Why the Internet is As Important to Our Recovery As the Stimulus Package

I am optimistic that we will have the most innovative decade that this country has ever seen, and it is largely due to the fact that the internet has allowed the minimum efficient scale of starting a new business and scaling that business to be lower than ever before.  Couple this with the fact that the vast majority of jobs in this country are created by small businesses, and you begin to see the possibility of a groundswell of innovation. What we have in this economy is a huge amount of talent that is in search of work, and even though capital is tight right now, it is possible to rent infrastructure - from Salesforce.com to broadband.  Threadless, the famous t-shirt company, sources designs first, and then demand - getting rid of all the traditional risk in the apparel business.  Like Harry Potter's book sales, there is a natural "pre-creation" demand which lowers risk and allows scaling.  Threadless's marketing, ordering infrastructure and customer service all ride on the internet.

Small businesses are twice as likely to use blogs and social marketing to promote themselves.  I have written before about the power of peer to peer lending - which differentially helps smaller borrowers and businesses.  In short, I'm optimistic because the United States has always had two great assets: immigrant talent at a scale and quality unknown to the world ever before and the most liquid market not just in capital, but more importantly in business models.  That is, we are willing to allow existing business models to be pulled apart by innovation.  this means that we have a constant supply of hungry, smart entrepreneurs, who are allowed to challenge the status quo - who now can find it cheaper and easier to start and scale.  It is a powerful combination, and the one that I think will be the real engine to take us out of this malaise.

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