Category: Economics of Technology

Is There “a Fortune to Be Made” in Selling to the Poor?

(p. B1) For years, multinational companies had little interest in lower-end consumers, figuring no money was to be made. Now, they are increasingly attractive to all types of industries, from consumer product makers to technology businesses. Google just announced plans to sell a stripped-down, cheaper version of its Android phone in India.
A decade ago, C. K. Prahalad, a University of Michigan business professor, in his book “The Fortune at the Bottom of the Pyramid,” detailed the potential, contending that such households were every bit as discriminating and aspirational as their counterparts at the other end of the income spectrum.
Mr. Prahalad, now dead, estimated there were four billion such consumers in a market worth $13 trillion. “People were saying, ‘There’s a fortune to be made. Let’s go,’ ” said Mark B. Milstein, director of the Cen-(p. B6)ter for Sustainable Global Enterprise at Cornell University.
But many of the first efforts failed. “There was not much thinking about what those consumers needed or wanted or how they might be different from consumers with more disposable income,” Mr. Milstein said.

For the full story, see:
STEPHANIE STROM. “Billions of Buyers.” The New York Times (Thurs., Sept. 18, 2014): B1 & B6.
(Note: the online version of the story has the date SEPT. 17, 2014, and has the title “Multinational Companies Court Lower-Income Consumers.”)

The book highlighted in the passage quoted is:
Prahalad, C. K. Fortune at the Bottom of the Pyramid Eradicating Poverty through Profits. Revised ed. Philadelphia, PA: Wharton School Publishing, 2009.

Over-Regulation Could Stifle Drones’ Potential to Revolutionize Our Lives

(p. A15) In the early days of the automobile, Vermont enacted a law requiring someone to walk one-eighth of a mile in front of every car and wave a red flag to warn pedestrians. Iowa directed all motorists to call ahead to warn each town on their route that they were coming. Some jurisdictions set speed limits so low that drivers who obeyed them risked having their engines stall.
Those laws seem humorously quaint, but if they had been widely adopted and enforced, the automobile revolution might have been shut down and its manifold benefits denied to millions. Today over-regulation could stifle the development of drones, which have the potential to revolutionize many parts of the economy and our everyday lives.
To cite a few examples: Amazon hopes to launch Prime Air, which would use drones to deliver packages in less than 30 minutes after an order is placed. Texas Equusearch, which organizes missing-person recovery efforts, can replace the labor of 100 volunteers with one drone. Clayco Inc., a construction firm, intends to use drones for aerial imaging of construction projects–replacing either helicopters, which burn fossil fuels and can be dangerous to those below, or construction workers, who risk serious injury through falls when they must climb to reach high, hard-to-reach places to take photos.

For the full commentary, see:
JOSEPH R. PALMORE and CHRISTOPHER J. CARR. “Overregulated Drones Struggle for Take-Off; The FAA has been slow and stuck in the past–precisely what the technology is not.” The Wall Street Journal (Mon., Feb. 23, 2015): A15.
(Note: the online version of the commentary has the date Feb. 22, 2015,)

Technology Getting Bum Rap for Job Woes

The job market has been anemic in a variety of ways, for several years. Some, as below, want to pin this on the advance of technology. I argue, to the contrary, that it is mainly due to our discouraging start-ups by bad policies (such as over-regulating and over-taxing). Start-ups, as Haltiwanger and his colleagues have been showing, are the main source of new jobs.

(p. A1) Lawrence H. Summers, the former Treasury secretary, recently said that he no longer believed that automation would always create new jobs. “This isn’t some hypothetical future possibility,” he said. “This is something that’s emerging before us right now.”

