According to Atlanta Federal Reserve Bank economist, Stephan Goetz:
The economy has been adding self-employed workers rather than employees. Between 2000 through 2010, the number of self-employed increased from 25 million to 36 million workers, which was a 40% increase. In comparison, over that period the wage-and-salary job number, basically stagnated at around 137 million jobs. Within the next decade, if these trends continue, it will actually be one in every four workers (25% of the workforce).
This burgeoning work-force of independent micro-entrepreneurs is projected to increase even further. This is driven by changes in technology and more efficient retail practices that have conserved labor for its most optimal use. This conservation of labor has allowed for an emerging class of small business owners.
A more efficient work force is always a better work force. While the accusations of Wal-Mart Stores, Inc. (NYSE:WMT) closing small businesses is true, more businesses have opened. Technological gains shift the aggregate supply curve of an economy to the right. In economic theory, this decreases prices, increases consumption, increases barriers of entry, and forces labor to be re-employed at its most optimal use.
Owning servers couldn’t become that big of an industry
Some critics like Jaron Lanier also state that it’s the companies mining the data and running the server that earn all the money. But, I believe that’s not true. After thoroughly analyzing every single Dow Component stocks across all economic sectors, there is absolutely no way data-mining could become one of the largest industries in the world.
AT&T projects that the cloud will become a $210 billion industry. Companies in the cloud like Amazon.com, Inc. (NASDAQ:AMZN) and International Business Machines Corp. (NYSE:IBM) are likely to benefit from the favorable economic environment. A $210 billion industry while big, is not necessarily “big”; remember the global economy generates $70 trillion in economic output, according to the World Bank.
Cloud virtualization is both Amazon.com, Inc. (NASDAQ:AMZN) and IBM’s fastest growing business. Both companies are expanding the breadth and depth of their services. Amazon was able to report 47.3% year-over-year growth and International Business Machines Corp. (NYSE:IBM) was able to report 70% year-over-year growth in the same segment. Analysts remain optimistic on both companies and anticipate Amazon to grow its earnings by 37.15% on average over the next five years. Likewise, IBM is expected to grow earnings by 10.49% over the same period.
Big-data benefits the users more than it benefits the companies that sell big-data services like cloud virtualization. Companies who use Amazon and IBM cloud based services are likely to experience savings on unnecessary IT spending. While Jaron Lanier argues that the cloud causes a loss of jobs, on the other hand, it actually increases real GDP growth because it lowers the cost of production which, therefore, allows companies to hire more employees, open more stores, and save money. All three are good, and lead to positive trickle-down effects for the economy.
