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Part 3: the new economy > the new economy is here to stay

Chapter 22. the new economy is here to stay

Of course, not everyone buys this. In spite of James Dyson's sound advice, a lot of people still wear suits. The Fortune 500 still wield some power. Some see the new economy as a mirage — a caffeine-induced hallucination; little more than a speculative bubble. This is wishful thinking on their part. Responding to recent concerns that the .com bubble might burst, Harvard's William Sahlman is bullish. Concerns about the "irrational exuberance" of the capital markets and inflation, raised by the Federal Reserve, are unfounded, he says. The only danger is from government interference. "Chicken Little told us that the sky was falling. Alan Greenspan and his cohorts at the Fed believe it just might ... I'm here to assure you that Chicken Little and Alan Greenspan have a lot in common; they fret for no good reason," says Sahlman.

The reality, he says, is that the sky — that is, the US economy — is just fine, thank you. In fact, it's never been better. And it will stay that way for many years to come if the government just manages to stay out of its way. The new economy, in Sahlman's view, is strong for four very good reasons. First, it is based on a business model that works — one that continually ratchets up efficiency. The old American economy was characterized by bloated companies protected by carefully constructed entry barriers, which was fine until the 1970s when foreign competitors descended on the party like locusts. The results were large-scale redundancies and a great deal of perplexed head scratching. The tough times of the 1970s, though, planted the seeds for the entrepreneurship of today, says Sahlman. The new model was invented by people like Bill Gates and Michael Dell — and is being continuously reinvented by new arrivals. Its great virtue is that it encourages efficiency. "Any model that relentlessly drives out inefficiencies, forces intelligent business process reengineering and gives customers more of what they want is bound to be sustainable," Sahlman contends.


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