The Internet literally takes time out of doing work (chrono-suction?) by eliminating all the queuing costs of collecting information and communicating with others. These wasted bits of time that are sandwiched between all the truly useful things we do in our lives represent a tremendous waste of energy. At one point long ago, it took months for a letter to make one round trip between New York and London to clarify a business idea. In the meantime, people on both sides of the Atlantic sat around aging. One day last week I had five email round trip conversations with man in Singapore in one day without interrupting my regular work.

In the same way that compression software squeezes the empty space out of computer files, the Internet squeezes the waiting time out of our lives. Analytically, this should have the same beneficial effects on the economy as an increase in our effective life span. We will get more useful things done in our life times.

Leonardo da Vinci lived to be 70 years old. Out of Leonardo’s 70 years, I will bet he spent 30 of them metaphorically walking to the library. He had to wait to get information, wait for answers when communicating with people and wait to receive the materials he needed to create his wonderful works of art. Delays in communication and transportation interrupted every aspect of his life. That means he had an effective, or productive, life span of only 40 years.

What could Leonardo have accomplished if he had lived for another 30 years? What paintings, what sculptures, what inventions would we have today if Leonardo had been able to devote his time to better use? Real-time communications has increased the ceiling on the amount of experience, information, knowledge and useful work that a person can accumulate and use in the three score and ten years we have to make our mark.

Taking the time out of business also takes the need for capital out of business. The Austrian economists wrote about capital as a means of increasing the roundaboutness of production. We need capital to feed the fisherman and his family while he takes time away from catching fish to produce a net that will improve his productivity later. This method of fishing, by first building a net, is more roundabout, i.e., takes longer, than using a fishing pole today, but it is more productive. Capital is a way to bridge time.

If you don not need time, you do not need capital. The Internet is radically decreasing our need for capital, driving real interest rates lower at a given level of output. Conversely, real-time communications are increasing the level of economic growth that we can produce with our current stock of capital. That’s why, for the past four years in a row, the economy has grown at about twice the rate the economists had predicted.

The explosion of the Internet means more growth, lower interest rates, and higher stock price multiples than traditional analysis would suggest. Whether we own Internet stocks or not, the Internet phenomenon will have a positive impact on all of us.