Where do you want to play? Where the economy used to be or where the economy is going?

Today asset manager James Altucher writes in Wall Street Journal that The Internet is Dead (As An Investment). There has already been a solid response, most notably from venture capital investor Fred Wilson, writing The Internet is Alive and Well (As An Investment), as well as posts from HipMojo, Stephen Arnold, and Elias Bizannes.

The nub of Altucher’s argument?

1. “Internet companies now should be treated, at best, like utility companies” such as electricity.

2. “Nobody can figure out a business model.”

Given a six-month timeframe, which Altucher seems to be taking, these arguments could be valid. However moving beyond that, it is delusional to think that the Internet will not:

a) continue to transform existing industries, as it has for more than a decade;

b) create value both in current forms and new ways.

There is no question that most investors would prefer to invest where there are clearly understood, long-established business models. However just because business models are rapidly evolving and changing in a new space doesn’t mean that there won’t be massive value creation. In fact, given that an increasing proportion of economic activity is shifting into ‘virtual’ activities, we have every reason to believe that that’s where a large proportion of long-term economic growth will be centered.

It will be a hairy ride for those on board, no question about it. In return I expect we will get what in economic jargon is known as ‘supernormal returns’. Either way, I know where I’d prefer to play.