Productivity Problems: Is ‘Shunning Technology’ Really the Main Villain?

Andy Kessler, a very smart and generally insightful guy, has a recent WSJ column titled ‘The is One Puzzling Job Market’ and subtitled ‘Why has productivity lagged for so long? Because huge sectors shunned technology.’

This assertion doesn’t feel right to me.  In the case of the healthcare industry, for example, Kessler says “Medicine is unproductive. It’s a doctor-intensive chronic-disease-treatment business. But with prevention and diagnostics to find disease early, perhaps we’d need fewer oncologists and cardiac surgeons.” Perhaps, but it’s not as if diagnostics–mammograms, for example–have been ignored.  Prevention can involve, for example, better diets and obesity reduction–these things are really more about accurate science, proper statistical analysis, and honest and effective public communication than they are about technology per se.

A major technology initiative in healthcare of the the last decade or two has been the wide use of electronic medical records.  While these do have considerable potential, the current implementation reality is different.  I don’t think I have ever heard or read a physician or other healthcare professionals who had anything good to say about these systems.  The perceived productivity impact is negative.

It is certainly true that telemedicine has great potential for productivity improvements, and also probably for better paytient outcomes, since it makes it far easier to get an appointment than is the case with traditional practice approaches.  But some of the same advantages can also come from local clinics with an emphasis on quick availability and more use of nurse practitioners and other alternatives to the need to see physicians for every visit.

As another example of an industry with poor productivity, Kessler cites education.  I think we can agree on the poor productivity. But is the problem really lack of technology? How about the massive administrative overheads, the insistence on instructional methods that don’t work very well (in teaching reading, for example), and the overweening power of the teachers’ unions?  Indeed, schools have been quite eager to spend money on ‘technology’.   The kind of projects that Michael Schrage referred to as ‘sparkly tools’ will not do much good until these other problems are addressed.

In transportation, there are indeed technology improvements that can be made in air traffic control and, for railroads, in rail car tracking and hot-bearing detection to prevent derailments, for example.  But there are also physical infrastructure issues–no matter how great your air traffic control system is, an airport’s capacity is going to be limited by the number of parallel runways, and, in some wind conditions, the availability of crosswind runways.  There are also management and process issues–in freight rail, for example, is the current vogue employment of very long trains, now under the banner of ‘precision scheduled railroading’, really a good idea from the standpoints of productivity and market growth?

Kessler says:  “Bell Labs invented the transistor in 1948, but its parent, AT&T,  had 10 to 20 years of old vacuum-tube inventory and so delayed using transistors.”  This claim makes no sense to me.  I can’t imagine that any company, even AT&T would have built up a 10-20 year inventory of just about any commodity, let alone inventory of items in a field which was already known for rapid change.  And early transistors weren’t cheap, and did have their limitations.

There is indeed an apparent paradox when you consider all the technological improvements of recent years–and then look at the productivity numbers.  But I suspect that much of the cause for this disconnect will be found in:

Mediocre or outright bad management. There is a tremendous amount of wasted motion and effort in a lot of organizations today. There’s always some of this, of course, but my sense is that it’s been getting worse, rather than better.  See for example this article about Google, written by a guy whose startup was acquired by that company.

Google has 175,000+ capable and well-compensated employees who get very little done quarter over quarter, year over year. Like mice, they are trapped in a maze of approvals, launch processes, legal reviews, performance reviews, exec reviews, documents, meetings, bug reports, triage, OKRs, H1 plans followed by H2 plans, all-hands summits, and inevitable reorgs. 

Unwise mergers and acquisitions.  Although company combinations can be beneficial, too often they are done under sets of assumptions that turn out to be, shall we say, optimistic.  How much productivity is lost as a result of all the legal and finance work done to enable these combinations and in the organizational disruption that often follows?  (And then, in some cases, to unwind them via a spinout?)

Excessive regulation, particularly ideologically-driven regulation.  In Washington, DC, childcare workers will now be required to have associates’ degrees.  There are many other examples of pointless education and training requirements.  And the ‘industrial strategy’ programs favored by the Biden administration are very likely to direct resources into politically-favored…but not particularly productive..companies and entire industries.

Bad technology implementations.  There are a lot of examples of technology implementations that seemed promising, but resulted in either complete failure or marginal…if any…productivity gains.  Often, there problems are a result of failing to systematically think about the overall business process and the potential people problems involved.  See the sad story of Target Canada, and Zeynep Ton’s description of retail inventory systems that carry meaningless balances because the work of the checkers, and the way in which the feedback loop from goods availability to sales numbers worked, is not properly understood.