Erik Brynjolfsson, an economist at M.I.T., said, “This is the biggest challenge of our society for the next decade.”
Mr. Brynjolfsson and other experts say they believe that society has a chance to meet the challenge in ways that will allow technology to be mostly a positive force. In addition to making some jobs obsolete, new technologies have also long complemented people’s skills and enabled them (p. A3) to be more productive — as the Internet and word processing have for office workers or robotic surgery has for surgeons.
More productive workers, in turn, earn more money and produce goods and services that improve lives.
“It is literally the story of the economic development of the world over the last 200 years,” said Marc Andreessen, a venture capitalist and an inventor of the web browser. “Just as most of us today have jobs that weren’t even invented 100 years ago, the same will be true 100 years from now.”
. . .
There are certain human skills machines will probably never replicate, like common sense, adaptability and creativity, said David Autor, an economist at M.I.T. Even jobs that become automated often require human involvement, like doctors on standby to assist the automated anesthesiologist, called Sedasys.
. . .
Whether experts lean toward the more pessimistic view of new technology or the most optimistic one, many agree that the uncertainty is vast. Not even the people who spend their days making and studying new technology say they understand the economic and societal effects of the new digital revolution.
When the University of Chicago asked a panel of leading economists about automation, 76 percent agreed that it had not historically decreased employment. But when asked about the more recent past, they were less sanguine. About 33 percent said technology was a central reason that median wages had been stagnant over the past decade, 20 percent said it was not and 29 percent were unsure.
Perhaps the most worrisome development is how poorly the job market is already functioning for many workers. More than 16 percent of men between the ages of 25 and 54 are not working, up from 5 percent in the late 1960s; 30 percent of women in this age group are not working, up from 25 percent in the late 1990s. For those who are working, wage growth has been weak, while corporate profits have surged.

For the full story, see:
Claire Cain Miller. “Rise of Robot Work Force Stokes Human Fears.” The New York Times (Tues., DEC. 16, 2014): A1 & A3.
(Note: ellipses are added.)
(Note: the online version of the story has the date DEC. 15, 2014, and has the title “As Robots Grow Smarter, American Workers Struggle to Keep Up.”)

A relevant Haltiwanger paper is:
Haltiwanger, John C., Ron S. Jarmin, and Javier Miranda. “Who Creates Jobs? Small Vs. Large Vs. Young.” Review of Economics and Statistics 95, no. 2 (May 2013): 347-61.

Progress Depends on Removing Barriers to Innovation

In the quotation below, Bill Gates is referring to the late, and way-under-appreciated, economist Julian Simon.

(p. A3) “. . . Simon’s view was that humans would have to change to innovate,” Mr. Gates said. Innovation, in other words, is not preordained. Indeed, it’s happened much more in some societies than in others. And it has happened, Mr. Gates was arguing, because people and institutions took steps to remove the barriers to progress.
. . .
. . . , much of the world is enjoying one of history’s most rapid increases in prosperity. Life expectancy has risen more than six years just since 1990. The world, to quote the title of a book by the economist Charles Kenny, is “Getting Better.” As Mr. Gates says: “The world is actually improving a lot. We’re trying to deliver both the good news on the progress and the possibility to do more.”

For the full commentary, see:
David Leonhardt. “Africa’s Economy Is Rising, and Focus Turns to Food.” The New York Times (Thurs., JAN. 22, 2015): A3.
(Note: ellipses added.)
(Note: the online version of the commentary has the title “Africa’s Economy Is Rising. Now What Happens to Its Food?”)

The book mentioned by Charles Kenny is:
Kenny, Charles. Getting Better: Why Global Development Is Succeeding–and How We Can Improve the World Even More. Philadelphia, PA: Basic Books, 2011.

One of the great books by Julian Simon is:
Moore, Stephen, and Julian L. Simon. It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years. Washington, D.C.: Cato Institute, 2000.

Congress Appropriates Funds to Test Concussion Theory of Rain

(p. 190) the first century A.D., when the Greek moralist Plutarch came up with the notion that rain followed military battles. Napoleon believed as much and fired cannons and guns at the sky to muddy up the ground between him and his attackers. Civil War veterans who wallowed in cold slop believed that ceaseless, close-range artillery fire had opened up the skies. In the late 1890s, as the first nesters started to dig their toeholds on the dry side of the one hundredth meridian, Congress had appropriated money to test the concussion theory in Texas. The tests were done by a man named Dyrenforth. He tried mightily, with government auditors looking over (p. 191) his shoulder, but Dyrenforth could not force a drop from the hot skies of Texas. From then on, he was called “Dry-Henceforth.”
Government-sponsored failure didn’t stop others from trying. A man who called himself “the moisture accelerator,” Charles M. Hatfield, roamed the plains around the turn of the century. A Colonel Sanders of rainmaking, Hatfield had a secret mixture of ingredients that could be sent to the sky by machine. In the age before the widespread use of the telephone, it was hard to catch up with the moisture accelerator after he had fleeced a town and moved on.

Source:
Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.

