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12 Posts authored by: Andrew McAfee

For me, the best thing about [the 2015] World Economic Forum in Davos was an exposure to worldviews very different from my own. Professionally, I hang around mainly with technologists, entrepreneurs, businesspeople, and economists at American universities.


People within these groups certainly don’t agree with each other all of the time, or with me, but most of us do share some baseline assumptions on important topics. These include:

  • Creative destruction is good news. Better products take market share from inferior ones, more nimble and innovative companies displace slow and sleepy older ones, and entire industries — like those for cameras, film, and standalone GPS devices — can be swept away by something as simple as a smartphone. This process should be encouraged, even though it’s not pleasant for all parties involved, and even though it leads to job loss and worker dislocation.
  • Markets allocate better than bureaucrats do. Economist Alan Blinder put it beautifully: “I believe every mainstream economist sees the invisible hand as one of the great thoughts of the human mind… Throughout recorded history, there has never been a serious practical alternative to free competitive markets as a mechanism for delivering the right goods and services to the right people at the lowest possible costs.”
  • There is such a thing as too much regulation. Almost all of my colleagues would agree that regulation and licensing are necessary for protecting public health and safety (as Eduardo Porter pointed out: “I’m reassured that if I ever need brain surgery, the doctor performing it will have been recognized by the profession to be up to the task.”). But it can go to far. Studies have found, for example, that requiring licenses for too many jobs can hurt employment. And I have absolutely no idea why courts in some countries second-guess the names parents give their children (plus, I kind of like “Fraise”).
  • Business is not the enemy. It’s certainly not the case that companies always and everywhere do only good, or that in looking after their interests they inevitably advance our own. But they are the source of the great majority of the goods and services we enjoy, and they provide most of the jobs and wages. As they compete with each other to satisfy our needs and whims, they make our lives better.
  • The state can’t provide jobs to everybody. The totalitarian promise of centralized full employment couldn’t stand in the real world. The government’s proper role is instead to set up an economic environment that’s conducive to private sector job and wage growth. The vast majority of people I interact with would also agree that the government should provide a safety net for those who fall too far behind, and to take care of orphans, the mentally ill, and other vulnerable groups.
  • We’re right about these things. Virtually all my colleagues believe that the statements above are no longer open for debate among serious people. Theory, experiment, and especially experience have shown that they’re correct.

Davos was a revelation for me because I came across serious, smart, and influential people who didn’t appear to accept these statements nearly as wholeheartedly as I do. And these people were not from strange or faraway lands (if there were delegations from North Korea or Cuba at the meeting, I didn’t come across them). Instead, they were from Europeans, my first cousins in the global family.


In Switzerland, I moderated an open forum session titled “Employment: Mind the Gap?” I was the only American on stage, and there was only one representative from the private sector on the panel. Two European trade unionists, a French economist, and the prime minister of Sweden (himself a former trade unionist) made up the rest of the speakers.


I found the discussion fascinating because once we got past the initial uncontroversial remarks (yes, education is important; yes, we must all work together…) we got into a conversation about the right way to mind the gap. As it unfolded,

I came to the conclusion that the majority of people on stage did not share my economic worldview as expressed in the statements above. Instead, they seemed to believe much more strongly in government planning, programs, and protections as the best way to ensure good jobs and wages. And they seemed willing to sacrifice some flexibility, decentralization, and innovation — perhaps a lot — in the pursuit of stability and prosperity for workers.


I pointed out that economic data from the European continent in recent years was not encouraging for this economic worldview, and my onstage popularity as a moderator dipped sharply. Panelists responded, correctly, that this was in part because of differing responses to the Great Recession. They seemed less willing to engage with the idea that it might also be because several European countries were trying to fight the uncomfortable dynamism of today by making sure those who had jobs yesterday would not lose them.


In case I wasn’t clear enough in Davos, let me be clear here: I don’t think this will work. To paraphrase Churchill, countries today have a choice between turbulence and anaemia. If they choose anaemia, they will still have turbulence.



This blog first appeared on FT.com Jan. 29, 2015 here.

