TECHNOLOGY AT WORK

More documents

Recommendations

Info

12 Citi GPS: Global Perspectives & Solutions February 2015 The digital age has broken the historical observation that shares in national income accrue to capital and labour in a constant manner Digital technologies can also make capital less relevant So far, the digital age has been the age of capital rather than the era of labour. This sheds a different light on the six stylised facts about economic growth Nicholas Kaldor famously published in 1957. Having observed remarkable historical consistency in the shares of national income accruing to capital and labour respectively over longer periods of time, he concluded that these shares are roughly constant — an assumption that is still at the heart of many growth models. 19 As the labour share of GDP has steadily declined over the past decades, across countries, this assumption has nevertheless become difficult to maintain. Yet, in the future, digital technologies could also increasingly substitute for capital. Crucially, the digital economy allows many goods and services to be codified, and once codified, they can be digitised and replicated. Furthermore, as has been pointed out by Erik Brynjolfsson, Andrew McAfee and Michael Spence: “digital copies can be made at virtually zero cost and transmitted anywhere in the world almost instantaneously, each an exact replica of the original.” 20 Consider Twitch, a live streaming video platform employing some 170 workers, which was acquired by Amazon.com for $970 million in September 2014. While receiving venture capital (VC) funding, the company did not need much physical capital relative to the industrial giants of the past. The same is true of Instagram and WhatsApp: both did not need much capital investment to get started, and thus not many workers to build up the new capital. While digital technologies increasingly substitute for labour, they may also reduce the demand for capital. In the digital age, innovators and entrepreneurs, not workers or investors, will be the main beneficiaries. Meeting the Challenge The speed of technology diffusion has increased… Technologies are diffusing much faster now than they have in the past. Historically, countries have adopted a new technology on average 45 years after its invention, although the lag has shortened over time. It took on average 119 years for the spindle to diffuse outside Europe. By contrast, the Internet has spread across the globe in only seven years. The extent to which new technologies have been adopted still varies substantially across countries and can account for some 25% of the differences in nations’ per capita income today. 21 However, as adoption lags become shorter, the rich world’s advantage of being an early adopter will inevitably decrease. Figure 5 shows the shortening of the lag in adoption, from telephones needing 75 years to get to fifty million users, to Angry Birds taking just 35 days. Services like Instagram reached 300 million users in just four years and Forbes recently noted that WhatsApp gained more followers in its six years of existence (700m) than Christianity did in its first nineteen centuries. 19 Kaldor (1957). 20 Brynjolfsson, McAffe and Spence (2014). 21 Comin and Hobjin (2010). © 2015 Citigroup
February 2015 Citi GPS: Global Perspectives & Solutions 13 Figure 5. Time to reach 50 million users Telephone 75 Years Radio 38 Years TV Internet Facebook Angry Birds 13 Years 4 Years 3.5 Years 35 Days Source: Citi Digital Strategy Team 0 50 100 …and looks to continue to do so Digital technologies have created enormous wealth and a sharing economy There are good reasons to believe that the pace of technological innovation has, if anything, increased over time, and will continue to do so. Digital technologies are connecting almost everyone, allowing people to share ideas. Scientific knowledge is becoming readily available to anybody eager to learn — to be sure, there is no mechanism that automatically turns science into technology, but its availability allows people to combine previous discoveries in innovative ways. Finally, the companies leading the digital transformation are already vastly profitable, compared to companies leading past technological revolutions. For example, the operating income per employee at Google is roughly six times that of IBM, and about 12 times that of General Motors. Digital technologies will continue to create enormous wealth. Meanwhile, a sharing economy is emerging in which more things are becoming available for free, leading to unprecedented benefits for consumers. Airbnb connects hosts and travellers, providing consumers with much cheaper accommodation. In a similar way, Uber uses a smartphone application that connects passengers with drivers, substantially reducing costs for consumers. Technology also offers new possibilities for entrepreneurs. Etsy, an online marketplace for arts and crafts, enables artisans to reach global markets even from deprived areas. © 2015 Citigroup
Page 1 and 2: TECHNOLOGY AT WORK The Future of In
Page 3 and 4: February 2015 Citi GPS: Global Pers
Page 5 and 6: PRODUCTIVITY HAS INCREASED FASTER T
Page 11: February 2015 Citi GPS: Global Pers
Page 63 and 64:
February 2015 Citi GPS: Global Pers
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Citi Global Perspectives & Solution
Page 103 and 104:
China & Emerging Markets China is A
Page 105 and 106:
Page 107 and 108:
show all

TECHNOLOGY AT WORK

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?