by Archie M. Richards, Jr., CFP^®
January 21, 2002

Some people consider the New Economy a bust. After all, more than 400 Internet companies have bit the dust. Enron, whose market value was once the 7th largest in the United States, transformed itself from an old-line utility to an Internet company, only to become America's biggest corporate failure.

Appearances are deceiving. In truth, the New Economy is a raging success. Its continued success will power stock prices to new highs.

Last year, Internet traffic tripled (some say quadrupled), and email messages numbered an incredible 3.5 trillion. No recession there! In a mere six years, three billion publicly-available Web pages have been created.

The Internet is helping corporations become smaller and more efficient. Formerly, companies were inclined to own their own suppliers, to cut the costs of negotiating prices and to mesh their various processes together more flexibly. At one point, for example, Ford Motor owned steamships, power plants, forests - almost everything essential for building the automobiles of the day.

Because of improvements in communication, companies can now find their suppliers on the Internet and negotiate prices all they please by email. They no longer need to mesh so many processes together, because they're focusing on what they do best and outsourcing the rest.

Famed management consultant Peter Drucker pointed out that the only parts of a corporation that are essential are innovation and sales. Everything else, he said, can be parcelled out to other companies, including manufacturing, transportation, human resources, and accounting.

Companies are following suit. IBM, a computer company, is arranging for another firm to manufacture its computers. BMW, an automobile company, is hiring another firm to assemble its cars. Boeing no longer refers to itself as an aircraft maker; it's a "systems integrator." The Internet is helping companies break into smaller pieces and partner with others to perform functions they once performed less efficiently themselves.

Other new technologies are helping as well. Printing machines, for example, used to be too expensive for consumers to own. Now, high-quality printers sit on the desks of consumers by the millions. As machines slim down, companies do too, becoming all the more profitable.

Enron didn't fail because it joined the New Economy. The company invented highly successful Internet platforms on which energy suppliers could buy and sell futures contracts on electricity and natural gas. These platforms, which continue being utilized by other companies, have cut energy costs for everyone. Enron's collapse has caused nary a spike in energy costs. The company's contribution to the Internet didn't cause its failure. Instead, Enron misled the public about its debt. Corporate deception is already illegal; no new regulations are needed, thank you.

By making knowledge available more widely, the Internet cuts cost and improves the quality of life. When I entered "home schooling" on my Google search engine, I was offered 485,000 potential sources of information in less than a third of a second.

Only 30 percent of publicly-available Webpages were built by businesses. The rest (such as a Website I happen know well, www.archierichards.com, where more than 100 newspaper columns are archived) are willing to share their knowledge and passions for nothing. The greater the dissemination of knowledge, the healthier the economy.

Want to travel? Get your tickets cheap at Travelocity.Want to trade? Try eBay.com or LetsGoTrade.com. Want expertise for free? Look at yardcare.com or knittingpages.com. Even if a Website is created by a company that has something to sell, no goon squads will knock down your door to force you to buy.

As the Internet and other technologies continue to advance, people work in ever smaller groups and feel more and more empowered as individuals. Eventually, the U.S. Congress will follow suit, by stopping the growth of government and freeing individuals from so much government interference. I look for Congress to introduce more individual choice to education, for example, by implementing educational vouchers and encouraging home schooling. Such changes would benefit everyone.

Advances in high-tech and the Internet will be positive for technology stocks and the stock market. The reorganization of production into smaller, more efficient groups and the advancement of individual liberty will escalate stock prices to levels we now can hardly dream of.