In his important recent essay “The Return of Nature”, Jesse Ausubel of Rockefeller University, highlights a wonderful phenomenon: we humans have been giving land back to nature, since we no longer need it for our purposes. Even though the world’s population continues to increase, we have in all likelihood past the peak for farmland; the number of acres under cultivation globally has been slowly declining, and will continue to do so. Forest loss also appears to have been reversed in recent years, and our use of natural resources such aluminium, copper and timber is decreasing over time.


The article’s subtitle, “How technology liberates the environment”, identifies why this is. Software, sensors, data, autonomous machines and all the other digital tools of the second machine age allow us to use a lot fewer atoms throughout the economy. Precision agriculture enables great crop yields with much less water and fertilizer. Cutting-edge design software envisions buildings that are lighter and more energy efficient than any before. Robot-heavy warehouses can pack goods very tightly, and so be smaller. Autonomous cars, when (not if) they come, will mean fewer vehicles in total and fewer parking garages in cities. Drones will replace delivery trucks. And so on.


The pervasiveness of this process, which Mr. Ausubel labels “de-materialization,” might well be part of the reason that business investment has been so sluggish, even in the US, where profits and overall growth have been relatively robust. Why build a new factory, after all, if a few new computer-controlled machine tools and some scheduling software will allow you to boost output enough from existing ones? And why build a new data centre to run that software when you can just put it all in the cloud?


One strong piece of evidence in support of the de-materialization hypothesis is the fact that while overall business investment has been in the doldrums for a while, U.S. corporate investment in software is near an all-time high. It was at 1.824 percent  of gross domestic product in the second quarter of 2015, very near its previous peak of 1.837 percent in Q1 2001, when a combination of Y2K paranoia and dot-com hysteria caused a sharp and unprecedented spike in software spending.



There’s no spike just this time — just a pretty steady increase in the software intensity of the economy. I bet it will continue, and continue to drive de-materialization. If your business is based on selling lots of atoms, this might not be happy news for you.



This blog first appeared in FT.com on Sept. 29, 2015 here.

I recently got invited to speak at Brooklyn 1.0, a conference of “design, people and technology” to be held this autumn in the borough that is New York City’s hipster hothouse. I accepted because preparing for the talk would force me to think more about an important topic: what’s up with the kids today?


The common answer at present seems to be something like, “Oh my, so much! The millennial generation is like none before it. The members of its tribe are more idealistic, more altruistic and more entrepreneurial. They’re already changing the world, and the best is surely yet to come.”


Breathlessness like this quickly activates my skepticism (and, if I’m being honest, my grouchiness). Haven’t we always been saying this about young people, and haven’t they always responded by, well, growing up? The Woodstock generation created and enjoyed the summer of love (lucky them) but then turned into the ageing boomers of today who, now that they are in charge, seem to be engaging in sclerotic politics, running rapacious companies and listening to bad music just like their fathers, and their fathers before them.


So what forces, if any, might prevent today’s millennials from becoming stodgy and conventional, and joining the System with demographic predictability?

The biggest [change]I can come up with is technological progress. Modern techs let young people live lives and create careers that were simply not possible a generation ago. This is already causing important changes, and I expect them to continue.


Let’s look at lifestyle first. This great video from Best Reviews shows how all the contents of a 1981 office fit into a laptop and phone in 2014. But even this underestimates the changes. A connected young person today can communicate endlessly around the world for free (OK, at zero marginal cost, which is close enough to the same thing). She can also maintain robust social and professional networks, and stay abreast of work conversations and workflow with tools such as Slack. If she actually needs to go somewhere it’s trivial to find and pay for a cheap flight, a non-traditional place to stay and a ride across town. There are also plenty of online marketplaces, both general and specialised, to help her find a job, at gig, a co-worker or a little help.


It’s possible, of course, to make too much of these developments, but I think the bigger mistake is to underestimate them. They combine to enable a life where the longstanding trade-off between fluidity and productivity is greatly eased.


