Irving Wladawsky-Berger

Automation Anxieties - We’ve Been Here Before

“The rise of artificial intelligence is the great story of our time,” notes What to Do When Machines Do Everything in its Preface.  The book was published earlier this year by Malcolm Frank, Paul Roehrig and Ben Bring of Cognizant’s Center for the Future of Work.  “Artificial intelligence has left the laboratory (and the movie lot)…  It’s pervading all the institutions that drive our global economy.… And this is just the beginning.”

The book deals with a number of important questions: When machines do everything, what am I going to do?; Will a robot take my job away?; How are humans going to make a living?; What will my industry look like in 10 years?; Will my children be better off than I am?

Overall, the authors are optimistic about the future, reminding us that we’ve been here before.  Automation anxieties have been with us ever since the 1810s, when the so-called Luddites smashed the new weaving machines that were threatening their textile jobs, and they continued to resurface over the past two centuries right along with advances in technology.

Over 60 years ago, the advent of computers led to a new round of automation fears.  In 1965, Newsweek devoted a special issue to The Challenge of Automation, which it called  “the most controversial economic concept of the age.  Businessmen love it.  Workers fear it.  The government frets and investigates and wonders what to do about it.

In his 1964 Bill creating the National Commission on Technology, Automation and Economic Progress, President Lyndon Johnson said that “Technology is creating both new opportunities and new obligations for us, opportunity for greater productivity and progress - obligation to be sure that no workingman, no family must pay an unjust price for progress.”

What’s the Core Priority of Corporate Managers?

In a recent Harvard Business Review article, - The Error at the Heart of Corporate Leadership, - Harvard Business School professors Joseph Bower and Lynn Paine raised a number of important questions. What’s the core priority of corporate’s management, the near-term gains of shareholders or the long-term health of the company?  Do shareholders generally share common investment objectives?  Can a governance model focused on maximizing shareholder value threaten a company’s overall health and financial performance?  These questions go to the heart of what a corporation is all about as well as to the very nature of modern capitalism.

The idea that maximizing shareholder value should be the primary goal of corporate managers is relatively recent, first put forth by academic economists in the 1970s, - most notably by University of Chicago economist and Nobel Prize recipient Milton Friedman.  In a 1970 NY Times Magazine article, The Social Responsibility of Business is to Increase its Profits, Professor Friedman wrote:

“In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business.  He has direct responsibility to his employers.  That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.”  He believed that business concerns beyond making a profit, - such as “promoting desirable social ends,” or “providing employment, eliminating discrimination, avoiding pollution and whatever else,” amounted to “preaching pure and unadulterated socialism.” 

Should Your Company Get on the Blockchain Learning Curve Now or Wait?

A few weeks ago I wrote about the current state of blockchain.  In particular, I asked whether blockchain is ready to cross the chasm from its early adopters, - who are already involved with blockchain in one way or another, - to the considerably larger set of mainstream users who may be considering blockchain but are waiting for results and assurances before jumping in.

I explored this question by comparing blockchain today to the Internet in the early-mid 1990s, which is roughly when the Internet made its own transition from early adopters to mainstream users.  My conclusion was that blockchain isn’t quite ready for this important transition.  It’s still in its early adopters stage, - perhaps akin to the Internet in the late1980s.  A lot is going on with blockchain, so much so that last year the World Economic Forum (WEF) named The Blockchain one of its Top Ten Emerging Technologies for 2016.  But much remains to be done in key areas, including standards, applications and governance.  Blockchain has the potential to make our digital infrastructures much more secure, efficient and trustworthy, but it will take time.

The Internet in the early-mid 1990s was clearly more advanced than blockchain is today.  On the other hand, the business environment in 2017 is quite different from the one back then.  The Internet and associated technologies like smartphones and cloud computing have significantly lowered the costs of collaboration and experimentation, enabling innovations to emerge more rapidly.  In addition to providing a good set of lessons for blockchain’s adoption, the Internet is smoothing the way for the development of blockchain platforms, applications and ecosystems.

What should  your company do?  Get on the blockchain learning curve now or wait until the technology is more mature before jumping in?  Become an early adopter of this potentially transformative technology, or run the risk of being left behind by more aggressive competitors?  How should your company decide when and how to best embrace a disruptive new technology like blockchain?

Global Arbitrage and the Productivity Puzzle

A couple of weeks ago I wrote about The Productivity Puzzle, - namely that despite our continuing technology advances, the US and other developed economies have experienced a sharp decline in productivity growth over the past 10 to 15 years.  In an article published earlier this year, McKinsey offered three main possible explanations for this productivity growth decline: the difficulty of measuring productivity in the digital economy, the shortage of demand and investment opportunities, and the impact, - or lack thereof, - of technological innovations. “So far, though, economists have failed to reach consensus on the causes of the  productivity growth slowdown or indeed the relative significance of the various arguments,” wrote McKinsey.

But another article, The New Class War by Michael Lind, offers a different, rather provocative explanation for our low productivity growth.  According to Lind, the last few decades have seen the rise of managerial elites in advanced economies which have been pursuing profits by methods other than technology-driven innovation and productivity growth.  Instead, they’ve been taking advantage of the significant reductions of trade barriers over this timeframe to pursue profits based on global labor arbitrage, as well as tax arbitrage and other forms of financial engineering.

Lind references James Burnham, John Kenneth Galbraith, and other political scientists and economists whose works I’m not familiar with.  I found the article quite interesting because Lind’s explanation for our declining economic and productivity growth seems quite different from those of most other economists.  Let me attempt to summarize his key arguments.