

Techonomy and the Economy: Is Change Happening Faster than Society Can Absorb it?

It's possible that unease with technology has people so alarmed it had an impact on the election, among many other things.

November 15, 2016

To me, the most interesting topic at last week's Techonomy 2016 conference was the impact that technology and data are having on the economy as a whole. As the conference immediately followed the election, it was a topic that came up in a variety of sessions—with a surprising number of comments about how changing technology has made many people uneasy, and how that may be hurting the economy and affecting how people vote.

Kirkpatrick, Chen, Morgan, ScottKirkpatrick, Chen, Morgan, Scott

"Change is happening at a much faster pace than society can absorb the changes," Tony Scott, the Federal CIO of the United States, said in the opening panel, noting that changes in technology, energy, and other areas are fundamentally changing where jobs are and how people live. Still, he said, "relentless digitalization" is inevitable.

Simulmedia CEO Dave Morgan noted that job loss to technology will only intensify, as 1.5 million driving jobs—the largest single job category for white men outside of the government—will disappear over the next 4-5 years. (I believe he is wildly overestimating the pace of change here, but we'll see.) Morgan stressed that, though economic issues are important, dignity is also important; in the small city in Pennsylvania where he grew up, people not only used to have jobs, they felt good about them.

Morgan referenced a 1946 book by Peter Drucker, Concept of the Corporation, which lamented the growing use of cost accounting, and argued that the relationship between labor and management had changed. In the 1950s, Morgan said businesses paid a living wage, offered health plans to cope with catastrophic incidents, and offered pensions, so workers participated in the growth of a company. Over time, pensions have disappeared, fewer companies offer health insurance, and wages are now considered costs.

Blackberry CEO John Chen said the bicoastal tech industry has largely missed the concept of jobs, and this has led to some of the anger directed toward the industry. Chen said he supports infrastructure investment and stressed the importance of cybersecurity.

Scott agreed that some paradigms need to be reexamined. He noted that we have an assumption that everything should interoperate with everything else, but in the near future, we may need to ask whether the system you might connect to is safe and performing the way it should.

Scott said that the government is on an unstoppable track to digitization that should improve interaction with the citizenry. For instance, he said that today's technology pretty much follows the org chart, so you need to understand the organizational structure to locate a site for the information you're after. This, he said, will change no matter who is president.

Similarly, Scott said the federal government spends $85 billion a year on technology, with more than 80 percent of this to simply "keep the lights on." We are now "air-bagging and bubble-wrapping old stuff" for cybersecurity, but said that we need to upgrade and replace systems in order to get to a more modern platform. Scott mentioned that there was a bipartisan bill to create an Information Technology Monetization Fund to hasten IT advancements and upgrades at the federal level.

There were a number of good questions and comments from the audience. Gary Rieschel of Qiming Venture Partners, who spoke in an earlier session, said there is a perception among Trump and Sanders supporters that "America is no longer fair." Where you live and how much money you have determines your quality of education and access to healthcare, Rieschel suggested, and while technology may help, it can only do so if it comes from the citizens up, and not from the top down. Rieschel pointed out that, until the 1970s, unions had large apprenticeship programs, but since then the skills of workers have eroded as older workers retired and younger workers weren't retrained.

Roger Pilc of Pitney Bowes talked about how technology has helped to democratize international trade. He quoted Alibaba's Jack Ma as saying that over the last twenty years this has mostly helped large businesses, but that over the next twenty it may help medium and small businesses. Pilc pushed things like shipping and logistics, citing cloud technologies, APIs, mobile, and IoT as items that can help smaller firms, and noted that most job creation comes from small and medium-sized businesses.

Others in the audience talked about how technology may not be the answer; how U.S. companies could build call centers and even coding centers in Middle America; and education. I noted a comment that the technology industry should not be surprised by the anger in the country, as many groups—especially women and minorities—are also angry at how they have been treated by tech.

The Economic Impact of Data Convergence

Annunziata, Farrell, KirkpatrickAnnunziata, Farrell, Kirkpatrick

I was quite interested in a conversation on the economic impact of data convergence, which featured GE's Chief Economist Marco Annunziata and Diana Farrell, Founding President and CEO of the JP Morgan Chase Institute and a former Deputy Director of the National Economic Council.

David Kirkpatrick, who moderated the discussion, said that data shows that life is improving in almost every major country. But Annunziata said that in most cases, the narrative is more powerful than the data. He said there is a lot of hype around data, but that the impact of data on the economy has been small. Going forward, however, Annunziata talked about using data to generate value.

Farrell said that one big problem is that while the overall economy has strengthened, the level of anxiety remains high. She said take-home pay has been particularly volatile, with 55 percent of Americans seeing a swing of income of over 30 percent month-to-month over the course of a year. Farrell said a fear of "the liquidity trap"—a concern of running out of liquid money—is true for almost all Americans.

Farrell said that the "gig economy" employs about 1 percent of adults in a given month, and only 4 percent of adults over last three years. These are primarily young and disproportionately low-income workers, who mostly view such work as supplemental income, used to offset volatility but not as a replacement for a job.

In a discussion of how people view data, Ford Motor Co. VP of Research and Advanced Engineering Ken Washington said that even though the government has lots of data on people, it is all in silos, and thus it is incredibly difficult to obtain holistic information on an individual. Washington said there were few ways for either the government or commercial companies to pull this information together, and said people are frustrated that the data is out there but not improving their lives.

Annunziata agreed, and said it seemed strange that the government "knows all this information about me, but treats me as a stranger when I go to the airport." Annunziata worries about things like data sovereignty laws in Europe. He said ringing a fence around data doesn't make it secure, and that by preventing data from being aggregated could negate the value of the data.

On the question of government use of data, I was interested in a separate discussion with Marina Kaljurand, former Minister of Foreign Affairs for the Republic of Estonia. She talked about how her country had created an "e-lifestyle" that started with government digital systems used to pay taxes, to vote, and to receive report cards. This was based on digital signatures using two-factor authentication and the goal of having a "paperless" approach to government. I think that's an interesting goal, but one that seems hard to reach in a country as diverse as the U.S., where individual states have their own policies and rules.

Overall, I wonder if Silicon Valley overestimates its direct impact on the economy, but underestimates the secondary impacts of the new technologies it creates.

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Michael J. Miller




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