How Cloud Computing Could Change Consumption and Our Economy

My friend Conor Sen‘s piece on consumption in the cloud (See 2012: The Year of Cloud Consumption?) offers some things that are sorely lacking in the discussion of our current social and economic environment: Originality and, dare I say it, optimism.

That’s not an easy thing to do when the prevailing topics of discussion are Europe, Occupations, elections, and everything else that’s gloomy. It’s all become a well-rehearsed Broadway show by now because we’ve been doing it so often for so long. We know all the songs, the dance numbers and lines by heart…



It’s no wonder some of us feel like we’re finished with all of this (See Five Things You Need to Know: I’m Finished). We want something new to get us excited. Something. Anything. Just don’t make us do that stupid dance number again with the heinous choreography we once thought was so unique to perform but is now totally ubiquitous and unimaginative.

Cloud-based consumption may be that new project we’ll want to sink our teeth into. Truth be told, it has been around for some time now (think of the terms “e-commerce,” “m-commerce,” or “digital commerce”). But it has really needed a spark to set it in motion as a disruptive force, and this last recession – and its associated recovery – may just be the thing it needs.
 
There are two ways to think about consumption in, or with the help of, the cloud. There are cloud-based products that are digital/virtual in nature, or the cloud provides essential infrastructure to aid in the consumption of tangible stuff. Think of the proliferation of tablets and e-readers for a second. It’s possible now to not only store more books in digital form in a smaller space, but we can get more current, up-to-date content faster than we could via print, TV, or other legacy formats. All we need is a Wi-Fi connection.
 
But what can cloud-based consumption do in other domains, such as health care or education? Daniel Kraft, M.D., the executive director of FutureMed at Singularity University, discussed the future of health care with TechCrunch recently, and there were six themes that came out:

Kraft also has a great TED talk on this subject and brings it all together rather nicely in this video. Almost every single one of these big ideas is cloud-based or the cloud acts as a hub to bring people, suppliers, or data together to transform distinct pieces of the health care market.
 
This isn’t the stuff of the cutting room floor from Blade Runner or Minority Report. This is stuff that could be within our reach in a few years. How would these things impact us? Imagine if this graph flattened out or even started to come down. It’s the year-over-year change in the Consumer Price Index for medical care:
 

 
It could happen with the help of mobile apps, social networks, and Big Data focused on making health care more efficient and more effective. And there will be companies there to provide those solutions, and they’re going to need investors and capital to do it.

In short, this is one of those opportunities you wait for. A fat pitch right down the middle of the plate you know you can get the head of the bat on and possibly knock out of the park. But you have to be patient.

I, along with others, have my doubts about the current crop of Facebooks and LinkedIns. They’re cool and all, but they won’t do the real transformational stuff that we’re clamoring for.
 
Another area that cloud-based consumption can change is education. Peter Atwater sent me this link, which is just an FAQ for the actual release from MIT. But before I talk about the contents of the release, let’s take a look at the year-over-year change in the CPI for tuition and child care:
 

 
Year-over-year change is increasing. That’s a frightening prospect because questions of access and affordability do come into play at some point. It doesn’t do anyone any good to operate a market where the one buyer that can afford your product has no interest in buying it.
 
So, back to the MIT release. There are several things MIT is looking to do. From the release (emphasis, mine):
 
MITx will offer a portfolio of MIT courses through an online interactive learning platform that will:

• organize and present course material to enable students to learn at their own pace
• feature interactivity, online laboratories and student-to-student communication
• allow for the individual assessment of any student’s work and allow students who demonstrate their mastery of subjects to earn a certificate of completion awarded by MITx
• operate on an open-source, scalable software infrastructure in order to make it continuously improving and readily available to other educational institutions.

Individualized learning, with online resources available in an on-demand, open-source, scalable infrastructure that will cost a fraction of what it costs today. And this isn’t some no-name university that is doing this, this is MIT. If a similar model were used en masse, you could say definitively the education cost curve would be more than bent; it would be broken.
 
But how does this get reflected in GDP that has been built around the idea that you add value by consuming resources continuously? To go back to our print media example, you need paper, ink, labor to put it all together, trucks to ship it out on, and stores to sell it in. What good is all of that physical stuff after content gets beamed over a wireless network in a continuous stream of 1s and 0s? It isn’t.
 
The same can be said for companies in these spaces that will lead the way forward. They’re not big S&P 500 names. Most, if not all, won’t have multibillion-dollar valuations. They’ll be much smaller than that. It’s like a Jedi mind trick; the companies that are powering the indices and doing IPOs are not the companies you’re looking for.
 
But they are out there. You just have to be willing to look in places you wouldn’t think of and think of our economy differently.