Must-Read: Kieran Healy: The Moral Economy of Technology

Must-Read: When I think of the standard uses of “moral economy”, I think not of “fairness” and “justice” but rather of tradition and hierarchy. I think of the Odyssey, in which the fact that Laertes looks like a badly-treated garden slave rather than like a prince is a violation of the moral-economic order:

Indeed your face and figure have nothing of the slave about them, and proclaim you of noble birth. I should have said that you were one of those who should wash well, eat well, and lie soft at night…

The market can and very often does produce pressure for outcomes that violate “moral economy” understood as tradition and hierarchy, but they may or may not violate “moral economy” understood as reasonable and humane notions of justice and fairness. Indeed, Prometheus the fire-bringer’s and the disruptions he causes have an alternative and stronger claim to “moral economy”:

Kieran Healy: The Moral Economy of Technology: “‘moral economy’ refers to some kind of informal but forceful collective control over the market…

…justice over efficiency, fairness over freedom, and community expectations over individual opportunity…. Technologies are counting and classifying your actions constantly in an effort to make you a better person. Their promoters and investors constantly moralize about their products, too…. This kind of moral economy is not about justice or fairness. Instead it evangelizes social progress through technological disruption. This vision has deep historical roots that are uncomfortably entwined with the origins of the social sciences…. The Saint-Simonian vision became what Hayek called ‘the religion of the engineers’, full of faith in the power of rational expertise. That religion is very much still with us….

Consider two basic experiences of our new world of smart devices and internet-enabled things. The first is the nice one… the lives of people who live in Apple advertisements… a computer or device knows what you want it to do, or has anticipated a need that you have and acted on it in a pleasing way. It is a feeling of magic and delight, or at least a sense of ease and convenience…. The second basic experience is the bad one. I associate it with a parade of malfunctioning, misconceived or badly-designed software and smart devices…. Most recently I’ve experienced it with allegedly smart devices that pretend they can talk with and understand you, but which are really just verbal command lines operating on the narrowest of gauges. If you stray from the expected path at all, the illusion of both interactivity and smartness is destroyed….

Social theorists consistently underestimate the value of technology’s delightful aspects… want to say your Fitbit or Apple Watch is exercising a subtle form of control over you by encouraging you not just to meet your step count for the day but also encouraging you to value the act of meeting your step count for the day, and most perniciously by arranging things so that you experience your valuation of the act of meeting your step count for the day as a satisfying personal choice, rather than an instrument of neoliberal governmentality. Conversely, though, the same theorists also consistently overestimate how often software and hardware actually works properly…. They reverse left and right, so that cheerful hype becomes a harsh critique of the all-consuming power of technology. But… they do not reverse up and down. The technology is still assumed to work, even though it probably doesn’t, most of the time. It matters which technologies are going to work, and which ones are just going to be billion dollar cargo-cults…

Must-Read: Marco Arment: Avoiding Blackberry’s Fate

Must-Read: Marco Arment: Avoiding BlackBerry’s Fate: “Before the iPhone, RIM’s BlackBerry was the king of smartphones…

…When the iPhone came out, the BlackBerry continued to do well for a little while. But the iPhone had completely changed the game…. The BlackBerry’s success came to an end not because RIM started releasing worse smartphones, but because the new job of the smartphone shifted almost entirely outside of their capabilities, and it was too late to catch up…. No new initiative, management change, or acquisition in 2007 could’ve saved the BlackBerry. It was too late, and the gulf was too wide.

Today, Amazon, Facebook, and Google are placing large bets on advanced AI, ubiquitous assistants, and voice interfaces…. If they’re right — and that’s a big ‘if’ — I’m worried for Apple…. [in] big-data services and AI…. Apple can do rudimentary versions of all of those, but their competitors — again, especially Google — are far ahead of them, and the gap is only widening. And Apple is showing worryingly few signs of meaningful improvement or investment in these areas….

If Google is wrong, and computing continues to be defined by a tightly controlled grid of siloed apps that you poke a thousand times a day on a smooth rectangle of manufacturing excellence, Apple is fine…. But if Google is right, that’s a big problem for Apple.

