The Podcast that NPR Planet Money Gets Horribly Wrong – #772 Small Change

Prelude

I am a huge fan and an avid listener of NPR’s Planet Money. I’ve listened to at least a hundred episodes, and every time I am left amazed at the job they do of coming up with ideas for the show, and how wonderfully well researched the information presented is, and how wonderfully well it is then presented to keep you engaged in the podcast.

But, on Friday when I was catching up to some of the old podcasts I had missed, I came upon “#772 Small Change”. As I was listening the podcast and driving my car, I was just vigorously shaking my head. I would have to re-listen to this when I got home, and I would have to let the hosts know that this time, they somehow weren’t looking at it from what in my opinion is the correct perspective.

Now, some background on myself, since I’d like the reader to know about biases I have and about how well informed I am. I am not an economist – I have never done a single course on economics. I am a Hardware Engineer by the day, and an investing enthusiast by evening. I am extremely curious about where the world is headed, both out of just academic interest but also out of self interest – will I have my job ten years down the line ? If yes, where will I be in the value chain ?

Not to get too much into details on what I do, but this is important so I will get into some detail. I work in the semiconductor industry, working on designing chips that go into electronic gadgets. The semiconductor industry over the last few decades has been nothing short of fantastic, yet, there are challenges. If you’ve bought a computer in the recent past, you know that it cannot do that much more than your computer from five years ago. It runs a little faster, is a little more efficient, and costs less.

To get a perspective of how amazing the run in the semiconductor industry has been, I’d like to quote the late Robert Noyce – from a lecture he gave in 1984. The video is available on youtube. It’s an enlightening talk from a giant in the area of semiconductors.

…. Comparing the progress in the computer and the aircraft industries, and pointed out that if in the last twenty years, the aircraft industry had made the same progress that the computer industry has made, a 767 would cost five hundred dollars, and go around the world in twenty minutes on five gallons of gas

That was 1984. The Pentium’s didn’t exist till 1993. If you look at any of the recent Moore’s law charts, you will see how far we have come from 1984. Sure, things are slowing down on the surface, but progress is always being made. Here’s one such chart from ‘Ray Kurzweil’

When I first got interested in looking at what the future holds, I went hunting for books to read and videos to watch. There was a series on TED called ‘TED Talks: Humanity’s Future’ – it might have been a Youtube watchlist. It is possible my thoughts and opinions are influenced by that.

#772 Small Change

I think that is enough Prelude. Onto the actual podcast itself then.

Robert Gordon is interviewed in the episode, and has a book out there which substantiates much of his claims. “The Rise and Fall of American Growth” I would like to do a follow up to this article once I have read the book as well, so I can understand things in it’s entirety.

I’d first like to start with some points made, and address then with counter points, where I think they are necessary.

