I have, for a long time, been telling audiences that there is no new technology coming along to drive our economy along. When doing so I have always got out my phone and said that the appeal they have to offer will run out of road when we come to realise that there are, after all, finite things they can really do for us. Confirmation comes this morning from the FT, who note:
The status value of a new smartphone is declining in line with its added utility. Users flaunting handsets with cracked screens are one indicator. Another is a profits warning from Dixons Carphone. The UK electrical retailer says customers are hanging on to their old iPhones for five months longer, well over two years. A slump in the shares reflects fears of deeper structural change.
I am not at all surprised.
And this is serious. As Gillian Tett notes this morning, also in the FT
Inflation has been undershooting for a long time and prices are also weak elsewhere in the western world. Instead, most Fed officials suspect that structural factors are also at work. Demographics, for example, may play a role: older people consume less aggressively. The decline of unions and a shift to temporary, contingent work might have reduced the bargaining power of labour, undermining wage growth.
Then there are ... mobile phones. Never mind the fact that “free minutes” has suppressed the PCE index this year. The really interesting point is that this symbolised a bigger trend: rapid digital innovation is expanding the productive capacity of our economic system in unexpected ways. This is changing price signals in a manner that economists and statisticians struggle to understand – or measure.
Our statistical systems were developed for a 20th-century industrial world, where goods and services had tangible prices and consistent qualities. They can count goods and serices from motor cars to massages well. But statisticians struggle to measure the impact of rapid product quality changes, such as when a $400 phone suddenly offers dramatically more services than a similarly priced one a year ago. The current statistical systems also fail to capture non-monetary transactions such as the barter that takes place when consumers download “free” apps and use “free” cyber services in exchange for giving their data to technology companies for “free”.
And as she points out, this really matters because get this wrong and wrong conclusions are drawn. She goes on to evidence that: she bizarrely suggests raising interest rates as a result, even though her analysis makes it clear just how harmful this might be.
We're living in a new economy shaped by, but no longer driven by, technology.
We have not worked out the consequences.
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I would say that technology is advancing faster than ever (the mobile phone has just reached maturity like the internal combustion engine did decades ago). The lack of growth in the UK is not because there are no interesting technologies it is because of a lack on investment – the wrong people in charge! As I keep on saying look at South Korea, invests 4.1% of GDP in R and D. UK is 1.7 %!
Here’s some ideas:
1. Most renewable energy technologies are advancing at an amazing rate – solar cheaper and more efficient, bigger wind turbines, storage bigger and more efficient.
2. Electric vehicles are advancing very fast.
3. AI is beginning to replace some jobs. Self driving vehicles in agriculture and just today we heard about self driving HGV tests. AI personal care assistants will be coming soon.
4. There is a revolution in biotech where DNA sequencing means we can tailor drugs to individuals. We are just beginning to understand epigenetics which could be the start of another revolution.
5. Also growing fast in the UK is photonics which includes imaging, microscopy, lasers optical communications, growing at 8% per annum.
6. There are new technologies in the pipeline, e.g. lighter flexible displays, wearable devices.
7. Nano satellites.
8. Drone technology.
9. Quantum computers and quantum cryptography (impossible to crack) are both now viable and other countries are developing them commercially.
10. Sensors for smart cars, smart homes, smart everything.
I am sure there are thousands of others that I do not even no about. The technology is there, we just need more of the desire and resource to develop it first, but it will not happen if people can make a fast one on a buy-to-let or hedging currencies instead.
Maybe!
I know this is a field you know more about than me
But maybe there is a reason for low investment, which is the commercial application iif these is not understood
Which gets back to my point
With all the “smart” technology we should then be in a position where people spend their productive time serving people, acquiring knowledge or developing new ideas (something for everyone). The trick is in developing the economic delivery system; because that requires smart (as in wise) people.
I don’t want to sound curmudgeonly but all you’ve provided is a list…as if you listed each edition of BBC’s Click in order.
Your amazing rate of advance in renewal technologies is not developed by the adjectives cheaper, bigger, more efficient. Amazing rates of advance might suggest more built-in obsolescence or new concentrations of corporate power or anything at all except amazing shiny futures. If the recent past is anything to go by then many of these advances will only advance further inequality and a more complete ignorance of our surroundings. Smart everything might simply mean completely stupid everyone. Driverless agricultural vehicles could empty the countryside further of ordinary people. And so on.
