Roubini on the Rise of the Machines and the Future of the Economy

The financial and economic guru Nouriel Roubini gave a speech on December 4th at the Bloomberg BusinessWeek 85^th Anniversary Dinner, which was held at the American Museum of Natural History in New York. The title of his "official toast" was “Rise of the Machines: Downfall of the Economy?”

To be a toast for Manhattan socialites, it was probably great, but when you read the published version on Roubini's Edge it fizzles somewhat. To begin with, his understanding of the birth of the computer is flawed. 

"This wave of technological innovation began in 1947 with the invention of the transistor. A little over 10 years later, the microchip appeared; and, soon after that, computers followed. From these basic roots, the rate of innovation simply exploded."

Well, no. The first electronic computers were created around 1940 and used vacuum tubes rather than the microchips he mentions, which later made microcomputers and PCs possible. (He may be forgiven for this transgression as he after all is an economist and not a techie.)

Roubini said that ”technologists claim that the world is on the cusp of a series of major technical breakthroughs” and that this is not just about IT, but a much broader third industrial revolution.

Yes, it is plausible that the IT-revolution of the past 30 years will be followed by an industrial and economic revolution due to broad technological progress, but let’s pause for a moment and remember that the technological and industrial revolutions of the late 19th and early 20th century contributed to the economic and political shifts in "plate tectonics" that resulted in two world wars. 

The destabilizing impact of new technology and globalization is truly global, and the world's political systems (including and maybe especially in democratic political systems) are at loss for how to respond. Technology opens possibilities, but it is a double edged sword, and where it cuts depends on who wields it and for what purpose. 

The best part of Roubini's speech was his reflection on job destruction and whether new jobs can make up for lost ones. The picture Dr. Doom painted here is dark, and he includes education in his scenario (maybe somewhat unfairly as teachers are not as easily replaced by algorithms as it at first may seem.)

He does criticize the "winner-takes-all capitalism" and increasing inequality, and reminds us of John Maynard Keynes's optimistic prognosis from 1930 that we soon would need to work no more than 15 hours a week, but contrasts it with another possibility in "the Brave New World" of labor-saving technology – “20% of the labor force will work 120 hours a week while the other 80% will have no jobs and no income.”

After that dystopic scenario (we can ignore his reference to "the Singularity" and Steven Hawking’s silly provocation that mankind should get think of leaving Earth in fear of artificial intelligence), one might have expected more in terms of a remedy than the whimper of an ending that we are served up: a longing for an enlightened despot/leader (Otto von Bismarck, Teddy Roosevelt or William Gladstone) and giving workers “skills” needed “to participate in the wealth that capitalism generates.”

Lost in a Cloud of Words

Welcome to the wordcloud. I just got a press release from Microsoft about their big partner conference in Washington, D.C. People from all over the world have gathered there to "seize new opportunities in the cloud" and help consumers "tap into the cloud through all the screens in their lives."

Lost in translation? No, Microsoft is not Volkswagen having fun with words like fahrvergnügen or Ikea being cute with Swedish names. Microsoft is from Redmond, WA.

"WASHINGTON — July 13, 2010 — Today at the annual Microsoft Worldwide Partner Conference, Jon Roskill, Microsoft Corp.’s new channel chief, addressed the Microsoft partner community for the first time, unveiling business strategies and resources to help partners of all types seize new opportunities in the cloud. The company also detailed new products and services to help consumers tap into the cloud through all the screens in their lives — from the largest screen in the living room to the smallest screen in one’s pocket."

I know what they mean, but isn't there a fundamental communication disconnect here?

The digital era has given us many new words, and a whole new way to view the world. We have learned to understand expressions like the world wide web, and reinterpret others, like computer (which used to be a person who calculates) and surfing (no board needed these days). I have no problem with that, but then we have the Globalyst stuff. No, it's not something from Harry Potter. It was a new PC-series launched by AT&T in 1994 after the company had bought NCR and renamed it Global Information Services. I remember the press conference when the Globalyst PC was introduced, featuring a communications program called Vistium. I asked one of the marketing guys about the weird name. He shook his head and said that all the good names were already taken.

Fast forward to July 2010:

“The industry is at an inflection point....and we are committed to helping our partners adapt and find the right cloud opportunities....,” said Jon Roskill.

Well, the cloud makes sense as a concept and is okay on a powerpoint slide, but beyond that I'd like my clouds in the sky. Leave it to the true believers to seek opportunities in the cloud.

Hans Sandberg

Windows 7 Is Here, And Guess What, It Seems To Live Up To Its Promise

Microsoft officially launched Windows 7 at a party held at Skylight Studios just around the corner from Manhattans' meatpacking district. Windows 7, the multiplatform, multitouch and relatively slim operating system offers hope for us stuck with XP, and an escape route for those of us who where unfortunate enough to upgrade to or buy a system with Windows Vista pre-installed.

Steve Ballmer was his usual self, jolly, engaging and straight-talking. The demo worked without glitches and the focus was totally on user experience. Not a word about gigabytes and gigahertz. It looks like the PC finally has caught up with and maybe even surpassed the Mac, displaying the look and feel of an iPhone. Steve Ballmer said that Windows 7 finally has reached the goal Bill Gates put forward many years ago, to put Windows everywhere. It aims to be the new digital home entertainment center, running everything from audiosystems and wireless picture frames to TV's, Internet TV's and allowing you to connect to your home network while traveling.

