Tag Archives: technology

It’s the society, stupid

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There is one other thought prompted by re-reading Jane Jacobs’ [amazon_link id=”039470584X” target=”_blank” ]The Economy of Cities[/amazon_link]. She has an almost by-the-by section about the changes in the mass media of the day, the switch in readership away from mass circulation national daily newspapers to mass television capturing the national audience and more local, often suburban, newspapers. TV was the disruptive technology of the day, and audience habits changed. The argument Jacobs makes is that the technology wasn’t so much the cause of the transition as the enabler of it. The driving force was the growth of the suburbs, and the social changes that went alongside it.

I don’t know enough US media history to evaluate this properly, but it’s surely a good reminder that technology always, but always interacts with social change. Knowing that’s true in general has been at the heart of my work since the 1990s, but at a time of exciting and rapid technical change (pace Robert Gordon), it’s easy to forget to central role of social change in specific cases. Including the changes happening now in media habits.

[amazon_image id=”039470584X” link=”true” target=”_blank” size=”medium” ]The Economy of Cities (Vintage)[/amazon_image]

Technology in history

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I’ll collate the economic history suggestions another time. Meanwhile, though, seeing a recommendation for David Edgerton‘s influential [amazon_link id=”1861973063″ target=”_blank” ]The Shock of the Old: Technology and Global History since 1900[/amazon_link] sent me to both that – which insists that there is too much cheerleading about invention and not enough focus on the implementation of technologies in specific historical contexts – and to his subsequent book, [amazon_link id=”0141026103″ target=”_blank” ]Britain’s War Machine: Weapons, Resources and Experts in the Second World War[/amazon_link].

The latter makes some contrarian arguments about the war. Edgerton argues that (a) Britain was the richest and most powerful combatant thanks to its imperial resources – it is a mistake to think of it as a beleagured nation standing alone begging for American charity, and Germany would (and did) struggle to combat it; and (b) the ‘declinist’ histories about Britain after the war (notably Corelli Barnett in [amazon_link id=”033034790X” target=”_blank” ]The Audit of War[/amazon_link] and  [amazon_link id=”0333480457″ target=”_blank” ]The Lost Victory [/amazon_link]etc) are mistaken, as relative decline was due largely to strong growth in other countries.

[amazon_image id=”0141026103″ link=”true” target=”_blank” size=”medium” ]Britain’s War Machine: Weapons, Resources and Experts in the Second World War[/amazon_image]

Edgerton’s argument is pinned on a materialist account of the resources and technology developed and used by Britain. Some of this evidence is very striking. One example is a graphic showing the vastly, vastly greater tonnage of bombs the UK dropped on Germany compared with German bombing of the UK – the horrors of the firestorms and mythology of the Blitz notwithstanding. It’s all very interesting. Britain’s early defeats led to a huge emphasis on increasing production, he writes, saying there was a “powerful sense that the war was a war of production,” with contemporary debate focusing on industrial efficiency, or the lack of it.

The importance of scientific advance in the conflict is obviously a well-known part of the story, from codebreaking (my favourite account is R.V Jones’s [amazon_link id=”185326699X” target=”_blank” ]Most Secret War)[/amazon_link] to the Manhattan Project. Edgerton adds to this the sense of Imperial power and the availability of material resources.

[amazon_image id=”185326699X” link=”true” target=”_blank” size=”medium” ]Most Secret War (Wordsworth Military Library)[/amazon_image]

His reinterpretation is certainly interesting, and it must always be fruitful to test received wisdom. His claim that postwar decline is misinterpreted is less convincing, however. Surely the loss of Empire is a decline, whether you think it was a good thing or not? And the transition to US superpowerdom postwar is clear.

I see from his website that Prof Edgerton is working on currently working on Capitalism, Empire and Nation: a new history of twentieth-century Britain, a forthcoming book for Penguin. That will be an essential read.

Innovation, competition and public good

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[amazon_link id=”1594203288″ target=”_blank” ]The Idea Factory: Bell Labs and the Great Age of American Innovation[/amazon_link] by Jon Gertner is a fabulously interesting and readable book. It’s a terrific business history about the research and development arm of AT&T during its golden, monopoly era. Scientists and engineers at Bell Labs created some of the defining technologies of modern times, including the transistor, the semiconductor, the laser, fibre optics, Claude Shannon’s information theory, submarine cables, satellites (Telstar), early work on mobile communications, and more.(Francis Spufford’s lovely book [amazon_link id=”0571214975″ target=”_blank” ]Backroom Boys[/amazon_link] has a chapter on the UK’s contribution to mobile communications at the same time.)