Walter Frick provides the best evidence I’ve seen that young people are already changing the business world. He looked as carefully as possible at the ages of the founders of the so-called “unicorns” — private companies valued at more than a billion dollars. While there were a few holes in the data, Mr. Frick’s startling conclusion was that at least half the founders were almost certainly younger than 35 when they launched their companies. This is a remarkable amount of success and value creation among people who in earlier times would still have been at the beginning of their careers. Facebook’s Mark Zuckerberg is an extreme example of a more general phenomenon: the rise of young tech moguls.

We haven’t seen the last of them.

Large start-up communities around the world — from San Francisco to London, Berlin to Tel Aviv, Shanghai to Singapore — are buzzing with energy. And young technologists are doing much more than writing apps these days.


They’re biohacking, extending the blockchain that underlies bitcoin and learning to make almost anything. Pharma and biotech, financial services, and manufacturing will be at least somewhat shaken up by their work.


So the kids are, in fact, all right. I look forward to hanging out with them.




This blog first appeared on the FT site August 13 here.

A group I’m part of made a strong claim recently. A number of executives, entrepreneurs, and investors from the high tech industries, along with some economists (who tend to believe that technological progress is the only free lunch around) got together to draft an “open letter on the digital economy”.


One of our main goals with it was to advocate a set of policies to deal with the fact that, as we wrote, “the benefits of [the current] technological surge have been very uneven.” I’ve written about these policies before; they include education and immigration reform, infrastructure investment, and greater support for basic research.


But we also wanted to make the case that technology is not the enemy, and should not be demonized or thwarted. Hence our strong claim: “The digital revolution is the best economic news on the planet.”


To back this up I could cite a lot of relatively dry research about the quality and productivity benefits of technology investment by companies, or about the sustained and huge quality improvements and cost declines of digital products themselves. I could also refer to historical research about the big and positive changes brought on by previous technology surges such as steam power and electrification.


But I want to be more vivid than that. So to make my case I’m going to point to two pieces of research that looked closely and carefully at what happens when digital technologies arrive at the base of the pyramid — the billions of people living in the world’s emerging economies.


The first is a study I consider a classic: Robert Jensen’s “The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector,” published in 2007. [Mr] Jensen was able to document what happened when the fishermen in the state of Kerala got mobile phones for the first time in the late 1990s. As he puts it, their adoption “was associated with a dramatic reduction in price dispersion, the complete elimination of waste, and near-perfect adherence to the Law of One Price. Both consumer and producer welfare increased.”


This is circumspect economist-speak for “important things got much better, right away.”

The material conditions of people’s lives improved, and also became more predictable. And [Mr] Jensen’s work makes clear that this improvement was due to the phones, and not to any other factors like policy changes or increased aid.


The second is what we’re learning about mobile phone-based cash transfer programmes like GiveDirectly. Ample research shows that giving very poor people money, even with no conditions or strings attached, helps them greatly. They tend not to mis-spend it, and it leads to long-lasting positive changes in their lives. Mobile phones allow these transfers to go directly to intended recipients without middlemen; this keeps overhead low and reduces bribes and theft.


We’re making great strides toward reducing dire poverty around the world. The spread of ever-more powerful technology throughout the base of the pyramid will accelerate this — I believe more quickly than any other possible intervention.


So I’m confident in our letter’s claim that tech progress is the best economic news on the planet. It brings with it challenges that we need to acknowledge and confront, but so do all good things.



This post originally appeared in my Financial Times blog here. More on the letter --and its signers--can be found here.

January’s jobs report was so good that The Atlantic declared it to be ‘without a blemish.’ Job creation remained strong and wages grew as well. I agree that there was a lot to like about it, but it also strikes me that the enthusiasm it’s generated is a bit unsettling because it shows me how far our expectations have been diminished.


At first glance, job growth looks quite torrid. The New York Times noted that “Since Nov. 1, employers have hired more than one million new workers, the best performance over a three-month period since 1997.” This sounds a bit better than it is: we need to keep in mind that there are also a lot more Americans of working age now than there were in the 1990s, so we need to generate more jobs just to hold steady.


To see this, I used FRED to graph monthly job growth as a percentage of the working age US population:


Screenshot 2015-02-09 16.53.00


This graph shows a steady and encouraging upward trend since the end of the recession, but it also clearly shows that the rate of job creation has been well below what we experienced during the non-recession years of the 1980s and 1990s.


