What is the “New Economy”?

The agricultural revolution transformed the way we grew crops and were able to move from subsistence living into the mass production of food.

The industrial revolution transformed the way we produced goods and services, bringing prosperity and specialization that had not previously existed.

The digital age brought about widespread use of computers, changing how information is shared and enabling things like space exploration.

We are currently experiencing the fourth revolution- the New Economy. What is it and what does it mean for you?

Technological intelligence: Artificial intelligence is at the center of the New Economy. Training computers to “think” and react like enhanced humans allows for self-driving cars, grocery shelves that can restock themselves, refrigerators that order milk when you are running low, and financial advice that can analyze millions of data points about you, giving you the best possible information you need when you need it.

Positives: The bottom line is that you can be freed up from tasks (like driving your car or grocery shopping) and can focus on higher valued activities. Furthermore, things that you can’t do- like instantaneously analyze your retirement plans in the context of tax changes and running complex scenario analysis on your finances, can now all be done at the push of a button.

Negatives: As the people who made buggies were put out of business by the invention of the car, so will people be forced to transform their skills to what is marketable in the New Economy. The good news is that “people skills” will remain at a premium, as humans will continue to crave human interaction. It is the skills that can be automated (like driving or complex computations) that will move from being done by humans to machines. Even certain aspects of medicine or legal work will go away, and only the most challenging cases will involve humans.

New paradigms: In part because of the success of start-ups in the tech space, big companies know that they need to do things differently or go the way or the dinosaur. The pace of life is rapidly increasing and thinking about life in terms of “sprints” and “agile development” has gone beyond the vernacular of computer science and into the mainstream. Some large companies, like Fidelity, have embraced these changes and are totally changing the way they work- and the way they think about technology — no longer as an “add on” or as “support”- but now it IS the business. Most big companies have adopted the veneer of change and innovation but have done precious little to actually change how they do things. Universities are about to also be under tremendous pressure, as the New Economy doesn’t value degrees in the way it once did — you can be a world class computer programmer (and business person, and many other professions) — without a college degree. Steve Jobs, Bill Gates, Richard Branson, Ted Turner, Anna Wintour, Larry Ellison, Michael Dell, and Mark Zuckerberg are all great examples of tremendous success without college, and of course there are many more. The difference now is that companies are taking notice, and with the proliferation of focused (non-degree) computer courses, it is easier than ever to learn what you need to know without being buried under student loan debt. Universities will be forced to add value — or they too will go the way of the dinosaur or be reserved for the super-rich who want to amuse themselves with intellectual curiosities but aren’t that concerned about employment.

Positives: The playing field has never been more level, and there are opportunities to enter into new fields that are challenging and pay decently well for a much broader range of people. Even some big companies are becoming more entrepreneurial.

Negatives: If you are unwilling to change, chances are your business won’t make it for the long haul. Too big to fail doesn’t exist, and we will see some companies struggle that we once thought were unbreakable (like GE perhaps?).

New pricing models: Paying for things used to be really easy. There was a price, and of you wanted it you paid — preferably in cash. Today, we don’t even think about how many of the things we use constantly — like Google or Facebook — are paid for. We think of them as being free- but nothing is free, not even in the New Economy. Today, if you aren’t explicitly paying for what you are getting, most likely you are paying for things with your data. That may seem like a good deal, because you aren’t feeling the impact directly. But this should give us all pause to consider if this is the trade we would like to make.

Positives: It is nice to get Google and Facebook and not make a payment

Negatives: It is creepy to be spied on constantly — and who is using this information and why?

The Sharing Economy: Sharing is a bit of a misnomer- it makes it sound like something is being given away, which is obviously not what is happening with Uber or Airbnb. It is much more about blurring the lines between personal and corporate use of assets. This creates a much more optimal use of resources — why have your house idle if you can get paid for someone else being in it? Pop-up restaurants in people’s homes, popular in some major cities, are another example. Companies like Slicify now let you sell the spare computing power off of your desktop. Peer to peer car and bike sharing companies are now ubiquitous.

Positives: Great ways to make extra money is now more available than ever

Negatives: You may have to do a bit more checking to make sure the person you are dealing with is legit (helpful tip from my own bad experience- don’t rent the Airbnb with no ratings!!), as compared with dealing with a well-known company.

So, in the New Economy, you can get more of what you want, when you want it, with better transparency around pricing and information. Pefin- the world’s 1st AI financial advisor, has been nominated as a finalist in the “New Economy” category at SXSW, which “recognize the most exciting tech developments in the connected world.” We are honored to be recognized by SXSW, and we are excited to be a part of the New Economy- bringing affordable, fiduciary financial advice to the world!