Book Report - The Great Stagnation

[jeffd]

Here is a cool Matt Yglesias post where he addresses Cowen’s argument that stagnating innovation has lead to stagnating median incomes.

@Yglesias

Now take a look at this chart showing the divergence between productivity and median household income.

Suppose that hadn’t happened to such an extreme extent and the average family had 50% more income. Suddenly those Thermomixes and Nespresso machines look much more reasonable. Keep in mind that income is a flow, while we’re talking about amassing a stock of consumer goods. Instead of each upper middle class yuppie household having one or two extravant devices, any prosperous professional would have all this stuff and people around the median would own a fair amount. That on its own would make technological progress look and feel a lot more impressive. The invention of things like dishwashers and washing machines seems really incredible, but that’s primarily because households had the income for those to become mass market goods. Today, thanks to sluggish income growth, new inventions become niche products for the elite. Not only does that limit the extent to which innovations transform everyday life, it means there’s relatively little incentive to invest in product development that doesn’t take the form of “let’s make a somewhat cheaper version of this thing that’s already out there.”

[strategy]

@jeffd

Today, thanks to sluggish income growth, new inventions become niche products for the elite. Not only does that limit the extent to which innovations transform everyday life, it means there’s relatively little incentive to invest in product development that doesn’t take the form of “let’s make a somewhat cheaper version of this thing that’s already out there.”

It’s an interesting thesis, but I can’t say I agree with this.

Cheap mobile phones have transformed life in the “third world” over the past decade, and thanks to the impetus of Android we are witnessing an incredibly rapid shift from smartphones being status symbols to being something that “everyone” owns. The Kindle Fire is an aggressive push to do the same for tablets. In a few decades, people born into technological societies will find it hard to imagine what it is to not be continually online and wired. And judging from current trends, the same will be true for a lot of “developing” countries. That isn’t a transformation of everyday life?

[AaronSofaer]

A decade ago’s inventions are hardly new.

[strategy]

@AaronSofaer

A decade ago’s inventions are hardly new.

I’m not really sure I see the point. Which inventions of 1870-1970 “transformed the world” immediately that it was invented? Inventions pretty much always take a lot of time from discovery to widespread dissemination - and even the internet has not significantly changed that. Even in computer science (where the jump from invention to production is minimal), you will often find that the latest buzzword was invented 5 or more years ago. It takes time for pretty much any invention to mature.

[AaronSofaer]

I dunno, how long after the invention of the dishwasher did dishwashers become an everyday thing?

It’s been 10 years since the smartphone hit the upper bracket markets and only now is it becoming mainstream.

What’s that like in terms of relative delay? I have absolutely no idea. But it’s an interesting question.

[strategy]

@AaronSofaer

I dunno, how long after the invention of the dishwasher did dishwashers become an everyday thing?

If we are to believe Wikipedia, the first dishwashers with integrated plumbing arrived in the 1920s and developed further in the 1940s. Commonplace in the 1970s.

It’s been 10 years since the smartphone hit the upper bracket markets and only now is it becoming mainstream.

Seems like a pretty typical timeframe for the transition period of new technology from the “this is cool” bracket to the “everyone has got one” bracket.

[mouselock]

@strategy

It’s an interesting thesis, but I can’t say I agree with this.

Cheap mobile phones have transformed life in the “third world” over the past decade, and thanks to the impetus of Android we are witnessing an incredibly rapid shift from smartphones being status symbols to being something that “everyone” owns. The Kindle Fire is an aggressive push to do the same for tablets. In a few decades, people born into technological societies will find it hard to imagine what it is to not be continually online and wired. And judging from current trends, the same will be true for a lot of “developing” countries. That isn’t a transformation of everyday life?

We’re on iPhone 4s (effectively the 6th generation of iPhone) and Android (the cheaper knockoff in general) is just now starting to rise. This runs contrary to his theory how? (Actually, to be fair what you probably ought to compare is iPhone and Android to Blackberry, which was initially a horribly expensive thing really only available for high-powered businesspeople who were important (read: wealthy) enough to need the type of access to information that smartphones bring.)

Inasmuch as I read his thesis as saying “We’d see far better results if we didn’t have to wait for ultracheap commoditization of new technology due to the inability of the middle classes to adopt technology as quickly as they have in the past”, your examples seem to prove his point rather than yours. If smartphones are a transformative technology, then certainly they’ve been delayed by the very slow trickling down of affordability rather than an explosive wave of adoption at their inception due to plenty of excess income amongst the middle class.