By all accounts we are living in a period of robust technological improvement. Innovations from smart phones to artificial intelligence are fundamentally changing lives and altering the way business is done across a wide range of industries. Historically, technological innovation has been the “secret sauce” that has fueled economic growth and the rising living standards that come along with it. But a strange thing has occurred over the last decade. Since 2007, productivity growth in the U.S. has averaged just 1.3% a year. This rate is less than half the gain recorded from 2000-2007 and well below the 2.1% annual average since 1941.
Economists have been scratching their heads trying to figure out what is behind these weak results. Some, like Martin Feldstein from Harvard, think we simply have a measurement problem. He argues that the way we measure productivity – – generally the amount of goods and services produced per hour worked – – does not capture the value associated with qualitative improvements. Google Maps, for example, does not provide a much different output than physical maps do, but it is a lot easier to use. Others, such as Northwestern University’s Robert Gordon, are less optimistic. He contends that today’s innovations do not have as much of an economic impact as blockbuster innovations of the past, like the electric light bulb. A third group argues that technological innovation occurs in waves. The wave begins with the introduction of a “general purpose” technology such as artificial intelligence. The real economic impact, however, is only felt once it is widely adopted and commercialized.
My guess is that all three of these theories play a part in the recent anemic productivity statistics. Artificial intelligence may not be the next “electric lightbulb” — Siri dialing a phone number for me is certainly convenient but it is hardly a groundbreaking innovation. But this technology is still in its infancy and may yet prove disruptive in a number of ways.
Each year, the MIT Technology Review prints a list of the technological developments expected to have the most impact on human life. The author of this year’s list is none other than Contributing Editor and Microsoft founder Bill Gates. Mr. Gates’ emphasis this year is in keeping with Martin Feldstein’s more optimistic view of the world. Many of the developments on his list focus on improving the human condition. Just over half involve healthcare. The gut probe in a pill and wearable health monitor, for example, both are aimed at improving patient outcomes, while the self-contained toilet is focused on reducing disease in the developing world. Innovations that focus on cleaning up the environment also feature prominently on the list.
Mr. Gates, one of the world’s leading technologists, is optimistic about the future, and his selections reflect that view. While he still thinks that much can be done to extend life, especially in some of the world’s most disadvantaged areas, he believes strongly that new technologies can help enhance personal fulfillment. This shift would represent quite an achievement if viewed from a longer term historical perspective.