The Innovation Recession and the Way Out

Silicon Valley analyst-cum-slideshow extraordinaire Mary Meeker has put together a very interesting presentation on the state of the Internet, which we've printed in full on our Technology page. You should check it out.

What caught my eye in particular were two graphs. The first shows the pace of penetration for AM radio, TV, Internet, and smartphones. The adoption rate of today's technologies looks remarkably similar to yesterday's...

... Meanwhile, the second graph shows the accelerating pace of adoption for Apple's last three products. The first iPad sold much faster than the first iPhone, which sold much faster than the first iPod.

These graphs reminded me of David Leonhardt's very smart and very scary column on America's crisis of good ideas. Whereas in the 1930s, he argues, the country was seeing secular technology gains that paid off in the 1950s (the invention of TV, nylon stockings, refrigerators, and washing machines; the development of faster rail and smoother roads), he worries that the pace of innovation is slowing down today. The rate at which new companies are created has been falling. Capital investments outside of real estate have declined for a decade. Meanwhile, health care is gobbling up resources at an alarming rate and we don't know how to slow it down.

Leonhardt writes:

The economy has not done an especially good job of building its productive capacity. Yes, innovations like the iPad and Twitter have altered daily life. And, yes, companies have figured out how to produce just as many goods and services with fewer workers. But the country has not developed any major new industries that employ large and growing numbers of workers.

I think this is right, and I tend to be as gloomy as Leonhardt about the intractability of our most serious problems, like middle class wage stagnation and rising health care costs. But here's a case for optimism. The most exciting technologies available to your average consumer are infants. Literally. A child born on the day the first iPhone was released wouldn't yet be in kindergarten. Television was invented in the 1930s and didn't hit 50% penetration rate until 1955. It didn't become the predominant source of movie studio revenue until the latter half of the 20th century. It didn't give birth to what is now a $10 billion video game industry until even later.

We don't know if the mobile economy will become as dynamic as the late-1800s railroad economy, if it will employ as many people as the 1920s auto industry, or improve productivity as much as the 1990s Internet revolution. We simply have no idea. But what smartphones and tablets have done is to put something more powerful than radio or television into the hands of consumers at an even faster rate radio and television penetrated the market. That is cause, I think, for some excitement, and even optimism.



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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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