Larry Cheng has a post a few days ago listing the decade-by-decade returns of major US financial indices.  Here are the returns from 2000 to 2010:

S&P500: -2.9%
DJIA: -0.5%
NASDAQ: -5.7%

I am not an Economist so I will not comment on the first two numbers, except that, as Larry also notes, it's much more difficult to count on 6-8% returns from the stock market that we've been taught to assume.

However, the NASDAQ number does make me think.  2000-2010 was the decade in which we saw the biggest breakthroughs in the connected economy.  In this decade, we saw:

1. The maturing of Google as the precursor of the connected OS.
2. The enormous drop in the cost to test ideas by creating lean startups.
3. The emergence of video over IP, with Youtube (Google) streaming more than a billion videos a day now.
4. The creation of the first attempts to own the identity layer of the connected economy, with Facebook and Twitter.
5. The blockbuster hits of digital media consumption hardware, with the iPod and perhaps the Kindle.
6. The biggest milestones of the mobile computing convergence: the iPhone and Blackberry.
7. The breaking of stale structures of content creation and distribution, through blogging and social media.
8. The availability of almost-free voice communication with Skype.
9. The power with which customers of content innovate to get to content of their choice, legally or otherwise, at minimal cost, represented by the torrent universe.

Each of these areas represent enormous leaps forward in utility and value.  Yet, the financial proxy for these innovations, arguably NASDAQ, is down for the decade.  My explanation for this is the inefficiency of the index in representing this value.

The individual stock prices and market capitalizations may be less and less relevant in accurately representing the value these companies will generate.  How do you value a record label during a seismic shift in how digital content is consumed? How could we have been able to predict the impact of iPhone, Kindle, or Google in our lives, before these products are launched?  This problem cuts both ways.  It can over or under-represent a technology/media company's value.

My point is that we are coming out of a decade of giant leaps forward in the connected economy.  The reflection of this massive creation of value and decrease of friction will have to be represented in dollars and cents.  Apparently, it is not being reflected in NASDAQ just yet.  Maybe it will catch up, or manifest itself through other measures. However, I continue to be very bullish about the economic implications of the connected economy.