Must-Read: Ezra Klein: Technology Is Changing How We Live

Must-Read: Ezra Klein: Technology Is Changing How We Live: “But it needs to change how we work…

…The closest the economics profession has to a measure of technological progress is an indicator called total factor productivity, or TFP. It’s a bit of an odd concept: It measures the productivity gains left over after accounting for the growth of the workforce and capital investments. When TFP is rising, it means the same number of people, working with the same amount of land and machinery, are able to make more than they were before. It’s our best attempt to measure the hard-to-define bundle of innovations and improvements that keep living standards rising. It means we’re figuring out how to, in Steve Jobs’s famous formulation, work smarter. If TFP goes flat, then so do living standards. And TFP has gone flat — or at least flatter — in recent decades….

What Thiel can’t quite understand is why his fellow founders and venture capitalists can’t see what he sees, why they’re so damn optimistic and self-satisfied amidst an obvious, rolling disaster for human betterment…. Thiel’s peers in Silicon Valley have a different, simpler explanation. To many of them, the numbers are simply wrong…. Hal Varian, the chief economist at Google, is… a skeptic. ‘The question is whether [productivity] is measuring the wrong things,’ he told me. Bill Gates agrees. During our conversation, he rattled off a few of the ways our lives have been improved in recent years — digital photos, easier hotel booking, cheap GPS, nearly costless communication with friends. ‘The way the productivity figures are done isn’t very good at capturing those quality of service–type improvements,’ he said.

There’s much to be said for this argument. Measures of productivity are based on the sum total of goods and services the economy produces for sale. But many digital-era products are given away for free, and so never have an opportunity to show themselves in GDP statistics. Take Google Maps. I have a crap sense of direction, so it’s no exaggeration to say Google Maps has changed my life. I would pay hundreds of dollars a year for the product. In practice, I pay nothing. In terms of its direct contribution to GDP, Google Maps boosts Google’s advertising business by feeding my data back to the company so they can target ads more effectively, and it probably boosts the amount of money I fork over to Verizon for my data plan. But that’s not worth hundreds of dollars to Google, or to the economy as a whole. The result is that GDP data might undercount the value of Google Maps in a way it didn’t undercount the value of, say, Garmin GPS devices. This, Varian argues, is a systemic problem with the way we measure GDP….

The gap between what I pay for Google Maps and the value I get from it is called ‘consumer surplus,’ and it’s Silicon Valley’s best defense against the grim story told by the productivity statistics. The argument is that we’ve broken our country’s productivity statistics because so many of our great new technologies are free or nearly free to the consumer. When Henry Ford began pumping out cars, people bought his cars, and so their value showed up in GDP. Depending on the day you check, the stock market routinely certifies Google — excuse me, Alphabet — as the world’s most valuable company, but few of us ever cut Larry Page or Sergei Brin a check…. The other problem the productivity skeptics bring up are so-called ‘step changes’ — new goods that represent such a massive change in human welfare that trying to account for them by measuring prices and inflation seems borderline ridiculous. The economist Diane Coyle puts this well. In 1836, she notes, Nathan Mayer Rothschild died from an abscessed tooth. ‘What might the richest man in the world at the time have paid for an antibiotic, if only they had been invented?’ Surely more than the actual cost of an antibiotic….

‘Yes, productivity numbers do miss innovation gains and quality improvements,’ sighs John Fernald, an economist at the San Francisco Federal Reserve Bank who has studied productivity statistics extensively. ‘But they’ve always been missing that.’… Consider Google Maps again. It’s true that using the app is free. But the productivity gains it enables should show in other parts of the economy. If we are getting places faster and more reliably, that should allow us to make more things, have more meetings, make more connections, create more value….

Perhaps the best way to value the digital age’s advances is by trying to put a price on the time we spend using things like Facebook. Syverson used extremely generous assumptions about the value of our time, and took as a given that we would use online services even if we had to pay for them. Even then, he found the consumer surplus only fills a third of the productivity gap…. A March paper from David Byrne, John Fernald, and Marshall Reinsdorf… comes to similar conclusions. ‘The major ‘cost’ to consumers of Facebook, Google, and the like is not the broadband access, the cell phone service, or the phone or computer; rather, it is the opportunity cost of time,’ they concluded. ‘But that time cost … is akin to the consumer surplus obtained from television (an old economy invention) or from playing soccer with one’s children.’…