There are certainly many technologies now available, and becoming available, that can greatly enhance productivity.  But it is difficult for any technology or combination of technologies to improve productivity enough to overcome the drag of the structural problems sketched about..and many others.  As Lewis Carroll said, we must run as fast as we can just to stay in place, and if we want to go anywhere, we must run twice as fast as that.  Unless we do something about the sources of the persistent backward motion.

Your thoughts on productivity and technology?

Miscellaneous Business/Economics/Energy Items

Apple is going to make Watches and MacBooks in Vietnam.  (More precisely, Apple suppliers will make the products there.  “Make” in this context meaning mostly “assemble”, I think.)  Apple is also planning to produce the iPhone 14 in India, with only about a 2-month lag from its initial production in China.

Intel will be partnering with Brookfield Infrastructure Partners to help pay for factory expansion projects, with Brookfield contributing up to $30 billion.  Most immediately, the money will pay for the expansion of Intel’s Ocotillo manufacturing campus in Chandler, Arizona, with Intel funding 51% and Brookfield funding 49% of the total project cost.  (This is pretty different from BIP’s typical investments, which tend to involve such things as railroads, toll roads, pipelines, and electricity transmission)

A useful overview of planned and in-development fabs, worldwide.

Electricity prices, marginal costs, and the last kilowatt.

Texas has banned BlackRock and several other firms from doing business with the state.

Finland may be facing power outages this winter.  On the other hand, if their Olkiluoto 3 nuclear power plant goes into production at the end of the year, as planned, this should help a lot.  Another plant is planned, taking total nuclear contribution in Finland to 60%.

Also,perhaps a way could be found to harness the power from their PM’s very high-energy dancing.  (If other Western leaders could dance like that, would it somehow influence their minds to adopt more rational energy policies?)

Elsewhere in Europe, skyrocketing energy prices are causing a lot of hardship–and will surely create serious economic pressures as much manufacturing in the affected countries becomes cost-prohibitive)

The Euro is not doing very well versus the dollar.  More here.

Paul Graham:

f you think people have scar tissue, you should see organizations. Each time there’s a disaster, they create a process to prevent future disasters of that type. Eventually they accrete a thick layer of these processes that prevents them from moving. Then they die.

Rapò Sitiyasyon Ayiti

Most problems were not problems long enough to be interesting.

— Larry Niven, PROTECTOR

Haiti has remained a problem long enough to be interesting.

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Abuse of Authority

If you are a teacher or professor, you have a legitimate sphere of authority concerning teaching methods, classroom discussion, grades, etc.  But you do not have legitimate authority to focus class time on selling students on your own personal political or social views–still less do you have authority to assign grades based on compliance with those views.

If you are Chairman or CEO of a publicly-traded corporation, you have a legitimate sphere of authority concerning organization design, business strategy, financing, people-selection, and many other things.  But you do not have legitimate authority to devote corporate resources–of which you are not the owner–to promoting your personal political views.

If you are an Intelligence Officer employed by the federal government, then certain things fall within your legitimate sphere of authority.  One thing that does not fall within your legitimate authority is using your position to influence US domestic election outcomes.

The whole concept that spheres of authority are and should be limited seems to be under assault in America today.  Not only do many people reject the idea of any limits on their own authority; many people object to the idea of limits on the authority of institutions. Indeed, here is a law school dean who seems to reject the principle that courts should be constrained by laws.

I also observe that there are plenty of people in leadership positions who, while showing very poor performance in their own jobs, are insistent that people outside their sphere of authority do things to solve their problems…a prime example being governors and mayors who blame  the skyrocketing crime rates in their jurisdictions on lack of (what they consider) proper gun control in adjacent states, when there are plenty of things they could do within their own scopes of authority and influence to address the problem.  Similarly with education–tolerate increasingly-awful performance on the part of the schools and malevolent interference on the part of the teachers unions, while blaming the problem of uneducated graduates entirely on Systemic Racism…so those politicians are off the hook because Somebody Else does something, or some set of things.

Your thoughts?

 

 

Unpacking the Port

I hate silliness – bureaucrats wielding power arbitrarily, ignoring consequences, etc. – ask me about our local Home Owners Association, for instance. But this Instapundit link is to a great, productive, tactful moment when analysis, persuasive writing, an understanding of his audience and human nature wielded the power of a leader, appropriate to such rare skills. Many of you (esp. Dan) have a better appreciation of the common bottleneck but even I can see this “impactful” (an ugly word but so appropriate here) of Peterson’s skill. Of course, why this is a “temporary” fix is another question. And why libertarians have a point about minimal control and why a disproportionately (well, disproportionate to the American tradition) strong state often stifles free enterprise.