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Tag Archives: creative destruction

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  • Once there was a computer therapist named ELIZA. While her developer thought she was just a machine, the people who talked to her liked her patience and enjoyed her empathy.
  • In the operating room, da Vinci is a robotic surgeon whose sense of touch engineers have begun to develop.
  • Factories have robots that move, slice, sharpen and precisely place objects.
  • And what about Roomba, the vacuuming robot?
A human surgeon uses da Vinci.

A human surgeon uses da Vinci.

Researchers predict that by 2025 computers will have caught up with the processing power of the human brain. Calculated in flops–floating-point operations per second–the processing power of the human brain is 10 petaflops. (A peta is the next level after giga and tera.) If we agree with Moore’s Law, then every 18 months, computer capacity doubles. So, going back to the first computers in 1940, with processing capacity doubling every 1 1/2 years, it will take until 2025 for computers to have the 10 petaflop capacity of the human brain.

But…what then?? What if computers can equal the human brain’s capacity (and that is a BIG if)?

With computers able to do human jobs more productively, economist Paul Krugman says we wind up with a “capital bias” that is controlled by an affluent elite. Leaving many of us behind, the income gap will increase and inequality will accelerate.

Disagreeing, a second group says “capital bias” creates jobs. Technological leadership brings production back to the US from the developing countries. Yes, it requires structural economic change but people have always worried about the deleterious impact of machines. In 18th century England, the Luddites worried that mechanized looms would create joblessness by replacing people. Instead, we got railroads and steel factories and more production, more jobs, more wealth and a rising living standard. In 1900 a typical worker put in 2300 hours a year. Now that number is down to 1800.

Deciding whether robotics will be good or bad for jobs takes us to Joseph Schumpeter and creative destruction. The transition to robotics has begun. Replacing old technology, it is another example of the disruptive impact of innovation.

Sources and resources: Radiolab tells us more about ELIZA, here, and Slate discusses Da Vince here and Haptics (the touch part) here. However, the best article I read about the economics of artificial intelligence was in Mother Jones. Meanwhile the Krugman postion is here and the oppostion is here. Finally, for the overview, here is the Schumpeter, creative destruction explanation, a TED talk on “Robots Will Steal Your Job, But That’s Okay,” a 60 Minutes segment, and a NY Times discussion.

 

 

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Does anyone remember LP records?

In 1980, the music industry was dominated by LP/EP. With LP standing for long play and EP, extended play vinyl records, both represented almost 60% of the revenue generated by different musical formats. Next? Cassettes at 19.1%. By 1992 CDs were in that 60% position and by 2002, they moved up to 95.5%. Fast forward to 2012 and all has changed.

Music Industry Revenue Sources:

Sources of Revenue Generated

From digitalmusicnews.com

Sounds like Joseph Schumpeter.

Joseph Schumpeter characterized the unsettling process through which innovations replace established technology as creative destruction. The computer replaced typewriters. The auto eliminated the need for buggy whips. In the music industry, because of CDs, 78 and 45 rpm records became obsolete. And now, led by 13 to 35 year olds, internet based listening (see below) represents more than half of all music listening. For those of us who are older than 35, AM/FM radio is still #1 with a 41% slice of the listening pie.

Looking more closely at creative destruction in the music industry, we would see massive shifts in land, labor and capital.

Music listening by 13-35 year olds

Sources and resources: To see 40 years of the music industry in 40 seconds, do be sure to go to this graphic. It is excellent. NDC, the source of my second graph, also had additional fascinating facts about where we listen to music. Finally, this econlife post tells more about Joseph Schumpeter (1883-1950) while a good brief biography is at econlib.

Hat tip to Ezra Klein’s wonkbook.

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Cost benefit analysis for hand washing and drying involves minimizing bacteria

Blowing out candles on birthday cakes has been banned in Australian childcare centers. The reason is the germs. Also, kids are required to wash their hands before going in the sandbox. Really. The rule comes from Australia’s Health Minister.

In the US, I guess that we do have a similar germaphobe state of mind. One reason might be the alcohol-based hand cleaner, Purell.

Made by Gojo Industries, Purell was invented 1988. At first, only auto mechanics used it to remove stubborn grease stains. Next, Wegman’s supermarket chain recognized its potential when they offered Purell to employees. Gojo hit the jackpot, though, when it targeted health care workers.

As an innovation, Purell’s trajectory is typical. At first, its use was limited but then it became more popular. Recommended by hospitals, adopted by the military with a bottle designed to survive a parachute jump, place by place, Purell infiltrated our culture. And now, in wall dispensers and in our pockets, it is everywhere.

