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To: CRL who wrote (88595)	12/1/2000 9:21:58 AM
From: Don Lloyd	Read Replies (1) \| Respond to of 152472

CRL - In a column I read the other day, one of the "financial market gurus" (as opposed to tech gurus) asked whether the productivity revolution was a result of our HAVING computers or of our USING them. Obviously the PC has been on people's desks for a decade or more now and they've been used on a heavy basis in the business community for at least 10 years. So, why did the productivity revolution not begin earlier? I think the answer is clear: it's not HAVING the machines or even USING them, it's CONNECTING them that has ignited the productivity revolution. And I don't think that's a development that can be stopped. I think the state of the global network, which is driving productivity improvements, is pretty safe now from purely financial shocks. But that's JMHO, I could be wrong. For any progressive economy, unit productivity (units produced per labor hour, independent of price) is virtually always increasing. The benefits of this productivity improvement are always split between higher profits, higher real wages and lower consumer prices. All of these contribute to a higher overall standard of living, but the actual distribution of these benefits is highly variable as profits, wages and prices are each subject to their own highly specific competitive markets. What is most significant is that the unit productivity in the manufacture and supply of specific products and services does NOT have a necessary connection to the overall government productivity statistics using total output over total labor. More importantly, increasing government measured overall productivity does NOT imply a GENERAL support for corporate profits and stock prices. Any specific technological advance that improves UNIT productivity will only improve a company's profits if the advance can be denied to its competitors by some kind of sustainable competitive advantage. Most technological advances are produced by a single company and then made available to the full range of possible customers who happen to compete with one another. In this light, the customers see the technological advance as a cost of business survival, rather than a source of increased profits, as the final product prices are competed lower to match the cost reductions. It is usually the technology supplier who harvests the profits, not his customers. From the above, it is likely that technology driven increases in government overall productivity measurements are NOT primarily the result of the USE of technology, but instead the result of competition driving the least efficient (and financially weakest) manufacturers and service providers out of business, thus excising their drags on the overall productivity measurements. Regards, Don