  • The Problem isn’t too much change – the problem is too little.
  • Technological innovation arranged by date
    • Window screens were invented in the 1880’s
    • The automatic washing machine had been invented by 1920.
    • Amazon was founded in 1994.
  • Thought exercise on taking a person from some age, and then moving them over to another age. 
    • Person from some age – has a horse, cart,  cooks over a fire.
    • Walking a long way bringing the apples from one town to another town.
    • When he needs to use the bathroom – poops in a hole in the ground. There’s no water, there’s no flush toilets.
    • In the US in the 1800’s. The world doesn’t look that different – still horses and carts, walking a long way, pooping in a hole, cooking over a fire. 100’s of years have passed and not that much has changed.
    • Same delivery guy, sleeps in 1870 – wakes up in 1940. He wakes up in a world that is completely transformed. Telephone. Light bulb – electricity. Airplanes. Flush Toilets. Cars. Truck. Kitchen. Refrigerator. Tall buildings. 
    • New York City – ride the subway. Buildings that were 75 or 100 stories tall. Empire state building was built in 1931.
      • If you measure productivity and progress by sky-scrapers, then let me remind you that the Great Pyramids were built several thousand years ago.
  • Point of the whole thought experiment is this – for hundreds of years, hardly any change at all. In one span, everything changes. Two key things – 1. Electricity, 2. Internal Combustion Engine.
  • General Purpose Technology – these technologies do all kind of different things all across the economy. Transforming daily life. Middle of 20th century – they transformed the way we work – work more efficient, workers do a lot more. Around WWII. 1944, 1945 – making a bomber airplane, 1 every hour.
  • After the war, the workers keep getting more and more productive. The Government builds interstate highways, makes truck drivers more efficient. 
  • Electricity gives us another big productivity breakthrough. Office worker productivity improvements.
  • Productivity is going up. How much value an average worker is creating in an hour of work.
  • Productivity growth is the way that societies get better off. It is the reason that people in the 50s and 60s are doing better than their grandparents. Tractors with Internal Combustion engines replaced horses , Food got more abundant, Builders use electric Power tools instead of hand tools,  Ordinary people could afford more comfortable houses. 
  • Same amount of work – more and better stuff.
  • Slows down in the 70’s and 80’s. Gets a huge boost in the 90s from computers. New general purpose technology. Businesses are going online, replacing paper with online websites. 
  • In 2004, something goes wrong. Productivity growth comes crashing down. Economists notice. 
  • 2010 – 2016 – productivity growth wasn’t picking up.
  • Rise of inequality. Why isn’t the pie growing at all ?
    • It is possible for the pie to be growing while most peoples shares are shrinking. This is what is happening – as the pie grows, larger and larger shares are being taken by fewer and fewer.
  • Productivity Paradox. We have all of this amazing technology – robots, AI, cloud. The economy as a whole – does not seem to be making a difference. Not making us more productive. 
  • Are we getting more productive , but not able to measure it correctly ? Easier to measure output/worker/hour making cars. How do you measure the productivity of the hospital worker ? Even accounted for, productivity isn’t growing as fast as it used to.
    • What is the productivity of a fully autonomous system ? Where no human hours are required ? 
  • Robert Gordon’s explanation. Fell asleep in 1950 and woke up today. What would have seemed new, would be everything to do with computers. Everything else – normal house. The microwave oven is the only thing that is new from 1950. Would find our cars entirely familiar. (safer, has GPS)
    • Just wait for self driving cars to go mainstream. Will not be very long now. You should watch the demo videos Tesla has showcased. And Google/Waymo is likely ahead.
    • And when semi-trucks become self driving, just wait. As I understand it, truck driver is the most common job in most of the US states. There’s also a piece I read on how truck drivers in spite of putting in long hours behind the wheel, still struggle to make ends meet.
  • Incrementally better – not some big revolution. more of the same rather than something new. The world has not changed as much in the past 70 years as much as it had in the 70 years before that. The big 20th century changes driven by electricity and the internal combustion engine – those were just a much bigger deal than the changes that have been driven by computers. 
    • You cannot fathom the changes that have been brought about by personal computers. Sure electricity and ICE are important, but they have nothing on computing. 
    • Skyscrapers and the subway might looks like big accomplishments, and they probably are, but they are not radical to improving human quality of life. Does your quality of life improve dramatically from living in an apartment on the 100th floor instead of a two storied apartment ? Does your quality of life improve dramatically from riding the subway instead of taking a cab on road ?
  • Computers and internet did give us that amazing decade in the late 90’s and early 00’s. Internet, Google came along, Smart phone came along. iPhone. 
  • iPhone and all the associated apps. Productivity growth is as low as it’s ever been in recorded US History. The nature of the iPhone with most of it’s uses is in your personal space. iPhones are a huge deal in our personal life, but they haven’t fundamentally changed the way in which most of us do our work. Other technologies – robots, AI – they haven’t changed our life either. 
    • This is patently wrong and false. The iPhone or any smart phone is not a toy regardless of how many people use it only to post their food photos on Instagram or their selfies on some other website.
    • Even before the iPhone, emails on Blackberry was an essential for every corporate big-whig who needed to stay up to date on communications. To me personally, emails and calendar invites are remarkable productivity improvements in my work. In the work-place, ask yourself how many secretaries and personal assistants have been replaced by web-apps or phone apps. Do you need a person to schedule appointments, to let someone know if you are available at a certain time ? Or do you login to your app, and it shows you exactly when everyone is free, and when they are tied up ? When you submit bills and receipts for official reimbursement, do you need a clerk to check that for you or do you do it yourself on an app ?
    • Have you seen iPhones being used in retail stores to scan codes, locate items, …etc ? I have seen this at the Apple store and even at stores like Home Depot. Why don’t you try locating an item based on a paper catalog instead ?
    • If you’re an Uber driver, the smartphone is front and center of your livelihood. This is not just about personal life. This is a whole new category of employment that has been enabled by the smart phone. 
    • Talking of apps, I personally use my phone to buy and sell securities – Robinhood, etrade, do all of my banking transactions – be it transfers, paying my credit card bills, checking transactions and statements, budgeting (mint) all from my iPhone, without even having to type a password to login to the app. (Thanks to the fingerprint reader) How did you transfer money to your friend 15 years back when you needed to ? I also make remittances to foreign countries right from my phone. How far did you have to drive to a Western Union to transfer money to someone internationally and how much of a cut did they take ? How do you measure the quality of life improvement from not having to drive 5 miles to your nearest ATM to withdraw money ?
