Humans need not apply

As one would of course expect from the economics correspondent of The Economist, Ryan Avent has written a very clear account of the way digital technologies, and the globalisation driven in part by technology, is changing the ways people can earn a living. The Wealth of Humans: Work and its Absence in the 21st Century brings together the debate about robots destroying jobs, arguments about the ‘death of distance’ and literature on the re-emergence of cities as economic hubs, the issue of inequality, and the more recent discussion of whether or not the world is in for an era of ‘secular stagnation’. The focus is on three related trends: automation, globalization, and the enhanced productivity of a highly skilled minority of people.

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It ends up being a rather pessimistic synthesis. The starting point is unarguable: “Society must go through a period of wrenching political change before it can agree on a broadly acceptable social system for sharing the fruits of this new technological world.” A few years ago this would have seemed hyperbole, but no more. And yet the rest of the book tends to suggest that this political change cannot happen. Essentially, Avent does not believe enough people can become educated or skilled enough to share the benefits of automation and globalisation with those happy few whose cognitive skills have made their incomes increase. He does not think as many as 50% can complete tertiary education. “The proportion of highly educated workers to less educated workers is no longer going to grow in the growth-boosting, inequality-dampening way it once did.”

Part of this, I’d take issue with. I don’t agree that skill upgrading has ‘run out of steam’. The character of tertiary education clearly needs to change; we are in a stage like the persistence of classical education in the late 19th century. The educational establishment is slow to change – but it will, or it will be disrupted. But I’m much more persuaded by James Bessen’s argument (in Learning by Doing) that in the later stages of the technological transformation of production, the necessary skills are steadily standardised and thus able to be codified and taught. And, while addressing the ‘lump of labour’ fallacy, Avent nevertheless argues that, “The problem is the sheer abundance of labour.” Yet he also sees technology replacing ‘expensive’ labour. Surely labour=people=knowledge, pretty key in an endogenous growth, knowledge-based economy. It seems more likely that ‘work’ will be redefined, with a role for appropriately skilled humans, as it has been so many times before.

There are some very nice details indeed in the book. I didn’t know that Robert Gordon used to ask audiences whether they would rather give up post-2000 technology or indoor plumbing – the answer used to be the former, until smartphones came along. And indeed in the developing world, people would clearly rather have their phones and the internet. (An aside: indoor plumbing is a great example of why technology is social more than it’s technological. It’s a simple and well-known technology, yet one many countries are unable to make work for them.) Arvind Subramanian’s term ‘fluff not stuff’ for weightlessness (cf The Weightless World) was new to me, although perhaps a little too derogatory-sounding for the source of most of the value-added in developed economies.

Avent concludes that the reason to be pessimistic is that there is ‘no-one in control’, able to pilot society wisely through the upheaval. Looking back over the past 200 years, someone thinking they are ‘in control’ seems a pretty bad idea to me. But, to get back to the starting point, the politics, I’d agree that this is the territory for pessimism. Where leadership to generate a sense of progress and confidence would be desirable (because expectations matter no end for the economy), we have politicians reacting to people’s fears. It’s understandable, but it isn’t what we need.

Different and alone

Courtesy of striking French air traffic controllers, I had a longer journey back from Toulouse than I’d expected today, and managed to read the whole of Olivia Laing’s thought-provoking book [amazon_link id=”1782111239″ target=”_blank” ]The Lonely City: Adventures in the Art of Being Alone[/amazon_link].

[amazon_image id=”1782111239″ link=”true” target=”_blank” size=”medium” ]The Lonely City: Adventures in the Art of Being Alone[/amazon_image]

It wasn’t what I’d expected from the reviews, which made it seem like a kind of travelogue about her having some time alone in New York and reflecting on modern urban life; I’m a sucker for books about sitting in foreign cafes feeling a sense of anomie while writing in one’s notebook. Instead, [amazon_link id=”1782111239″ target=”_blank” ]The Lonely City[/amazon_link] is more a sort of successor to Susan Sontag’s [amazon_link id=”0141187123″ target=”_blank” ]Illness as Metaphor[/amazon_link] with a soupcon of Patti Smith’s [amazon_link id=”0747568766″ target=”_blank” ]Just Kids[/amazon_link]. Through her research into the work and lives of four artists who engaged with and battled with loneliness, but also with poverty, rejection, AIDS, Laing actually gives us a profound discussion of society’s inability to tolerate difference.

