To recap, economic productivity has gone down, leading to ‘The Great Stagnation‘. Though we are innovating in the world of bits, we are not innovating in the world of atoms. One of the reasons for this is the diminishing returns to scientific research in the last few decades. ICT (Information and Communication technology) is the only area of innovation.
But, on the optimistic side, we have not entered the ‘golden age’ of deployment of ICT yet. The ‘installation’ phase is complete, and we are at the turning point, and we face global populism, xenophobia, and feeble growth. But if we are able to take some specific steps, we might be able cross the turning point to enter a multi-decade period of prosperity across the globe.
What are these steps? Carlota Perez offers some directions here:
On one side, the the active role of the state. Having some capitalistic tendencies, I am not a huge fan of the state, but from her framework, whenever the golden age starts, business works along with the state, and that benefits everybody. She mentions in this interview:
During the golden age of mass production, in the 1950s and early 1960s, the interests of business and society converged. With the welfare state and suburbanization, working-class people in many Western countries could become homeowners and consumers. Therefore, when companies paid high salaries and high taxes, it all contributed to increasing domestic demand. Government support for education and health services freed up discretionary cash for people to spend on consumer products. High demand for these products created conditions for growth and profit. It was a robust positive-sum game, a super win-win between business and the majority of the population, resulting in good profits and decent livelihoods.
Dr. Perez mentions that the suburban lifestyle, the TV dinner, the house and the car, were a result of policies taken by the government – so that consumers could spend more – and both society and businesses, benefited. Now we need a new lifestyle to emerge, for the new phase of growth.
She calls the new way of thinking – ‘Smart Green Growth’, which is:
It is a constant increase in proportion of intangibles in both GDP and Lifestyles.
I am especially intrigued by the lifestyles part. Apparently, since technology destroys jobs and skills, we need new lifestyles – to create new needs – which are fulfilled by new employment. A new way of life – in the new golden age – requires multiple new services and products to create jobs. What does the new good lifestyle look like? I will again use the screenshot from her video as it captures the ideas succinctly:
This lifestyle has already begun with the richer, more educated, and younger people, adopting it already. (I have had arguments over younger people who stressed a lot on sustainable growth and they seemed naive to me, but now finally, I see their point.) Since masses copy the elites, it is likely that these lifestyles will spread.
Personally, as I moved from India to The Netherlands, I can see the contrast in action. Compared to middle class Indian society, the Dutch are much more into natural food, minimalist design, and of course, cycling. People (especially younger) also stress much more on sustainable products. Most of the things seem to be going in the right direction.
But even with Carlota Perez’s voice, the optimism is not convincing for me, as this is about state intervention and policies. I do not have a mental framework to address things at the state level.
But neither do I think that it is only the state which can help us get to a better, stronger economy. And that’s where innovative product design and management comes in.
The premise is simple. We have the technology infrastructure in place, but we are not growing fast enough, and a possible golden age lies ahead. What should we do? I think we need to find better ways to harvest the technologies we already have. While it is great to hear of billions being poured into startups, it is highly unlikely that we have exhausted the idea space offered by the world of bits.
In other words, there might be room, a lot of room, for design driven-innovation.
In an interesting paper by Roberto Verganti and Don Norman, they differentiate between technology driven and design driven innovations. While technology (mostly) provides radical innovations, a design research approach provides incremental innovations. But being design driven could provide radical innovations – by re-interpretation of existing technology.
In the next post, I will explore this area further.