Productivity growth in the digital world
Can Tech Revive Productivity Growth?
It would come as a surprise to you that ‘productivity growth’ has been declining in the past few decades, especially in advanced countries. Jared Bernstein, a former chief economist to Vice-President Joe Biden, says technology hasn’t stalled, but for some unforeseen reason, the level of productivity it brings doesn’t trickle down to smaller sectors.
From the start of mankind, there were numerous innovations that completely and radically changed the way people went about their work (and in turn had a positive effect on the economy), like the innovation of ‘round’ wheels by a resident of Mesopotamia around 3500 BC, industrialization era in the 18th century, invention of electric bulb in 1879, to first flight in 1903 which dwarfed the globe to a few hours, to computers and collaboration era post 1970, which shrunk the world to minutes/seconds. The one thing common in all these discoveries/innovations, is the quantum jump in the productivity of the individual and/or the economy. These were the physical innovations, and now we are moving towards the digital and virtual innovations, which promises to substantially increase productivity among the users, bring users closer, provide a social interaction platform across boundaries, races and nationalities.
The Internet Evolution: From Web 1.0 to the Metaverse
We have witnessed the internet boom because of the adoption and resultant so called Web 1.0 (static pages dishing out information to users) and Web 2.0 (more interactive mode such as mobile apps, e-commerce driving the usage multifold). Metaverse is the new buzzword today. Although it’s not a completely new concept, but there are radical use cases being discussed which will potentially transform and touch all our lives at some point. While gaming, elementary/primary education and virtual travel are already adopted uses cases in the metaverse world, there are many more which will have a prominent impact like –
- Not being physically present at government offices to register/sell/buy land. Avatar on metaverse with blockchain technology can eliminate the need to be physically present. Environmentally sustainable too.
- Digital Twin of human bodies/patients, which will allow medical institutions/colleges to train doctors to perform complex surgeries, as opposed to ‘watching over the shoulder’ and viewing recorded videos of surgeries.
- Accessories like jackets for the metaworld will allow people to feel the touch physically (haptic response) when the person you are interacting with, pats your back in virtual world. A fantastic social use case which helps bring people closer.
- MetaBanks, which already is a reality. From a technology point of view, this will bring together a magnitude of AI/ML technology like voice bots, blockchain, crypto currency, using which an authenticated user meta-visits the bank, doesn’t need to wait for a token or stand in queue and directly speaks to an avatar (which could be a bot or a live person) and carry out banking transactions.
If you look at the economic side of this, there are multiple revenue streams available and almost all that which is physical today, will have to be made in the virtual world leading to almost doubling of world GDP. Maybe I exaggerated it a bit, but there will be efforts, automation, manpower, demand and equivalent supply which will definitely push the business case further up. Tech Mahindra believes, the revenue opportunity is estimated to reach more than $800 billion by 2024.
Shaping the Future of ‘Productivity’
It is safer to assume that technology advances at a faster pace than what humans can adopt and adapt to. A case in point from history books - productivity growth didn’t increase until 40 years after the introduction of electric power in the early 1880s. It took until the 1920s for companies to figure out how to restructure their factories to take advantage of electric power with manufacturing innovations like the assembly line and new electric products like consumer appliances. While there has been significant impact of automation and digitalization on the ICT world, but these benefits have not percolated down to all sectors at the same frequency. Digitization offers the promise of meaningful productivity enhancing opportunities, but we are yet to see the materialize at scale. There are many reasons because of which the impact of digitization is not reflected in the productivity numbers. Adoption, risk of the unknown and the transition costs are few things that are holding the companies back to see the full benefits of digitization, leading to a Solow Paradox, defined as a perceived discrepancy between measures of investment in information technology and measures of output at the national level. However, we expect the post Covid world will have a positive impact on productivity, as a direct result of the accelerated digitalization and adoption of hybrid way of work. It is imperative for economies to invest in their businesses, people and the skills that would help them cope up with the technology, which would ensure the “growth in productivity”.
Will metaverse or the Web 3.0, be the innovation that will see a huge increase in the user efficiency and output? Well, the ‘wheels of time’ will unravel that. What’s your take?
