The cuckoo economy
Where we learn that the new digital giants behave a bit like cuckoos, implanting their software into existing economies
A few years ago I went walking in the forest, when I spotted a cuckoo. This clever bird not only lays its eggs into the nest built by others, but it also leaves it to the latter to feed its offspring. Since digitalization is often in the back of my head, it suddenly struck me that some players of the new economy actually behave a little bit like digital cuckoos.
Let me explain what I mean with an example. When you take a local taxi service in your town, say at the station, it is obvious that you are contributing to the local economy. After all, you’re spending the money on the spot. However, if you take a company like for example Uber or Lyft in the same place, will the money also be spent locally? The taxi will clearly also be a real physical object in your town, and get you to the same destination, but the money, where will it go?
You probably know the answers: for the cases above a part of the money goes to California. And depending on the service, more or less cash will flow out of your town. For example, Uber takes a percentage of 20 to 25 percent, while other digital services, like AirBnB take about 10–20 percent. So if you assume that the annual income of hotels in Switzerland is around 1 billion Swiss francs, this would mean that if everybody used AirBnB, or Booking.com, hundreds of millions would flow to the USA each year!
In that sense, the new services behave a bit like cuckoos in a digital space, creating a kind of “cuckoo economy”. They implant a simple software application in a rotating economy, which optimizes the system, but for this service they suck out a significant part of the revenues from the local economy. And like cuckoos, they also build on existing physical infrastructures and technologies, such as locally existing roads, security and telecommunication services, cars and hotels.
Don’t let me be misunderstood: I’m a fan of well-used technology and of improving services. And the rise of the digital giants such as Google, Amazon, Facebook and Apple are clearly bringing numerous new services to our society. However, I would like to highlight the underlying economic model, since it is becoming more and more widespread and a potential challenge for the local economy.
The challenge for Switzerland will thus be to maintain control of the innovation chain over the long run (and not become a nation of mere consumers of a new digital economy). Else we might find ourselves stuck between the US giants mentioned above, and the uprising Eastern giants, such as Baidu, Alibaba and Tencent.
So maybe we need to do it like India under Gandhi in the 1930s? When he became aware that cotton produced in India was sold at low prices to the British, who sold expensive shirts back to India, he decided to keep textile production in India. So what if the large amounts of data produced here was the cotton of the 21st century and we would take back control over our data?