Maybe this shiny future will arrive but it won’t be wonderful or amazing for the people who live through it unless people are forced to repeat this over and over.
Here it comes…hold on…one second…bah humbug!!!!!!
What is BBC Click?
Richard,
BBC Click is the BBC’s Technology magazine show, you should be able to catch it on iplayer
I confess one of the things I do not do much of is watch such things
My television viewing has to be pretty selective. I usually prefer a book
I’m no techno expert but I tend to agree with Charles. The problem is judicious investment. From my perspective it’s symptomatic of the Capitalist economic model, which is entering its dotage with a general decline in long-term profitability, hence lack of new investment at levels required to sustain its historic impact.
Then there’s the largely ignored issue of ‘The Internet of Things’ exponded by such luminaries as Philip N. Howard (‘Pax Technica’) and Jeremy Rifkind (‘The Zero Marginal Cost Society’).
The initiatives outlined by Charles above in themselves provide amazing opportunities to improve life on the planet for everyone, not counting what else is already in the pipe-line. Translating the technology into a benefit for all is the major challenge facing governments. And, as always, it comes back to socio-economic policy that can either work for the 99% or the 1%. Based on current trends I’d say the 99% will be the net losers.
I think it’s pretty safe to say that we really are entering a ‘Brave New World’, 86 years later than Huxley predicted, the outcome of which is impossible to anticipate.
I think I’m going to have to admit to an error on this one….
“I think I’m going to have to admit to an error on this one….”
As you well know yourself Richard, you are always right. In this case, saying you are wrong you are again right.
To add to Charles (nice to see him in his area of normal expertise rather than economics), people think nothing new is coming as smartphones and computers aren’t obviously getting step changes in new ideas. But look elsewhere, more examples…
– medical improvements, this video is beautiful…
https://twitter.com/DanielJHannan/status/899384155116580864
– military exoskeletons to allow soldiers to carry many times normal weight are now allowing the paralysed to walk
– HIV patients can now live as long as the general population due to the phenomenal work in the drugs industry
– self driving cars, so passe these days it almost seems, but think about it, knight rider made real in just 30 years. Just think of the technology needed to make this work when you boil it down to what software and hardware has to do.
– SpaceX, this is unbelievable – Thunderbirds did this and it’s only just become real
https://www.youtube.com/watch?v=hulMgWJV3e8
– the fact that your cellphone can do 100Mb/s along with many people next to you, in a tunnel on a train or in a car
– even the crappy copper BT wire laid decades ago to carry voice at less than 4kHz is carrying data at 20,000 times the speed
and so much more.
Rub it in!
But it’s made me think again
Which is a big part of my reason for blogging
Might it not depend on how long you have been saying it Richard? I expect you were right at some point and now you are right in saying you are wrong, which is better than being wrong twice.
Has no-one in your audience ever challenged your view?
I recall a couple of years ago you were saying that there couldn’t be any more entrepreneurs because their parents owned houses.
So well done and keep up the good work.
What are you talking about?
Why not engage in useful exchange, or not bother at all?
‘Exponded’? Expounded!
What I find amazing is not that Dixons Carphone profits have crashed but that people are surprised to see this.
As saturation of a market rises so the market changes from a new to a replacement market and you either have to find new markets for the same thing eg China for iPhones of have to deliver new advances to make the existing product redundant. This law of nature applies equally to Apple whose stratospheric rise has been on the back of doing both of these ie new geographical markets and product enhancement. The geographical spread has finite limits and it appears to be harder and harder to find new gizmos to feed the replacement churn.
Add in the well trumpeted issues of constrained household budgets and uncertainty about the future in the UK and you could argue that Dixons Carphone have done pretty well!
I wonder whether hardware might follow software into a rental model, once the product reaches a point of maturity, beyond which innovation offers diminishing returns, and therefore declining sales and consequent manufacturer profits? (I’m looking at you, Photoshop!)
