Posts about Technology

Efficiency over growth (and jobs)

The hook to every song sung at Davos is “jobs, jobs, jobs.” The chorus of machers on stages here operate under an article of faith that growth can come back, that they can stimulate it, that that will create jobs, and then that all will be eventually well.

What if that’s not the case? I am coming to believe, more and more, that technology is leading to efficiency over growth. I’ve written about that here.This notion is obviously true in some sectors of society: see news and media, retail, travel sales, and other arenas. But how many more sectors will this rule strike: universities? government? banking? delivery? even manufacturing?

As I write this, I’m watching a WEF panel moderated by Reuters’ editor, Steve Adler, with Larry Summers and government and business leaders. They’re discussing growth strategies and so far we’re hearing the same notions we hear elsewhere in Davos, the complete trick bag: spend money on infrastructure, be nice to business, regulate less, reform taxes, reform immigration. OK and OK.

“The problems of job creation are more complicated than that. They are more complicated than wealth creation,” says one of the panelists (operating under Chatham House Rule, so I won’t attribute*). “This is a group that understands wealth creation better than job creation.” He says “there are inherent limits” to the number of people employed in various sectors.

I haven’t heard any strategy yet that reverses the trends underway in the transition from the industrial economy to the digital economy. What will offset the shrinking of vast industries? New industries? Well, we have new, digital industries, but they are even more efficient than restructured old industries. Compare Google’s staff size to GM’s, even now. Facebook serves almost a billion people with the staff the size of a large newspaper. Amazon employes far fewer people than the bookstores it put out of business did. So those new industries will bring growth, profit, and wealth, but not many jobs.

“There are fewer jobs for regular people because those innovations happened than there would have been if those innovations hadn’t happened,” the panelist says. It would be “a delusion” to think that encouraging this innovation will increase jobs.

So what if the key business strategy of the near-term future becomes efficiency over growth? Productivity will improve. Companies will be more profitable. Wealth will be created. But employment will suffer.

I’m hearing no strategies focused on this larger transition in a gathering about the transition. I think that’s because the institutions’ trick bags are empty. They ran an industrial society. That’s over. And the entrepreneurs who will create new companies but also new efficiency aren’t yet in power to solve the problem they create.

I ask the panel whether all this talk of jobs, jobs, jobs is so much empty rhetoric. I ask whether there are other tricks in the bag.

The panelist I’ve been quoting says that there are two sets of economic issues: In the short term, for the next five years, we are dealing with demand and macroeconomic policy. “Employment today has nothing to do with the Kindle,” he says. “It has everything to do with the financial system, deleveraging, and macroeconomic policy.”

It’s in the long term that the issues I’m addressing here come to bear. “For the longer term, we don’t have nearly as good answers as we would like to,” he says. “We are going to have to embrace the idea that we are going to have growing numbers of people involved in the provision of fundamental services to other people, services like health care and education. We’re going to need to make that work for society.”

That is to say, health and education don’t directly create wealth; they are services funded in great measure by taxes of one sort or another. Employing people in those sectors amounts to a redistribution of wealth with the fringe benefit of providing helpful services. Is a service-sector economy the secret to growth? Who pays for that when fewer people have jobs in the productive economy? I still don’t see an answer. This is not an economic policy so much as it is a social policy.

Another panelist says that we will have fewer people and we will need to retrain people throughout their lives for new jobs. I agree. But that doesn’t create jobs (except in schools); it just helps fill the ones we have.

One more panelist, from Europe, suggests that nations here will end up making stuff for the growing economies and consuming middle classes of China, India, Brazil, etc. In a globalized world with maximum price competition, I’m not so sure that’s a strategy for growth, only survival. I’d hate to place my strategic bets on continuing — or returning to — the industrial economy. And at some point, that strategy bumps up against the question of sustainability: is there enough stuff to go around?

Indeed, in a globalized society, we need to look at total jobs, the sum of work and productivity and demand, not country-by-country. The question is: Will jobs on the whole increase in this digital economy?

If instead efficiency increases — and with it, again, productivity and profit — then great wealth can be created: see Google, and the technology economy. But that means the disparity of income and capital will only widen yet more. And it’s just wide enough today to cause unrest around the world. That’s much of what #Occupy_WEF et al is about. That’s what is causing such tsuris and uncertainty on the stages of the world (Economic Forum). That’s what is causing the institutions represented here to fear, resist, and regulate technology in the hopes of forestalling the change it is bringing. There is the root of the disruption we’re witnessing now even in Davos.

* I saw Summers later and he gave me permission to quote him by name. He is the quotable panelist.

Davos08: Wireless

“If you defend the status quo when the quo has lost its status, you’re in serious difficulty,” says Sony head Howard Stringer in a panel on the future of mobile. “It’s a most exhilerating time” because it’s all up in the air. A year ago, he says, cable companies were negotiating from a position of strength. But look at their stock prices now; they reflect the walls falling around them. This has made them nicer to deal with. But he’s not saying he’s sitting in daisies himself. “It’s going to be hard to hold onto the price of content.” Then again, he turns to a Chinese mobile phone mogul and says that if Sony could sell just one song to each of his 500 million users, his music company would be instantly (and apparently finally) profitable.

Stringer, the funniest man at Davos (far funnier than Al Gore), says out of nowhere that he likes Google. Why? asks moderator David Kirkpatrick of Fortune. Because Google’s going to buy wireless spectrum and they’ll be in his business even more. The only reason he came onto the panel to be close to Google’s Eric Schmidt.

NBC’s Jeff Zucker says mobile is not that important to the network. Nonetheless, they’re going to put out 2,200 hours of programming on mobile from the Olympics.

Stringer says young people will drive usage in ways we can’t predict. The hot fact passing around conferences this week is that novels written — written — on mobile phones are selling like crazy in Japan. Stringer says mobile will be the platform for everything.

Google’s Schmidt asks what’s new “and I think it’s the arrival of short-form video as a category.” He says it’s not a replacement for a prior form but an entirely new form.

He also says he is so bullish about mobile as a business because he believes the players are motivated to make sense of the current lack of standards and create a unified platform.

There’s much discussion about openness from regulation to devices to business models. From the audience, Jonathan Zittrain asks about whether an open system will bring us viruses on our phones and a new frontier of unreliability. Schidt responds: “Open platforms are like Linux, not like Windows.” Oohs from the geeky audience.

Michael Arrington asks FCC Commissioner Kevin Martin about the open letter Google wrote requesting openness in the upcoming spectrum auction, wondering whether this made the decision harder — as pressure — or easier, as covering fire with the other commissioners. “The open letter is nothing like the pressure that others can put on in more private ways. I actually appreciated the openness of it,” Martin responds.

Somebody asks whether any of the companies represented planned to include scent — olfactory functionality — in phones since it’s the only sense not addressed by the internet. Gawd, and you thought it was irritating to hear other people’s mobile phones. I dread having their smells waft my way. Another person from the audience whether anyone is working on holographic images to replace the tiny screen on mobiles. That doesn’t seem to be in the works, either.

From the tree

Check out my son Jake’s review of Windows Vista. Can’t blame a dad for bragging, can you?

Big trouble

I’ve been saying for sometime that Google is getting to be trouble: big, closed, arrogant. Now the NY Times is saying it:

But instead of embracing Google as one of their own, many in Silicon Valley are skittish about its size and power. They fret that the very strengths that made Google a search-engine phenomenon are distancing it from the entrepreneurial culture that produced it – and even transforming it into a threat….

Wikis arrive

At Barcamp, Ross Mayfield shows off the way wikis are supposed to be: Wikiwyg. Give it a try. [via TechCrunch]