Apple Now Bigger By Market Cap Than Entire US Retail Sector

From Zero Hedge:

A company whose value is dependent on the continued success of two key products, now has a larger market capitalization (at $542 billion), than the entire US retail sector (as defined by the S&P 500).

Apple sells computers of various sizes. These makers of general-purpose machines have reached a symbolic milestone in passing the retail market cap. This has to do with stock strategy and market valuation as well as other complicating factors, so we can’t read too much into it. But it’s easy to imagine a company like Apple eventually selling more computers than the world sells non-computers. The everything box ultimately encompasses all other products.

Will the App Economy Continue to Drive Job Growth? A Few Points of Skepticism

Much has been made recently of how the App Economy is a “job leader.” People are saying that the App Economy has “managed to create jobs during the worst recession since the Great Depression,” and has created 466,000 jobs since 2007. This is clearly good news, but I’m skeptical of the future of this App Economy to continue creating jobs. Here are some random thoughts:

  • Current App Economy growth is probably driven in large part by the the adoption of new mobile operating systems. Once the mobile market is saturated, App Economy growth may level off.
  • In an open app marketplace, apps compete against all other apps. This inevitably leads to the superstar effect.
  • As with other software, for every paid app there is likely to be a free ad-driven alternative, and for every ad-driven alternative, there is likely to be an ad-free alternative developed by amateurs. Digital abundance tends to drive prices down toward zero.
  • As computers increase in power, it will become easy to absorb many app features into other apps, or even into the operating systems themselves, possibly creating convergence towards just a few “everything” apps.
  • New creation tools will make it easy for ordinary people to quickly create custom apps and thereby lower the market rate of app developers. As an analogy, consider the plethora of easy-to-use blogging tools that exist today. Not long ago, building a robust blog would have required hiring a web developer, or at least learning a bit of programming. Building a simple app may soon be as easy as starting a blog.
  • Improved device and network speeds will allow the remote execution of app-style programs through your web browser, effectively bypassing the App Economy entirely.

Cory Doctorow Predicts a War on General Purpose Computers

Watch this excellent presentation by science fiction author Cory Doctorow:

“The last 20 years of Internet policy have been dominated by the copyright war, but the war turns out only to have been a skirmish. The coming century will be dominated by a war against the general purpose computer, and the stakes are the freedom, fortune and privacy of the entire human race.

“The problem is twofold: first, there is no known general-purpose computer that can execute all the programs we can think of except the naughty ones; second, general-purpose computers have replaced every other device in our world. There are no airplanes, only computers that fly. There are no cars, only computers we sit in. There are no hearing aids, only computers we put in our ears. There are no 3D printers, only computers that drive peripherals. There are no radios, only computers with fast ADCs and DACs and phased-array antennas. Consequently anything you do to “secure” anything with a computer in it ends up undermining the capabilities and security of every other corner of modern human society.

“And general purpose computers can cause harm — whether it’s printing out AR15 components, causing mid-air collisions, or snarling traffic. So the number of parties with legitimate grievances against computers are going to continue to multiply, as will the cries to regulate PCs.”

(Video and quote via Linas Vepstas)

Economists Generally Don’t Take Seriously the Idea that Technology Destroys Jobs

I wish to challenge an article written by Russell Roberts entitled “Obama vs. ATMs: Why Technology Doesn’t Destroy Jobs.”

It’s not that I want to pick a fight with Roberts, whose excellent podcast Econtalk I find entertaining and informative. Rather I’ve chosen this article because it’s a good example of how economists typically respond to the claim that “technology destroys jobs.”

On the issue of improved productivity Roberts writes:

“The savings from higher productivity don’t just go to the owners of the textile factory or the mega hen house who now have lower costs of doing business. Lower costs don’t always mean higher profits. Or not for long. Those lower costs lead to lower prices as businesses compete with each other to appeal to consumers. The result is a higher standard of living for consumers… That higher standard of living comes from technology. It isn’t just the rich who get cheaper TVs and cars, plus the convenience of using an ATM at midnight.”

This argument is correct and yet in a way completely irrelevant. I don’t think any reasonable person would argue that technology doesn’t ultimately lead to higher living standards for both rich and poor. Or that we shouldn’t cheer on productivity gains as anything other than what they are: progress. However, this point has nothing to do with whether or not, objectively speaking, technology destroys jobs.

There are two parts of the quote I want to call attention to. First is the line: “or not for long”, which introduces the concept of a lag time between when a new technology appears and when markets adapt to it. If technological progress is accelerating, such a lag time could become very critical.

Another key line is: “The average worker has to work fewer and fewer hours…” which assumes job availability. Needless to say, there’s a huge gulf between having a part time job and no job at all. Or between having a small income and no income. One dollar may indeed buy a lot in the future, but that doesn’t help if you can’t get ahold of even that one dollar.

But of course the notion that there might be less jobs in the future is generally not taken seriously by economists. Roberts writes:

“Somehow, new jobs get created to replace the old ones. Despite losing millions of jobs to technology and to trade, even in a recession we have more total jobs than we did when the steel and auto and telephone and food industries had a lot more workers and a lot fewer machines. Why do new jobs get created? When it gets cheaper to make food and clothing, there are more resources and people available to create new products that didn’t exist before. Fifty years ago, the computer industry was tiny. It was able to expand because we no longer had to have so many workers connecting telephone calls. So many job descriptions exist today that didn’t even exist 15 or 20 years ago. That’s only possible when technology makes workers more productive.”

I fully admit history is on Roberts’s side here.  Previous claims about the coming obsolescence of human labor were highly exaggerated. However “because it hasn’t happened yet” is never a suitable argument for something not happening in the future.

I would also point to Amara’s Law which suggests that “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” It is quite possible that the early predictors of human obsolescence were not wrong but simply too early.

We have to grapple with the fact that computers are unique. As Andrew McAfee and Eric Brynjolfsson point out in their recent eBook “Race Against the Machine“, computers are a General Purpose Technology. Like steam power and electricity, computers reside in a category of innovation “so powerful that they interrupt and accelerate the normal march of economic progress.” But that is only half the story, since to compare computers to steam power and electricity may be to underestimate their disruptive power.

In the early days of personal computing it was easy to see your PC as just another household appliance. But these days it might be more appropriate to look at your PC as a black hole that swallows up other objects in your house. Your computer is insatiable. It eats binders full of CDs, shelves full of books, and libraries full of DVDs. It devours game systems, televisions, telephones, and radios. It gorges on calendars, photographs, filing cabinets, arts supplies and musical instruments. And this is just the beginning. Can we really expect to keep creating new industries faster than the computer can consume them?

Moreover, the evidence is in: the new computer industry is not employing that many people.  According to a recent article in Business Insider, “Apple, Amazon, and Google together employ 113,000 people–which is less than 1/3rd as many as a single American success-story from the prior generation, GM, employed in 1980.” Ask yourself if the businesses of the future are more likely to look like Apple or GM?

It’s time for economists to start questioning their faith that there will always be plenty of new jobs to replace the ones that technology displaces. At this point in history, increasingly the burden falls on economists to present an argument of where these new jobs are supposedly going to come from.