The Internet Just Isn’t That Big a Deal Yet: A Hard Look at Solow’s Paradox

The Internet age has given us blisteringly fast connectivity to the World Wide Web, cloud computing, nearly instant collaboration and high definition face-to-face video communication with our peers around the world. Yet in terms of our rate of economic productivity, we have not only stalled in the past several years but also taken hugely dramatic dips. The promise of the Internet making everyone’s job easier and boosting economic advancement has not been met. Why?

The answer lies in a closer look at Solow’s Paradox. The concept was first described in 1987 by economist and author Robert Solow, who stated, "You can see the computer age everywhere but in the productivity statistics." As it grew in popularity, Solow’s Paradox became defined as the “discrepancy between measures of investment in information technology and measures of output at the national level.” In particular, it asks why the rate of productivity increase appears to be slowing dramatically in the Internet age.

And that is undeniably true. According to an early November report from the Bureau of Labor Statistics, 2014’s third quarter business sector labor productivity increased at a 2.0 percent annual rate. Output increased 4.4 percent and hours worked increased 2.3 percent. From the third quarter of 2013 to the third quarter of 2014, productivity rose 0.9 percent as output and hours worked increased 3.0 percent and 2.1 percent, respectively.

Looking at the year-over-year performance by quarter, that seems like good news. But taking a closer look, productivity actually declined steadily from a high of 8.3% in Q2 2009, including sizeable dips of -2.7 percent in Q1 2011 and – 4.5% in Q1 of 2014.

An average productivity growth of 2.0% is something people actually might notice in their lifetimes. With the trends since 2009 showing steady decline over the past several years, however, what’s really noticeable is that there seems to be no correlation between productivity and technological advancement.

For me, it boils down to the fact that, compared to the technological innovations of the last industrial revolution (electricity, automobiles, wireless broadcasting) the Internet age just isn’t that impressive. Technological advancements of the last century had a truly transformative effect over the previous industrial age. Ice farming was replaced by refrigeration, the horse and buggy by the automobile, burning of fossil fuels for energy by centralized electrical power production. These advancements were notable not just in what they achieved in themselves but how they affected society.

What’s more, consider that the average American worker’s productivity soared at an average rate of 2.7% from 1939 to 2000. Among other reasons, the productivity surge occurred because the military industrial complex went from building more weapons to building more expensive, more sophisticated ones. This was a 20th Century idea, and came into its own with the advent of the Cold War. The USA knew it could never beat the Soviet Union or China by weight of numbers, but it could beat them with more efficient systems. This caused both the arms race escalation and the space race.

In defence of today’s technology, despite its ubiquity, some industry observers believe society has really only been in the Internet age for no more than 15 years. As a result, today’s incredible advances in technology innovation have simply not had the time to effect society yet. With the every-quickening rate of change offered by the Internet, it is sensible to assume that 15 years from now we may see some more profound changes, on the order of those enjoyed across society in past periods of innovation.

That is, of course, it we take advantage of the new technological changes available to us. Right now, we are not. People are afraid of rapid change, and when technological change happens faster than the investment cycle for a technology, major problems can happen. People will dig in their heels as a reaction to the newness of innovation. They will stick to old familiar processes, even when the new ones are faster, easier and more efficient. That’s the equivalent of driving a horse-drawn carriage on the freeway.

To avoid falling victim to Solow’s Paradox over the long term, society as a whole – and business in particular – needs to think bigger. No longer can business think in terms of 10% improvement. Today’s business leaders need to radically change their business process, and look for 10 times better process. Take advantage of the opportunities offered by the cloud and gigabit Ethernet, put the applications of the Internet age to work daily, across every aspect of your operations.

That will spur a real revolution in how to do business. And only then might we be able to disprove and put to rest Solow’s Paradox.

This piece first appeared in Wired Magazine November 2014

Trade Show Robots: Defying Convention

I take a rather dim view of the new technology of service robots in the workplace. Recently, though, I’ve come across a new use for the technology that makes a lot more sense: video conference-enabled trade show robots.

Unlike robots in the office, trade show robots could be a boon for the $100 billion-plus global trade show and conference industry. Combined with video conferencing capability, these robots could dramatically change how trade shows and similar events engage attendees.

First, a little background. There is a market boom in so-called “service” robots, as opposed to “industrial” robots like the ones used on assembly lines. The International Federation of Robotics estimated the worldwide market for robot systems in 2012 at $26 billion. Service robots, meant for personal or professional use, saw a 20 percent increase in 2012 sales over 2011. From 2013-2016, that segment alone will likely have a market value of $ 17.1 billion.

How does this play into the trade show world? In October 2013, Suitable Technologies made 50 of their Beam “remote presence” or “telepresence” robots available for rent at the RoboConference in Silicon Valley. In a conversation with a trade editor, Suitable’s founder Scott Hassan suggested he could have 10,000 of his robots at the 2015 Consumer Electronics Show (CES).

It’s not such a far-fetched notion to have robots roam the trade show aisles. Some show goers are already renting Segways to cover more convention area quickly. This would just be removing the human element altogether, and replacing it with so-called robot “avatars” already making a splash on the market.

Robot builders originally suggested a far less practical business model, which was to use the technology in the workplace so traveling workers could have the same kind of access as when they’re actually in the office. I just can’t see the market for very many business robots, zipping around on their little robot wheels, popping their little robot video heads into offices. It’s hard to justify more than a couple of these service robots in even a very large company, and that’s not a growth strategy.

Trade shows, though, now that’s another thing altogether. The economics of using robots makes sense there. When CES rolls around, it’s hard to find a hotel room in Las Vegas for less than $400 per night. Add the travel costs, and it becomes prohibitive to have a group of attendees at the show. That cost is even greater for international travellers. Robots would eliminate that expense, or at least reduce it greatly.

And with telepresence robots (that is, robots with video conferencing capability), you’re not limited to one attendee per robot. Today’s video conferencing technology allows for multiple shared calls on the same device. An entire group can attend a conference on a single robot, with eight or nine shared views. Participants can drop in or out at any time, depending on their interest in what’s happening at the time.

All this begs the question of whether exhibitors and show coordinators will have to create robot-friendly environments. It may no longer be practical to have raised platforms in booths and exhibit areas. Printed information like brochures or show guides may be gradually phased out in favor of scannable QR codes to download the information right through the robot.

If robots catch on, we can expect shorter cafeteria lines as more attendees opt for the virtual experience. (On the other hand, it will put a crimp in concession revenues -- and a real dent in the promotional gift market. Expect substantial sales drop-off in stress balls, t-shirts, mints and other promotional items when robots roam the floors.)

Of course, not all show organizers would want to manage 10,000 robots. That opens up an entire new potential line of business, which I’m dubbing “fleet robotics.” Suitable’s Scott Hassan has the edge on the thinking here. Fleet robot rental companies could provide and manage large numbers of robots for trade show or event companies that don’t want the hassle of their own service robots.

It’s not unlike rental car companies that offer fleet services to other businesses. And it opens the robot market to a company like Suitable to supply new channels for their products -- they can sell direct, offer fleet services themselves, or create inventory for an emerging fleet rental market.

Believe me, that market is likely to happen. If we’ve learned anything from Arnold Schwarzenegger, it’s that robots are pretty hard to stop.

This article first appeared in Wired Magazine January 2014