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The Myths Behind Technology and Productivity February 26, 2016

Posted by Peter Varhol in Strategy, Technology and Culture, Uncategorized.
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There was a period of about 15 years from 1980 to 1995 when productivity grew at about half of the growth rate of the US economy. To many of us, this was the Golden Era of computing technology.  It was the time when computing emerged from the back office and became an emergent force in everyone’s lives.

When I entered the workforce, circa 1980, we typed correspondence (yes, on an IBM Selectric) and sent it through the postal system. For immediate correspondence, we sat for hours in front of the fax machine, dialing away.  Business necessarily moved at a slower pace.

So as we moved to immediate edits, email, and spreadsheets, why didn’t our measures of productivity correspondingly increase? Well, we really don’t know.  I will offer two hypotheses.  First, our national measures of productivity are lousy.  Our government measures productivity as hours in, product out.  We don’t produce defined product as much today as we did then (more of our effort is in services, which national productivity measures still more poorly), and we certainly don’t measure the quality of the product.  Computing technology has likely contributed to improving both of these.

Second, it is possible that improvements in productivity tend to lag leaps of technology. That is also a reasonable explanation.  It takes time for people to adapt to new technology, and it takes time for business processes to change or streamline in response.

Today, this article in Harvard Business Review discounts both of these hypotheses, instead focusing on the fact that we are communicating to more people, for little purpose.  Instead, this article focuses on what it calls the dark side of Metcalfe’s Law.  Metcalfe’s Law (named after Ethernet inventor and all-around smart guy Bob Metcalfe) states that the value of a telecommunications network is proportional to the square of the number of connected users of the system.

The dark side is that we talk to more people, with little productivity. I will acknowledge that technology has contributed to a certain amount of waste.  But it has also added an unmeasurable amount of quality to the finished product or service.  It has enabled talented people to work where they live, and not have to live where they work.  It has let us do things faster and more comprehensively than we were ever able to do in the past.

To say that this is not productive is simply stupid, and does not take into account anything in recent history.

Warning: I am not an economist, by any stretch of the imagination.  I am merely a reasonably intelligent technical person with innate curiosity about how things work.  However, from reading things like this, it’s not clear that many economists are reasonably intelligent people to begin with.

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