One of the most frequent questions I get asked by people at the moment is, “how’s business?” It’s an easy conversation starter, but I also think people are worried about the economy, jobs, the future; they’re looking for data points. You just know that they’re expecting a mildly negative response, accompanied by some grumbly comments about how tough life is at the moment, but that’s not what they get. What they get is, “pretty good, actually”, followed by a smile.
The reason is simple. I live in the UK, but that’s not where I do business. When the economic statistics are compiled, they’re always done on a country basis (because only countries have offices of national statistics) and we always see league tables of countries and growth. China is currently the world’s second largest economy and growing at over 9% per year. The UK is sixth and not really growing at all.
But an increasing number of people are working in an economy that isn’t based anywhere. It’s called the Internet. I think about the Internet as an economy in it’s own right, just as I would the UK or China or the US. According to McKinsey, if it was listed as a separate place it would be bigger than the Spanish, Australian or Canadian economies and it’s growing faster than Brazil. All around me, I see armies of well educated people working really hard to build out the infrastructure, services and communities of this place called the Internet. Some of that activity will be unproductive, a lot of it will change the way we live our lives. That’s why, when asked about business, I can smile and say, “pretty good, actually”.
I’ve always had a soft spot for Ronald Coase, an admission most likely to trigger a response of ”Ronald who?” I can happily confirm that he wasn’t a guitarist in an early line up of the Rolling Stones, a misunderstood but skillful winger for Leeds United or a radical student union leader from my college days. No, he’s a 100 year old economist who won a Nobel Prize and whose work brought to my attention the concept of transaction costs. For the record, a transaction cost is, “the cost incurred in making an economic exchange”. Not the actual price paid, but all the other costs that I might incur in order to buy or sell something, for example the time and effort in driving to the shop to buy that flat screen TV.
The ability to crush transaction costs has been crucial to the success of most internet business models. Think how much easier it is to sell something on eBay than it is to take it to a car boot sale. Think how much easier it is to buy a book on Amazon when it’s not in stock at the local book shop. Think how much easier it is to stay in touch with hundreds of ‘friends’ via Facebook than it was via the telephone. A lot easier. And that ‘easier’ usually equates to lower transaction cost, less friction.
Fast forward to now and my lingering desire to learn a foreign language that has historically been stymied by my inability to stick to a steady and regular series of lessons or appointments with a language tutor. I want the knowledge, but I want the learning to fit in around me. What’s stopping me becoming an adept in Italian are the transaction costs associated with learning the language. I have to find someone suitable, I then have to make sure that they are flexible enough to see me during the day, although I can’t manage it on a regular weekly basis. These obstacles are transactions costs to me and they’ve been big enough to stop me buying the services of a language course or language tutor. How many other people are there who want to learn, but who don’t because of all these (admittedly) small things that get in the way? The internet is the great slayer of transaction costs, but education has been late to the game, possibly because traditionalists have only considered there to be one way to learn. That is slowly changing and Tutorhub is a part of that. Education is way too big an issue for genuine innovation to pass it by. I’m not not talking about curriculum tinkering, I’m talking about root and branch, new ways of doing things.