Tag: Information Economy

Must-read: Ben Thompson: “Antitrust and Aggregation”

Posted on by Brad DeLong

Must-Read: Ben Thompson: Antitrust and Aggregation: “What ultimately undid Microsoft…

…and why that $95 billion revenue figure was a peak; the current trailing twelve month number is $87 billion–was that even as Windows continued to have a monopoly on laptops and desktops the definition of a computer was dramatically expanded to include smartphones (and, to a lesser extent, tablets). And while many Microsoft partisans argue that the antitrust-related restrictions caused the company to miss mobile, the truth is Apple’s iPhone succeeded by being a very different product than Windows, and Android leveraged a very different business model; if anything Microsoft’s PC dominance meant their mobile failure was inevitable as the company was ill-equipped to think differently…

Must-read: Manu Saadia: “Robots could be a big problem for the third world”

Posted on by Brad DeLong

Must-Read: Manu Saadia: Robots could be a big problem for the third world: “If manufacturing is reduced to the status of agriculture, a highly rationalized activity…

…(read: employing very few people) [then] the historically proven path to economic growth and prosperity taken by Korea and China might no longer be available to the next countries. This is what keeps many economists up at night. The rise of the robots will probably reduce economic opportunities for emerging nations…. Countries you rarely hear about today, say Uganda and Tanzania, are projected to have two hundred million and three hundred million inhabitants respectively by the end of the century. What is going to happen to these people if there are no opportunities for work and wages because the manufacturing of goods has become a trivial, automated low-returns business? Not all of them will find jobs at Starbucks, regardless of how big their cities are.

It turns out that the reinvention of work imagined by Star Trek and all the social adjustments that come with it are not just some kind of pleasant philosophical exercise for overfed upper-class Western consumers of entertainment. In a world where machines produce most of the goods at a marginal cost, a just and adequate distribution of resources is a matter of life or death for billions of people yet to be born. Developed countries will or will not enact redistributive policies in the face of growing automation. The responses are well known, from progressive taxation to universal health insurance, and access to education to unconditional cash transfers, or so-called basic income. We possess stable institutions and the wealth to settle these matters adequately. Less developed countries do not yet. We are racing toward pervasive automation faster than they are catching up.

Must-read: Martin Ford: “How Unprepared We Are for the Robot Revolution”

Posted on by Brad DeLong

Martin Ford: How Unprepared We Are for the Robot Revolution: “Machines are rapidly taking on ever more challenging cognitive tasks…

…encroaching on the fundamental capability that sets humans apart as a species: our ability to make complex decisions, to solve problems — and, most importantly, to learn…. In the coming decades, machine learning is likely to be the primary driving force behind a Cambrian explosion of applications…. The near-term future is likely to be transformed not by general purpose robots or AI systems but rather a nearly limitless number of specialised applications… ultimately consuming nearly any kind of work that is on some level routine and predictable….

Low-wage service sector jobs in areas such as fast food and retail… are certain to be heavily affected. Even more important will be all the white-collar occupations that involve relatively routine information analysis and manipulation. As these ‘good’ jobs, often held by university graduates, begin to evaporate, faith in evermore education and training as the common solution to technological disruption of the job market seems likely to also erode. All of this portends a social, economic and political disruption for which we are completely unprepared…. If we fail to have a meaningful public conversation about what robotics and artificial intelligence mean for the future, and develop workable ways in which to adapt our economy and society, then far greater, and more frightening, volatility is sure to soon arrive.

Must-read: Duncan Weldon: “Fear of the robots is founded in the messy reality of labour”

Posted on by Brad DeLong

Must-Read: Duncan Weldon: Fear of the robots is founded in the messy reality of labour: “Dystopian visions of a future in which machines sweep millions of people out of work…

…are as old as technological change itself. What is missing from today’s debate about the march of the robots is an appreciation of the crucial role of labour bargaining power. When labour bargaining is weak, the Luddite fear of mechanisation is worth taking more seriously…. The best argument for being relaxed about this process is the long sweep of economic history itself…. But looking at the big picture risks missing important details….

