The Digital Economy Should Be about Capital Creation, Not Extraction | Big Think

TL;DR

Corporate profit has been decreasing for 75 years, indicating a shift towards prioritizing money accumulation over value creation. To succeed in the digital economy, businesses should focus on creating and circulating value rather than solely pursuing growth and acquisitions.

Transcript

For 75 years now corporate profit, over their total value, has been decreasing. That means corporations are really good at accumulating money but increasingly worse at deploying that money, at making money with money. This is really serious. Pharmaceutical companies don't know how to make drugs, they only know how to acquire companies that do. Goog... Read More

Key Insights

• 👨‍💼 Corporate profit has been decreasing for 75 years, indicating a need for a shift in business strategies.
• 👨‍💼 Many companies have shifted their focus from creating value to acquiring and selling businesses.
• ❓ The current corporate model is obsolete in the digital economy, which requires a focus on creating and circulating value.
• 👨‍💼 CEOs often prioritize short-term growth by selling off profitable businesses, which harms long-term business success.
• 👨‍💻 The tax code should be adjusted to incentivize revenue generation and discourage growth for the sake of growth.
• 🖐️ Banks can play a role in facilitating local economic activity by supporting businesses through community crowd-sourcing initiatives.
• 😋 Supermarket chains can establish themselves as partners in local food initiatives, such as farmers markets, to create value and adapt to changing consumer preferences.

Questions & Answers

Q: Why have corporate profits been decreasing for 75 years?

Corporate profits have been decreasing because many companies are more focused on accumulating money rather than deploying it effectively for value creation. This trend towards prioritizing money accumulation leads to a decline in the ability to create value.

Q: How have companies like Google shifted their focus?

Google, once a technology company, has transformed into a holding company called Alphabet. Their new business model revolves around acquiring and selling technology companies instead of focusing on creating value through technological innovation.

Q: How can businesses adapt to the digital economy?

Businesses should shift towards creating and circulating value rather than solely pursuing growth and acquisitions. This includes fostering peer-to-peer networks, embracing the concept of circulating value, and focusing on creating products and services that meet customer needs effectively.

Q: Why is it important for businesses to generate revenue and make ongoing profits?

Generating revenue is crucial for the long-term success of businesses. Without revenue-generating industries, businesses struggle to sustain themselves. It is essential to move away from cannibalizing productive enterprises for short-term growth and instead focus on making money in an ongoing and sustainable way.

Summary & Key Takeaways

• Corporate profit has been steadily decreasing for the past 75 years, indicating a decline in the ability to deploy accumulated money effectively for value creation.

• Many companies, including pharmaceutical giants and technology companies like Google, have shifted their focus from creating value to acquiring and selling off businesses.

• To thrive in the digital economy, businesses should prioritize creating and circulating value, fostering peer-to-peer networks, and promoting wider and distributed economic activity.