Car ‘purchases’ seem to effectively be moving that way – but will mobile phones (new iPhone rumoured to cost around £1000!!!) eventually be available *solely* to rent, with automatic upgrades appearing as an incentive, but in reality simply sustaining the manufacturer by having them rely on rent-seeking?
Not wishing to sound too much like Dennis Nordern…but if, like me, you can remember a time when you could only rent not buy a telephone from the GPO, then it would seem like the economics of technology could actually be regressing rather than progressing!
I do remember renting from BT
And when it was illegal to have your own answerphone
The hardware rental model you suggest reminds me if a time as a student many years ago, when not only the phone was rented, but tv’s & vhs players came courtesy of radio rentals!
Agreed on BT, although if you see the problems the internet gave them – and still gives them, they were probabaly right to insist on only their equipment…
Otherwise I agree entirely with Charles.
We lack – well the government lacks – vision and so these exciting developments regularly go unsupported. Allegedly they are supposed to be intuitively supported by the private sector but as Mariana Mazzucato has proved, the only proper support and the best result is with investment by the state.
I’m afraid this is yet another disaster from our Brexit loving, private rent seeking. austerity loving, narrow minded, incompetent government.
The pattern is well-established:
…Strange New Thing is expensive and cranky but a few people create value with it and become rich;
…It becomes an Expensive New Thing that works pretty well, is used by quite a lot of people who create a lot of value and expand the economy, while demand and mass-production bring the price down;
…Ordinary cheap-as-chips commodity device/drug/service is used by everyone and visible to no-one. Margins are razor-thin and the economic expansion it created is mostly over.
…Maybe, just maybe, it’ll be the platform or the infrastructure for a Strange New Thing.
The question for a cynic is: who gets the value at every stage of the process?
For the record, I think that computing and consumer electronics are mature technologies that have a long way to go in terms of the economic maturation process: commoditisation and ever-cheaper computation.
There is a great deal of economic value to be developed in activities that are currently impracticable due to the difficulties in tracking things, organising and controlling things cheaply enough to realise an efficiency gain, and in data-processing tasks that grind out precise anwers to questions that were left to the uncertainties of safety margins and wasted marketing spend.
The bad news is that some of the value in that can be harvested by powerful individuals who regard people as things: as an exercise in dystopian dread, substitute ‘things’ for ‘people’ in that last paragraph, and consider the ways in which ‘Ãœberisation’ of the economy is commoditising the workforce and transferring *all* of the value created by the labour of the many into profits for the few.
And then, of course, there is the ‘Strange New Thing’, of value only to a wealthy few, of using commodity computation on social media datasets to model individuals with exquisite precision – an ability to be as persuasive as a one-to-one conversation with Obama or Bill Clinton, without the target even being aware they are being persuaded, but a thing that you can do with hundreds of thousands of voters for a dollar a head – and the wealthy few are using this strange new power to distort elections and referenda.
Google for ‘Mercer’, ‘Cambridge Analytica’, ‘Referendum’ and see what you get. I *strongly advise* that you do that search on DuckDuckGo through an anonymising VPN.
I think that that particular thing isn’t going out into the consumer market any time soon. I hope and pray that there is never a mass market in surveillance data: the business-to-business market in consumer tracking data is dystopian enough already.
But, warnings aside, there is still value to be created. The question is, as I say, who will get to harvest and keep it.
Of course in our increasingly sick Western societies there’s always the remote chance of them changing direction and investing in social need as opposed to profit need. Simply in pure Attachment Theory argument terms children would benefit from seeing more of their birth parents many of whom have been forced to work long hours to make ends meet to keep a roof over their children’s heads and put food in their bellies.
Richard I think that you are right in a way so don’t be too hard on yourself. What you seem to be saying refers I think to really genuinely useful technology and the lack of investment thereof.
Technology that reduces jobs (we now have the prospect of 1 driver being able to drive 3 lorries on our roads at the same time – that’s 2 less jobs made by the economy) seems to be on the increase because its how the investing 1% get a bigger return on their money when there are less wages to pay for. The focus on technology seems to be about reducing cost (usually wages) without any thought about the human or social consequences of this. It’s stupid and only benefits a smaller and smaller group of people.