Smart Phones Bring Power to the Patient

(p. A11) We instinctively reach for our smartphones when we need to take pictures, get directions, deposit checks or reserve a table. Eric Topol, a cardiologist and digital pioneer, thinks that they are ready to perform at least one more task: revolutionize health care. In “The Patient Will See You Now,” he argues that smartphones will democratize medicine by bringing data and control directly to the people.
The power of doctors, says Dr. Topol, “can be likened to that of religious leaders and nobility” in centuries past, when knowledge and authority belonged to a small elite. He notes that we’ve never seen “a discrete challenge to the medical profession” akin to Luther ‘s challenge to the Roman Catholic Church or democracy’s challenge to monarchy and despotism. “But we’ve not had the platform or landscape for that to be accomplished. Until now.” Smartphones, he says, enable a range of medical applications to move from the hospital to the home, and they shift medicine’s locus of control from doctor to patient.

For the full review, see:
DAVID A. SHAYWITZ. “BOOKSHELF; Doctor Android; In the same way that Luther challenged the Catholic Church, smartphones are poised to upend the medical profession.” The Wall Street Journal (Tues., Jan. 13, 2015): A11.
(Note: the online version of the review has the date Jan. 12, 2015.)

The book under review is:
Topol, Eric. The Patient Will See You Now: The Future of Medicine Is in Your Hands. New York: Basic Books, 2015.

Ways Technology May Decrease Inequality

(p. 7) As the previous generation retires from the work force, many more people will have grown up with intimate knowledge of computers. And over time, it may become easier to work with computers just by talking to them. As computer-human interfaces become simpler and easier to manage, that may raise the relative return to less-skilled labor.
The future may also extend a growing category of employment, namely workers who team up with smart robots that require human assistance. Perhaps a smart robot will perform some of the current functions of a factory worker, while the human companion will do what the robot cannot, such as deal with a system breakdown or call a supervisor. Such jobs would require versatility and flexible reasoning, a bit like some of the old manufacturing jobs, but not necessarily a lot of high-powered technical training, again because of the greater ease of the human-computer interface. That too could raise the returns to many relatively unskilled workers.

For the full commentary, see:
TYLER COWEN “TheUpshot; Economic View; The Technological Fix to Inequality.” The New York Times, SundayBusiness Section (Sun., DEC. 7, 2014): 7.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the commentary has the date DEC. 6, 2014, and has the title “TheUpshot; Economic View; How Technology Could Help Fight Income Inequality.” )

The “Miracle Machines” of Farming

(p. 75) Nobody had washing machines, vacuum cleaners, or incandescent light bulbs. But the farmers did have their miracle machines. In fifteen years, the Lucas family had gone from a walking plow pulled along behind a mule, to a riding plow, in which horses carried the blade through the soil, to a fine-tuned internal combustion plow.
“Machinery is the new Messiah,” said Henry Ford, and though that sounded blasphemous to a devout sodbuster, there was something to it. Every ten seconds a new car came off Ford’s factory line, and some of them were now parked next to dugouts in No Man’s Land.

Source:
Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.

As with Airplanes, Lives Must Be Risked to Achieve Routine Safety in Spaceships

(p. A21) SEATTLE — ONE clear winter day in 1909, in Hampshire, England, a young man named Geoffrey de Havilland took off in a twin-propeller motorized flying machine of his own design, built of wood, piano wire and stiff linen hand-stitched by his wife. The launch was flawless, and soon he had an exhilarating sensation of climbing almost straight upward toward the brilliant blue sky. But he soon realized he was in terrible trouble.
The angle of ascent was unsustainable, and moments later de Havilland’s experimental plane crashed, breaking apart into a tangled mass of shards, splinters and torn fabric, lethal detritus that could easily have killed him even if the impact of smashing into the ground did not. Somehow, he survived and Sir Geoffrey — he was ultimately knighted as one of the world’s great aviation pioneers — went on to build an astonishing array of military and civilian aircraft, including the world’s first jet airliner, the de Havilland Comet.
I thought immediately of de Havilland on Friday when I heard that Virgin Galactic’s SpaceShipTwo, a rocket-powered vehicle designed to take well-heeled tourists to the edge of space, had crashed on a flight over the Mojave Desert, killing one test pilot and seriously injuring the other.
. . .
Certainly the Wright brothers and others like de Havilland were involved in what we now view as an epic quest, but many experts of the day were certain that flight, however interesting, was destined to be not much more than a rich man’s hobby with no practical value.
“The public has greatly over-estimated the possibilities of the aeroplane, imagining that in another generation they will be able to fly over to London in a day,” said a Harvard expert in 1908. “This is manifestly impossible.” Two other professors patiently explained that while laymen might think that “because a machine will carry two people another may be constructed that will carry a dozen,” in fact “those who make this contention do not understand the theory of weight sustentation in the air.”
. . .
There will be tragedies like the crash of SpaceShipTwo and nonlethal setbacks such as the fiery explosion, also last week, of a remote-controlled rocket intended for a resupply mission to the International Space Station. There will be debates about how to improve regulation without stifling innovation. Some will say private industry can’t do the job — though it’s not as if the NASA-sponsored Apollo or space shuttle missions went off without a hitch (far from it, sadly).
But at the heart of the enterprise there will always be obsessives like Sir Geoffrey, who forged ahead with his life’s work of building airplanes despite his own crash and, incredibly, the deaths of two of his three sons while piloting de Havilland aircraft, one in an attempt to break the sound barrier. Getting to routine safety aloft claimed many lives along the way, and a hundred years from now people will agree that in that regard, at least, spaceships are no different from airplanes.

