Don’t you hate it when one of your heroes says something stupid?
New York Times columnist Paul Krugman (above), a winner of the Nobel Memorial Prize in Economic Sciences, has long been one of my favorite pundits, and I’ve quoted him on numerous occasions.
But, of course, Krugman is as mortal as the rest of us and therefore is capable of the occasional foolish observation. One such example came to my attention this morning when I read THIS PIECE about the history of the Internet, which includes the following passage:
In 1994, when [Gary] Wolfe [of Wired magazine] extolled the commercial energy of the Internet, it was still largely devoid of commerce. To be sure, the big Internet service providers like America Online (AOL) and CompuServe were able to capitalize on what was quickly becoming a voracious desire to get connected, but for the most part, that is where business began and ended. Because few companies had yet figured out how to make money online—Amazon, which got in early, in 1995, didn’t make a profit for six years—the Internet was often seen as a playground suitable for youthful cavorting, not a place for serious grownups, especially not serious grownups with business aspirations. “The growth of the Internet will slow drastically [as it] becomes apparent [that] most people have nothing to say to each other,” the economist Paul Krugman wrote in 1998. “By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s…. Ten years from now the phrase information economy will sound silly.”
Here Krugman was dead wrong. In the first five years of the new millennium, Internet use grew 160 percent; by 2005 there were nearly a billion people on the Internet. By 2005, too, the Internet auction site eBay was up and running, Amazon was in the black, business-to-business e-commerce accounted for $1.5 trillion, while online consumer purchases were estimated to be between $142 and $772 billion and the average Internet shopper was looking more and more like the average shopper.
Meanwhile, entire libraries were digitized and made available to all comers; music was shared, not always legally; videos were made, many by amateurs, and uploaded to an upstart site (launched in 2005) called YouTube; the online, open-source encyclopedia Wikipedia had already begun to harness collective knowledge; medical researchers had used the Internet for randomized, controlled clinical trials; and people did seem to have a lot to say to each other—or at least had a lot to say. There were 14.5 million blogs in July 2005 with 1.3 billion links, double the number from March of that year. The social networking site Facebook, which came online in 2004 for Ivy Leaguers, was opened to anyone over thirteen in 2006. It now has 850 million members and is worth approximately $80 billion.