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Apparently this tech thing has run out of steam. There’s been nothing truly amazing for a decade now and we’re entirely misunderstanding how this all works. At least, we’re misunderstanding it according to economists, and they do have a point.
Sure, all of them see the world a bit skew-whiff, as we know, but technology is entirely central to the subject of economics. Obviously, not the creation of it, but the effects are that very thing being studied in the subject. For how do we get richer? By deploying new technologies to raise productivity.
A technology here is a method of doing something. It can be a machine, in the more colloquial sense, but double-entry bookkeeping is a technology – and a vastly important one – to the economist. It allowed accurate record keeping in a business adventure, thus more business adventures took place after Fra Pacioli wrote down how to do it in 1494.
Definition of technology
Using this wide definition of technology, there have really only been three of them that were truly important. Agriculture, the scientific method and the limited liability company – that last allowing large-scale economic adventures of a kind just not possible when every investor was liable down to their cufflinks.
We want to come down to a slightly more detailed level and here the economist insists on dividing into invention and innovation. The go-to economist here is William Baumol, on everyone’s list of likely Nobels but not quite made it as yet. Invention is the creation of a new thing. Innovation is the doing of something with it.
We’ve all heard Obama’s (and Elizabeth Warren’s) “you didn’t build that” and the insistence from the likes of Marianna Mazzucato that the state does a lot of invention – which it certainly does and it funds a great deal of the basic research which leads to it too.
Baumol points out that the government, or the market, can and do invent things, around and about equally well, too. It’s the next stage, doing something, where bureaucracy doesn’t work and market processes do.
Which brings us to Steve Jobs and the iPhone. There was no new technology in the iPhone, or at least there wasn’t in 2007. It’s entirely true that many of the constituent parts were originally devised using grants and state funding. There wasn’t really any invention there. What there was, was the integration of extant things into a new whole to do a new thing – that’s innovation.
We can also make the same point in reverse. The Soviet Union never did produce an even adequate washing machine – I once owned one of what they did produce and it was essentially a bowl with a stirring stick in it that you inserted into the bath tub. All a washing machine is, really, is some steel, concrete for the weight and some ball bearings.
The commies certainly had concrete as the architecture shows, steel in abundance and they actually had an entire Ministry of Ball Bearings. But they never did get them together to make the washing machine – they had the necessary tech but not the innovation.
Invention or innovation
Using this perhaps rather strict definition of invention it could be true that we’ve not had much in the tech world – or anywhere else perhaps – over this past decade.
Things have improved, certainly, got faster, cheaper, less energy intensive, but nothing really new. Any misunderstanding comes from not getting the importance of this, which is little to none. For what does matter is the innovation, the uses to which people put things. This is where markets shine simply because we get many more attempts at doing different things.
Any technological advance – invention if we wish – expands that technological universe of the possible. We then need some method of testing what might conceivably be done against what can be and what we want to be. Allowing every nutter on the planet a go at combination gives us the fastest sorting through of those possibilities. Thus we zero in on those which meet some need or desire more swiftly.
In the telephonic universe, this is how we ended up with SMS. Originally there for the testing engineers to be able to communicate, users loved it and so grew that industry.
Such serendipity is not unusual. The new big thing in banking for the poor was discovered similarly by accident. Think back a decade or two and it was all about microcredit. The poor needed access to credit, investment, so they could grow their own incomes. Sure, it worked, a bit. Then came M-Pesa, running really cheap banking over phones and the thought was this’ll really gee up that reduction of poverty through lending.
Quite the opposite. The service which the poor flocked to was savings accounts. Being poor is oft coterminous with infrequent income so being able to save small sums for a rainy day is really what is wanted. Nobody had a scooby that this was the case until they started to see the custom coming through the door.
Clearly, this is also what is now being rolled out elsewhere. And this provision of desired financial services to the poor is highly likely to have a greater impact upon human welfare than any other technology roll-out currently happening. Simply because there are billions still to benefit from this basic service of being able to save, safely.
Which is what leads to the economists’ heartfelt response to the complaints of the absence of earthshaking new inventions: Meh. They’re not the important thing, it’s the being able to do things better which is. That’s something that comes from innovation and that’s cracking along at a faster than usual pace.
None of us would say that applying artificial intelligence, molecular modelling and some serious computing time to drug design is exactly a new invention. It is what’s likely to cure our varied diseases as we age into them over the coming decades. It’s the application of things that matters, the innovation, not the invention.