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Tyler Cowen's "The Great Stagnation" - An IT Perspective

January 26th 2011

Tagged: econ

Yesterday, economist Tyler Cowen (famous on the Internet mostly for the superb MarginalRevoluation.com) released an ebook single for Kindle and Nook entitled The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better. The book has generated considerable buzz, both for its format (novella length, electronic only, $4 price) and for its content (an incisive, original, non-dogmatic treatment of the recent economic situation in the US and globally). Rather than add yet another comprehensive review, I want to take issue with two specifically technology-related points he makes, one where I think he's missed the mark, and one where I think he was on the verge of an even better breakthrough.

First, what's missing: An acknowledgement of the extent to which mobile communications technology has changed day-to-day life for normal Americanas. Cowen asserts that technological progress insofar as it applies to everday life plateaued in the 1960s/70s, and that while we've had technically amazing breakthroughs since then, they haven't translated to the same sort of life changes that electricity, cars, and television did:

... just look around. I'm forty-eight years old, and the basic material accoutrements of my life (again, the internet aside) haven't changed much since I was a kid. My grandmother, who was born at the beginning of the twentieth century, could not say the same thing.

Where Cowen repeatedly praises the internet (exactly 36 mentions — thanks Kindle!), the word 'mobile' doesn't appear. Yet again, just look around. Take the quintessential pre-mobile era sitcom, Seinfeld, and equip each character with a 2011 model smartphone. How many of the plots still make sense? Half of them could be recast as 30-second mobile carrier ads: Jerry's comedy performance is canceled, so from the cab's backseat he connects with George and Elaine, finds directions to the theater they're at, buys tickets to the 8:45 showing, and meets them just in time for the lights to dim.

It's not just calling and texting, it's the always-on information connection. Cowen at one point references the Jetsons and the proverbial missing jetpacks, but isn't the smartphone a Star Trek communicator? Or the Kindle (or iPad) a Hitchhiker's Guide to the Galaxy?

Second and more important, I think, is Cowen's discussion of how the information technology sector's growth, production, and profits differ from previous technological breakthroughs:

Most Web activities do not generate jobs and revenue at the rate of past technological breakthroughs. When Ford and General Motors were growing in the early part of the twentieth century, they created millions of jobs and helped build Detroit into a top-tier U.S. city. Today, Facebook creates a lot of voyeuristic pleasure, but the company doesn't employ many people and hasn't done much for Palo Alto; a lot of the "work" is performed more or less automatically by the software and the servers.

Where I differ from Cowen is not in how he views the current state of affairs, but in the interpretation of the way forward. Software development as a career/discipline/vocation/whatever is still in its craftsman-style infancy. We don't know how to teach people to program. We don't know how to efficiently scale large projects. We are so lost that there is a major strain of thought that the best way to train people is medieval-style mentor/apprentice relationships. More frightening is the likelihood that at our current level of understanding, those people are right.

As a consequence, software development is something magical done by people born with a gift or interest, so supply of programming talent is constricted. Consequently, developers are free to devote half or three-quarters of their time to social to-do lists and still make a comfortable living.

Cowen notes that the work performed by Facebook is mostly done by servers, but the work done by cars is mostly done by combustion engines. Facebook is the car, not the Ford or the General Motors. There are vast untapped reserves of low-hanging fruit in replacing inefficient business processes and creating new ones, we just don't have the willing and capable manpower available to take advantage yet.

The next technological plateau will be achieved by a Henry Ford of IT. The workers won't look like current software developers any more than a Ford assembly line worker looked an artisan wagon-builder, but they'll produce the same giant leap forward in economic progress.