What the App Economy Can Teach the Whole Economy

The lessons from an infant industry, including the power of cooperation and importance of regulating with a light touch

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Android, apps, iPhones, Angry Birds, iPads, FarmVille, data contracts: It's a bit jarring to realize that these terms, so familiar today, only date back five years. The introduction of the iPhone in 2007, and the initial distribution of Android the same year, marked the birth of the App Economy.

But the App Economy didn't just mean more fun games and more ways to do work on the go -- it meant more jobs as well. Based on research I did for Technet, the association of high-tech innovative companies, the App Economy has generated nearly 500,000 jobs since 2007. This is an impressive total, especially during the worst labor market downturn since the Great Depression. It's also an indication of the growing macroeconomic impact of the App Economy.

We can draw three lessons from the success of the App economy to help us understand how we can drive prosperity forward.

Innovation creates jobs. Nobody conceived of the idea of 'apps' before the iPhone was introduce in 2007, followed by the opening of the Apple App store in July 2008. But suddenly it turned out that there was a pent-up demand for light-weight applications to run on mobile devices and platforms, and a pent-up supply of programmers to create these light-weight applications.

The resulting explosion of creation and entrepreneurship has produced a wide variety of new products, revenues, businesses and--amazingly enough--jobs. Even as overall national employment has shrunk, the need to create, market, and maintain apps has become an entirely new source of jobs.

Historically, industries that are job leaders during recessions tend to drive the expansion that follows. Once again, we confirm that innovation creates jobs in ways that cannot be anticipated beforehand. This is the future of industrialized countries.

Cooperation matters. Apple created the original iPhone and app store, of course, under the leadership of the late Steve Jobs. But in a larger sense, Apple could not have accomplished its breakthrough without the essential contributions of a wide variety of other players.

Key members of the "team" included the telecom providers. In the past year alone, AT&T and Verizon have invested $36 billion to beef up and maintain their networks, in large part to handle the data demands imposed by the burgeoning use of apps.

Similarly, apps are more useful because of access to information and services produced by other companies. For example, apps that run on the iPhone and iPad can access data from Google Maps, deriving benefit from Google's investment in cartographic data. This is despite the fact that Google is the main player behind the Android mobile operating system, the principal competitor to Apple's iOS.

The success of the App Economy shows that innovation and job growth requires the cooperative contributions of a team, even if all the players don't have the identical interests.

Light-touch regulation is important. The key elements in the App Economy "team"--Apple's development of the iPhone, Google's development of Android, the buildout of wireless networks by AT&T, Verizon and other providers--were not the object of heavy government regulation. Government did have a role in unlocking and distributing spectrum and otherwise clearing the underbrush. But no government agency was in charge of supervising the burgeoning App Economy.

Is more regulation needed? Given that App Economy companies are creating jobs and investing in the United States economy during a period of economic weakness, there's an argument for not messing with success. Government agencies should restrict themselves to 'light-touch' regulation of the App Economy unless there's real problems in the market.

Nobody could have predicted the rise of the App Economy before it happened. It's the rarest of birds these days -- unexpected good economic news -- and we should draw the right lessons from its success.

More comfortable online than out partying, post-Millennials are safer, physically, than adolescents have ever been. But they’re on the brink of a mental-health crisis.

One day last summer, around noon, I called Athena, a 13-year-old who lives in Houston, Texas. She answered her phone—she’s had an iPhone since she was 11—sounding as if she’d just woken up. We chatted about her favorite songs and TV shows, and I asked her what she likes to do with her friends. “We go to the mall,” she said. “Do your parents drop you off?,” I asked, recalling my own middle-school days, in the 1980s, when I’d enjoy a few parent-free hours shopping with my friends. “No—I go with my family,” she replied. “We’ll go with my mom and brothers and walk a little behind them. I just have to tell my mom where we’re going. I have to check in every hour or every 30 minutes.”

Those mall trips are infrequent—about once a month. More often, Athena and her friends spend time together on their phones, unchaperoned. Unlike the teens of my generation, who might have spent an evening tying up the family landline with gossip, they talk on Snapchat, the smartphone app that allows users to send pictures and videos that quickly disappear. They make sure to keep up their Snapstreaks, which show how many days in a row they have Snapchatted with each other. Sometimes they save screenshots of particularly ridiculous pictures of friends. “It’s good blackmail,” Athena said. (Because she’s a minor, I’m not using her real name.) She told me she’d spent most of the summer hanging out alone in her room with her phone. That’s just the way her generation is, she said. “We didn’t have a choice to know any life without iPads or iPhones. I think we like our phones more than we like actual people.”