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To: Michael Watkins who wrote (40579)	2/19/2000 12:23:00 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 99985

There's a limit to how much technology can do to eek productivity gains out of the system Well, there's a limit to everything Michael. But I think we have a long way to go before the efficiencies inherent in an information based economy are fully realized. And the rest of the world still seems to be lagging far behind (or maybe it's just the cultural and economic differences) and have yet to begin to exploit the efficiencies. But there is little doubt that some of the old economy industries are falling on hard times and their importance will be replaced by the new economy of IT based economy, with their market being the rest of the world which lags behind. Personally, if there is any bottleneck to increasing productivity, I would believe it would lie in our dependence on foreign suppliers who may not be as able to supply a JIT economy. Just my opinion Regards, Ron

To: Michael Watkins who wrote (40579)	2/20/2000 2:57:00 PM
From: Jack T. Pearson	Read Replies (1) \| Respond to of 99985

Michael, Thank you for your carefully considered response. I I did not claim that there was no limit to how much technology can improve productivity. But I will claim that there are reasons to believe that productivity growth will continue to grow. First, technology change has shown no sign of decelerating and new technology brings new opportunities for improved productivity. Second, many companies, particularly in older industries, have not taken full advantage of the technology opportunities available to them and will not do so until competitors offer them no alternative. The status quo is still the mantra in many companies. Third, application of technology without changing the fundamental process simply makes waste more efficient. The biggest payoffs are available when the process is made more efficient. In my company, buying a PC used to take 68 steps and 9 months. Now it takes 24 steps and three months. I maintain further improvement is possible. To you point regarding productivity growth slowing: Could happen. Might slow temporarily or permanently. No one knows. Might speed up. Regarding "reducing the need to hire new workers." Some companies are hiring new as fast as they can to support rapidly expanding. Some other companies are losing workers to the "new economy" companies but are maintaining sales and production by changing processes and applying technology to maintain operations with fewer workers. Ten years ago, when we wanted to expand or someone left, the solution was to hire more people. In today's economy, the first question we ask is how can we change what we are doing to allow us to minimize the need to hire someone new. We buy COTS software instead of writing our own. We eliminate a level of bureaucracy. We streamline our purchasing function. We outsource payroll. Etc. In some parts of our business, we are going out of business. Competitors who have become more efficient are hiring our people, paying them more, and selling competing products for less than we can. My point was not that everything is great and there is no end to this boom. My points are 1) that technology and productivity growth are significant factors in explaining both the growth of the "new economy" (in an absolute sense and relative to the "old economy") and the low inflation rate in spite of low unemployment, and 2) that the leverage the Fed has on the "new economy" financed by th equity market is different than the leverage it has on industries financed by debt. As for the prices of stocks being too high. I vote with my purchases and sales of stocks. Jack

To: Michael Watkins who wrote (40579)	2/20/2000 3:47:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 99985

Jack and Michael, re. technology and productivity: I am not in IT, but I am in health care, which has seen massive changes due to IT and technology advancements in general. In my experience, more technology has resulted in increased need for workers. Let me give you an example: When I was a medical student, I did a rotation in a Neonatal Intensive Care Unit. The Unit is a huge room, with a group of tiny babies surrounded by a lot of machinery. There are lots of computers, and hundreds of other machines, all of which have chips in them, and screens that display the data generated by the machines. I once stood at the center of the room, and counted up what people were doing. There were 22 people. 2 were directly tending the babies. 5 were tending the machines. 5 were not doing anything, as far as I could tell. 10 were doing paperwork, which mainly means documenting and responding to the data generated by the machines. The point is that, 30 years ago, none of those machines existed, and so those babies would have been taken care of by maybe 5 people (4 of whom would be nurses or nurses aids, and their jobs would mainly be feeding the babies and changing diapers, a low skill/low education/low pay job). Today, neonatal ICU nurses have college degrees, and a lot of additional training, and get paid a lot more. In my experience, the health care industry, (a large and growing part of the economy) has responded to technology changes with a huge demand for more workers, who need to be far better educated than previously. The amount of data generated per patient is increasing in a geometric fashion, and all that data still needs to be assessed by a human being, and the efficiency of that person is not increasing. I don't know, but I suspect that this is true for many service industries.