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Silicon Valley Has Not Saved Us from a Productivity Slowdown
- snowwrestler 11y agoWell duh; most of what Silicon Valley builds are not productivity tools. If anything they build anti-productivity tools like social media and entertainment.
- digikata 11y agoSilicon 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 11y agoDing 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 11y agoNon-paywall copy of paper, from author: [1] [1] http://faculty.chicagobooth.edu/chad.syverson/research/productivityslowdown.pdf http://faculty.chicagobooth.edu/chad.syverson/research/produ...
- oldmanjay 11y agoIt 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 11y agoI 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 11y ago> 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.
- seiji 11y agotrying to distill the activity of 7+ billion people Yeah, it's slightly disingenuous, but we still need some models. It's like when people take the total revenue of Google and divide by the total number of Google employees (including assistants and chefs and tech support and the PMs and artists and designers and all the actual engineers too) to reach a "revenue per employee" number. It's not perfect by any means, but anytime you divide one number by another, you get to call your result a metric (then you get to write insights about your new discovery too).
- cowardlydragon 11y agoThe 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.
- thetrumanshow 11y agoAnother way to say this is that the normally-presumed cause/effect relationship is actually backwards here. I.e. If you aggregate the outputs of industry over a long enough period, higher wages cause higher productivity and not visa versa. This is a fun thought-experiment.
- theseatoms 11y agoA related concept: https://en.wikipedia.org/wiki/Efficiency_wage https://en.wikipedia.org/wiki/Efficiency_wage
- pcarolan 11y agoThe capture and transfer of wealth is really well illustrated by looking at profit per employee. http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-new-metrics-of-corporate-performance-profit-per-employee http://www.mckinsey.com/business-functions/strategy-and-corp...
- digikata 11y agoThe other interesting thing about that data is that the average number of employees per business has more than doubled from 1995 to 2005. This hints that there is a scaling limit to the conventional business wisdom that larger businesses are able to operate more efficiency.
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- tryitnow 11y ago
- JustSomeNobody 11y agoHow 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 11y ago> 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 11y agoThe OP specifically called out the semantic difference between working and productivity.
- ktRolster 11y agoYes. In some ways it's fascinating that a person can refer directly to a concept and still not understand it.
- baddox 11y agoI'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.'"
- JustSomeNobody 11y agoSigh. I do understand it. Sadly, you still missed the point.
- futuremeats 11y agoDo you believe the numbers about how the average workweek has gotten shorter over the past 100 years? Table 2 and 3 in the article below contain info like what I'm talking about. https://eh.net/encyclopedia/hours-of-work-in-u-s-history/ https://eh.net/encyclopedia/hours-of-work-in-u-s-history/ I generally consider myself a pro-capitalist rational optimist, but we are a lot richer than we were 100 years ago, and my workweek is still 50+ hours a week. I wonder when we will get those 10 hour workweeks...
- natrius 11y agoThe 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.
- SilasX 11y ago>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 Seriously? UberBlack didn't increase the usage factor[1] of existing black cars? UberX drivers didn't have higher usage factors than regular cabs? Because I'm pretty sure the initial selling point of Uber to limo drivers was "hey, fill in gaps between your scheduled rides", which pretty much only works if it increases the usage factor. And a higher usage factor means higher productivity. [1] ratio of "time spent driving a passenger" to "total time working (including idle)", my own term, don't know if there's a standard one
- natrius 11y agoI don't think idle driver time shows up much in productivity statistics. The productivity per car increases, but I don't think we collect enough data to be able to amortize those existing limos over the time that UberBlack has existed. We'd only see fewer limos purchased over the years or lower prices of limo rides. Probably the latter, because the labor is most of the cost of a ride. Productivity goes up when customers pay the same price for the same value that can now be produced with less labor, but technology has been driving prices down. Technologies used to take much longer to spread. Cotton gin early adopters made way more money than people who did it the old fashioned way, and it took a while for everyone to get on board and drive the cotton prices down with competition. These days, technology gets adopted so fast that adoption is the cost of survival: prices will drop instantly and you won't be able to keep up. My hypothesis is that the speed of adoption these days hides productivity increases. Productivity growth only measures profit from temporary advantages over competitors, and those advantages have become so temporary that people don't take profit from them. Another hypothesis is that business strategies have just changed. Instead of using technology to increase profit, we now use it to lower prices and increase market share. Our productivity statistics aren't measuring how much abstract value labor can provide. It's measuring our business practices.
- p4wnc6 11y agoStart-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?
- henrikschroder 11y agoThe 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 11y agoYes, productivity is measured per hour of human labor.
- thedevil 11y ago"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.
- revelation 11y agoHow does all of that relate to how much better it could be? It's silly to take a fixed point in time and just declare "I think we are all pretty happy here", it's extraordinarily silly to do that as Marc Andreessen.
- thedevil 11y agoI definitely think we're nowhere near where we could be. I just meant to say that the article's claim that slow productivity growth is "real" doesn't make any sense. We definitely could be doing much better though.
- toomuchtodo 11y ago>We definitely could be doing much better though. The question shouldn't be: "what more can we have?" then. It should be: "how can we work less?" http://groups.csail.mit.edu/mac/users/rauch/worktime/ http://groups.csail.mit.edu/mac/users/rauch/worktime/ "An average worker needs to work a mere 11 hours per week to produce as much as one working 40 hours per week in 1950. (The data here is from the US, but productivity increases in Europe and Japan have been of the same magnitude.) The conclusion is inescapable: if productivity means anything at all, a worker should be able to earn the same standard of living as a 1950 worker in only 11 hours per week." To do that, you must legislate a reduction in work hours as productivity increases. Otherwise, corporations and shareholders see all of the gains while workers continue to slave away.
- calinet6 11y agoComplex 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."
- sbov 11y agoMaybe 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".
- api_or_ipa 11y agoI 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.
- x5n1 11y agoAn estimated 26.2 percent of Americans ages 18 and older or about one in four adults suffer from a diagnosable mental disorder in a given year. When applied to the 2004 U.S. Census residential population estimate for ages 18 and older, this figure translates to 57.7 million people. In any given year, 1 in 5 Canadians experiences a mental health or addiction problem.
- dilemma 11y ago>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.
- baconizer 11y ago[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 11y agoAre 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 11y agoyes 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 :)
- slavik81 11y agoTechnology changes over the years, but people don't change much. http://paleofuture.gizmodo.com/commuters-reading-their-newspapers-on-a-train-in-philad-1472729259 http://paleofuture.gizmodo.com/commuters-reading-their-newsp...
- Animats 11y agoMost 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.
- Johnnybe 11y agoWell stated.
- greenyoda 11y agoThe decline of the number of people employed in agriculture is certainly due to increases in productivity (small family farms giving way to industrial-scale farming). But much of the decline in the number of U.S. manufacturing jobs has occurred due to these jobs being moved outside the country, where labor is cheaper.
- Animats 11y agoNo. US manufacturing output is at an all-time high.[1] US manufacturing jobs peaked in the late 1970s.[2] [1] https://research.stlouisfed.org/fred2/series/OUTMS https://research.stlouisfed.org/fred2/series/OUTMS [2] https://research.stlouisfed.org/fred2/series/MANEMP https://research.stlouisfed.org/fred2/series/MANEMP
- dredmorbius 11y agoThere'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.…
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- arjie 11y agoHang 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 11y agoWhat 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.