Inter-American Development Bank
facebook
twitter
youtube
linkedin
instagram
Abierto al públicoBeyond BordersCaribbean Development TrendsCiudades SosteniblesEnergía para el FuturoEnfoque EducaciónFactor TrabajoGente SaludableGestión fiscalGobernarteIdeas MatterIdeas que CuentanIdeaçãoImpactoIndustrias CreativasLa Maleta AbiertaMoviliblogMás Allá de las FronterasNegocios SosteniblesPrimeros PasosPuntos sobre la iSeguridad CiudadanaSostenibilidadVolvamos a la fuente¿Y si hablamos de igualdad?Home
Citizen Security and Justice Creative Industries Development Effectiveness Early Childhood Development Education Energy Envirnment. Climate Change and Safeguards Fiscal policy and management Gender and Diversity Health Labor and pensions Open Knowledge Public management Science, Technology and Innovation  Trade and Regional Integration Urban Development and Housing Water and Sanitation
  • Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Beyond Borders

  • HOME
  • CATEGORIES
    • Asia – LAC
    • Innovation and Technology
    • Investment Attraction
    • Public-Private Alliances
    • Regional Cooperation
    • Regional Integration
    • Trade & Investment Agreements
    • Trade Facilitation
    • Trade Promotion
  • Authors
  • Spanish
disruption_trade_latin_america

Islands of Value: looking beyond disruption

November 29, 2016 by Andrei Vazhnov Leave a Comment


Imagine that in 1975, or some other time before the advent of the Internet, you wished to know the name of Isaac Newton’s dog. Your only option would have been to go to a large library and start reading all of Newton’s biographies one by one, crossing your fingers and hoping that one of his biographers would have been sufficiently interested in canine affairs as to mention Newton’s best friend in his book. You would know that the information you needed almost surely existed somewhere, but finding it would have been next to impossible. Or imagine being in a restaurant and hearing on the radio the last minute of a song you liked a lot. Your only option to find out the singer or the band would have been to wait for a radio station or TV show to put the song on the air again just as you were listening at some other time. And this could be never or take a long time. Even if the CD with the song were available at the record store around the corner, there would not be an easy way to look for it.

Today, it takes seconds to put the search on Google and find several pages dedicated to Diamond, Isaac Newton’s dog or use the Shazam app on your smartphone to identify the song and buy it online immediately. The same goes for books on Kindle or shows on Netflix. It is really a small miracle that we can find in less than five seconds a book that we want between millions of titles or a desired page among more billions of pages that currently exist on the web. Looking for a needle in the haystack is nothing compared to what we ask Google to do every day.

A Liquid World

Searching for a song or information on the web are examples of how the first wave of the Internet created a liquid market for information assets: if a digital product you need is available somewhere in the world, you can find it, pay it and start to use it with just a few clicks. Supply meets demand not through a physical store, but through an algorithm, and without regard to space and time that separate the buyer and the seller. The reason why Uber, Airbnb and other similar apps have been so prominent is that they are starting to bring this same liquidity to any physical asset, and even the world of work. This liquidity, in turn, can transform an industry dramatically.

BlackRock is the world’s largest mutual fund, with $ 4.59 trillion of financial assets under management. Its CEO, Larry Fink, recently explained the change as follow:

“For generations, young people all around the world have focused on acquiring two key pieces of property: a home and a car… With the advent of technologies like Uber and Airbnb, these long-accepted financial decisions may start to change. Why bother with the big upfront investment, the hassles of maintenance and parking, or the liability of owning a car, if you can have one available within minutes with one tap of your phone.

As more and more people use sharing services for transportation, for example, personal vehicles will become less important, both financially and in terms of status…

Think about the scale of this change—Uber was founded just five years ago. In another five years, car-sharing technologies could be replacing car ownership at a meaningful scale. That has significant implications for the global economy.”

Consider what really happens when you press a button to call a taxi for Uber. It is actually a search run by an algorithm except that, instead of being a phrase, the search term is the GPS location of the passenger and the vehicle. Taxis and passengers are scattered in the streets of the city just as the information you are looking for is lost among the millions of pages in libraries and websites.

In addition, just as Google personalizes your search based on your history and other factors to bring you the most relevant information, Uber takes into account a lot of contextual information while you are executing your order to bring you a taxi more directly and efficiently.

For example, Uber can analyze your travel history, whether it is raining or what the traffic patterns in the city are at this time. If you are asking for a trip from the airport in your city, Uber knows that the most likely place to go is to your home, but if you are elsewhere, you will probably go to a hotel. Just as Google uses the power of the algorithm to connect readers with articles and books no matter where they are, Uber connects taxi drivers with passengers and in the process creates a liquid market for millions of idle vehicles, bringing together the driver and and the passenger no matter where they are. In other words: Uber created liquidity for a category of physical goods. And this ability to provide liquidity to physical assets will now shake up one industry after another.

