May 04, 2003

Why Low Profits in Silicon Valley Are Good

Edward Hugh makes an interesting and under-recognized point about how the relative lack of profits in Silicon Valley is (or might be) good news for the information age:

Interesting point this: the lack of price leverage in the technology sector is transferring more power to the end users. This is all part of a fairly predictable process of techological evolution. After the initial surge of speculative activity, the real benefits of the arrival of railway and telegraph were felt in the broader industrial economy which grew more rapidly as a consequence. As the internet and the PC come of age, the interest moves downstream, to individuals and companies who will try and realise the enormous productivity and welfare benefits which are there for the taking in the age of connectivity. Of course, the big unanswered question is still whether the rate of expansion in user markets can grow fast enough to absorb the shock of the Moore's Law driven upward pressure on capacity and downward pressure on prices, and hence turn a deflationary conundrum into a growth explosion....

Posted by DeLong at May 4, 2003 09:30 AM | TrackBack


I thought it was so odd when everyone thought they could make money selling things on the internet, the easyest way to price comparison shop ever.

Because of the great freedom of information in the silicon valley world, they make less money than they "should" in comparison to other industries. So, they recieve less investment money than is optimal for society. maybe we should subsidise (reduce taxes) on industries that have low profit margins industry wide?

too messy...

Posted by: markmeyer on May 4, 2003 11:39 PM

We already do, with the absence of state sales taxes on online purchases.

Posted by: Julian Elson on May 5, 2003 04:57 AM
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