And even though the job news is good and getting better, labor force participation remains quite low by historical standards, and has been generally declining even since the end of the great recession:


Screenshot 2015-02-09 16.57.00


This decline seems to have leveled off over the past year, but there’s not much evidence yet that it’s reversing itself.

The more underwhelming trend is that of wage growth. Here’s year-over-year wage growth for the past few years:


Screenshot 2015-02-09 17.01.13


Here again, we see an uptick over the past year, but  only a small one.

Data for front-line workers goes back a bit farther, and shows that wage growth is significantly lower than it’s been in the past. These workers have also seen a pretty sharp wage growth decline over the past few months:


Screenshot 2015-02-09 17.05.28

So while the January employment news is unquestionably good, there’s still a lot of room for it to get better. When I look at the participation and wage growth rates, I get the impression there’s still a lot of slack in the labor force.



This post first appeared in my Business Impact of IT blog on February 10 here.

Facebook’s recent announcement that it’s readying a version of its social software for workplaces got me thinking about Enterprise 2.0, a topic I used to think a great deal about. Five years ago I published a book with that title, arguing that enterprise social software platforms would be valuable tools for businesses.http://ebusiness.mit.edu/images/enterprise.jpg


The news from Facebook, along with rapid takeup of new tools like Slack, the continued success and growth of Salesforce’s Chatter and Yammer (now part of Microsoft), and evidence of a comeback at Jive, indicates that the business world might finally be coming around to Web-style communication and collaboration tools.


Why did it take so long? I can think of a few reasons. It’s hard to get the tools right — useful and simple software is viciously hard to make. Old habits die hard, and old managers die (or at least leave the workforce) slowly. The influx of ever-more Millennials has almost certainly helped, since they consider email antediluvian and traditional collaboration software a bad joke.


Whatever the causes, I’m happy to see evidence that appropriate digital technologies are finally appearing to help with the less structured, less formal work of the enterprise. It’s about time.


What do you think? Is Enterprise 2.0 finally here? If so, why now? Leave a comment, please, and let us know.



This post first appeared on my Business Impact of IT blog November 20 here.


The November jobs report from the BLS was the most encouraging in a long time, because all three indicators of employment that I look at headed in the right direction. The employment rate (which is 100-the unemployment rate), the labor force participation rate (the percentage of adults who are in the labor force instead of sitting on the sidelines), and the employment-population ratio (the percentage of adults who have work) all ticked up by either .2% or .3%.


Another encouraging recent piece of news is the upward revision in America’s GDP growth rate for the 3rd quarter of 2013. It’s now estimated at 3.6% per year, which is a healthy clip.


Of course, these two happy trends are closely related. As Erik B. and I argue in The Second Machine Age (out in January, available for preorder now), the best way to grow jobs today is to grow the economy. Robots and AI are still far from complete substitutes for human labor, so if companies want to grow they’ll generally need to hire people. We’ve written about the unfolding ‘great decoupling‘ between economic growth and employment growth, but it’s not yet anything like a complete divorce, if it ever will be.


The jobs crisis is still far from over, however. To see this, all we have to do is draw two of the stats above over a long time scale:


FRED Graph


The employment-to-population ratio has hardly recovered at all from its plunge during the Great Recession, and the labor force participation rate has been on a steady and nasty downward trend since the economic slump started. It’s going to take a lot of work and a lot of time to get these lines on a better trajectory.



This post first appeared on my Business Impact of IT blog on Dec. 11 here.

A new study is out from the OECD about worker skills in many countries, and it ain’t pretty for the US.


Screen Shot 2013-10-23 at 2.56.29 PM

It examined literacy, numeracy, and problem solving skills among adults. Compared to other countries we’re not doing well in any of these, and as the New York Times summarizes:

Americans were comparatively weak-to-poor in all three areas. In literacy, for example, about 12 percent of American adults scored at the highest levels, a smaller proportion than in Finland and Japan (about 22 percent)…

American numeracy skills were termed “very poor.” The United States outperformed only two comparison countries: Italy and Spain… That Americans were slightly below average in problem solving using computers was especially discouraging.

