Robert Gordon on the end of growth at TED 2013
Here is the Prof Robert Gordon TED2013 talk on the end of growth which was answered by the Erik Brynjolfsson counter view (posted on last week.) Then the two of them had a 12 minute debate. The first point I noted is that instead of the 6 headwinds the presentation is now about 4 headwinds. ( Losing 2 headwinds seems odd to me*.)
“So I started wondering and pondering, could it be that the best years of American economic growth are behind us? And that leads to the suggestion, maybe economic growth is almost over. Some of the reasons for this are not really very controversial.
There are four headwinds that are just hitting the American economy in the face. They’re demographics, education, debt and inequality.
They’re powerful enough to cut growth in half. So we need a lot of innovation to offset this decline. And here’s my theme: Because of the headwinds, if innovation continues to be as powerful as it has been in the last 150 years, growth is cut in half. If innovation is less powerful, invents less great, wonderful things, then growth is going to be even lower than half of history.” ….
“The problem we face is that all these great inventions, we have to match them in the future, and my prediction that we’re not going to match them brings us down from the original two-percent growth down to 0.2, the fanciful curve that I drew you at the beginning.” ….
“If so, that’s going to require that our inventions are as important as the ones that happened over the last 150 years.”
Twelve minutes is not long enough for this kind of argument but so far most viewers of the clip seem to think that Gordon is unconvincing. Note: * The 2 headwinds Gordon left out of this updated version of his thesis were environmental impacts and the twin deficits of government and consumer debt.
I wonder if this is because we all want to be more optimistic in the face of some grim economic news and we just hope that the economy will improve or we really do believe in the brave new world of technology driven change.
Brynjolfsson makes a couple of telling points in his talk on how the impacts of change are measured. GDP doesn’t do that at all for the “weightless economy” and also that for a number of key innovations it took a time lag of decades before we not only worked them out but before we changed the work paradigms we were used to.
Zero pricing for “free products & services” and huge price reductions don’t show up in GDP measurements which undermeasures the economic growth and related changes.
It is highly probable that Gordon and Brynjolfsson are both right.
Innovation is very hard to measure because as a species we don’t really like change but the irony here is that some of the headwinds Gordon refers to as slowing innovation are exactly the same ones which will stimulate more innovation.
In the education space ( where I work part time) the increasing costs of tertiary qualifications and the globalisation of markets means that educators are very much looking at ways to improve the learning ecosystems all round. I think the quality of education will improve and that the cost will go down because of technology innovations which are here but not yet well understood.
The real kicker though is that my 11 year old daughter may train for a job that hasn’t been invented yet in only a few years time. These future jobs will have a connection to current ones but measuring the impact of that kind of technological change is too difficult for most of us to imagine.
Here is a clip from one of the masters of innovation on how we have to start with the customer experience rather than the technology because it is not the technology itself that brings the real changes.
When innovation comes along there is a very well known dynamic which sees early adopters and tech users who can make use of new products and services but it is not until they mainstream ( “crossing the chasm”) that they truly become useful products.
I remember the Apple Newton from 1993 to about 1998 and it failed then for various reasons but look around today at tablet computing including iPads and it is a very different world.
An iPad now is a consumer device for all whereas the Newton was a geek toy which was innovative but not really that useful but perhaps without that product evolution we wouldn’t have got to where we are today.
To be fair to Gordon – many innovation stories are hard to measure well in the GDP numbers but the journey from idea to product is one that is gaining in velocity and usefulness.
There are also other localised innovations which are being held up because of finance or political will. These innovations that may not seem hugely significant in terms of GDP impact will have a huge impact in quality of life terms.
The examples I’m thinking of are wider availability of malaria nets and cleaner (less smoke) cooking techniques in parts of the world outside the U.S. Equivalent quality of life innovations happened many years ago in the U.S which is where Gordon’s data is focussed.