Thursday, April 6, 2023

Macro-Economic Thursday.

Today's post might win the award as my most complicated post ever. So hold onto your pantaloons. I'll be galloping across the decades in this one.

Way back in October, 1999, I read an article in the Atlantic by Peter Drucker called "Beyond the Information Revolution." 

I figured it made sense to pay attention to someone who while still alive had a business school named after him.

Drucker wrote about the process of technological change. It seemed to me so profound and simple (and historical) that I copied it and I've been carrying a digital copy around on my hard drive for a quarter of a century.

In looking at technological leaps from the printing press, to the railroad to the computer, Drucker is able to delineate that it takes humans time to adjust to technology. It takes us time to really figure out how it can help us.

He writes, "the Information Revolution so far—that is, since the first computers, in the mid-1940s—has only transformed processes that were here all along. In fact, the real impact of the Information Revolution has not been in the form of "information" at all. Almost none of the effects of information envisaged forty years ago have actually happened. For instance, there has been practically no change in the way major decisions are made in business or government.... The processes have not been changed at all. They have been routinized, step by step, with a tremendous saving in time and, often, in cost."

About four years ago, Northwestern professor Robert Gordon, wrote one of the best books I've ever read on macro-economics. It was called "The Rise and Fall of American Growth," and it was reviewed in The New York Times by Nobel Prize Winner, Paul Krugman. Again, it seems to me when a Nobel Prize winner takes the time to explain complicated things simply, you owe it to yourself (and to your clients) to pay attention.

Krugman reviewing Gordon writes, "Now, in 1940 many Americans were already living in what was recognizably the modern world, but many others weren’t. What happened over the next 30 years was that the further maturing of the Great Inventions led to rapidly rising incomes and a spread of that modern lifestyle to the nation as a whole. But then everything slowed down. And Gordon argues that the slowdown is likely to be permanent: The great age of progress is behind us.... he makes two really good points that throw quite a lot of cold water on the claims of techno-optimists.

“First, he points out that genuinely major innovations normally bring about big changes in business practices, in what workplaces look like and how they function. And there were some changes along those lines between the mid-1990s and the mid-2000s — but not much since, which is evidence for Gordon’s claim that the main impact of the I.T. revolution has already happened.”

That brings us, in a lurching way to two recent op-eds by Dr. Krugman. The first was from March 31 and was titled, "A.I. May Change Everything, but Probably Not Too Quickly."  The second was from Monday, April 3, and was called, "The Internet Was an Economic Disappointment."
It's worth it, if you can hold four ideas in your head at once, to think about the articles I've mentioned here in light of the lastest tech mania--A.I., NFTs, the Metaverse, Web 3.0, self-driving cars, fusion-derive-power, quantum-computing, Tamagotchi Go, whatever.

In his March 31 op-ed, Krugman writes, "How large will these effects [of A.I.] be? And how quickly will they come about? On the first question, the answer is that nobody really knows...On the second, history suggests that large economic effects from A.I. will take longer to materialize than many people currently seem to expect."

I'll end this with a bit from Krugman's April 3 op-ed. "...The key point is that nobody is arguing that the internet has been useless; surely, it has contributed to economic growth. The argument instead is that its benefits weren’t exceptionally large compared with those of earlier, less glamorous technologies. For example, circa 1920, only about one in five U.S. households had a washing machine; by 1970, almost everyone had one or access to one. Don’t you think that made a big difference? Are you sure that it made less difference than widespread access to broadband?

For the fact is that while moving information around is important, we’re still living in a material world: Most of what we consume is physical stuff or in-person services, which haven’t been drastically affected by the internet.

Now, it’s quite possible that artificial intelligence — or at any rate, the things we’re calling artificial intelligence, regardless of whether they warrant that designation — will really, truly, be a big thing. But one thing we should have learned from the history of information technology is that things that seem exceptionally glamorous needn’t be especially useful, and vice versa."

My point today is my point almost always. 

Take a beat.

Don't trust hyperbole.

Look before you leap.

And when it comes to hustlers and hypers and "this will change everything-ers," be wary.

They're the people who used to try to sell people like me the Brooklyn Bridge.

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