Dematerialisation and the Digital Economy


An article on a “decluttered digital economy” by Diane Coyle in the FT, got the old gears ticking over and, leaning back into my digital armchair, connecting my digital fingertips a la Burns, I settled in for an evening of contemplation and repose.

The theme: the future. The method: generalisation. The end result: ?!... Emoji, emoji emoji.

“Technology is dematerialising the economy. The UK economy has grown by about 60 per cent since 1990, but the physical mass required to generate that output has fallen by nearly 20 per cent.”

Dematerialisation is the idea that as the digital economy expands primary industry disappears, secondary industry recedes and services multiply as fast as an estate agent greases up his hair, the actual meat and bones of public physical (consumer) life shrinks into chips, flat screens and smartphones. Remember cathode ray tubes? Thought not.

This means that not only do Brick and Mortar (B&M) businesses and services decline - UK bank and building society branch numbers have fallen over 40% in the past 25 years – but also that goods become distilled and channelled into more virtual spheres: phones and laptops replace individual consumer technology, hosting TV, Internet, radio and music.

These developments amalgamate the entire home media spectrum into one or two multi-application products.

For businesses e-commerce has huge promise in terms of capital utilisation and labour productivity. As Tim Pike of the Bank of England reported in a recent blog post:

“A Virtual Service requires less labour than one provided in-store, with the consumer’s computer input displacing the administrative services of the store worker.” Therefore “online services thus often have much higher labour productivity, and lower marginal costs compared with their B&M [Bricks and Mortar] counterparts.”

Can everything go truly virtual? 

With decreased need for physical presences and customer interface the demand for administrative staff falls as the need to operate and manage buildings, staff and infrastructure becomes voided. These advances bring lots of benefits to the consumer, including more competition and greater transparency of pricing whilst also increasing firms’ capital productivity.

But progress is often double edged.

Staffing requirements drop, sometimes completely, leaving many – think shop assistants, designers and commercial property developers – without jobs and opportunities.

The so called ‘sharing economy’ becomes not only a utopian ideal of amalgamating resources and technology to save on financial and environmental costs but also a means to weed out incumbent services that have sustained services, products and until the advent of the digital era. Good for managers, bad for employees. We already have ride-sharing, flat-sharing and office-sharing for regular Joes; it's unlikely that such grassroots consumer led movements turn the world's richest into wealth-sharers.

But where will it all end up?

As a provider of Virtual Offices and professional business service solutions, we embrace the developments in digital technology that have enabled people from all over the world to streamline their company processes into quicker, cheaper and less CO2 emitting moulds.

"For us, London Virtual Offices and Virtual Telecoms enable small businesses to reach more markets, build better brands and start businesses from all over the world".

To that end, the more people working virtually the better. But what of the future of technology in society? How will it change the consumer landscape, and the business ecosystem that underpins it?

Will we be looking at a driverless transportation network run on a solar panel grid so vast it frees our global economy from its catastrophic environmental, social and political dependence on oil?

Will our high streets be replaced by the formless primary colour sheen of steel containers and warehouses stocking multi-use miniature products that grow applications in inverse proportion to the size of their shrinking microprocessors?

Will we ever have to leave our bedrooms as higher education transforms into the cultivation of a select few, mainly online skills that enable us all to provide de-unionised, flexible services for other de-unionised flexible workers in a virtual, cyclical world?

These are the questions that keep me up at night.