The Disruption and the Islands of Value

Reading this one may ask, “What is the idea here? None of this is new. Uber and the ‘technological disruption’ have been talked about for years and it is true, ‘disruption’ is a term that has become so overused to an extent that sometimes it means nothing concrete. However, one of the main reasons why it became useless is because ‘disruptive technology’ started to be used as a generic synonym of ‘powerful technology’ or ‘transformative technology’. To understand the utility of the concept of disruption it is important to keep in mind what it is that we are disrupting when we talk about disruption, and what we are referring to is a business model. In this sense, there are no disruptive technologies by themselves.

A technology is disruptive only in reference to a specific business model.

Was the Internet, perhaps the most paradigmatic example, disruptive for McDonalds? For BMW? Not at all. Not only was it not disruptive for these companies, it was something that helped McDonalds and BMW become more efficient in their business through integrating communications, logistics, human resources better. Was the Internet disruptive for travel agencies or for music distributors? In this case, the answer is yes, because Booking.com, iTunes, and other similar applications have replaced the entire business model of these industries.

Instead of thinking of disruption as something binary, assessing whether the technology is disruptive or not, it is better to think of the arrival of new technology as a tide that is slowly ebbing, revealing an underwater archipelago.

At first the highest islands come into view here and there, these represent the places where the value that the new technology is can contribute is greater, as is the case of GPS for which was first used in maritime navigation. As the tide goes, which represents the falling cost of technology, more and more islands begin to appear: first the island of GPS for cars, then the GPS for phones and finally Uber.

We can see this in action more recently with augmented reality. In 2012, Google premiered the Google Glass, the wearable device that was projecting images directly into your eyes. For a couple of years, the Glass was emblematic of the near future, an indispensable personal effect in tech conferences dedicated to all manner of disruption. In fact, one could not speak of technological trends without mentioning it. However, in January 2015, Google discontinued the project and now sometimes photos of people with Google Glass already look retro-futuristic. Many commentators noted that augmented reality, “was a failure” and yet the only thing that failed was that the mass market was not yet reachable with the price of 1,500 USD of the first iteration of the Google Glass, and the archipelago remained below the surface. With the benefit of hindsight in 2016, we know that augmented reality came roaring back when the concept was reinvented in inexpensive way as apps for your cell phone and the world briefly went crazy with Pokemon Go.

In a similar way, there will not be a concrete moment of “disruption” due to Internet of Things o uberization of the economy. Instead, there will be a sequence of impacts in different areas, some significant, others that fizzle away quickly and the main challenge is not just to see the potential which tends to be diffuse over time but to be the first to find these islands of value.


Filed Under: Investment Attraction, Trade Facilitation

Andrei Vazhnov

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Follow Us

Subscribe

Search

Productivity and Trade

This space explores how trade, investment and sustainable development in strategic sectors can boost productivity and strengthen more dynamic, inclusive and resilient economies in Latin America and the Caribbean. From trade facilitation and export and investment promotion to entrepreneurship, the development of public-private synergies, agri-food systems and tourism, we address challenges and opportunities for growth in the region.

Related posts

  • How Blockchain Will Track Your Sneakers around the World — and Get Them to You Faster
  • How can we make digital trade more inclusive?
  • Women’s leadership in Latin America and the Caribbean
  • Making trade more efficient with blockchain
  • TECHNO-INTEGRATION IN LATIN AMERICA

Categories

Footer

Banco Interamericano de Desarrollo
facebook
twitter
youtube
youtube
youtube

    Blog posts written by Bank employees:

    Copyright © Inter-American Development Bank ("IDB"). This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives. (CC-IGO 3.0 BY-NC-ND) license and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed. Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC- IGO license. Note that link provided above includes additional terms and conditions of the license.


    For blogs written by external parties:

    For questions concerning copyright for authors that are not IADB employees please complete the contact form for this blog.

    The opinions expressed in this blog are those of the authors and do not necessarily reflect the views of the IDB, its Board of Directors, or the countries they represent.

    Attribution: in addition to giving attribution to the respective author and copyright owner, as appropriate, we would appreciate if you could include a link that remits back the IDB Blogs website.



    Privacy Policy

    Copyright © 2025 · Magazine Pro on Genesis Framework · WordPress · Log in

    Banco Interamericano de Desarrollo

    Aviso Legal

    Las opiniones expresadas en estos blogs son las de los autores y no necesariamente reflejan las opiniones del Banco Interamericano de Desarrollo, sus directivas, la Asamblea de Gobernadores o sus países miembros.

    facebook
    twitter
    youtube
    This site uses cookies to optimize functionality and give you the best possible experience. If you continue to navigate this website beyond this page, cookies will be placed on your browser.
    To learn more about cookies, click here
    X
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
    Non-necessary
    Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
    SAVE & ACCEPT