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strategy and business
 / Spring 2010 / Issue 58(originally published by Booz & Company)


The Thought Leader Interview: Erik Brynjolfsson

S+B: Given the continued evolution of both technology and management practice, what do you see as you look forward? Will the productivity spike last a while?
Well, these estimates always get revised in hindsight, sometimes pretty significantly. It could be revised up or down. So I would hesitate to ascribe a lot of significance to any particular number in the short run. But over time, the growth in productivity is significant. It reflects growing output without growing labor input. As a general trend, we will probably have a continuation — and even acceleration — of this jobless recovery phenomenon. And this is possible because of the business process changes that companies have put in place.

It’s also possible that the productivity growth spurt could be short-lived. The last period of high productivity growth, between 2000 and 2004, followed a period of very intensive IT investment and business process change. People used the Y2K conversion as a catalyst: “Rather than spending a lot of time fixing our computers, let’s just overhaul the whole system now, and since we’re getting rid of all our old COBOL anyway, we may as well put in a new CRM [customer relationship management] function.” There was actually too much IT investment. They overshot. But nonetheless there were a lot of productivity gains harvested.

This time around, investment in IT over the past five or six years has been relatively tepid, and so there may be less harvesting of technological impact available now. On the other hand, there may be a productivity boom coming in IT itself. “Cloud computing” is shorthand for the Internet becoming an enterprise computing vehicle, and we don’t know how big the effects will be.

The other cause for concern about the economy is the distribution of benefits from this (or any) productivity boom. I don’t know that there’s anything in pure economics that says you couldn’t have a sustainable society with just a few wealthy people and the rest being have-nots. It may not be fair. It may not be the kind of society we want to live in. And Bill Gates won’t consume as much food and clothing as his money would buy if it were distributed evenly. But he might spend more on jets and safaris, and it might not slow down economic growth that much.

In fact, part of the problem of income inequality may be due to the combination of IT and management practice we’ve been talking about. Some of our research suggests that global connectedness and IT power can create a kind of superstar effect, where it amplifies the creative and managerial talents of a few people. That can tend to concentrate wealth in not just the top 1 percent of the economy but the top 0.1 percent or less. Whether that issue gets addressed without undercutting productivity growth depends not just on innovation in the management sphere and technology, but also on our choices as a society and how policymakers implement those choices.

Reprint No. 10108

Author Profiles:

  • Art Kleiner is editor-in-chief of strategy+business and the author of The Age of Heretics (2nd ed., Jossey-Bass, 2008).
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