
Silicon Valley Has Not Saved Us from a Productivity Slowdown - leothekim
http://www.nytimes.com/2016/03/06/upshot/silicon-valley-has-not-saved-us-from-a-productivity-slowdown.html
======
thedevil
"they valued free Internet services at ... less than 1 percent of G.D.P."

So Pandora, Facebook, Hacker News, YouTube, Google, Wikipedia, gmail, google
maps, Reddit... all of these together are worth less than $50/month? Would any
of you give up all the free parts of the internet for $50/month?

And look back 30 years: everything has gotten so much better. Rotary dial
landlines have been replaced with smartphones. Houses are better and bigger.
Cars are better, more comfortable, safer. Children's toys, strollers,
playgrounds are so much safer and more convenient. Music has changed from a
few CDs to thousands of songs carried around in almost every pocket. The
numbers don't seem to make any sense to me.

Marc Andreessen is onto something. The economic numbers don't make any sense
when you compare them to reality.

~~~
thedevil
And here's an idea to explain the mismatch. Not sure if it's right, but it
might explain why the numbers make no sense:

newspaper -> hacker news, google news: GDP drops, but life is better.

stereo + CDs -> mp3 player: GDP drops, but life is better

GPS -> Google maps, GDP drops, but life is better.

snail mail -> gmail, text, GDP drops, but life is better.

~~~
superuser2
>newspaper -> hacker news, google news

Um, what? Google News doesn't do reporting, it aggregates newspaper content.
If the traditional media outlets die, there will be no content left for Google
News to aggregate. Unless you are referring the part of the newspaper industry
which actually puts ink on dead trees, which is pretty small compared to the
newsrooms.

People write posts that go on HN to promote themselves and their business
interests. Nothing wrong with a little of that, but it isn't a substitute for
journalism.

~~~
undersuit
Newspapers aggregate news as well. The point is you buy the newspaper for all
or most of the content or you visit Google News or Hacker News. They are
portals.

>it isn't a substitute for journalism.

 _No true journalist_ would ever impinge their profession by writing for such
trash as a blog.

~~~
superuser2
I am using "newspaper" in the sense of "organization which pays reporters and
editors to produce a textual representation of the news of the day." So
perhaps this is semantics. But Google News does not do that.

Google News is sort of similar to the business unit of a newspaper which takes
finished copy in digital form from the newsroom and actually delivers dead
trees to people's doors. Of course the internet should (and will) kill that
entirely.

Journalism is a professional craft. Writing about current events for free
because you are passionate about some issue, or for a salary because your
benefactor has a vested interest in some issue, etc. is not journalism. Your
income has to flow from the fact that _people want the news_ , and you/your
bosses/your editors have to be properly incentivized to actually report the
news.

------
natrius
The Uber example is a great one. From 2009 to 2015, Uber didn't do much to
increase the amount of value a driver could create per dollar spent. It did
somewhat: Uber drivers can charge less than taxi drivers due to higher
utilization and regulatory avoidance. But at the end of the day, drivers were
still putting in the same amount of work to move a passenger.

UberPool and UberHop are actually productivity increases. A single driver can
provide 2-4 trips worth of value with about 1 trip's worth of work. However,
that's just going to drive the cost of trips down. If Uber and its drivers end
up not increasing their revenue per driver trip, the productivity statistics
would look the same even though drivers are moving four times as many people!

My layman's interpretation could be wrong, but it really just looks like we're
using productivity wrong. It's useful to compare companies and countries at a
particular point in time, but if you use it to compare the 2000 world to the
2016 world, it's probably not going to tell you useful things.

~~~
YokoZar
>UberPool and UberHop are actually productivity increases. A single driver can
provide 2-4 trips worth of value with about 1 trip's worth of work. However,
that's just going to drive the cost of trips down. If Uber and its drivers end
up not increasing their revenue per driver trip, the productivity statistics
would look the same even though drivers are moving four times as many people!

In this scenario, you need only 1/4 the drivers, and some fraction of those 3
newly unemployed people will eventually do other work. _That_ is the
productivity growth.