Technological advance that can genuinely help the world such as more use of electricity in transport is going be messed up and misallocated because no-one yet realises that to produce as many batteries as there are cars at present is going to be a huge drain on resources. Putting that technology into State invested public transport on the other hand would be much achievable in my view. But the pursuit of satisfying individual need will be the market’s first concern so we can expect a crisis to emerge of some kind.
Another area that does need investment is that of antibiotics. Years ago I watched a fascinating documentary about phage medicine in Russia. Phages (bacteria killing viruses I think, rather than viruses that kill the patient) can be very useful in dealing with infections that normal antibiotics cannot deal with. The documentary told the story of a major phage lab in Russia who looked for Western investment when the Wall came down. None was forthcoming and the lab did not like the offers they got from the Western (US neo-lib minded) vulture funds. At the end of the doc’ I wanted to ring the NHS and beg them to invest in this really interesting and potentially life improving science. As I understand it, phage medicine is still restricted to Russia and Poland. What a pity. A people’s QE in this field would be wonderful.
But then again Charles is right too about investment (as you have been). I have just started Werner’s ‘Princes of the Yen’ and his preface has made me very angry because the Japan he describes in his book – a Central Bank that could help with the money supply to stir demand and investment in the moribund economy but chose to do nothing expect bang on about structural reform – seems to be exactly what appears to be happening here.
Having just read ‘Democracy in Chains’ I am rapidly coming to the conclusion that if there is not a conspiracy then it sure as hell feels like there is one at work here. And it has to be stopped – somehow. Surely?
Oh yes, it has to be stopped….
And it’s down to each of us
My working class and tradesmen employees and their peers have learned to use their smart phones too, and well.
Most requests for materials, parts and tools are made by texted photo of the item required, taken from the remnant of the broken or used up item, and those photos are shown to the material, tool or part guy.
Laser levels now feed into smart phones via blue tooth. My more or less illiterate carpenter explained the details to me in extremely technical language, which he picked up on the fly.
Site coordination between trades or master tradesman to apprentice have become incredibly efficient. This happened explosively when unlimited calling plans became cheap and common. Most of these guys have earpieces and will be on their phones hours each day while working with their hands. Sample: Electrician to apprentice: “OK, connection is fixed, flip the breakers on in sequence and I’ll tell you when you have the right one”.
1. Gillian Tett is buying into familiar line that you often see in the FT and elsewhere which tries to tell us that the declining incomes of the majority, low productivity growth etc. are all being horribly underestimated and misconstrued because they fail to take into account all those cheap / free whiz-bang gadget improvements that we keep receiving.
https://www.ft.com/content/c1a92c47-058e-3d59-a72a-65bb8f4ffacc
While there may be some truth to this suggestion there is a big load of rubbish contained within it as well. A lot those wonderful life-enhancing intangibles seem to be be doing little more than the enslaving the microscopic attention spans of millions of smart-phone zombies. Creating internet “apps”, and services that ensure the consumer does all the work and destroying what little is left of human interaction in daily economic activity.
I think that many would prefer affordable housing to the latest, superfluous, planned-obsolescence creating “upgrade” that Microsoft or Apple have to offer.
2. I’m not sure what you mean by “no new technology coming along to drive our economy along” and I am a little surprised that you said that. “New technology” drove our economy along when productivity gains resulted in real wage rises and shared prosperity. That doesn’t happen anymore as you well know. This we associate with increasing inequality & permanent technological unemployment. Restoring greater equality is worthy in itself and will create demand but ultimately it will not change the fact that AI will destroy more jobs that it creates.
We are in the end of phase of the industrial revolution. An era of permanent excess capacity where ‘productivity gains’ are more of a problem than a solution and markets will be incapable of equitably allocating income and what little “work” remains.
If we allow it, the world will become a place where we have an unprecedented capacity to produce and most can’t afford to buy – technology can create a lower standard of living. The question now is one of allocation, distribution and quality of life. Technological gains alone won’t resolve anything. Not anymore.
I have accepted I overstated my case
By the way,
this, despite its source, is well worth a look:
http://www.economist.com/blogs/babbage/2011/11/artificial-intelligence
Richard can you please elaborate on what you meant by – “We’re living in a new economy shaped by, but no longer driven by, technology.” What is it driven by?
Others have already persuaded me I Amy be wrong