For the full commentary, see:
SAM HOWE VERHOVEK. “Not a Flight of Fancy.” The New York Times (Tues., NOV. 4, 2014): A21.
(Note: ellipses added.)
(Note: the online version of the commentary has the date NOV. 3, 2014.)

Leading Computability Expert Says Humans Can Do What Computers Cannot

(p. B4) What does Turing’s research tell us?
“There is some scientific basis for the view that humans are doing something that a machine isn’t doing–and that we don’t even want our machine to do,” says S. Barry Cooper, a mathematician at Leeds and the foremost scholar of Turing’s work.
The math behind this is deep, but here’s the short version: Humans seem to be able to decide the validity of statements that should stump us, were we strictly computers as Turing described them. And since all modern computers are of the sort Turing described, well, it seems that we’ve won the race against the machines before it’s even begun.
. . .
The future of technology isn’t about replacing humans with machines, says Prof. Cooper–it’s about figuring out the most productive way for the two to collaborate. In a real and inescapable way, our machines need us just as much as we need them.

For the full commentary, see:
Mims, Christopher. “KEYWORDS; Why Humans Needn’t Fear the Machines All Around Us; Turing’s Heirs Realize a Basic Truth: The Machines We Create Are Not, Indeed Cannot Be, Replacements for Humans.” The Wall Street Journal (Tues., DEC. 1, 2014): B4.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Nov. 30, 2014, and has the title “KEYWORDS; Why We Needn’t Fear the Machines; A Basic Truth: Computers Can’t Be Replacements for Humans.”)

One of the major books by the Turing and computability expert quoted in the passages above, is:
Cooper, S. Barry. Computability Theory, Chapman Hall/CRC Mathematics Series. Boca Raton, Florida: Chapman and Hall/CRC Mathematics, 2003.

Bezos Devices Aim to Create a Virtuous Cycle ‘Flywheel’

(p. B1) Amazon now makes four different kinds of devices. There are dedicated e-readers, multipurpose tablets and, starting this year, a TV streaming device and a smartphone, the Fire Phone. Just this week, Amazon introduced another streaming machine, the Fire TV Stick, a $39 gadget that is the size of a USB stick and promises to turn your television into an Amazon-powered video service.
. . .
(p. B9) What is Amazon’s endgame with all these devices? Mr. Bezos has always said that his mission, with hardware, is to delight users with devices that are priced fairly. The devices also contribute to Mr. Bezos’s famous “flywheel,” the virtuous cycle by which greater customer satisfaction leads to more sellers in his store, which leads to more products, greater efficiencies, lower prices and, in turn, more customers.
“Everything is about getting that flywheel spinning, and it isn’t necessarily about building a big and successful tablet business of their own,” said Benedict Evans, an analyst who works at the investment firm Andreessen Horowitz and has studied Amazon closely. “Whether they actually drive meaningful commerce isn’t entirely clear, but Amazon is rigorously focused on data, so if they’re doing it, you can trust that there must be data that justifies it.”
And if this year’s devices don’t take off, you can bet that Mr. Bezos will try a slightly different tack next year.

For the full commentary, see:
Farhad Manjoo. “STATE OF THE ART; Amazon’s Grand Design for Devices.” The New York Times (Thurs., OCT. 30, 2014): B1 & B9.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date OCT. 29, 2014, and has the title “STATE OF THE ART; Amazon’s Grand Design in Devices.”)

Bezos’s enthusiasm for Jim Collins’s “flywheel” idea is discussed in:
Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon. New York: Little, Brown and Company, 2013.