~~~
qq66
You wouldn't necessarily need only 1/4 the drivers. The reduction in prices
would increase demand for transportation by some amount. If that amount is
less than 4x, you would see an industry employment decrease, but if it was
more than 4x, you would see it increase, just like how auto industry
employment increased as cars were able to be made for cheaper and cheaper
prices.

------
digikata
Silicon Valley can provide tools, or perhaps supplant some industries, but the
bulk of productivity improvement is internal to companies. I think the
productivity slowdown is a result of many companies not investing in internal
improvement/development and instead using their capital in non-productivity
enhancing financial moves such as stock buybacks.

~~~
calinet6
Ding ding ding.

In fact, if anything, the increasing inequity between management, C-level
executives, and employees makes companies even less able to handle the complex
systems of the present world, which is only growing in complexity.

The real issues are human, and human problems require improvements in
management, leadership, internal systems, and knowledge and understanding.
When rifts form between management and employees, what happens instead is an
individual competitive focus that brings productivity and innovation down
significantly.

What we're seeing, effectively, is that the world is changing and becoming
more complex, and management and internal systems are not keeping up, and
instead in many cases going downhill.

There are small pockets of hope in the Lean movement, Kaizen/continuous
improvement, and in those who know and understand Deming management
philosophy. For a great modern take, read General Stanley McChrystal's "Team
of Teams."

------
Animats
Non-paywall copy of paper, from author: [1]

[1]
[http://faculty.chicagobooth.edu/chad.syverson/research/produ...](http://faculty.chicagobooth.edu/chad.syverson/research/productivityslowdown.pdf)

------
JustSomeNobody
How much more productive does the middle need to be!? Good grief, nobody is
allowed to "turn off" any more. We're ALWAYS working.

Edit: And please don't kill me with semantics of "working" vs "productivity".

~~~
ktRolster

      > And please don't kill me with semantics of "working" vs "productivity".
    

Maybe if you understood the difference between working and productivity you
wouldn't be ALWAYS working.

~~~
wavefunction
The OP specifically called out the semantic difference between working and
productivity.

~~~
baddox
I'm not sure how that absolves OP of the actual semantic difference between
the two. You can't just say "all doors are squares, and don't kill me with the
semantic difference between 'square' and 'rectangle.'"

------
p4wnc6
Start-ups rally around fashion signalling through open-plan offices, and
create elaborate HR codewords to rationalize unhealthy cramming of people into
intrinsically unproductive physical situations.

The cost effectiveness of providing private offices for knowledge workers,
even in the most dense urban areas, has been well known for a long time, yet
few organizations do it, and some organizations even _spend_ money to tear
down productivity-enhancing privacy features in favor of wasteful open-plan
fashion.

Why would anyone look to the start-up world when expecting productivity?

------
Animats
Most big productivity increases have been in the manufacturing and agriculture
areas. Those have been so successful that they now employ only 9.5% of the US
workforce. The areas with strong productivity increases shrink, while the ones
with low or no productivity increase come to dominate employment.

~~~
dredmorbius
There's a formal statement of that, essentially an analogue of Amdahl's Law.
As you optimise labour in certain parts of the economy, you're left with the
bits that cannot have their productivity increased.

Unfortunately I cannot for the life of me remember what it's called or where I
read it. Good odds it's in Robert Gordon's new book ( _The Rise and Fall of
American Growth_ ) or related discussion. Or somewhere in William Ophuls'
_Ecology and the Politics of Scarcity_ discussing technology, or Carlotta
Perez's _Technological Revolutions and Financial Capital_.

Light reading.…

~~~
sbierwagen
Baumol's cost disease.

    
    
      Baumol and Bowen pointed out that the same number of 
      musicians is needed to play a Beethoven string quartet today 
      as was needed in the 19th century; that is, the productivity 
      of classical music performance has not increased. On the 
      other hand, real wages of musicians (as well as in all other 
      professions) have increased greatly since the 19th century.
    