Some countries are making progress from generation to generation. But in the United States, as in Britain, the literacy and numeracy skills of young people coming into the labor market are no better than those who are about to retire. Americans who are 55 to 65 perform about average in literacy skills, but young Americans rank the lowest among their peers in the countries surveyed.


To which I can only add, yuck. As we head deeper into the second machine age, we clearly need a highly skilled workforce, one with exactly the skills the OECD report finds lacking. America has the best-managed companies and most vibrant startup scene, but this is largely despite our educational system, not because of it.


We can’t kid ourselves any more that what we’re doing at all levels — from primary to college education — is working. It’s past time to start trying experimenting with new approaches, from flipped classrooms and mastery learning to MOOCs, doing solid research to understand what works, then scaling up these better answers.


Doing so is going to upset the status quo and threaten some incumbents (perhaps a lot of them), but these are small and necessary prices to pay for a smarter workforce, to say nothing of the more vibrant economy and healthier society that such a workforce will foster.

So let’s stop being complacent, and start demanding more.



This post first appeared on my blog, The Business Impact of IT, on October 23, here.

A new round of stats about the US economy have been released recently, and they tell a familiar ‘good news, bad news’ story. The good news is that both GPD (blue line) and corporate investment (red line) have rebounded well past their pre-recession highs (which are indexed to 100 in the graph).


I’d add lines for corporate profits as further good news, but they’d skew the graph too much: if total profits outside the finance industry equalled 100 before the Great Recession hit in December of 2007, they’re at 129.6 now. Including the financial industry, they’re at 139.3.


The bad news is captured by the green line, which measures how many people have jobs in America. This number is still not back to its pre-recession peak, which was almost six years ago.


FRED Graph


So companies are generating revenue in a growing economy, and spending plenty of it on gear while still making healthier profits than ever.What they’re not doing is hiring lots more people in order to grow revenues and profits.


A major reason for this, I believe — no, the major reason — is that technology and automation have advanced so much that companies in most (if not all) industries simply don’t need to be as labor-intensive as was was previously the case. To put it quite simply, the gear is substituting for the employees.

Erik Brynjolfsson and I discuss this phenomenon in our 2011 book Race Against the Machine. In our new book The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (out in January; available for pre-order now) we fit it into the larger trends of technology-induced economic and societal change. The Second Machine Age makes the point that while most of the news about this phenomenon is great, it will bring with it some labor force challenges.


One of these challenges is the fact that many people seem to be dropping out of the workforce in recent years. This is easy to see if we take our graph back further in time and add one more line to it: the black line below is the civilian labor force participation rate, or the percent of working age Americans who have work or are looking for it (once you stop job hunting, go back to school, or otherwise leave the labor force you’re no longer included in the black line).


Labor force participation has been declining with depressing steadiness since the Recession, and is now at 63.2%. It’s not been this low since the summer of 1978, when women had not yet entered the American workforce in large numbers.


FRED Graph


I wish I could see what’s going to make that black line change direction and start heading up. Economic growth and stellar corporate profits don’t seem to be enough. Any ideas what will be?



This post first appeared on my Business Impact of IT blog September 6 here.

Now that July 4 is past and we’re squarely in the heart of summer, I thought I’d share a few of the books I’m looking forward to reading between now and Labor Day. I know I’m forgetting a bunch of great ones, so leave a comment, please, and tell us what else should be on the list.


The Signal and the Noise, by Nate Silver. I’m embarrassed I haven’t read this one yet, especially since Silver is a geek hero of mine. I want to learn what he thinks about how to do prediction well (since few do it better) and how he sees human abilities combining with digital ones in this area. After reading the research of Paul Meehl, Daniel Kahneman, Ian Ayres, Phil Tetlock and others, I’m coming to the conclusion that people should really just ignore their intuition and go where the data take them (or, at most, offer their opinions / intuition as one more data input to the algorithm). I’m eager to see how much Silver agrees with this.