I'm not a big fan of Microsoft, but neither am I one of those who allways have to find faults in everything they do. Vista was a disaster that set them back tremendously, opening the field for Apple and Google, but with Windows 7 they have a strong foundation to build on.

We have two Vista systems in the family, one 32-bit XP and one 64-bit XP in our family, plus a bunch of other systems mostly gathering dust. Microsoft Sweden sent me a copy of the 64-bits Windows 7 last week, and even though the install on our 64-bit XP system was anything but painless as it refused to recognize the 32-bit networking card, webcam and mouse driver. The installation program suggested that we find help online, but that was hard without access to the network and router, so my 18-year old son Erik had to download "homemade" drivers on another system and copy them over via an USB stick. However, he eventually got his system up and running, and now loves it. It's fast, looks damn good, and runs everything but the sticky notes, the webcam and the mouse, which works so and so.... "Now I understand why Logitech's webcam was on sale... and they are not going to provide me with 64-bit drivers as they rather sell new webcams," he tells me.

Well, well, that's nothing compared to my futile attempts to install OS/2 many years ago. I swapped out every possible part and driver. I still never installed! And that may have been my good luck as IBM eventually would throw in the towel on their "Windows killer"...

As I write this, Alex, my 15-year old son, comes by my office and reports that his upgrade from 64-bits Vista to 64-btis Windows 7 went smooth. No problem at all. "It seems pretty good so far," is his first comment.

Hans Sandberg

Legend Has It…

(Syndicated article for the Metro newspaper group).

Legend's spokeswoman Catherine Lee showing one of the company's new computers for children.

Legend is a shining star among China’s young and fast-growing computer companies. It has leapfrogged the competition – both domestic and foreign – and captured 31 percent of the PC market in China, as well as 12 percent of the Asian market (outside Japan.) Last December, it opened a new $200 million PC factory, which can build 2 million desktop computers each year.

The factory is located just east of the Summer Palace, in Zhongguancun, an area that is also known as Beijing’s “Silicon Valley”. This is the Haidian district where many of China’s leading universities and research institutes including Tsinghua University and the Institute for Computing Technology (ICT) are located.

This is where eleven ICT researchers set-up a small consulting shop in 1984, and that shop later became Legend. At that time, Legend was among only a few dozen computer stores and small start-up companies in the district. Today, Zhongguancun is hard to recognize. Last year alone, the zone generated $19 billion in income (up 40 percent from 1999,) and 2,400 new companies were added to the thousands that already existed.

Zhongguancun boasts modern factories, office skyscrapers, new apartment complexes, luxury hotels, restaurants, bars and trendy Internet cafes. Traffic crawls on its noisy streets, while bulldozers flatten the old single-story Chinese houses to make room for things new.


Catherine Lee.

Legend’s spokesperson Catherine Lee tells us about the company’s new Intranet, and its new Enterprise Resource Planning system (ERP, i.e. a computer system that integrates all facets of a business, from sales and marketing to corporate planning and manufacturing.) Her company’s elegant meeting room, laptop, and her snappy PowerPoint presentation may not sound like much, but it does reflect a the new style of doing business in China, where previously a reporter would have to “make due” with a party secretary’s political platitudes, while sitting in a meeting room with spittoons and under-stuffed doily-covered armchairs.


A Legend PC for the modern office worker.

Legend has 12,000 employees and a turnover of $2.3 billion. Sales have increased by 72.4 percent on average for the past three years, and profits have gone up 53 percent. “We sold 1.5 million PCs in 1999 and reached our goal of 2.6 million for 2000,” says Ms. Lee, and adds that Legend has been China’s leading PC manufacturer since 1996.

Access to the factory floor is strictly controlled, and photos are not allowed. Past the production flowchart, racks of ready-mounted PCs, and six assembly lines, lies a colossal room - the likes of which you’d find in an IKEA store. The aisles between the huge metal shelves are barely ten-feet wide however, as they are navigated by computer-controlled robots, and not by humans.

On three of the assembly lines (dubbed “satellite” lines,) one worker puts together one computer at a time – start to finish. Ms. Lee says that the average Chinese consumer is still not ready for custom-made computers, but Legend’s vast network of distributors can place custom orders into the company’s e-commerce network via the Internet. The orders are then sent to the company’s ERP system, and will end up on an assembly worker’s computer screen.

It takes 50 minutes to build a desktop PC at Legend’s new factory, plus an additional 1 hour and 10 minutes to test it. “No other local producer has such an advanced capacity,” writes Richard Lo of the Hong Kong-based financial company Ing-Barings, in a report published in February.

The other three assembly lines are called streamlines where, according to the company, computers can be mounted in as little as 20 seconds.

“We have a factory outside of Shenzhen and we are building a new one in Shanghai…so Legend’s capacity should be 4.5 million next year,” says Ms. Lee.

They will need the increased capacity and new factories to face future competition as China joins the World Trade Organization (WTO.) But Legend shouldn’t fear WTO since they already have access to cheap labor (about 70 cents per hour,) and -- as more electronics manufacturers invest in China -- cheap components as well. This combination is hard to beat, so long as China manages to combine economic reforms with political and social stability.

Gone are the days it seems, where the iron rice bowl was a worker’s only incentive. All employees who have worked at Legend for two years are entitled to buy stock options in the company, which is listed both in Hong Kong and NASDAQ. But in case this is not enough motivation, a red banner facing the assembly lines boldly reads: “If you love your country, you have to love your factory.”

Hans Sandberg