book.chapter New regulatory measures

Since the 1990s, the economy has been increasingly becoming more digitally interconnected, characterized by three key features: speed, connectivity, and intangibles. In this connected economy, the principles of wealth creation differ from those of a physical economy. Wealth is now generated through financial processes rather than physical ones. This shift has led to a greater emphasis on investments and cash flows over income and products. Wealth in a connected economy is accumulated in unearned assets rather than earned ones. Intellectual assets that promise future revenue streams are valued more than physical assets like factories that produce goods and services in the present. The distribution of wealth in a connected economy is also broader. Individuals and households that have sufficient discretionary income to invest will find that the income earned from these investments will constitute a larger proportion of their total income. This means that a wider segment of society will accumulate wealth in a connected economy, not just those who can afford to acquire large assets. Control of wealth in a connected economy has shifted to individuals from institutions. Individuals are now responsible for managing their own wealth, facilitated by easy access to high-quality financial information and professional services via the internet. The connected economy has also given rise to three new forces: the evolution of information into a rich and accessible resource that has led to the development of efficient markets for evaluating risk; the increasing scarcity and thus value of human talent and intellectual capital; and the growing mismatch between the social structures of the industrial era and those of the connected economy. These forces have led to three new rules that govern wealth creation in the connected economy. The first rule is that risk has evolved from a threat into an opportunity to create wealth. The second rule is that efficient financial markets will develop for everything, including human capital. The third rule is that new forms of social safety nets will emerge to support those who fail. These safety nets will encourage risk-taking, fostering an environment conducive to innovation and growth.