the industry.” While UGC is actively traded for digital advertising dollars, its value as social capital is neither measured nor cultivated. GDP cannot “see” UGC in the economy unless it is monetized.

According to Forbes, “U.S. non-financial companies held a staggering $1.73 trillion in cash” at the end of 2014, much of it overseas. This capital sits idle due primarily to limited metrics and outdated accounting practices. Instead of ineffective repatriation schemes or threats of mass taxation, corporate cash reserves would naturally be lowered if companies had improved metrics to measure the impacts of their investments.

Over 80 years ago, GDP was created as a metric to guide industrial age investments — is it not time we create metrics to guide digital age investments? The market validity illustrated by digital advertising revenue positions UGC as an ideal starting point for augmenting GDP. By measuring global UGC we would begin to “see” the immense economic value invisible to GDP. Companies making investments based on a UGC Index would have a metric enabling long-term cultivation of UGC. Free societies would have a metric for currency circulation unavailable to competing industrial nations such as China where access to the Internet is highly restricted.

A global economy that augmented GDP with a UGC Index would be more sustainable and loosen the stranglehold GDP has placed on our ability to understand and improve societal wellbeing.

To further explore how UGC Index based investments might impact the global economy check out Unlocking the Labor Cage, now available on Amazon. For more information about this proposal please visit UGCIndex.com.

Thanks for reading! If you enjoyed it, please click that heart below and share on the socials to let others know. Your love is appreciated!