“Finding an aspect of modern life that doesn’t incorporate some strand of Bell Labs’ DNA would be difficult,” as Gertner rightly puts it.

[amazon_image id=”1594203288″ link=”true” target=”_blank” size=”medium” ]The Idea Factory: Bell Labs and the Great Age of American Innovation[/amazon_image]

The book is also a thoughtful exploration of how this institution was able to be so consistently innovative for such a long time. The key is the implicit deal between AT&T and the US authorities to permit the company its monopoly of local and, for many years, long-distance calls as long as the fruits of the research were shared with competitors. Thus key technologies such as the transistor were quickly licensed at low cost. It was an excellent system for delivering the public good of innovative ideas. The parent company was a dull but profitable utility. It paid good and steady dividends to shareholders, and to Bell Labs. “The paradox of course was that a parent company so dull, so cautious, so predictable was also in custody of a lab so innovative,” Gertner writes.

An interesting question is therefore how Bell Labs came to be so innovative in the first place. Apart from the steady flow of generous funding from the parent company, its rules seemed to have played a vital role. People were strongly discouraged from closing their doors. Anybody could ask anybody else – no matter how eminent – to help on a problem. The different disciplines were located in close proximity. All work had to be written down in specified notebooks and countersigned, so ideas were attributed, but nobody could claim individual patents. Everyone had to work on their own side-projects, an idea copied by Google. Its director saw the lab as a living organism, with physical proximity essential for the fruitful cross-fertilisation of ideas.

In those pre-competitive times, the value of patents was well understood, and Bell Labs was careful to patent its discoveries, but there was no inhibition in exchanging ideas with the broader scientific community. For example, in the early days of semi-conductor research, visitors from Fairchild Semiconductor in Palo Alto and Texas Instruments in Dallas were frequent visitors to the Bell Lab home in New Jersey. It’s hard to recall a time when commercial entities were so open with each other about their R&D.

Eventually of course the monopoly power for social returns deal broke down – and apart from Bell Labs, the other social aspect of it was AT&T’s use of long distance profits to subsidise local calls. By the time the break up of AT&T into the Baby Bells occurred in 1984, there had been several assaults on the monopoly by various US regulators. (Tim Wu’s [amazon_link id=”1848879865″ target=”_blank” ]The Master Switch[/amazon_link] gives an account of the communication monopoly from a far more sceptical perspective than The Idea Factory.) The Federal judge who finally oversaw the agreement to break up AT&T was not concerned about the vertical integration of AT&T with its research subsidiary or Western Electric, the equipment subsidiary, seeing economic benefit to consumers in the supply chain links, but rather with the horizontal integration. Hence the deal to break off the regional Baby Bells. Competition from MCI on long distance calls was already occurring. But some people anyway saw the end of the monopoly as an inevitable result of the earlier licensing of key technologies. AT&T and Bell Labs had given birth to their own future competitors.

The inevitable question is what kind of innovation system could again deliver such fundamental technological advances? All of the communications technologies have involved vast, vast sums of money and multi-year, multi-person efforts. Mariana Mazzucato has argued that government involvement in innovation is always essential, due to the scale of funding and effort, and the risk involved, giving examples mainly from the computer industry in her book [amazon_link id=”0857282522″ target=”_blank” ]The Entrepreneurial State[/amazon_link]. Governments of course fund university research, as do some foundations, but direct public funding of research and – importantly – development in the commercial sector is rare – often done through the defense budget in the US, previously through nationalised entities in other countries.

Elsewhere, and in the post-privatisation era, it is pretty rare. And today’s information sector monopolists and quasi-monopolists do not seem to have the same sense of public obligation as their Bell Labs predecessors; the profit motive did not drive the creation of transistors and semi-conductors, although it was vital in getting them into new products in the market once they had been invented. Dominant companies in digital businesses with low marginal costs and strong network effects have tremendous market power which it’s hard for competition authorities to address because there are large consumer benefits and because there’s always the hope of disruptive entry by a new and better soon-to-be-dominant company. Perhaps the right public policy approach is to learn a lesson from the history of Bell Labs and look at what public or social benefits these dominant players offer until that disruption happens?

[amazon_image id=”1848879865″ link=”true” target=”_blank” size=”medium” ]The Master Switch: The Rise and Fall of Information Empires[/amazon_image]

To infinity, and beyond

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Brad Stone’s [amazon_link id=”059307047X” target=”_blank” ]The everything store: Jeff Bezos and the age of Amazon[/amazon_link] is a rattling good read, and it should be on everybody’s reading list. The raw material is a gift to a storyteller of course. Jeff Bezos is clearly an extraordinary character, Amazon an extraordinary company, and the period since the dawn of the internet an extraordinary era. Stone has covered the company for many years and the account here is authoritative.