    • I use podcasts to listen to podcasts such as yours – when I am out walking, cycling, or stuck in traffic driving. How many ever episodes I want to listen to, when I want to listen to. Tell me you could do that 15 years back. Sure, there was the radio, and television, but there was no customization of what I wanted to listen to. For all I know, I might have been stuck listening to movie reviews that I absolutely don’t care about. If technology helps improve and raise the knowledge floor of people, that’s perhaps the single most useful thing in our pursuit of a better life.
    • I use my iPhone to track my fitness activities. I know I have bicycled 1300 miles this year so far, while I had biked about 1200 miles last year. I can compare how my half marathon times are improving, how my Personal Records on a bicycle have or have not been improving. (Strava, Endomondo)
    • I use my iPhone to pay for goods in many places. (Wallet)
    • Let’s talk about companies like Square and how they are transforming small businesses. Guess what Square needed to process your payments in the first place ? A smartphone. Does this seem like personal space to you ?
    • Let’s talk some societal dynamics here as well. When you see outrageous video be it of a crime, or of a hapless man being shot at by police, and that starts a national conversation on such things, that leads to people being more informed, aware and as a result being able to bring in change, tell me that’s not a “big deal”. Tell me you’d take Refrigerators to Racial equality.
    • Robots and AI don’t change our life ? That’s pure insane. Do you know why you get your Amazon packages a day after you ordered it ? Heard of a company called Kinva Robotics ? How do you know what to stock in which warehouse so that it arrives at someone’s doorstep in two days, or in some cases, the same day ?
    • Let’s talk Robots – I personally use a Roomba and have never had to vacuum my apartment in the last year or so. Sure, this is personal space, and possibly doesn’t make me more productive at work, but it’s a positive influence on my life, and improves my quality of life.
    • Heard of Robotic Surgery ? Surely your measure of productivity and progress is not how many surgeries you can do per hour. This enables new surgical procedures that weren’t present before, or the ability to remotely operate on patients.
    • How about drones in warfare ? If your work is in the line of national defense, for sure, robotics have improved your productivity. How about drones to just measure methane leaks in natural gas sites ? or in other similar hazardous situations ?
    • For everything that saves me time, and energy in my personal life, my quality of life just improved. Isn’t productivity broadly defined as doing more with less ? If I am able to save time doing menial tasks, and use that for self-improvement – be it finding time to research investments, understanding the global economy and where it is headed by listening to podcasts, getting healthier by keeping track of my exercises, shouldn’t that be accounted for somewhere ?
    • AI is changing your lives without you even realizing it. You have to realize that while data analysis can give some amazing insights into totally new things, more often than not, it can help you improve incrementally, yet continuously. For example, if Geico can use IBM’s Watson to determine better models where good drivers’ premiums come down, isn’t that great ? If at the same time they can be more profitable, isn’t that even better ?
    • AI for example as used by Google Photos, will help you identify photos of yourself, your family …etc. I was surprised to learn that it could search the photo of a bill based on the search term I typed. Sure, this is in the personal space again.
    • Let’s see what other apps help you – checking into your airplane – check. navigating to an unknown place – check. Want to translate a foreign phrase – check.
  • Find the Robot – when I get on a airplane, go to a hotel – human beings do the same thing they did 10-15 years ago. In office situations, going to the doctor, the dentist, the vet, going into retail stores, going into restaurants. I see a large part of the economy operating in the same way it’s been operating the last year and the year before.
    • You could not be more mistaken about everything here. First things first – booking airplane tickets are so much easier today. I can compare prices online, (think Kayak, TripAdvisor), I can book a ticket from my phone, have the boarding pass delivered to my Wallet on the iPhone. The first airline person I interact with is at the time of boarding when I swipe my phone on the QR code reader. Are there other things about flying that have improved ? Airlines are using data and using computing on that data to determine which routes to serve, how to fill the most seats, and offer the most affordable experience. I would be shocked if you told me that airlines were operating as well as they are today ten or fifteen years ago. I would be equally shocked if you told me that the airline ticket was as cheap as it is today. There – that’s two metrics
      • Operational Efficiency of Airplane carriers.
      • Cost reduction of airplane tickets.
    • Let’s talk about hotel bookings next. Could you compare the prices of hotels and get the best price 10-15 years back ? Could you make a hotel reservation right from your phone – while stopped at a traffic light ? Also, could you let out your house and make an income from it ? – AirBnb. I do not know about the process improvements hotels have had in their operations. Maybe they still employ the same number of service staff they used to. But I’m willing to bet they’re more operationally efficient.
    • The doctor, the dentist, the vet. Here I would perhaps have to agree. But there are improvements here as well – there are tele-docs. I’ve never tried one personally. I think in terms of setting up appointments (online), getting your prescription filled electronically, storing health documents …etc there are improvements.  But clearly this is one area ripe for disruption. Many have tried to disrupt this space and failed – I think mainly because of the complexity around local legislation and such, and not for technical reasons.
    • Retail Stores – you have got to be kidding me. Just look at the financial results of major brick and mortar retailers from the last year or so, and tell me things are just he same. In another five years, you will not be able to visit most of the retailers you visit today. You can talk to a cylindrical object sitting on your living room table, and have toilet paper delivered the next day. E-commerce has changed the way most people shop.  It’s even more disruptive in countries where the shopping experience is more of a hassle – no parking, narrow aisles …etc. Try going shopping in a developing country like India – it’s a challenge. Having goods delivered at your footstep is transformational. Also, considering the prices have been aggressively driven down has to count for something. You can buy more for less. 
    • Restaurants – How do you think deliveries stack up today vs how they were 10-15 years ago. Did you have review sites like Yelp, did you have recommendations of where you could eat based on where you presently are ? In terms of the experience inside a restaurant, I agree that nothing dramatic has changed. But do you want it to ? In my utopia, I’d still want to eat freshly cooked meals the way I ate growing up.
  • Fewer hours of human labor – productivity should be going up really fast. The number of jobs would be declining. Economy has been adding millions of jobs every year, year after year. 
  • The next 10 years – going to look a lot like the last 10 years – incremental changes, no big revolution. 
  • If you take the long view, slow incremental change is normal.

