The idea presented here started because I was trying to analyze two things: productivity gains and the question as to how accurately CPI measured the quality of the stuff being purchased. The idea with the later is that a computer we buy now (and other consumer electronics products) are vastly improved from 10 years ago so how does one measure the computer power per dollar.
As I looked at the data I realized that we pay so much attention to things such as jobs data, CPI and productivity that sometimes we miss the possibility that something might happen to fracture the mold creating those monthly numbers.
We have seen inflation well contained for years and a main reason has been productivity gains. Productivity is the output of goods and services per hour worked. On Star Trek: The Next Generation we see some serious productivity gains. Picard wants blankets - he gets blankets. No work is done by seamstresses. Here in the U.S. the Chairman of the Federal Reserve cautions that we may no longer be able to support the levels of productivity gains that we have had in the past 10 or so years and consequently may see inflation.
I think that Productivity gains may be the most important economic data there is. I also think that economists (and everyone else) may be myopic about productivity.
I see and hear a general pessimism about the economy: high energy prices, Offshoring, the housing bubble, blah blah blah.
My own opinion is the if we can understand how to vastly improve productivity we can improve the economy and the quality of life of everyone in the country and perhaps the world.
We should look at the productivity gains we have had and say, "This is pathetic. We can do better." We regard 5.9% Worker Productivity Gain as a major accomplishment. We should not settle for that. I am not going with Greenspan’s thesis that we can’t continue 5.9% productivity growth and I want to suggest that we should have as a goal an era where 5.9% growth is regarded as pathetic.
I am making one big point: constantly increasing productivity by a large amount is not only the key to economic health and our general well-being it is the key to the future.
So how do we do this? I suppose we can issue whips to management and have them beat workers to achieve greater productivity but somehow I don't think that is going to work.
I would offer that the only source of increased productivity will be the same source which it has been for the past few decades - technology. Productivity gains in the recent past have been generated largely by the computerization of practically everything. We have on-line banking, ATM's, Amazon.com. We buy an airline ticket on Orbitz, go to the airport, swipe the old credit card in the machine and get a boarding pass. (I am going to leave out the security, take your shoes off thing because it ruins my thread and, besides, we need technology there too.) Businesses take advantage of IT systems which manage inventory and lower costs. You order a Dell computer on their web site and it gets manufactured and shipped. The only middle man is the UPS dude. You can apply for a mortgage on-line. I can order a credit report, an appraisal and open an escrow - all on-line. I can e-mail you the loan application package. This allows me to sit here at my desk in jeans, a t-shirt and my tennis shoes saving money on dry cleaning. For the guy out there thinking “yeah and why don’t your fees go down” I say, “Shush.”
All of the above: on-line banking, Amazon, Orbitz etc. are examples of productivity gains. I think that the dot-com boom/bust was based on an idea that was valid but was simply applied to the wrong set of companies at the wrong time. Productivity will be increased and profits will be generated by web based technologies.
The Internet thing is largely off and running and will see continued productivity gains.
So what then? I suppose if you want to go to the master of positive thinking it has to be Ray Kurzweil who sees productivity gains on a scale vastly more gigantic than practically everyone else. If you do not know about Kurzweil start at: http://www.kurzweilai.net/
Kurzweil's experience is in practical AI (Artificial Intelligence). He is a pioneer in optical character recognition, speech recognition and text to speech.
In his recently published: "The Singularity Is Near" he paints a world in which we first do enough research with medical scanning to truly understand how the brain works. On a parallel path we develop nanotechnology to build computers which are in essence laptops which have (this guy is a serious optimist), roughly speaking, the combined brain power of everyone on the planet. And he is not merely talking about executing computer programs but doing something which would be regarded as thinking.
He sees nanotechnology not merely as being something pushing MOSFET technology into a space where we laugh at it the way we now laugh at the price and power of mainframes of the 1960's but as, in essence, producing manufacturing plants. If you want to push this to the edge, Kurzweil sees a world in which (and this is making things simple) nanobots manufacture things we need from common raw materials including soil, rocks and garbage. Nanotechnology is (and again this is making things real simple) the technology of treating atoms (of, say, carbon or silicone) as if they were Legos and building molecules and macroscopic structure (think of an eight foot long 2x4) out of them.
Kurzweil's mantra is "exponential growth." For those not so mathematically inclined exponential growth is growth that occurs at a rate proportional to its size. The bigger it gets - the faster is the rate of growth.
One can argue as to how realistic Kurzweil is but the fact is that the blueprint which he proposes for the future is uniquely ambitious, written by someone with a track record and deserves serious consideration.
The greatest deterrents to even attempting the ambitions he sees may be the utter inability of governments to even consider allowing such radical change and the myopia
of capital markets. There just might be some folks on Wall Street thinking, "Nanotechnology - the next dot-com travesty."
I am a technology guy with a degree in physics. I look at the energy crisis (or whatever it is called this week). I listen to folks on TV ask why gasoline costs $3.00+ a gallon and want to throw something at the screen.
Let me think: no new nuclear power plants and no new refineries since the late 1970's and someone is asking why we have an energy crisis and high gasoline prices? Hello!
The direction of technology was hijacked in the 1970's by fear, stupidity and some valid environmental concerns. One of our greatest ever economic mistakes was posturing nuclear power into a corner. Once the post-Arab Oil Boycott price of oil fell we stopped having economic incentive. For a while, oil was cheap.
We need to get a lot smarter about what the government spends its technology dollars on. Just say no to spending money on manned space travel and instead spend money on basic research in controlled fusion, microbiology and nanotechnology.
We should not let any similar myopia stand in the way of concepts such as Kurzweil espouses.
What is the upside? A world in which everyone has most everything they need. A world in which human work may be unnecessary. A world in which nanobots undo pollution of the past and perform amazing medical procedures.
Is this thinking so outlandish that it cannot possibly happen? Maybe. Is his optimism justified? I have no idea but I am certain of this: if we do not try it - it will not happen. More importantly we must not let the skepticism engendered by Iraq, Katrina, and gasoline prices stand in the way.
This is not mere optimism or science fiction. Science fiction about travel to the moon was written by Jules Verne before anyone heard about NASA. The most extraordinary science fiction writer of our generation, Philip Dick, wrote about nanotechnology. Dick also wrote the possibilities of conflicts between humans and computers. Kurzweil suggests that nanotechnology may be a lot closer than most folks think.
Realized in any manner similar to Kurzweil's perception, the effects on society and the economy will be more dramatic than anything since the concept of agriculture. The effect on our lives will be greater than the effect of the Industrial Revolution, telephony, the MOSFET world of personal computers, and the Internet.
Some of us must be willing to see beyond the gloom of $3/gallon gasoline, let our imaginations run and actualize what we imagine in a real-world, make-it-happen manner.
If anyone sends me one of those America is losing jobs, housing is too expensive and the Dow will never move up e-mails I am gonna come and punch you out. Don't worry about your job and your darn house. The nanobots will do the work for you and build and repair your next house. Please keep making the mortgage payment on your present one.
Think positively and have a great weekend because if Kurzweil is correct the future may be one big weekend. Start practicing now!
Originally published on October 14, 2005
as RateWatch #481 A Very Different Take on Productivity on www.loanmine.com
RPM - SF