There’s a simple explanation for the disconnect between how much it feels like technology has changed our lives and how absent it is from our economic data: It’s changing how we play and relax more than it’s changing how we work and produce. As my colleague Matthew Yglesias has written, ‘Digital technology has transformed a handful of industries in the media/entertainment space that occupy a mindshare that’s out of proportion to their overall economic importance. The robots aren’t taking our jobs; they’re taking our leisure’…

Must-read: Ben Thompson: “Andy Grove and the iPhone SE”

Must-Read: Invest like mad in your technology drivers–even if it looks as if they are not the most profitable. But, conversely, don’t keep pouring money into things that used to be technology drivers but are no longer. And keep your mind open and place many bets as to what your future true technology drivers will be:

Ben Thompson: Andy Grove and the iPhone SE: “While [Gordon] Moore is immortalized for having created ‘Moore’s Law’…

…the fact that the number of transistors in an integrated circuit doubles approximately every two years is the result of a choice made first and foremost by Intel to spend the amount of time and money necessary to make Moore’s Law a reality… and the person most responsible for making this choice was Grove…. Grove [also] created a culture predicated on a lack of hierarchy, vigorous debate, and buy-in to the cause (compensated with stock)…. Intel not only made future tech companies possible, it also provided the template for how they should be run….

Grove’s most famous decision…. Intel was founded as a memory company… the best employees and best manufacturing facilities were devoted to memory in adherence to Intel’s belief that memory was their ‘technology driver’…. The problem is that by the mid-1980s Japanese competitors were producing more reliable memory at lower costs (allegedly) backed by unlimited funding from the Japanese government…. Grove soon persuaded Moore, who was still CEO to get out of the memory business, and then proceeded on the even more difficult task of getting the rest of Intel on board; it would take nearly three years for the company to fully commit to the microprocessor….

Intel today is still a very profitable company…. [But] the company’s strategic position is much less secure than its financials indicate, thanks to Intel’s having missed mobile. The critical decision came in 2005…. Steve Jobs was interested in… the XScale ARM-based processor… [for] the iPhone. Then-CEO Paul Otellini….

We ended up not winning it or passing on it, depending on how you want to view it. And the world would have been a lot different if we’d done it…. You have to remember is that this was before the iPhone was introduced and no one knew what the iPhone would do…. At the end of the day, there was a chip that they were interested in that they wanted to pay a certain price for and not a nickel more and that price was below our forecasted cost. I couldn’t see it. It wasn’t one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought.

It was the opposite of Grove’s memory-to-microprocessor decision: Otellini prioritized Intel’s current business (x86 processors) instead of moving to what was next (Intel would go on to sell XScale to Marvell in 2006), much to the company’s long-term detriment…

Lunchtime Must-Read: Ricardo Hausmann: Technological Diffusion and Economic Theory

Ricardo Hausmann: Technological Diffusion and Economic Theory: “One idea about which economists agree almost unanimously is that…

…huge income difference between rich and poor countries [are] attributable to neither capital nor education, but rather to “technology”… [which] sounds more meaningful than confessing our ignorance, [but] it really is not…. Devices can be put in a container and shipped around the world, while recipes, blueprints, and how-to manuals can be posted online…. So the Internet and free trade should make the ideas and devices that we call “technology” available everywhere…. Daron Acemoglu and James Robinson’s book Why Nations Fail… [argues] essentially that technology does not diffuse because the ruling elite does not want it to…. I am also struck by how often governments that embrace the goal of shared growth–post-apartheid South Africa is a good example–fail to achieve it. Such governments promote schooling, free trade, property rights, social programs, and the Internet, and yet their countries’ economies remain stuck. If technology is just devices and ideas, what is holding them back?

The problem is that a key component of technology is knowhow, which… neither involves nor can be acquired through comprehension… tacit knowledge… an ability to recognize patterns and respond with effective actions…. Knowhow moves to new areas when the brains that hold it move there. Once there, they can train others. Moreover, now that knowhow is becoming increasingly collective, not individual, diffusion is becoming even slower…. Progress happens by moving into what the theoretical biologist Stuart Kauffman calls the “adjacent possible”… technology does not diffuse because of the nature of technology itself.