Why You Should Be Bullish on Technology

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Why You Should Be Bullish on Technology

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In the past, the price of just about everything increased over time but thanks to technology, many products and services are getting progressively cheaper and in many cases, better. In the 1980s, you could have paid 25 cents per-minute for a domestic long-distance call and dollars per-minute for international long-distance. Not only has the price of a long-distance call dramatically decreased over time, today, IP communications assigns no per-minute cost to communicate. In fact, you can now use Skype to set up a free baby monitor a continent away with HD quality video and audio which puts the phone company's quality to shame.

More impressively, today’s smartphones pack the punch of mainframes or even supercomputers from about a decade ago and they are far cheaper. The first flat-screen TVs cost thousands of dollars but now we can get a similar or even better quality TV viewing experience on a tablet or smartphone via a free app. WiFi and 4G/LTE have turned every connected area into a virtual office allowing single-parents the ability to easily work while keeping an eye on kids or while being engaged in other activities. Software has improved manufacturing, inventory management, customer service, analytics and anything else you can think of that boosts productivity.

Decades ago a cheap or out-of-tune automobile would have lots of trouble starting and would stall often in the cold weather. Thanks to current automation, cars almost always start, run and will soon be able to drive themselves.

Doesn’t tech kill jobs?

Yet at every turn there are naysayers who say technology destroys jobs. Even President Obama has blamed ATMs for lower employment - apparently unaware that there was certainly tremendous job growth for many years after the advent of this machine. The argument could have been easily made that the industrial revolution would be a job killer. If there was ever a new technology which should have eliminated employment it was the one that almost eliminated the need for manual labor.

The invention of the car eliminated the jobs of countless farm hands and blacksmiths making horse shoes but somehow more jobs were created after this invention. Electricity adoption meant even less manual labor was needed thanks to powered sewing machines, dishwashers and other devices. It's application to the modern house and factory should have killed even more jobs.

The fax machine allowed you to get a contract across the world in seconds for a ridiculously small amount of money. It should have eliminated millions of jobs and sank the global economy. Then there was the massive amount of automation afforded by the mainframe, mini, personal computer and so on.

Just think how much less labor is required to send a text message or email than a letter and consider at one point a letter could have touched the hands of a dozen people before it got delivered. Using the flawed logic of technology=less jobs, it's a wonder that after Facebook was created, any jobs remain.

The truth is, in every one of these cases, some old jobs were destroyed but many more were created as a result.  For example, the typewriter repairman is gone, replaced by the Apple store salesperson and programmer.

Tech continues to aid us

A new white paper from UBS argues that technology growth and application to the economy will continue to be an incredible driver of economic productivity and it will make the world far more prosperous than we can imagine. In fact, UBS breaks down technology advances into a few different categories.

Manufacturing Efficiency: The authors argue a tremendous amount of waste will be eliminated shipping raw materials to one country and then shipping finished products all over the world from that location. Instead, they say manufacturing will see a massive productivity boost thanks to robotics and 3D printing. Moreover inventory waste gets minimized if products are produced in a more on-demand fashion.

Energy Evolution: Not only will the above technologies make manufacturing more efficient, they likely will likely put downward pressure on energy costs as you won’t need the waste associated with all the shipping of products to unnecessary locations. In other words, if your robots and 3D printers are near the customers, you don't need to ship the raw materials to China first. Pushing energy prices down even further are oil and gas extraction from shale and renewable energy technologies like wind and solar.

Information and Communications Technology: Mobile device growth, artificial intelligence, machine learning, voice recognition and IoT/M2M will help produce tremendous increases in productivity.

There is much more… Five billion smartphones will be sold over the next four years, up to three-billion new people will enter into the global economy in the next decade, robots will eventually cost $4 per hour in the manufacturing sector and finally, these technologies could have an impact of up to $33 trillion per year by 2025.

Smart people connected to smart everything

I would further argue wearable tech will usher in a revolution in health and fitness to start and will subsequently take the internet revolution to the next level. Moreover, M2M will make everything smart – your thermostat to your kitchen appliances and all of these devices will live symbiotically with you, catering to your ever-changing desires and needs.

Apps in-turn will help usher in levels of technological convenience once only conceived of by the writers of the Jetsons.

The US to benefit most

UBS believes the US is positioned well to benefit from many of these advances due to our head-start in the tech space. The good news is the technologies above will lower the price to produce many goods and will potentially put downward pressure on the inflation rate thanks to lower energy costs and the continuing technological revolution being applied to everything.

The downside in my opinion will be the same challenge we have seen for decades… The lower-skilled worker will have more problems finding a job thanks to more automation.

What of wage pressure?

In the last few decades we have witnessed a few billion new low-cost workers entering the workforce in Asia and we can’t expect this challenge to western workers to slow anytime soon. The good news is, over time, wages around the world in developing nations will rise to a point where workers in the US and Europe will feel less downward pressure on their incomes. This is already happening in China and India and we saw it happen in Japan in the eighties.

What of reduced headcounts?

Another concern worth mentioning is the reduced headcount needed to form a company today. Thanks to the cloud and outsourcing you can have a company with millions in revenue run by a few people where decades back you might have required dozens more people. To offset this change in the way companies operate, all governments will have to be much better at reducing regulations and taxes to encourage more companies to be started.

The good news is, even progressive New York which has companies fleeing its high tax and regulation grip is running ads touting its tax breaks for companies who do business there. In other words, even the blue states which are typically the most-unfriendly to corporations are beginning to understand they need more companies in their borders to create more jobs and the way to ensure the success of these companies is to reduce their tax burden.

The tech market continues to do its part – innovating and coming up with new business models and ideas. Now it’s up to regulators to help grease the wheels allowing demand to pick up and the creation of new jobs. While the gridlocked nature of today’s politics may make this task more difficult, the good news is tech will still continue to innovate and create a much better economy and standard of living for the entire planet. Yes, you should be bullish… Very bullish, on technology.



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