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Krugman is wrong about the internet. Again.

Remote work will do to the office what e-books did to stores. And that's bad news for most cities and offices.

Dror Poleg
3 min read
Krugman is wrong about the internet. Again.

In 1998, Paul Krugman shared his thoughts about the future of the Internet:

"The growth of the Internet will slow drastically... most people have nothing to say to each other! By 2005, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's"

This ridiculous prediction is premised on a brilliant analogy: The fax machine made it easier for people to share more written stuff, but it turned out people just didn't have anything interesting to share. Why wouldn't the Internet uncover a similar dearth of content?

Things ended up a little differently. The Internet enabled people to express themselves in multiple ways — way more than the fax — and led to an explosion of human interaction and content creation. Krugman's fax analogy's logic was correct, but it (and he) suffered from a failure of imagination.

This week, Krugman is once again prognosticating about the Internet. This time, he's sharing his predictions about remote work. And just like his fax prediction, he uses a historical analogy that is both brilliant and misguided.

This time, Krugman compares going to the office to going to the book store:

"A decade ago many observers believed that both physical books and the bookstores that sold them were on the verge of extinction. And some of what they predicted came to pass: e-readers took a significant share of the market, and major bookstore chains took a significant financial hitBut e-books' popularity plateaued around the middle of the last decade, never coming close to overtaking physical books. And while big chains have suffered, independent bookstores have actually been flourishing."

Krugman ascribes the "limited" growth of e-books to the difference in the digital and physical experience:

"...browsing a bookstore is also a different experience from purchasing online... online, I can find any book I'm looking for... But what I find in a bookstore, especially a well-curated independent store, are books I wasn't looking for but end up treasuring."

This is a familiar argument: Online interactions are "efficient" but they do not enable the type of discovery and serendipity that drives true innovation. People can "do what they're told" remotely, but they can't bump into colleagues or come up with new things they should be doing, even without being told.

This argument is logically sound, but just like the "internet-is-a-fax", it suffers from a failure of imagination. For a growing number of people, the dynamic that Krugman describes is precisely the opposite. At the office, you "find what you're looking for" and "do what you're told". Remotely, you figure out your own way to get things done, experiment with new tools, and — yes — spend time "idling" on Twitter/Discord/etc. where you're exposed to actual new ideas and people. Sometimes, these ideas and people lead you to build completely new products and companies.

Krugman is also wrong about e-readers. Their users are not simply "getting what they're looking for." An e-reader allows you to try multiple books for free and recommends new and obscure titles. Used in conjunction with other tools (Twitter, ReadWise, GoodReads), an e-reader allows you to share, discover, and remember insights in ways that are not possible with a physical book.

Krugman also overlooks the meaning of his own argument: Even if he's right, the implications of remote work for cities and offices are dramatic. About 20% of books are currently sold online. Following this "limited" impact, thousands of physical bookstores have shut down over the past two decades, and the two largest incumbents went into full or near bankruptcy. More broadly, the share of actual reading shifted away from books and is now done mostly online on websites and emails (not to mention podcasts).

Seen with clear eyes, the story of physical bookstores should offer little comfort for mayors and landlords. It entailed two decades of turmoil, followed by a revival of small, independent, and unique destinations — words that don't describe most large office buildings or megacities.

Eighteen years after his internet-is-fax comment, Krugman tried to defend his prediction by saying it was only made to "provokoe thought" and that, anyway, no one should have taken him seriously since he was venturing outside his area of expertise:

"I don't claim any special expertise in technology -- I almost never make technological forecasts, and the only reason there was stuff like that in the 98 piece was because the assignment required that I do that sort of thing."

We'll leave it at that.