Explaining “creative destruction,” economist Joseph Schumpeter (1883-1950) said that economic growth depends on the pain of old industries dying and new ones taking their place. For Purell, we could site a ripple that initially affected soap purveyors like Proctor & Gamble. But then, the germaphobe mindset moves us to all activities and objects that might increase contact with germs, including birthday candles and cakes.

Far beyond economics, Purell is all about creative destruction.

Sources and Resources: My interest in Purell started with a New Yorker article from David Owen  and continued with these Daily Mail details about the Australian birthday cake directive.

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texting is 20 years old

Sometimes, you never know…

At first, it was just a “Merry Christmas” message sent from a computer terminal to a cell phone. The year was 1992, the firm was Vodafone, and the goal was just a better way for secretaries to page their managers. The managers, though, could not reply. And anyhow, they figured the service was limited because it was too much of a hassle to type a message.

Think of what had to happen between then and now.

  • Develop a 2-way system so the recipient could reply.
  • Enable texting among different networks.
  • Figure out what to charge and how to charge.
  • Redesign cell phones.
  • Develop “text-speak.”

And the rest is history. In the US, in 1995, the average user sent 0.4 texts a month; by 2000 it was 35 a month; now Pew Internet says the “median teen text user” sends 60 messages a day. And texting has become a $150 billion business.

Below, CNN interviews Neil Papworth, who was 22 when he sent the “Merry Christmas” text 20 years ago.

Our bottom line? While sometimes you never know where innovation will go, Joseph Schumpeter (1883-1950) would remind us that it leads to creative destruction.

A final fact: It is interesting to ponder the words that accompany innovation. For the telegraph (1844), Samuel Morse tapped: “What hath God wrought?” With his telephone, Alexander Graham Bell said (1876), “Mr. Watson, come here–I want to see you.” And, Neil Papworth, the gentleman who sent the first text message said that most engineers are happy just to say, “Testing, testing testing.”

Sources and Resources: During the The Economist’s Babbage weekly podcast, I first heard about the texting birthday and then read a bit more about it here, here and here. And here, you can read more of the Pew Internet study in “Teens and Smartphones.”

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19th Century Urban Transport Was An Environmental Problem

When we worry about the impact of autos on the environment, perhaps we should remember the horse.

In 1880, the horse population in Manhattan and Brooklyn was somewhere between 150,000-175,000 and growing. A basic part of city life, horsecar rides totalled close to 297 per person in 1890 (see below).

Happily, the size of the horse population was a barometer of economic growth. As national affluence grew with the production of goods and services, so too did the need to transport the freight. Yes, we needed the railroad but also, horses took the goods to the train and then delivered them to their final destination. As a result, railroads owned large “fleets” of horses.

Imagine, though, what it took to sustain several hundred thousand horses in one urban area. Just one horse consumed close to 1.4 tons of oats and 2.4 tons of hay annually. One estimate suggests that 15 million acres of farmland, the size of West Virginia, fed the urban horse population. And, from that total we can only start to calculate the environmental impact on local ecosystems.

In 1898, an international urban planning conference that met in NYC focused primarily on the horse manure crisis.  Horse manure accumulation was estimated at 15 to 30 pounds per day per horse; for the city, that added up to 3 to 4 million pounds a day. Add to that 40,000 gallons of urine a day and you have a lot of pollution! People also coped with the muck that rainy weather created, the dust when it was dry and the noise from the clatter of iron horseshoes on cobblestones.

Surprisingly, on a per capita basis, horse transport was more deadly than autos. In 1900, in NY, 200 were people killed by horses and horse drawn vehicles while in NY in 2003, there were 344 auto-connected deaths. Why? Horses kick, stampede, fall, bite, could be spooked, and they pulled vehicles that were tough to brake.

Our bottom line: Pollution has always been a negative externality–an uninvolved 3rd party experiencing a cost–of urban transport.

A final fact: With the onset of the auto, cross sweepers who, for a fee, opened a path for pedestrians on manure laden city streets, experienced Joseph Schumpeter’s (1883-1950) creative destruction.

From the Library of Congress:

An Environmental Challenge: 19th Century Horse Pollution

Sources and Resources: All of my facts are from a wonderful article by Eric Morris from the University of California Transportation Center. Also, it was so interesting looking through the Library of Congress’s pictures of horse drawn carriages and trolleys with a NYC backdrop.

 

http://www.uctc.net/access/30/Access%2030%20-%2002%20-%20Horse%20Power.pdf

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