November 25, 2016


There's a major problem with the way America measures productivity (Melody Hahm, 11/21/16, Yahoo Finance)

Dave Roux, partner at Silver Lake, a private equity firm that focuses on leveraged buyouts and investments in technology and tech-enabled industries, believes that we are actually a hyper-productive generation, and credits advanced technological developments for dramatically improving the welfare of our society.

"The most important problem is that we're missing hyper-productivity. It's so dramatic that you miss it because it's not priced," said Roux.

"Think of search photo-sharing sites like Instagram or dating apps like Tinder. How do you think about the success of such companies? Successful hook ups per hour? There's no money changing hands and it's not measured. Yet, think about how you're spending your time. These companies are a core part of it," Roux told Yahoo Finance. Time is money, after all.

The problem with measuring productivity has been around since computers were in their infancy. "You can see the computer age everywhere but in the productivity statistics," Robert Solow, Nobel laureate in economics, said in 1987. He illuminated the chasm between the amount of money invested in information technology (IT) and how little that investment has contributed to the country's gross domestic product (GDP).

This inability for new technology -- apart from the era between 1996 and 2004 -- to reflect increased productivity in the economy is now fittingly known as the Solow paradox. Thirty years after Solow identified this perplexing predicament, we are still confronted with this inability to calculate how digital, intangible investments are leading to a more productive economy.

The US bureau of labor statistics (BLS) defines productivity as a way to measure how efficiently inputs are converted into output. The standard measure is GDP per hour worked. GDP was an concept created in the 1930s, when the Department of Commerce commissioned economists to develop a way to measure the total value of final goods and services, like bushels of wheat or housing services.

...why a detective in an old movie or tv show has to wait so long for the film to be developed so he can look at photographs.

Posted by at November 25, 2016 6:39 AM