by Robert J. Gordon, an American economist and university professor, in a conversation with Credit Suisse contemplates if roboadvisors could eliminate jobs and whether Facebook could become the new Ford. We often think of progress as gradual. Yet in his recent book, "The Rise and Fall of American Growth," Northwestern University professor Robert J. Gordon argues that some of the biggest changes in the way Americans live have happened remarkably fast. He makes a convincing case that during America's "special century" between 1870 and 1970, a series of innovations changed the quality of human life more profoundly than at any other place or time in world history. Credit Suisse recently spoke with Gordon about the special century, why it isn't likely to repeat itself, and how modern innovation stacks up with that of the past. CS: What accounts for the sheer scale of innovation during the special century? RG: I just think the time was ripe. One invention led to another: The telegraph led to the telephone, the invention of batteries led to Edison's experiments that produced electric light, and the internal combustion engine allowed the Wright brothers to fly an airplane.
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Credit Suisse considers the following as important: Economics, Global Economy, innovation
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Robert J. Gordon, an American economist and university professor, in a conversation with Credit Suisse contemplates if roboadvisors could eliminate jobs and whether Facebook could become the new Ford.
We often think of progress as gradual. Yet in his recent book, "The Rise and Fall of American Growth," Northwestern University professor Robert J. Gordon argues that some of the biggest changes in the way Americans live have happened remarkably fast. He makes a convincing case that during America's "special century" between 1870 and 1970, a series of innovations changed the quality of human life more profoundly than at any other place or time in world history.
Credit Suisse recently spoke with Gordon about the special century, why it isn't likely to repeat itself, and how modern innovation stacks up with that of the past.
CS: What accounts for the sheer scale of innovation during the special century?
RG: I just think the time was ripe. One invention led to another: The telegraph led to the telephone, the invention of batteries led to Edison's experiments that produced electric light, and the internal combustion engine allowed the Wright brothers to fly an airplane.
CS: How dramatic were the changes in everyday life for most Americans between 1870 and 1940?
RG: The differences are enormous. In 1870, the American home was isolated. By 1940, it was connected to the outside world by five different connections – electricity, gas, telephone, running water, and sewage removal—and all of those made a tremendous difference in quality of life.
CS: Could there be another special century, or have all the big problems already been solved?
RG: I think the biggest problems have been solved. Just think about speed and temperature. We went from the early 19th century, when the fastest modes of transportation were the horse and the sailboat, to the Boeing 707 in 1958, which could travel at 80 percent of the speed of sound. We went from living in environments that varied between hot and cold extremes to even room temperatures, thanks to central heating and air conditioning.
Similarly, it took only 30 years for us to go from 8000 cars on the road to 26 million, and the impact of that was enormous. Now we have the self-driving car, but its potential to cause revolutionary change is limited by the fact that we already have 200 million-plus cars that require drivers. People are not going to throw out existing cars just to have an imperfect driverless experience.
CS: How can you say that driverless cars won't be as revolutionary as the first automobiles?
RG: Driverless cars are great for being stuck in slow-moving traffic on an expressway, but they're much less good at driving on rural roads at night and finding your house in the dark. Besides, people still have to spend time in the car going from A to B, so driverless cars aren't comparable to inventing the car in productivity terms. Driverless trucks have more potential in that regard, but many truck drivers unload trucks as well as drive them. The unloading function is not going to go away.
CS: You write a lot about productivity. But total factor productivity growth has slowed since 1970. Is it fair to say that innovation has slowed, too?
RG: No. We've had major innovation in computers, communication, and entertainment. Television has evolved more rapidly in the past 20 years than in the previous 20, and since they became widespread in the 1950s, the quality of televisions has evolved from black-and-white, fuzzy models to high-definition color televisions with cable, streaming capabilities, and a huge number of programming choices. The personal computer and the internet completely changed the way the work is done in every kind of office between 1975 and 2005, but we've had very few further changes since then. Smartphones are primarily a revolution in social networks and consumer behavior. They have not created the same revolution in office work.
CS: Silicon Valley is often hailed for its innovative powers. Will companies like Facebook be revolutionary in the same way as, say, Ford was during the special century?
RG: No. Bringing social networks to the people of the world is an admirable effort, and the lives of ordinary people have been changed by their ability to be connected and trade pictures. I'm very respectful of that effort, but I don't think social networks are really getting to the heart of our slow productivity growth, and that's where incomes come from. We don't create more or better jobs just because people can trade pictures with their families.
CS: What about robots and artificial intelligence? Many believe they will completely change the nature of work in the next few decades.
RG: Robots that replace humans are actually making very slow progress. We've had robots in manufacturing for 50 years, and 20 years ago, robots in auto plants were already doing most of the work in the paint shop and welding auto bodies together. Automation has continued to reduce the number of workers in manufacturing, but there are still an awful lot of things robots can't do or that they do more slowly than humans.
As for artificial intelligence, 15 or 20 years ago, we saw airline websites pretty much wipe out travel agents. More recently we've seen voice recognition, language translation, computers that can read radiology scans, and roboadvisors that give personal financial advice. But these advances are only happening gradually and in very limited parts of the economy, and we're still creating 2.5 to 3 million jobs a year. I think artificial intelligence will bring evolutionary, slow progress rather than a lightning bolt that suddenly eliminates half of human jobs, as some people forecast.
CS: How do you see the future trajectory of economic growth and productivity?
RG: Growth over the next 25 years is going to be disappointing compared to growth in the special century. We had a period in the 1970s and 1980s when productivity growth was slow, but overall economic growth was fairly rapid because women came into the labor force and hours of work per person were growing. That allowed average income per person to rise. Now, we're going in the opposite direction with the retirement of the baby boomers.
CS: What is your absolute favorite innovation of the special century?
RG: I'm a fan of the flush toilet.