[amazon_image id=”059307047X” link=”true” target=”_blank” size=”medium” ]The Everything Store: Jeff Bezos and the Age of Amazon[/amazon_image]

The book is particularly good on the distinctive dynamics of online businesses, and the consequences for the various strategic calls Amazon has had to make. For example, when a solitary analyst at Lehmans, Ravi Suria, started to write negative reports in 2000 about Amazon’s then-low or negative margins, it risked becoming a self-fulfilling prophecy because financial viability depended on suppliers not demanding faster payment, and on customers having the confidence to continue flocking to the website. I hadn’t really appreciated before Amazon’s negative working capital requirement as customers pay for goods faster than suppliers need to be paid for them.

There are descriptions of moves straight out of the playbook of [amazon_link id=”087584863X” target=”_blank” ]Information Rules[/amazon_link] by Carl Shapiro and Hal Varian (although this book, one of my all-time favourites, isn’t referenced), such as super saver delivery – free for people who don’t mind waiting longer – and also Clay Christensen’s [amazon_link id=”0062060244″ target=”_blank” ]The Innovator’s Dilemma.[/amazon_link] Amazon has set up some new areas of business as skunkworks, but in other cases Jeff Bezos simply drove through new activities that would cannibalize existing sales. One example is the introduction of Marketplace, putting other retailers on the same page as Amazon itself.

[amazon_image id=”087584863X” link=”true” target=”_blank” size=”medium” ]Information Rules: A Strategic Guide to the Network Economy[/amazon_image]

The corporate culture sounds awful; I’d never work there. Amazon has become a nasty competitor as it has grown – and the book has an interesting section on its entanglements with competition authorities over e-books. It raises some questions too about the company’s business methods in dealing with both suppliers and smaller competitors – undercutting pricing in nappies, apparently to induce an online diaper supplier to sell out to Amazon; the use of grey markets in high quality goods to get a better price, thereby undermining the viability of the supplier. All, though, in the interests of delivering Amazon customers “everyday low pricing”, a desirable aim but one that simply conflicts with some other desirable aims such as sustaining craft production. This is an unfinished story, as the long term will one day catch up with the short term.

The other big question, not explicitly raised but obvious, is what a post-Jeff Bezos Amazon will be like. That’s no doubt many years away but his driven personality and vision have shaped the company. Succession in these digital giants is clearly a big issue.

All in all, a terrific book for thinking through some of the dilemmas the online world presents, and for thinking about the digital challenge to existing business models. The Jeff Bezos story is amazing too, and by the way he wants to colonise space. That’s not a joke.

Highly recommended book, whether for pleasure or for business students.

Robots for all!

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Yesterday I took part in a fascinating Resolution Foundation discussion, Equity in the Age of the Robot. It was an apt day to be debating the impact of automation on jobs and equity, as the Tube strike probably left half the audience wishing those jobs were already being done by robots and the other half pleased the union is still holding out for the humans.

My contribution was to point out that although we can be concerned about the speed at which automation is going to be able to replace a lot of middling-skill, middling-income jobs, with all the transitional problems that brings, the UK economy needs more robots. That’s the message of the low labour productivity problem. Real wages can’t rise over the long term unless investment in capital and productivity improve. Having said that, we need to worry about

(a) the distribution of the productivity gains, and ensuring these aren’t all extracted by over-paid executives – perhaps thinking about robot ownership; and

(b) equipping people with skills that could be useful and managing the transition in the labour market better than in the past. As Conrad Wolfram pointed out in a recent article, we’re teaching children to be not very good and expensive versions of Siri when it comes to the maths curriculum; they need to understand how to solve quadratic equations but they key skill they need is not memorising and replicating that. Like Professor Alan Manning, I think we should not be resisting the robots but focusing on the institutional and political arrangements that ensure fair outcomes.

I highly commend the work of Michael Osborne, who was presenting new data for the UK showing which jobs are vulnerable to automation by 2020 – mainly in sectors like retailing, logistics, transport. (Here’s the paper he wrote with Carl Benedikt Frey, The Future of Employment: How Susceptible are Jobs to Computerisation?) The whole panel discussion is worth a viewing.

The books cited in the discussion were – of course – Bynjolfsson and McAfee 1 and 2, [amazon_link id=”0984725113″ target=”_blank” ]Race against the machine[/amazon_link], and [amazon_link id=”0393239357″ target=”_blank” ]The Second Machine Age[/amazon_link].

[amazon_image id=”0393239357″ link=”true” target=”_blank” size=”medium” ]The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies[/amazon_image]