The digital revolutions we have experienced in the last few decades are nothing short of miraculous. In fact, the changes have been so dramatic that some have predicted the demise of physical commerce entirely. "The retail guys are going to go out of business, and e-commerce will become the place everyone buys," declared Netscape cofounder and venture capitalist Marc Andreessen. Author Brett King argues that branch banks are headed the way of book and record stores: "By 2016, the average user of banking services will be using digital services 300 times for every physical interaction with their bank." One can imagine similar arguments about entertainment (who needs movie theatres or concerts?), about routine medical services (the doctor diagnoses your condition through remote sensing and sends the prescription to your e-pharmacy), and even about the production and distribution of goods ("dark" factories and warehouses, staffed entirely by robots).
And yet, straight-line extrapolations of digital dominance miss some important insights. We humans are physical and social beings. We like to go out, to interact in person with other people, to touch and handle and make things. Besides, any straight-line extrapolation assumes that changes in the business ecosystem will continue predictably in the direction of the current curve, when in fact rapid evolution creates unexpected opportunities and new competitive dynamics. Look at movie theatres: People have been predicting their demise for nearly 70 years. In principle, we could easily watch all of our movies at home, streamed digitally to a big-screen TV. In practice, theatre owners and others in the business have devised a variety of attractions—better seating, innovative projection and sound technologies, full-service theatre-restaurants— to lure us off our couches. US theatre attendance has declined a little over the last decade, but it is still nearly three times as large as attendance at all theme parks and major sporting events combined. Profitable theatres will almost certainly coexist with more home viewing in the foreseeable future. You can’t watch an IMAX in your living room or on your mobile device (yet).
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