[https://en.wikipedia.org/wiki/Baumol%27s_cost_disease](https://en.wikipedia.org/wiki/Baumol%27s_cost_disease)

~~~
dredmorbius
Thank you. I'd run across that elsewhere and was wondering where the hell I'd
just recently mentioned it....

------
api_or_ipa
I might be late the party for anyone to read what I have to say.

For the past 45 years, Canada has had limited growth in labour productivity
and currently stands at $42/hour, contrasting against the US at $52/hour,
measured in GDP/hour worked.

It turns out that it's very very difficult to understand productivity. It is
against common understanding why Canada's more numerous bachelors degree
holders seemingly doesn't contribute to a more productive labour force. If
investments in education do not increase labour productivity (as predicted by
nearly every model of labour economics), then what measures do affect
productivity? It is increasingly unconvincing that countries become more
productive by mere accident.

~~~
dilemma
>It is against common understanding why Canada's more numerous bachelors
degree holders seemingly doesn't contribute to a more productive labour force.
If investments in education do not increase labour productivity (as predicted
by nearly every model of labour economics), then what measures do affect
productivity?

The "education system" is not an education system. It is a selection system
used to choose who gets one of the at any one tine limited number of jobs.
Increasing the number of people in that selection system makes it less
effective, hence the lowered value of a degree, the need for internships, and
increased stress on personal networks for finding jobs.

~~~
api_or_ipa
Your argument is absurd. You're implying the job market for university
educated workers is perfectly inelastic and each successive degree holder
produces _no_ extra value on the margin. Moreover, you make the baseless
assumption that competition amongst more candidates for skilled work produces
no further value-- in other words, every worker is just as skilled.

There are many more plausible reasons that don't have to invoke such strong
assumptions on the education and skilled workforce markets.

Cultural, social and political differences, a lower population density et al.

------
sbov
Maybe I'm off base, but why would we necessarily expect great productivity
gains? The late 90's to early 2000's was a time when computers become
ubiquitous. Yes, there are smart phones and tablets now, but the difference
between "by hand" and "by computer" is far larger than "by PC" and "by
tablet".

------
snowwrestler
Well duh; most of what Silicon Valley builds are not productivity tools. If
anything they build anti-productivity tools like social media and
entertainment.

------
arjie
Hang on. Correct me if I'm being terribly obtuse here, but it looks like
making an end goal process with a saturated market more efficient would count
as a productivity loss?

So say everyone needs to pay taxes. Let's say that everyone complies and pays
a company $100 for software to do this. Now I make equivalent software which
I'm able to sell for $50 (because I'm better at running my company, say). Now
people are spending exactly half as much money, but the same job is being
done. This looks like an economic productivity loss? If so, surely there are
alternative models that capture the intuitive gain from things like this? Or
maybe such gains are rare and negligible?

~~~
YokoZar
What happens in this situation is the people who used to make the obsolete
things are now out of a job, and eventually get employment somewhere else.
What they do _then_ counts for productivity. If they earn what they did
before, you'd measure no change in productivity -- though we'd all be better
off.

The studies in the article assert that the size of the productivity shortfall
is so large that even if we place pretty generous values on all this free
stuff we have now it doesn't fully cover the gap.

------
calinet6
Complex systems never got any simpler, only more complex.

Certain circles are beginning to realize that the main issues are human and
not technological (Lean, Deming, Kaizen, Design thinking, etc).

So there's your answer. Increasing complexity of work, with unchanged or at
best slowly increased ability to cope with it.

For a great overview and insight into this shift (and how to tackle it), check
out Gen Stanley McChrystal's book, "Team of Teams."

~~~
dilemma
Standard Work is an incredibly interesting concept that I've just started
looking into for organizational design.

~~~
calinet6
One of many concepts needed together to create a high-functioning
organization.