To understand how the labour market reacts to labour-saving technology, economists tend to look at two related effects: the displacement effect and the compensation effect. The interaction of these processes determines how long a painful short run will last…. Labour market interactions are rarely the bloodless interplay of supply and demand lines on a graph. They are instead conditioned by the social and political context…. If labour’s bargaining position is weak, as it is currently, then the danger is that the higher productivity from new technologies will not sufficiently be captured in swift wage growth. Instead, it could flow to the owners of the technology…. Avoiding that unhappy outcome means recognising now that wage growth plays a crucial role in helping an economy through technological transitions and that labour bargaining power is a big part of it…

Must-read: Cory Doctorow: “Supreme Court sends Authors Guild packing, won’t hear Google Books case”

Posted on by Brad DeLong

Must-Read: A defeat for the rent-seekers!

Cory Doctorow: Supreme Court sends Authors Guild packing, won’t hear Google Books case: “The Authors Guild has been trying to get a court to shut down…

…Google’s book-scanning/book-search program for more than a decade. Last October, the Second Circuit Court of Appeals — the most publisher-friendly court in America — ruled that the program was legal. Today, the Supreme Court settled the question forever, by declining to hear the Authors Guild’s appeal. I’ve written a lot about this, but here’s the tl;dr: if making a copy in order to create a search index violates copyright, then all search engines are illegal….

Unlike other forms of Google search, Google does not display advertising to book searchers, nor does it receive payment if a searcher uses Google’s link to buy a copy. Google’s book scanning project started in 2004. Working with major libraries like Stanford, Columbia, the University of California, and the New York Public Library, Google has scanned and made machine-readable more than 20 million books. Many of them are nonfiction and out of print.

Must-read: Ben Thompson: “Obsoletive: Revolutionary Products in Tech Don’t Disrupt–They Obsolete”

Posted on by Brad DeLong

Must-Read: Ben Thompson (2013): Obsoletive: Revolutionary Products in Tech Don’t Disrupt–They Obsolete: “[Christiansenian] disruption is low-end…

…a disruptive product is worse than the incumbent technology on the vectors that the incumbent’s customers care about. But, it’s cheaper, and better on other vectors that different customers care about. And, eventually, as the new technology improves, it takes the incumbent’s market.

This is not what happened in cell phones. In 2006, the Nokia 1600 was the top-selling phone… the BlackBerry Pearl the best-selling smartphone. Both were only a year away from their doom, but that doom was not a cheaper, less-capable product, but in fact the exact opposite: a far more powerful, and fantastically more expensive product called the iPhone…. The problem for Nokia and BlackBerry was that their specialties–calling, messaging, and email–were simply apps: one function on a general-purpose computer. A dedicated device that only did calls, or messages, or email, was simply obsolete. An even cursory examination of tech history makes it clear that ‘obsoletion’–where a cheaper, single-purpose product is replaced by a more expensive, general purpose product–is just as common as ‘disruption’–even more so, in fact…. The Mac (and PC), iPod, and iPhone weren’t so much disruptive as they were obsoletive. They absorbed a wide range of specialized tools for a price far greater than any one of those tools cost on their own….

Christensen’s theory of disruption remains an incredibly elegant and insightful framework for understanding why some companies–like Microsoft, to name the best example–decline. But it’s dramatically over-applied in technology. Most new products are simply better… while the most revolutionary products… are obsoletive. They are more expensive, more capable, and change the way we live…

Must-read: Ben Thompson: “Antitrust and Aggregation”

Posted on by Brad DeLong

Must-Read: Ben Thompson: Antitrust and Aggregation: “With zero distribution costs and zero transaction costs…

…consumers are attracted to an aggregator through the delivery of a superior experience, which attracts modular suppliers, which improves the experience and thus attracts more consumers, and thus more suppliers in the aforementioned virtuous cycle. It is a phenomenon seen across industries including search (Google and web pages), feeds (Facebook and content), shopping (Amazon and retail goods), video (Netflix/YouTube and content creators), transportation (Uber/Didi and drivers), and lodging (Airbnb and rooms, Booking/Expedia and hotels)…. All things being equal the equilibrium state in a market covered by Aggregation Theory is monopoly: one aggregator that has captured all of the consumers and all of the suppliers.

