MBAs and Quarterly Profit Focus are the Cause of the Great Economic Stagnation

Economist Tyler Cowen makes the case that the pace of innovation has slowed, and that we are now on a “technological plateau” that makes further growth challenging. There is a detailed review by Chuck Crane.

The USA has eaten low hanging economic fruit since the 1700s.

1. Free land (Homestead Act, etc.)
2. Technological breakthroughs (electricity, motor vehicles, telephone, radio, television, computers etc.)
3. Smart, uneducated kids (who were made productive through excellent public education).
4. Cheap fossil fuels.

The fault is not in our technology the fault is in our MBAs and focus on quarterly profits.

The business mentality that focuses on short terms profits is what is preventing the rollout of radical technology.

Some would say that the fault is regulation and regulators. If a company was truly innovating, then that company would outpace the regulators. If a company is moving so slow that they have not escaped the regulatory paradigm then they have not achieved a true moon shot technology.

Masses of people with MBAs are managing companies for the last several decades. They focus on milking the profit of existing technology. They can milk a cow but they cannot generate a truly new cow.

An example is one that Nextbigfuture noted recently. The cable distribution giants like Time Warner Cable and Comcast are already making a 97 percent margin on their “almost comically profitable” Internet services, according to Craig Moffet, an analyst at the Wall Street firm Bernstein Research. As Levin points out, “If you are making that kind of margin, it’s hard to improve it.” And most Americans have no choice but to deal with their local cable company.

Time Warner Cable chief technology officer Irene Esteves says you don’t really want the gigabit speeds offered by Google Fiber and other high speed providers.

This is MBA Marketing spin (BS).

There could be a mountain of new profit and economic growth with multi-gigabit internet and fiber to the home.

The existing companies will not lead the way to explore that case.

It was new companies that broke through in the mid-1990s to drive the first internet wave and drove new cable and DSL internet. The old companies (AT&T and other phone companies) would have had a slower ramp of communication speed without VC funded competitors. They would have kept a more controlled move from 64 kbps ISDN and 128 kbps and 256 kbps DSL and 1 mbps T1 lines.

The profits from todays broadband was from the foundation and infrastructure (more fiber backbone) laid down in the late 1990s. There is new investment now but just enough to milk what was done before.

No Moonshots and Breaking Through Stagnation without Transformational Goals, Plans and Follow Through

Google is different by mainly being focused on moonshot technological breakthroughs.

As interesting as Apple and iPhone have been, the iPhone was priced and targeted at people in the developed world who already had laptops and broadband and blackberry. However, $20 and $100 android smartphones and $20-100 android tablets produced by the billions are transforming China, India, and Africa. The next 2-5 billion are being elevated with a personal computer and connectivity by android powered devices.

Spacex and Elon Musk are targeting transformational change for the space industry. United Technologies and the established players would be satisfied with fat military contracts and the status quo.

MBAs And Wall Street Do Take Risk but Only with Others Peoples Money

This is related to financial crisis. MBAs and Wall Street did take risk leading up the financial crisis but only with others peoples money and for the purpose of more personal wealth. The financial risk taking was not to establish new technology or to try to solve a true problem (not to establish an industry in space or to transform civil aviation). It was to juggle financial products just to game the system for personal wealth. More wealth for the company would be a possible side effect. It was about personal bonuses and stock gains.

Stagnation for Americans and Europeans compared to their Grandmas but what about for a Chinese or South Korean compared to Their Grandma?

China and South Korea has seen radical change this generation. It is because the prior generations were screwed up and they are catching up now. There are some countries that were screwed up in prior generations and still screwed up in the recent generations. The Philippines has vastly underachieved. There has not been the will and the drive to re-engineer their society to achieve true change and to tackle basic societal problems of lack of education and societal corruption.

China and South Korea had people with an urgent need to transform their societies.

Transformation is still possible, but the people have to want transformation badly enough and be willing to not be satisfied without true transformation and not be seduced by quarterly profits and a well paying job.

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