Startup Rising, by Christopher Schroeder. Schroeder has spent a lot of time recently in the Middle East, and distilled his thoughts and findings here. It looks like it’s going to be a lot more hopeful than most books about the region; Schroeder witnessed a great deal of entrepreneurial energy which, when combined with ever-greater access to technology, could be a big deal. Will the young, wired, and energetic people of the Middle East see their ambitions realized or thwarted? This book should help us get a handle on this critical question.



Doing Capitalism in the Innovation Economy, by Bill Janeway. This one is denser than the others on the list — I don’t think it’s beach reading — but should repay the effort. Janeway has a ton of first-hand experience watching technology and capitalism intersect, and has thought deeply about the phenomenon. I’m eager to learn what he’s concluded. Tim O’Reilly recommended this one to me, which is really reason enough to read it.




Mindset, by Carol Dweck. I met Dweck at this year’s Aspen Ideas Festival, and was intrigued by her description of her work. As she described it to me, the right mindset for success is not “I’m really smart” but rather “I’m really good at learning and adapting.” The former leads to fragility (“If I’m so smart, why did I fail at this?”), the latter to resilience (“That failure taught me something, and will help me not fail next time.”) Her work has deep implications for how we think about ourselves and educate our children.



The Immigrant Exodus, by Vivek Wadhwa. I reconnected with Vivek at the Ideas Festival, and was glad I did. He’s both smart and enthusiastic, rigorous and relevant. Immigration is one of the topics he’s done work on, partly in collaboration with Annalee Saxenian and others, and I want to hear what he has to say. My understanding is that his work shows that immigration-fueled entrepreneurship has been tapering off recently, at least in part because of wrongheaded policies. If this is the case we need to fix them, fast.



Of course, I’m going to read a lot of fiction as well. For reasons that are not quite clear to me, I have an abiding fondness for really dark stories, particularly ones where there’s a long guy slogging through the muck, trying to figure out what the right thing is and then how to do it (I can’t tell you how many times I’ve read Raymond Chandler’s The Long Goodbye). So I’m looking forward to Derek Raymond’s “Factory” series, Fat City by Leonard Gardner, and Countdown City, the second of Ben Winters’s “Last Policeman” series of novels about a small town New Hampshire cop trying to do his job as a giant, all-destroying comment hurtles toward Earth. These should all ensure that gorgeous weather and beaches don’t cheer me up too much… ;)


What’s on your summer reading list? Leave a comment, please, and let us know.




This post first appeared on the Business Impact of IT blog July 5 here.

Am I right that carmakers today have a serious technology problem with their customer-facing digital technologies?


I took my car in to the dealer today. While it was being worked on I wandered around the showroom looking at all the latest models. I stopped in front of a Lexus LS460L because of the sticker price, which was $87,850. It looked like a nice enough car, but Holy Cow…


I looked closely at the sticker to see if I could figure why it cost that much. The first thing listed under “Luxury and Convenience Features” was a “Navigation [system] with High Resolution 12.3 inch screen, Remote Touch Interface.” Here’s a picture of the screen:


The White Elephant in the Dashboard


The problem for Lexus is that this system makes me less likely to buy the car.


The digital in-car systems I’ve seen for navigation, climate control, music, and so on range from mildy lousy to actively terrible. The user interfaces are cryptic, slow, and non-intuitive; the data they rely on for navigation are archaic; and they generally feel like things I have to wrestle with as I drive from point A to point B.


I used to think that this was my fault – that I hadn’t yet spent enough time in the driveway practicing with the with the owner’s manual open on my lap — but I don’t any more. My smartphone and tablet have shown me an alternative. They’ve shown me that a digital screen can be intuitive and easy to use while simultaneously delivering a ridiculously large amount of functionality.


My iPhone contains a music library, a music streaming device, and a constantly updated, crowdsourced GPS system that’s the best I’ve ever used (thanks, Waze!). These latter two capabilities are completely free to me, yet are better than anything I’ve ever found in a car. So why do I want the screen that comes with the car? I just want a power source and decent holder for my phone and/or tablet, not an inferior, hardwired substitute for them.


