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E-World Equilibrium: Are We There Yet?

This product image was provided by amazon.com Inc., shows the Kindle 3 reader. Since April 1, Amazon sold 105 books for its Kindle e-reader for every 100 hardcover and paperback books, including books without Kindle versions and excluding free e-books. (AP Photo)

No, and we won’t be anytime soon. Thing is, people have been talking about the Internet taking over from traditional newspapers, printed books or even your hand-written love letters. Yes, there’s some truth to that. Almost all mainstream media are now online entirely or as an add-on to their print stuff.

Some famous bookstores are going bankrupt as more and more people buy the Kindle version of their favorite reads. In the music industry you can buy individual songs at a discount price, without having to suffer through traffic jams to get to the otherwise beloved record store. So we hear complaints about companies closing down, laying off workers. A dramatic change is in progress, yes.

But not so fast, as in killing the traditional media? It really depends on creativity (what doesn’t?). After the dotcom bubble burst, some companies were gone, some remained. The equilibrium was filled with giants like Google and Yahoo. Increasingly, Amazon.com crawled into virtually every single household with the Internet and a credit card.

First, we bought books online: choose the book, enter the credit card details and wait for the postman at home. Then one day, less than four years ago, the company brought us Kindle, the e-book reader: we picked a book from the catalog, and within minutes we were reading it on our device. The explosion, however, did not take place until Apple joined in with the iPad, three years later. I wasn’t particularly thrilled by the iPad, until it signed a deal with Amazon: you can read kindled books on it. Life is good.

Competition matters. Barnes & Noble was quick to launch Nook, its e-book reader, some healthy competition for Kindle (and later, iPad). Other companies also found their comparative advantage in the supply chain: Condé Nast, Zinio, et cetera. But Borders was less lucky. It introduced its own e-reader, Kobo. It didn’t fly, though, and now the otherwise great bookstore chain has filed for bankruptcy. (I was sad as I read the news, for at least one-third of my dissertation was written in a Borders’ coffee shop, interspersed with reading magazines and listening to the latest records).

So why the fuss? Why do we hear complaints? Isn’t this e-nization of everything a good thing? Consumers everywhere are happy (even legislators, so I hear). Producers find new niches: online stores, e-vouchers, software and what not. But yes, some businesses are unfortunate. Borders is a case in point. But there are a lot more out there, smaller, unheard of, that are suffering too. One of my favorite music stores in Jakarta is now gone. The same thing happened to a nice little store selling used books in Champaign, Illinois. (The owner, an old friend, e-mailed me: “What do you expect, our used books are way more expensive than the kindled version!”)

I’m glad to learn that my friend the used-bookstore-owner now works for a local art company. I’m less concerned about big companies — many of which are part of conglomerates — that are forced out by competition in the e-world, as I’m pretty sure they’ll find a new game to play. Some of them were simply not efficient and hence deserved to be replaced. Yes, they usually spoke up before giving up, but isn’t that normal?

In 19th century England, the Luddites destroyed textile machines in order to save workers from the competition — or so they thought. Frederic Bastiat ridiculed French protectionism by writing a parody petition asking for protection for candle makers from their main competitor: the sun. So, this rejection of everything Internet should be familiar to history’s ear. But everybody benefits from advances in technology, though not in the same instance.

What is taking place is, I think, merely a process toward a new equilibrium. That is, a new state where we do things mostly online. By mostly, I mean not everything. There are things that are arguably better in their current forms. Public libraries with real books for children in poor regions are one example. And we don’t need to burn books, do we? As public schools in New York City go iPad, maybe tangible books can find their way to someplace useful: the shelves of public libraries in African cities.

Or in Indonesia. Despite our often-cited status as a top user of the Internet and all its social networks, we still lack books (or more precisely, the motivation to read books). Real books — as the competition apparently hasn’t pushed the price of tablets low enough. But for sure, prices are going lower, not higher. And by that time, we will face yet another new game.

Cafe Salemba started as a blog in 2005 by University of Indonesia economics students Arianto Patunru, Ari Perdana, Rizal Shidiq, Firman Witoelar and Sjamsu Rahardja. After continuing their work and study in different schools on different continents, they remain committed to making economics and the logic behind it fun to read. We are pleased to host the new Cafe Salemba.