Tag Archives: Industry

Is Productivity Growth Becoming Irrelevant?

By Adair Turner – As we get richer, measured productivity may inevitably slow, and measured GDP per capita may tell us ever less about trends in human welfare.

Our standard mental model of productivity growth reflects the transition from agriculture to industry. We start with 100 farmers producing 100 units of food: technological progress enables 50 to produce the same amount, and the other 50 to move to factories that produce washing machines or cars or whatever. Overall productivity doubles, and can double again, as both agriculture and manufacturing become still more productive, with some workers then shifting to restaurants or health-care services. We assume an endlessly repeatable process.

Or suppose that 25 of the surplus farmers become criminals, and the other 25 police. Then the benefit to human welfare is nil, even though measured productivity rises if public services are valued, as per standard convention, at input cost.

The growth of “zero-sum” activities may, however, be even more important. Look around the economy, and it’s striking how much high-talent manpower is devoted to activities that cannot possibly increase human welfare, but entail competition for the available economic pie. Such activities have become ubiquitous: legal services, policing, and prisons; cybercrime and the army of experts defending organizations against it; financial regulators trying to stop mis-selling and the growing ranks of compliance officers employed in response; the huge resources devoted to US election campaigns; real-estate services that facilitate the exchange of already-existing assets; and much financial trading.

Much design, branding, and advertising activity is also essentially zero-sum. more> https://goo.gl/qpxGRb

Why Every Leader Needs to Be Obsessed With Technology

By Lisa Kay Solomon – Digitization has moved beyond music and entertainment, and now many big retailers operating physical stores are struggling to stay relevant. Meanwhile, the pace of change is accelerating, and new potentially disruptive technologies are on the horizon.

More than ever, leaders need to develop a strong understanding of and perspective on technology. They need to survey new innovations, forecast their pace, gauge the implications, and adopt new tools and strategy to change course as an industry shifts, not after it’s shifted.

Nurturing curiosity is the first step to understanding technological change.

Becoming more technologically minded takes discipline and focus as well as unstructured time to explore the non-obvious connections between what is right in front of us and what might be. It requires a commitment to ongoing learning and discovery.

Whatever your strategy, the goal should be to develop a healthy obsession with technology. more> https://goo.gl/2ETU3m

Cities: Where the economy plays scrabble

By Brad Cunningham – For those who haven’t played Scrabble recently, here’s a refresher. Players collect a number of individual tiles, each of which carries one letter of the alphabet. Players then combine their letters in order to spell words. The value of the words is determined by the sum of the value of each letter, with rarer letters (e.g. Q, X, Z) having a higher value than common letters (e.g. A, E, S, T). Players then compete to produce the most valuable words out of the letters available to them.

In an economy, firms endeavor to make products similar to how Scrabble players make words. To make a product, firms must bring together a variety of very different and very specific inputs and activities. Each of these inputs can be thought of as one capability needed for production, just as a letter in Scrabble represents one capability needed to make a word possible.

Under this model, there are two paths to industrial growth. The first path occurs when an industry with potential is new to an area and some necessary capabilities are not available locally. An entrepreneur must figure out how to create the missing letters and coordinate them with locally available letters to spell a new word. Once this problem is solved, industries can grow via the second path: by simply replicating and scaling up existing capabilities.

Developing countries can grow by bringing in capabilities from around the world, whereas developed countries generally have to innovate new capabilities to grow. more> https://goo.gl/m52AbL