Unravelling what awaits us in 2022- On Network-Based Economy

News:  India needs to update many of its governance laws so that India does not miss this epochal shift to a network economy.

Contrary to what many believe, Industry’s success is not dependent on economies of scale. Rather, the most important factor in the industry’s success in the network age is connectedness.

What matters in the network age is whether the “node” of your activity is “linked” to other nodes that matter in the space of your activity. For example; there can be nodes who are securities traders, their major links will be with fellow securities traders, which may be innocent. However, there can be links with nodes who are powerful corporate executives who then pass on insider information for trading.

Thus, network analysis becomes significant for the Securities and Exchange Board of India to spot insider trading.

Why the government should update many of its governance laws?

In the era of the network economy, the power of technology can be leveraged to affect competition between industries. For Instance,

Currently, large US and Chinese tech companies in e-commerce, social media, and fintech are reporting enormous losses in their Indian operations. However, they are applauded for their large-heartedness and for the foreign exchange they bring into India.

But a network-era-based analysis will reveal the true nature of these actions. They are “subsidising” one side of the network (it could be customers or suppliers) to gain market share, and thus abusing the system.

Source: This post is based on the article “Unravelling what awaits us in 2022” published in Business Standard on 3rd Jan 2022.

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