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John, I think your analysis on the downside is powerful, essentially that technology and innovation inevitably exert deflationary pressure, and that information technologies are more powerful in this respect than physical technologies. It's probably occurred to you, JSB and Lang D. that Marx pretty much predicted this a long time ago. What I find harder to grasp is how knowledge flow and pull will change this. I can see why this would be true in the case of an individual firm that takes a lead in these new of achieving productivity. But as these techniques inevitably become generalized across the economy the impacts on margins and returns will spread. Unless you believe that a handful of monoliths will rule these roosts. What we are seeing today is a lot of both. Massive deflation in specific markets (like media) and quasi-monopolies like Google and Apple that have managed to capture point positions. This raises some questions: - is the dominance of these quasi-monopolies sustainable? - if so, don't they do so at the expense of ROC across the rest of the economy (which means that average ROC will continue to decline) - if not, won't average ROC decline anyway, as the methods of the knowledge-stock pioneers become generalized?
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Apr 19, 2010