One thing you have to realize is if the GDP is measured as exchange of services and goods for money, then technology is going to adversely affect that measurement. Isn’t there a joke about if a rich lady marries her chauffeur, the GDP just went down ? If your car drives itself, thereby not needing either chauffeurs or taxi cab drivers, that is going to affect the way we measure economic progress. If you measure productivity as the true cost to do something, then definitely for most things, that cost has been falling. That true cost should also consider the harm we are doing to the environment – CO2 production might be a good measure. Surely, we are making progress on the environmental front.

I have not touched on the improvements made in healthcare. If survival of the species and civilizations is top-priority, and it should be – otherwise, we lose the residual knowledge our species has gained and built up over a period of centuries, then every effort we are making towards keeping our civilizations intact is great progress. Are we able to act faster to disasters today ? Are we treating more medical conditions ? Is human life-expectancy increasing ? Is there less suffering through that prolonged life expectancy ? If you don’t touch on healthcare improvements, considering it is roughly 1/6th of the US economy, how accurate is your assessment of progress ?

I can go on and on with point by point rebuttals, but I leave you with this – what is the best life a person can lead ? Where do you draw the line on things that give you comfort and happiness and excesses ? How close are we to providing all of the things that provide all of the basic comfort and happiness to people ? A world where suffering is reduced, and people can pursue their interests freely.  We need good health, good education, and other basic amenities. Oh, and in another 50-100 years, your imaginary friend might just wake up on mars.

 

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