The situation only gets worse when I consider that I’ll likely own my next car for at least six years. This is four ticks of Moore’s Law — four doublings of computer power per $. Which means that the device I can buy six years from now will be sixteen (2^4) times more powerful than the one I can buy now. Phones, tablets, and other digital devices will be unimaginably cool in six years, just like the ones we have today were unimaginable six years ago. So even if the screen in the Lexus I saw today is absolutely cutting edge (which it’s not; it started to get obsolete the day its design was finalized, which was a long time before the car was built and delivered to the showroom) it will be an annoying joke in six years — a constant reminder of how much I overpaid, and how locked in I am to a (by then) obsolete technology.


What can carmakers do about this situation? They could follow the lead of phone and tablet makers and open up their digital platforms to open innovation – publish their specs; let outsiders develop systems for navigation, music, climate control, and so on; and provide a convenient way for users to download these systems to their cars. Ford has taken some encouraging steps in this direction with its OpenXC platform, but I haven’t seen much other evidence of truly open digital innovation sanctioned by the manufacturers.  And even if it there were more of it, it wouldn’t deal with the issue of hardware obsolescence.


I mean this seriously: I’d be thrilled to find good car that didn’t even try to provide a digital user interface. Give me a few knobs and dials for the basics, and a reconfigurable power source, mounting bracket, and input/output cable for whatever device I wanted to use. I’d actually pay more for that car than I would for one with a big hardwired screen. Wouldn’t you?



This blog first appeard in The Business Impact of IT on November 26, 2012.

At year end a few major businesses, including MorganStanley, and many state and local governments were handing out pink slips to thousands of employees. I was asked to comment on these news items as wellas on a new Social Media trends report from KPMG. Below are some quick thoughts.



I. When Economic Growth is Decoupled from Employment Growth



Q: To what extent is digitization impacting U.S. jobs in sectors such as financial services and government?



Andrew: There are several things going on here. Layoffs are actually back to where they were before the recession, but there are many fewer “quits”— that is, people are not voluntarily leaving their jobs. And job growth is slow because employers are finding that they don’t have to rehire when business comes back, since their existing workers are so productive.

Increasingly, the economic growth is becoming decoupled from employment growth. We think that’s due to digitization and the fact that there are great alternatives to human labor -- not just blue collar jobs, but white collar as well. With the astonishing pace of technology, people are more productive and workers arebecoming jacks of all trades.




Q: Do these examples illustrate the theories put forth in The Race Against the Machine regarding mid-level workers feeling the most pressure?




Andrew: Technology and digitization are major reasons that these workers feel the most pressure. Computers are making huge strides when it comes to routine work like communicating with others and pattern recognition; so it’s not surprising that mid-skill workers are feeling the heat. Going forward, this digital improvement is probably not going to slow down. Computers are doubling in power every 12-18 months, and most humans are not evolving their skills at anything close to the same rate. So I don’t see the trends we document in the book reversing any time soon.




II. Social Media’s Uneven Global Adoption



Q: The KPMG report notes that BRIC countries are more open to social media than so-called developed nations. What explains the disparity?



Andrew: This reminds me of the tech joke about how God invented the world in just six days. The answer? No installed base. In the case of social-media adoption, the answer is also legacy--both of systems and networks and mindsets. These are a big installed base to overcome. The developed world has enterprise 1.0 collaboration and computing capabilities and there’s lots invested in them. They are populated with content and rules, and also with assumptions about how work ‘should’ be done.

Enterprise 2.0 tools, I believe, are better for collaboration – they enable a different set of practices and bring along different assumptions. Companies can adopt them, bypassing 1.0, and therefore leapfrog their competition.

We’ve seen this before with the rapid adoption of cell phones, which were able to bypass the hassle of land-lineinstallation. We’re seeing that in the U.S., now, too, with phone and business technologies that are leapfrogging old infrastructures.



Q: What productivity and economic implications do you see from this trend as well?



Andrew: In macro terms, if you’re not tied to that legacy, you will have the competitive advantage and lower costs. If leapfrogging is better, remaining with 1.0 tools is a disadvantage. The impact and implications for BRIC are large; productivity will improve and work will become more knowledge-based. There will clearly be more competition for western countries… new business models are being created.

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