Innovation Monitor: Measuring Innovation and the Roaring 20s

Innovation Monitor: Measuring Innovation and the Roaring 20s

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Welcome to this week’s Innovation Monitor.

“History is fixated on the glitz, but the [1920s’] deeper roar arose from below — from a vast, subterranean engine of commerce that pushed to the surface after World War I and the Spanish Flu pandemic, and ignited an age of consumer convenience.”

So begins Steve LeVine’s think-piece on global productivity and tech optimism, which suggests that long-gestating technologies are finally entering the consumer space.

As AI, XR, 3D printing, and other tech become increasing embedded in various everyday tech, some suggest that this increases our Total Factor Productivity (one typical measure of innovation)…

Accordingly, in this issue, we’ll take a look at a handful of key tech-optimism pieces that highlight what we can look forward to in the coming decade.

Stay safe & thank you for reading.

All best,
Erica Matsumoto The Roaring 2020s? A case for tech-optimism What’s the case for tech optimism in the coming decade? The Economist has a short piece that covers three major reasons. The article is paywalled but the gist is:

  • Innovation: There is a deluge of recent technology that has enormous potential — synthetic mRNA, large language models, self-driving cars, better batteries, among others.

We’re all closely familiar with the pandemic’s influence on the adoption of virtual meeting software (Zoom was founded in 2013, and most of us started hearing about it in the last few years), and we can draw parallels between the 1918 pandemic and ours, but we’ll focus on the first point.

Traditional economic metrics might not capture the full effect of newer technology, Axios notes, as it doesn’t compare to the “the advances of the past, like widespread electrification and antibiotics.” But like Erik Byrnjolfsson argued in a paper last year, we might just be experiencing a “productivity J-curve”:

“When powerful new technologies are introduced into the economy, productivity may flatten or even dip a bit as initial investments are made — the first part of the J. But once those technologies have been fully digested, productivity can swoop upwards — the second part of the [productivity J-curve.] That’s what we’ve seen in the past. For example, computers began to filter into the workplace in the 1970s and 80s, but it wasn’t until the 1990s that the productivity gains of all those PCs were finally felt.”
Early 20th century growth and the J-curve We have another historical precedent for the blooming of latent technology, besides the PC explosion of the 90s. In Will the 2020s Really Become the Next Roaring Twenties? LeVine traces breakthrough inventions that took decades to mature, until, in the 1920s, “across the country, companies delivered the first affordable vacuum cleaner, washing machine, temperature-adjustable iron, and food mixer, not to mention the automobile — an economy-driving treasure of inventions.”

In 1882, Thomas Edison turned on a hundred lights in the Wall Street offices of J.P. Morgan. Harvey Hubbell patented the US electric plug in 1896. The washing machine (1907), vacuum cleaner (1908), and the waffle iron (1911) were all disruptive tech too expensive and unwieldy at the time of their introduction. But by the 1920s, lower electricity prices and years of experimentation led to sleeker, cheaper appliances.

The backbone across the four decades since Edison’s flipped the switch on Wall Street was electricity — a general purpose technology. Many consider AI the world’s next general purpose technology: “The fundamental breakthroughs in the most popular current forms of A.I. were made in the 1980s by pioneers like Geoffrey Hinton, at the University of Toronto, and Judah Pearl, a professor at UCLA.”

While consumer spending will see a surge once things open up — LeVine calls it a “bacchanalia of dining, drinking, travel, and other revelry” — after a few years, will be there “enough underlying zip in the economy to sustain a boom for the remainder of the decade”? LeVine says we’ll need a mature general purpose technology to carry us through. Let’s go back to Brynjolfsson’s J-curve:

“Erik Brynjolfsson… says early A.I. has gestated long enough. In the paper, Brynjolfsson and his co-authors describe the path of general purpose technologies as a figure ‘J’. The bottom loop of the letter represents the arrival of a potentially breakthrough technology and the typical subsequent period of stagnation ‘as people figure out how to use it,’ he told me. The vertical line in the J reflects what happens next — ‘Productivity goes up sharply,’ he said. ‘I think we just turned the corner on machine learning. I anticipate a takeoff in the coming decade.’” The technology we can look forward to While many place AlexNet’s win at the ImageNet 2012 competition as AI’s defining moment, it’s arguable that this was superseded by last year’s AlphaFold performance at CASP, the protein folding competition. Eli Dourado sums up why 2020 might have moved AI past its (quite amazing) “toy” stage:

“What DeepMind’s achievement indicates to me the most is that machine learning is actually useful. This might seem obvious, but consider: most applications of machine learning so far — excluding autonomous vehicles, which have themselves not really arrived yet — are toys. I love watching AlphaZero crush Stockfish on YouTube, but chess is literally a game. GPT-3 produced some fun demos. AlphaFold heralds something different — non-toy superhuman performance is now here, and I am interested to see what else it can do.”

Returning to LeVine’s piece, we’re reminded that society has reshaped itself around the everyday uses of general purpose technology: “But the crucial thing to understand about general purpose technologies was that, while ingenious and potent in theory, to succeed they required other industries and segments of society to entirely reorganize around them…. [otherwise] the new technology was fated to be a glorified experiment.”

Brynjolfsson, LeVine, Dourado, and many others suggest that the Roaring 2020s could be fueled by the maturation of AI as the private and public sectors continue to adapt for it — which, as we’ve highlighted in this newsletter previously, comes with significant considerations and concerns. However, it’s important to recognize the what’s around the bend, and there is plenty of tech that Dourado covers in his piece that might bloom in the late 2020s and 2030s. As LeVine wrote…

“The forecasts hinge on a number of presumptions. Even if you accept that a ton of cool, potentially economy-driving ideas may be out there on the horizon, who is to say their time will come in the 2020s — or whether, like the refrigerator, which only took hold in the 1930s, when their high price dropped, they are likelier to ripen in the next decade? What if we are actually looking at a Thundering Thirties?” This Week in Business History January 19th, 1736: James Watt, inventor of the Watt Steam Engine, is born

Watt, born in Greenock, Scotland made steam engines much more efficient and powerful enough to become practical for transportation and manufacturing. This played a crucial role in the development of the Industrial Revolution. Watt also invented the pressure gauge, coined the term horsepower, and created the “centrifugal governor,” the first feedback device in which the output of a machine controlled its operation (“the germ of automation,” according to Isaac Asimov).

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