She also reflects on the role of our use of digital contact through social media and always being online – using it as a shield against human contact and at the same time a means of human contact. Laing notes the trajectory of Sherry Turkle’s assessment of digital tech through her trilogy, [amazon_link id=”0262701111″ target=”_blank” ]The Second Self[/amazon_link] (1984), [amazon_link id=”0684803534″ target=”_blank” ]Life on the Screen[/amazon_link] (1995) and the far more pessimistic [amazon_link id=”0465031463″ target=”_blank” ]Alone Together[/amazon_link] (2011).

Andy Warhol, one of the artists discussed by Laing, predates Twitter and Facebook. What would he have done with them, I wonder?

Digital and democracy

I’ve been dipping into [amazon_link id=”0691167346″ target=”_blank” ]Digital Keywords[/amazon_link] edited by Benjamin Peters. This is in the chapter ‘Democracy’ by Rasmus Kleis Nielsen: “Attempts to assess the effects of digital technology use on political participation have again and again found only modest effects and often a ‘reinforcement’ tendency whereby the digital technology use may correlate with political participation, but mostly in ways where already-engaged groups are even more engaged and less-engaged groups are no more engaged. Digital technologies offer easier access than anything else, but for many, apparently, access is less of a barrier to political participation than inclination (or confidence that even trying is worth one’s while).”

[amazon_image id=”0691167346″ link=”true” target=”_blank” size=”medium” ]Digital Keywords: A Vocabulary of Information Society and Culture (Princeton Studies in Culture and Technology)[/amazon_image]

The circumstances in which click-ability leads to a reduction in transactions costs or barriers, and those in which it doesn’t, is surely worth some research. But while the above argument is plausible, it does seem worth worrying about the way the filter bubble can reinforce social and political chasms. This by Tom Steinberg puts it eloquently.

The platform era

The economics of digital platforms, including the sharing economy, has become a hot topic – not only among researchers but also with several new books for the non-specialist reader. Yesterday I took part in the Digital Forum organised by the Toulouse School of Economics – home of Nobel Laureate Jean Tirole, one of the first economists to analyse platforms (or two-sided or multi-sided markets). It was a packed event with some fascinating contributions. And on the train to and from Paris, I read [amazon_link id=”1633691721″ target=”_blank” ]Matchmakers[/amazon_link] by David Evans and Richard Schmalensee. This follows on from [amazon_link id=”0393249131″ target=”_blank” ]Platform Revolution[/amazon_link] by Geoffrey Parker, Marshall Van Alstyne and Sangeet Paul Choudary (which I reviewed here), and [amazon_link id=”0262034573″ target=”_blank” ]The Sharing Economy[/amazon_link] by Arun Sundararajan (here).

[amazon_image id=”1633691721″ link=”true” target=”_blank” size=”medium” ]The Matchmakers: The New Economics of Multisided Platforms[/amazon_image] [amazon_image id=”0393249131″ link=”true” target=”_blank” size=”medium” ]Platform Revolution: How Networked Markets are Transforming the Economy–and How to Make Them Work for You[/amazon_image]

[amazon_image id=”B01F26CC4S” link=”true” target=”_blank” size=”medium” ]The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism[/amazon_image]

All three are well worth reading – they all clearly explain the economic characteristics of digital platforms, with lots of examples. Inevitably there is some overlap but in fact the books complement each other nicely and also include different examples. [amazon_link id=”0393249131″ target=”_blank” ]Platform Revolution[/amazon_link] takes more of a business design perspective, while [amazon_link id=”B01BG90H9W” target=”_blank” ]The Sharing Economy[/amazon_link] is specifically focused on peer-to-peer markets. [amazon_link id=”1633691721″ target=”_blank” ]Matchmakers[/amazon_link] has more about the economic analysis and public policy questions including competition – David Evans’ earlier book, a collection of papers, [amazon_link id=”1468102729″ target=”_blank” ]Platform Economics[/amazon_link], was quite heavily focussed on the competition issues.

