The forty-year IT boom is over. Why will the Dow Jones sector skyrocket the 2020's?
The systemic efficiency of the "old" and "new" economies show no difference after excluding the costs of human labor.
The "human factor" is the only significant difference between the "old" and "new".
For the several decades, the IT industry has been the peak of popular investing. And simultaneously the attention of the media and the general public.
As usual, the impression is that "it will last forever". However, without exceptions, all similar expectations in the past have not come to pass.
In order to develop a rational prediction, it is necessary to look into the heart of the phenomenon.
What is the cause of IT having such a firm and lasting superiority over all other industries?
1. Why in IT did superstars appear first — overnight becoming multi millionaire giants?
In the public discourse there is no answer to this question.
What's more, it isn't even raised.
A priori, the IT industry is supposed to have some special qualities which are so obvious that there's no sense in mentioning them again.
Meanwhile, the scientific method of learning about the world looks at "sacred cows" skeptically.
So do we.
Thus, the secret of IT's superiority can and should be exposed.
2. And it is (in our opinion) in the absence of people at the operational level of business.
Take Google search for example.
How many people are employed in processing the billions of daily search queries?
And how many in the presentation of advertisements?
Nil, zero, no one.
At the operational level, Google is one of the first examples of an Unmanned Enterprise.
And how many people are employed in taking care of the operational activities in a company comparable to Google in capitalization — Walmart?
3. More than two million.
This is despite the fact that on all the “information systems, digital retail and others”, Walmart spent four billion dollars in 2017 alone.
Twice as much as on opening stores.
These two million people took the lion's share of Walmart's 100 billion dollars (twice as much as Russia's military budget) annual operating cost.
Walmart's MBA managers are too embarrassed to write the exact sum spent on labor costs.
But, it's unlikely that we are far off (if we are, then only on the lesser side), if the amount for paying people from these $100 billion is three quarters, that would be $75 billion a year.
The inertia of these millions of people (the "human factor") is the main brake holding back the so-called "traditional industries" from developing with the sonic speed of the so-called "new economy".
The statement in the previous paragraph is hardly new.
However, we are going further and affirming that the "human factor" is the only meaningful difference between the so-called "old economy" and the so-called "new".
All other differences are either greatly exaggerated or complete fabrications.
So, they say that Walmart has a huge, heavy infrastructure (stores, warehouses, trucks, etc...) and Google is a virtual money generator?
This is a misconception.
Around Google's (or its contractors') neck weighs a colossal infrastructure of data centers and communication centers all over the world, plus costs of maintenance and keeping all of this functioning.
Google's electrical infrastructure alone devoured to the order of 8 terra watts/hour in 2018.
Walmart's energy consumption was to the order of 40 TW/h a year (up to 400 kilowatts/hour per square meter of sale's space per year, 110 million square meters of stores).
Google's revenue is four times less than Walmart's; in other words, they spend almost the same on electricity with respect to revenue.
That is, the efficiency of "old" and "new" economies' infrastructures, excluding the presence/absence of expenditures on human labor, does not differ.
And now, gentlemen, let's conduct a thought experiment.
4. Imagine that Walmart (on the operational level) suddenly becomes an Unmanned Enterprise like Google.
Two million people are not there.
In their place is $75 billion (actually it will be more).
Pure profit; thus, instead of the current $15 billion, there is $80 billion a year.
Under these conditions, how much will Walmart's capitalization grow from today's $250-300 billion?
And it is precisely that from such Walmart's of varying sizes, 99.9% of today's world economy is composed (about $100 trillion of the world GDP/year).
5. Now you're likely snorting skeptically: "What's with the isolated punditry?"
Where is this magic wand that can disappear two million human factors from Walmart?
Specifically the IEM System (missing until this moment) is the key piece of the puzzle, logically connecting completely disparate pieces — driverless cars, intelligent storage equipment, smart contracts, B2B platforms, the Internet of things, Internet store fronts, automatic contracting, etc. — into a connected picture of a true industrial revolution.
Accuracy in this sector — as stated in the header — from the Dow Jones.
And the IT industry, after successfully removing human intellects (dangerous for business) from the Dow Jones, standing on its fundamental indicators for attracting investments (unavoidable) returns to the flat line of "old" industries.
Together with P/E ratios.
P.S. Amazon writes about the early movement in this direction. But much of what it writes is unavoidably in future tense.
P.P.S. The reservation of scientific accuracy.
Certainly the current Walmart "can't just take and deduct"™ human employees.
The theoretically possible and practically super-profitable evolution of an e-commerce retailer into an Unmanned Enterprise includes the successive stages of the transformation described in the "Unimart" model.
P.P.P.S. It's possible to go further with some extra effort and try to see the contours of the near future and beyond the 2020s.
Our version (for lovers of science and futurism, with emphasis on "science").
In contrast to the colorful and poorly connected "visions" in the pages of the less-than-selective pop media, our version is a well-thought-out, logically connected prediction.
The realization of which (plus or minus some details) is completely believable.
This does not mean that it will be exactly as written (there are many variations of the future).