The digital revolution and the State

The Digital Revolution was fostered and funded by the state, specifically the American Department of Defense. It has now matured beyond any need for continued state sponsorship. In fact, is now challenging state authority as it disrupts established markets and their supportive ecosystems of regulations. Digital entrepreneurs need to study the institutionalized history of the markets they are addressing as their technologically friction-free services encounter economic, regulatory, and cultural frictions that slow down deployment (and, incidentally, threaten the valuation of the Unicorns). Moreover, the digital revolution is far from over: its partial and incremental implementation helps explain the “productivity puzzle,” as was the case with electrification 100 years ago. Finally, access to big data has generated a new engine of monopolization, since more data means better service and better service provides access to more data. Along with the role of social media in undermining the integrity of political process on which state legitimacy rests, this inevitably creates demand for regulatory responses that remain more visible in Europe than in the United States.