------
baconizer
[off-topic] aren't mobile phones and tablets just sucking productivity out of
mankind, if not slowing it down? was watching old movies from 90s with my lady
and we both noticed how interactive ppl were in the background, on streets or
in cafe, nowadays every one just dives into their mobile phones ...

~~~
baddox
Are you talking about economic productivity, or social interaction? Those are
two questions with potentially very different answers. Also, I think the
social interaction argument is pretty weak. The global connectedness that
comes from the Internet and smartphones is, in my opinion, a huge improvement
to social interaction in the world. I'm not that fussed if I'm at a restaurant
with friends and some are using their phones.

~~~
baconizer
yes i immediately realised what you meant after my reply, so I should mark my
words as off topic. it did inspired me similar thinking today, before I saw
this :)

------
henrikschroder
The article states that labor productivity has been growing less in the last
decade, but how is that measured? Is the productivity number compensated for
the number of hours worked? And is it measuring only labor performed by
humans?

~~~
_delirium
Yes, productivity is measured per hour of human labor.

------
cowardlydragon
The middle class never got any money for being more productive in the 90s and
aughts. Maybe they're wising up.

Also, virtually every market is dominated by cartel, duopoly, or monopoly
conditions, and companies are often satisfied with that position, so
investment is down.

~~~
tryitnow
While I agree with your statement, it's not terribly germane to Cowen's
argument.

What he's saying is that all the fuss over Silicon Valley technology is not
warranted when it comes to actual productivity gains.

This is a really important point because it suggests two different way of
conceiving of technology: 1) how economists define technology, viz something
that allows us to do more with less 2) what laymen consider technology: the
latest gee whiz gizmo marketed by Silicon Valley

The economic definition is a lot stricter in some ways - and broader in other
ways.

The takeaway is that in economic terms we really haven't experienced much
technological evolution. I find that to be pretty believable.

~~~
TheOtherHobbes
No, the takeaway is that economic terms themselves haven't experienced much
evolution.

What does productivity mean when your economy is increasingly powered by data,
not money?

As a wild generalisation, there are two kinds of economic model - the
political model, where the point is to use rhetoric to enhance power
differentials between social castes, and the evolutionary model, which
considers economic activity a proxy measure for collective intelligence and
opportunity.

We're in a transition period where the former model is peaking and about to[1]
crash, and the latter model is becoming more sharply defined.

In the former model an abundance of data is a bad thing, because the market
value of any specific type of data crashes towards zero.

In the latter model an abundance of data is a good thing, because it increases
the possibility of invention and innovation. And an abundance of data
refinement tools is even better.

Which is a more accurate measure of productivity?

[1] For very poorly defined bounds of "about to". I'm guessing more than
decade, less than a century.

~~~
williamcotton
Can I pay my rent in data? For humans like me who pay their rent in dollars,
GDP is a perfectly reasonable way to measure productivity.

What kind of "evolution" are you talking about? I think all you're pointing
out is that Silicon Valley is extraordinarily bad at attributing value to
data.

It's not the roll of economics to fix that problem. Economics deals with real
things like people buying food and having to pay rent and pay actual taxes.

If Silicon Valley can't figure out a way to get translate "data" in to "thing
I trade to my landlord so he doesn't call the cops", well, then Silicon Valley
is wasting everyone's time.

------
oldmanjay
It seems that trying to distill the activity of 7+ billion people into a line
graph that you can extend naively to make predictions is a bankrupt exercise.
Calling lower-than-predicted growth a slowdown is more than a bit
disingenuous.

~~~
Ericson2314
I didn't read it as less-than-predicted growth, but rather simply less than
previous growth. Regardless, the wording of the article and headline is wrong,
and makes me sad that evidently more people didn't learn / don't remember any
calculus.

Derivative of productivity != productivity, NYT.

~~~
dragonwriter
> Derivative of productivity != productivity, NYT.

See, this is what happens with decades of people tolerating media confusion
between the GDP and the annualized rate of growth of the GDP.

Now its spreading to everything else.

