Digital Economy Dispatch #059 -- Riding the Wave to a Real-Time Data Revolution

Digital Economy Dispatch #05924th October 2021

Riding the Wave to a Real-Time Data Revolution

Sitting in my home office recently (aka “the spare bedroom”), it suddenly dawned on me that I had not left the house for 4 days. Not one step. My new working pattern seems to be breakfast followed by the 30 second commute upstairs to sit in front of the computer all day. Aside from a few short breaks for tea and cake, that seems to be how I spend a lot of the day. Not what I’d imagined I would be doing 2 years ago. But here we are.

It is strange how much our lives have changed over that time as we have been forced to adjust to the consequences of the pandemic and its aftermath. And while we have seen dramatic effects on our personal lives, there has also been substantial impact at a much broader level to organizations, institutions, and society as a whole.

Consequently, among the big challenges being faced today is how to make sense of the short and long term impacts of the pandemic on the economy. A question that is now high on the agenda of industry watchers such as The Economist. As it reports on the day-to-day business world, it has also taken the opportunity to consider some of the more systemic impacts of the covid crisis. Amongst other changes, they suggest that due to the current crisis we have now accelerated toward a new phase of macroeconomics driven by the digital transformation of our society.

The Three Waves of Macroeconomics

In what The Economist refers to as a real-time revolution in economics, three different economic approaches can be distinguished. The first was based around key individuals such as Adam Smith and John Maynard Keynes who focused on big questions regarding how to understand the economy as a whole and the principles on which it operates. This approach dominated economics until late in the 20th century when more practical approaches began to emerge using the wealth of official data and statistics that had started to become more widely available. This second wave had a great deal of impact on government thinking with the result that data analysis is a key component influencing policy formation and decision making.

In the last few years, the push toward data-driven policy making has taken a fresh turn we can see as a third wave of macroeconomics. Accelerated by the covid pandemic, the current period of instability and volatility has brought many challenges. One important area of concern is how we monitor and react to on-going changes to be able to take appropriate actions with sufficient speed and how quickly we can determine the impact of those actions. The constant availability of large amounts of relevant and accurate data are central to this shift.

Nowhere is this more important than in the area of macroeconomics where broad indicators are used to consider the status and directions of the economy as a whole. The need to gain a meaningful understanding in this area is crucial as it forms the basis for critical decisions across much of our lives, from the direction of future interest rates to the priorities determining government spending on healthcare, transportation, education, and so on.

For many years, there has been substantial effort to collect and analyze data on economic performance and the factors that effect it. Economists take a great deal of care to ensure this data is accurate and complete. Access to reliable data has always been important for decision making. However, in recent years, additional pressures have emerged. The volatility and uncertainty we face requires not just more data, but a wider variety of data sources and improvements in the speed at which it is available for analysis and decision making,

From Data to Value

The widespread adoption of digital technologies is providing new ways to understand behaviours on both an individual level and across a broad population. Three advances have made a significant difference in enabling real-time data access to improve our understanding of the evolving economy.

The first is a result of opening up of a wide variety of public datasets. A variety of organizations, including the UK government, make available all sorts of information in areas such as population demographics, energy consumption patterns, travel and transportation trends, educational choices, retail preferences, and so much more. The frequent release of this data provides greater access to information and increases transparency into evolving behaviours. The consolidation around common standards and practices ensures greater interoperability across this data.

The second is the ease with which data can now be accessed, manipulated, and shared. Data sources are much more useful due to the availability of programmatic interfaces to data. Extensive programming libraries are readily available to enable rapid development of solution to exploit the data through standardized Application Programming Interfaces (APIs) and other means. This brings innovation via a broad community of developers creating insight by working together to process different combinations of data and readily delivering their results into software-based applications.

The third is due to new streams of data becoming available offering insights previously unavailable. As the variety and effectiveness of data-generating devices increases, novel kinds of information can be obtained. For example, a number of organizations provide services to take advantage of the widespread availability of mobile phones and a wave of new Internet of Things (IoT) devices in homes, offices, campuses, and cities to build vital perspectives on our everyday activities. As such deployments increase, we are provided the opportunity to shorten the gap from insight to action.

To Infinity and Beyond

As we gain access to new data sources, we learn more about the world around us and the changes that are taking place. The effect of increasing access to this fine-grained information to economists is rather similar to the invention of the microscope for biologists. A significantly different picture emerges that offers a new perspective on the world.

Many areas of business and society are now rapidly evolving as a result of this real-time data revolution. By tapping into these data sources, we are all learning more about the current state of the world, deriving patterns that predict the future, and exploring the behaviours that drive change.

Digital Economy Tidbits

Cloud Migration Opportunity: Business value grows, but missteps abound. Link.

An interesting review of the state of IT migration to the cloud based on a survey of 450 CIOs.

A McKinsey survey of nearly 450 chief information officers (CIOs) and IT decision makers globally finds that a subset of organizations has shifted a majority of IT hosting to the cloud on time and on budget. This article reveals the aspirations and hurdles that business leaders are facing in their journey to the cloud—and what outperforming organizations are doing right.

Revamped WeWork Rises in Debut on Nasdaq. Link.

After an earlier IPO failure, WeWork has now gone public using a SPAC approach. It now is valued at around $10B, or about one fifth of its valuation in 2019. Even though the company lost over $6B in the last 18 months, many investors still view the prospects as good. What the heck….it’s only money.