Some of the examples in [amazon_link id=”B01BO6QMCI” target=”_blank” ]Matchmakers[/amazon_link] are very nice. I particularly liked the case of the US trucking industry. There’s also a chapter on M-Pesa, which I know a bit about; it is a nice description of how it worked in Kenya, although I’d have been interested to read about why mobile money platforms have failed in so may unbanked countries – regulatory barriers in my view. One of the questions about platforms’ success or failure is the extent to which they take advantage of opportunities for regulatory arbitrage on the one hand and can be killed by hostile regulation on the other hand.

Marshall Van Alstyne was one of the participants in the Toulouse School of Economics event and gave a great talk including this chart; he and I agreed that there is a huge research agenda on this subject as we’re entering the era of platforms. I have an issues paper out soonish, sketching some of the questions.

Marshall Van Alstyne at the TSE Digital Forum 16/6/2016

Marshall Van Alstyne at the TSE Digital Forum 16/6/2016

Computing, the British way

I’ve *loved* reading [amazon_link id=”1472918339″ target=”_blank” ]Electronic Dreams: How 1980s Britain Learned to Love the Computer [/amazon_link]by Tom Lean. It’s a thoroughly enjoyable mix of business history and social observation, written with the enthusiasm and affection of somebody who got his first Commodore 64 at the age of 8 as a Christmas present.

[amazon_image id=”1472918339″ link=”true” target=”_blank” size=”medium” ]Electronic Dreams: How 1980s Britain Learned to Love the Computer[/amazon_image]

The book starts with Britain’s pioneering role in computing, opening with Manchester’s ‘Baby’, the first electronic stored program computer, built on wartime expertise. It then skips straight to the late 1970s to explore why conditions then enabled the flourishing of a number of innovative computer manufacturers in the UK, and alongside this supply the expansion of mass market demand. Parts of the story are very familiar, including the competition between Sinclair and Acorn so well told in Micro Men. Other parts are less familiar. I for one didn’t know anything about Prestel, and why it failed where France’s Minitel succeeded so well. One key difference was that the French state gave business and home users free terminals at the rate of 10,000 a week by 1984. Impossible to envisage Mrs Thatcher ever thinking that a good idea.

The book has a very nice chapter on the origins and vitality of the UK games industry too. I love some of the early games: Dennis Through the Drinking Glass featured Dennis Thatcher hunting around 10 Downing Street for a G&T while trying to avoid Mrs T. There was a game based on the TV series Auf Wiedersehen Pet, which gave users the chance to play a Geordie brickie building a wall in Dusseldorf – the book doesn’t say how successful this was. The commercially unsuccessful Deus Ex Machina featured Dr Who actor Jon Pertwee, historian E.P.Thompson, rock star Ian Dury and comedian Frankie Howerd; astronomer Patrick Moore turned the gig down. Fabulous.

The book highlights the key role in the spread of computing and programming played by the famous BBC Micro, a complex but hugely successful initiative by the BBC. Many of the successful video games pioneers, including David Braben, started off with this machine, which was also familiar to many from school. The book’s epilogue features the Raspberry Pi – it was obviously written before the launch of the BBC’s MicroBit, now going free to all Year 7 high school students in Britain to prepare them to move on to the Raspberry Pi and other coding efforts.

The hope of course is that these tiny new computers will inspire another generation to innovate and create in the industry. But the history of the 1980s personal computer industry shows as well the importance of the scale and sophistication of American competitors. It is clearly right to try to familiarise and even excite all young people with the potential of the beautiful new machines, but achieving large-scale industrial success with them will need some strategic thinking by the government, of which there is disappointingly little sign at present.