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Productivity Is Soaring at Top Firms and Sluggish Everywhere Else (hbr.org)
45 points by luu on Oct 11, 2015 | hide | past | web | favorite | 17 comments

The author implies that the gap is due to lack of diffusion and that this is a problem that should be addressed and corrected. I think that the real issue is much simpler:

Technology has made manufacturing, services, mass communication, and markets much more efficient. When they are efficient, competition creates fewer winners and the winners win big.

If you want to understand inequality understand that. This is fundamental economics. We can dream of a world where there are 1500 different brands of phone each having close to equal market share but when one gains advantage, the advantages multiply and you end up with one or two major phone manufacturers. Propping up the other ones is nice, and may do some local good, but it's Sisyphean - it won't change the dynamics.

The end goal of capitalism is one corporation selling you air.

I'm pro-capitalist (not least because it works) but also pro-market regulation, capitalism should be harnessed for the good of everyone not just a few.

I think you might be interested in this article on the end of capitalism: http://www.theguardian.com/books/2015/jul/17/postcapitalism-...

"Postcapitalism is possible because of three major changes information technology has brought about in the past 25 years. First, it has reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages. The coming wave of automation, currently stalled because our social infrastructure cannot bear the consequences, will hugely diminish the amount of work needed – not just to subsist but to provide a decent life for all.

Second, information is corroding the market’s ability to form prices correctly. That is because markets are based on scarcity while information is abundant. The system’s defence mechanism is to form monopolies – the giant tech companies – on a scale not seen in the past 200 years, yet they cannot last. By building business models and share valuations based on the capture and privatisation of all socially produced information, such firms are constructing a fragile corporate edifice at odds with the most basic need of humanity, which is to use ideas freely.

Third, we’re seeing the spontaneous rise of collaborative production: goods, services and organisations are appearing that no longer respond to the dictates of the market and the managerial hierarchy. The biggest information product in the world – Wikipedia – is made by volunteers for free, abolishing the encyclopedia business and depriving the advertising industry of an estimated $3bn a year in revenue."

I'm not sure whether I agree or not but thank you for sharing that article. Very interesting.

I appreciate your polite reply.

Is this what you had in mind: See George England, "The Air Trust", http://www.gutenberg.org/ebooks/12826

Yes but I'd not seen that book, no such thing as an original idea I guess, I was thinking more of Nestle and their attempts to control water supplies.

It's not much different to what happened at the beginning of the 20th century. A few firms have managed to gain a lot of market dominance and have leveraged that to grow even further.

If antitrust law were actually enforced suddenly all of this "efficient technology" would stop creating such big winners.

Can many people really say that IT is being used effectively in most organisations ?

Almost every one I have worked in use haphazard methods, unnecessary manual input and duplication of input, outdated forecasting, bad choice of software tools (e.g. spreadsheet heavy) ... the list goes on of small day to day things that add up.

There was a recent story about 90% of people not even knowing about Ctrl-F to search documents.

Think about all the times you've had images sent in Word documents or crappy artwork you've had to re-create by hand because the only copy of the logo was a 400px jpg.

Multiply the time wasted on those things by a few hundred million.

Now tell me there's no productivity to find, and we haven't even got on to your actual business processes.

How much of this is productivity and how much is merely increased revenue? If you assume that costs are not linear with large economies of scale (which is not such a wild assumption), then some of this "productivity" increase can be attributed to rent taking; especially so when taking into account the power law distribution at the thick end of markets and reduction of competitiveness at the big end.

They use a measure called Multifactor Productivity. From the linked report :

Multi-factor productivity (MFP) growth measures the growth of GDP over the combined contributions of total hours, workforce skills, machinery and structures and ICT capital.

From wikipedia [0] :

Multifactor productivity measures reflect output per unit of some combined set of inputs. A change in multifactor productivity reflects the change in output that cannot be accounted for by the change in combined inputs. As a result, multifactor productivity measures reflect the joint effects of many factors including new technologies, economies of scale, managerial skill, and changes in the organization of production.

[0] https://en.wikipedia.org/wiki/Multifactor_productivity

Yes, most measures of productivity correspond to profitability, as there are few other measures, so this is a big issue, especially in service industries (eg finance, where productivity has fallen since the crash as measured, but how work is done has not changed, just because volumes of sales have fallen).

It is clear that some firms are drastically less efficient than others though.

The most productive teams were mostly bought and consolidated by rich firms, that is until a new generation of disruptive small startups that take the chance of not wanting to be bought out by the big firms, will take things to a different level again. This pattern has always been there and always will be, business as usual.

It's strange to read this story immediately after this other one https://news.ycombinator.com/item?id=10367253

I'd be afraid to see the correlation between who uses those kinds of methods and who is at the frontier of productivity. I hope that other article isn't the future :(

There's something of a snowball effect here, especially in the manufacturing sector (and coincidentally, the most productive mfg companies have been diversifying into services (logistics, warranty mgmt, co-engineering, etc) because it's so much more profitable -- often in the 15-20% gross margin rather than 4-6%), but additionally, just having the working capital and financial leverage that large corporations have helps ensure their continued growth and success. The big have gotten so big that even the small guys wouldn't succeed without somehow also giving money to the big guys. For example, if I'm in Shenzhen and I start a widget factory, it would be hard for me to avoid the influence of Foxconn, for better or for worse. ... Just like further up the food chain, Apple's iPod/iPhone/iPad successes padded the coffers of Foxconn, Jabil, Samsung, TSMC, and others. The "no one was ever fired for choosing IBM" maxim holds true manufacturing, too. :-/

Article doesn't mention what firms tho'.

It also doesn't appear that the firms are constant year over year. It just takes the top 5% and labels those the frontier firms.

So with just the info in the article i don't think it supports any particular conclusion without more information.

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