This monopoly, though, is a lot different than the monopolies of yesteryear…. Consumers are self-selecting onto the Aggregator’s platform because it’s a better experience. This has completely neutered U.S. antitrust law, which is based on whether or not there has been clear harm to the consumer… it’s why the FTC has declined to sue Google for questionable search practices….

Once competitors die the aggregators become monopsonies — i.e. the only buyer for modularized suppliers. And this, by extension, turns the virtuous cycle on its head: instead of more consumers leading to more suppliers, a dominant hold over suppliers means that consumers can never leave, rendering a superior user experience less important than a monopoly that looks an awful lot like the ones our antitrust laws were designed to eliminate….

There was one remedy from the European Commission settlement with Microsoft that actually worked out quite well: Windows was required to document interoperability protocols for work group servers, which while designed for the benefit of established competitors like Sun, was actually more important for the open-source Samba project. Samba made it possible for non-Windows PCs and servers to be fully compatible with Windows-based networks, making it viable to use a Mac or Linux machine in corporate environments, or (more importantly) in corporate data centers, one of the first areas where the Windows monopoly started to come apart. Of course Windows remained dominant on the desktop thanks to its application lock-in…. Both of these approaches — interoperability and API disclosure — could be solutions when it comes to defusing the market power of aggregators…

Must-read: Joshua Gans: “Ford hedges to deal with disruption”

Posted on by Brad DeLong

Must-Read: Joshua Gans: Ford hedges to deal with disruption: “The auto industry is facing a trio of disruptive technologies: electric batteries, autonomous vehicles, and the mobile phone…

…The first two have been long-standing threats, relatively speaking, and are embodied in one company, Tesla. Which is why the auto industry’s reaction to Tesla’s announcement on March 31 of its Model 3 is so strange. They feel a bit relieved, maybe even overjoyed. More than 325,000 people have made a $1,000 down payment to pre-order the Model 3, sight unseen, even though the excepted delivery date was two years away. CEOs of competing automakers are reassured to see a large group of consumers getting excited about purchasing cars again. Tesla may seem ahead in the electric car game, but that doesn’t take away from the fact that, this time around, they are playing a familiar game: find out what people want in a car and deliver it to them. Traditional car companies need to play catch up, for sure, and it’s not clear that they can. But at least they have a clear target.

But the mobile phone… has enabled ride-sharing apps…. If these apps continue to grow, then people could have less of a need to but own their cars since they can hire them at will. That could potentially force carmakers into business-to-business sellers rather than business-to-consumer sellers. And the specifications of what one wants in a car would change, too…. BMW… recently paired with a car sharing firm in Seattle. But Ford is taking the most interesting approach. It launched a spinoff company, Ford Smart Mobility, LLC, which will try to tackle these three potential disruptors at once…. Ford is handling disruption by investing in a separate business unit. This is a play straight out of Clay Christensen’s disruption playbook….

Here is the problem: none of the three disruptors I have outlined here are traditional Christensen-style innovations. They are supply-side architectural innovations…. Ford should go in the other direction: toward integration. Fujifilm, for example, outlasted Kodak not only because it changed from being a film to an image company two decades ago but because it built its entire organization around its new approach…. It’s a potentially reasonable decision for a company to decide that it can’t meet the challenge…. But, if they decide that they can meet the challenge, they should bet everything on that new world vision. They can’t hedge, like Ford is doing.

Must-read: Robert Gordon (2012): “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds”

Posted on by Brad DeLong

Must-Read: Robert Gordon (2012): Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds: “Start by assuming that future innovation propels growth…

in per-capita real GDP at the same rate as in the two decades before 2007, about 1.8 percent per year…. Baby-boomer retirement (the reversal of the demographic dividend) brings us down to 1.6 and the failure of educational attainment to continue its historical rise takes us to 1.4 percent…

And adding 1.0%/year population growth gets us up to 2.4%/year as the U.S. economy’s future projected rate of economic growth.

Www nber org papers w18315 pdf

Www nber org papers w18315 pdf