Why Aren't Smartphones Making Us More Productive?

Given the dramatic manner in which mobile phones have taken over our lives, you would think that their impact would begin to become apparent in economic terms: productivity, compound annual growth, profitability, etc. And you would be wrong.

These devices are everywhere and they have profoundly changed, probably forever, the way we communicate, shop, plan and think. Yet the official data in which those influences might be expected to appear show nothing that indicate this the significance of this dramatic metamorphosis.

What is particularly curious is that the mobile phone penetration has proceeded more rapidly than did that for computers. And yet, despite the fact that the computational power available in the hand is equivalent and sometimes superior to that of the early internet days, the economic impact is negligible by comparison, at least so far.

There are plausible explanations for this. First, it usually takes humans a while to figure out how to use technology most productively. We may well be in the midst of this lag effect now. Secondly, the enhanced efficiency and effectiveness provided by mobile technology shows up in so many aspects of the economy - but in so many small ways - that it may take economists time to identify, capture and model them. Finally, we may simply not be cognizant of all of the improvements yet. It is conceivable that the impact will become more apparent as usage becomes less astonishing and more inconspicuous in our daily lives. JL

Dennis Berman reports in the Wall Street Journal:

Imagine you woke up each morning, strapped a keyboard, monitor, Wi-Fi receiver, desktop computer, camera and stereo to your body, and ventured clumsily out the door.

Of course, you're already doing it.

You're using a smartphone, and today that thin slab has roughly the same computing power as the powerful desktops of 2005.
We regard these hand-held machines as game devices, Web browsers and messaging tools. But at heart they are like all computers before them. They are efficiency engines, a means of saving time, bridging distance, reducing cost.
Yet there's something bizarre going on. Even as an estimated 130 million smartphones roam the U.S. streets, economists can't quite find them.
The official U.S. productivity numbers are low when compared with the stunning 3% yearly gains of the first Web era, roughly 1995 to 2004. In fact, annual productivity growth since 2004 is about 1.5%, below even the long-term average of 2.25%. It's as if a time-wasting flock of Angry Birds has buried productivity like a worm. Classically defined, an increase in productivity either reduces labor, improves output, or both. And by that measure, argues Northwestern University economist Robert J. Gordon, the iPhone "has done absolutely nothing" to improve productivity.
So is there something wrong with the government numbers? Or, more intriguing, are we overestimating how these little machines can affect living standards?
The answers are wonky and, inconclusive. For now, we're left in the fallible realm of impressions. Here the relevant question seems to be: Can you find an area of life and business not being affected by the devices?
Let's head to the cockpit of a small jet, which has just landed outside a major U.S. city. A year ago, that jet would have refueled there regardless of cost. Prices for fuel, provided by a patchwork of middlemen, were opaque and jumbled.
Today, its pilots are probably using a little mobile app known as FuelerLinx. It collects and analyzes the cost of jet fuel at airports around the globe, suggesting the best prices.
In 2008, FuelerLinx founder Kevin Moller started gathering prices at 1,800 locations by phone and fax, entering them by hand into a giant Excel spreadsheet on Wednesday mornings. Today the collection is largely automated, and pilots can access it from their cockpits via smartphone.
"Five years ago the processors and Internet speeds and tools weren't there. Now all of it has come together," Mr. Moller says. "People can take on more in their day."
In the realm of global commerce, this is a tiny change to a tiny market. But it's happening across industries, a creative conjoining of mobile-computing brawn, faster wireless speeds and data-crunching in the computing cloud. Author Nicco Mele calls it "radical connectivity." It's the power of that computational engine, finally made mobile and thus ubiquitous.
It's the difference between an artillery piece and a tank.
"If you think about almost any dimension of human activity, it will ultimately be touched by this ability to harness computational power," says Dan Sichel, a Wellesley College professor who argues the official productivity numbers understate technology's impact.
It's happening at eBay Inc., EBAY +0.02%where Chief Executive John Donohoe describes users who are listing three million auction items a week on mobile devices. "They're taking photos and listing in two minutes," Mr. Donahoe says in an interview. "They're far more productive.
For the best example, look no farther than the taxi industry. There, new services are using mobile apps to help drivers and passenger locate each other quickly. The savings in time, fuel and hassle are obvious. Travis Kalanick, CEO of the Uber service, says taxi drivers who use his system take in $10,000 more a year than those who don't. Again, more output for less input.
For econ geeks, the hard part is capturing all these small improvements across the economy, especially among service businesses. Dr. Sichel calls the current productivity rates merely a pause.
There's another reason to pause here. Often technology changes faster than people. And the distribution of its spoils isn't always spread widely. One reason why corporate profits remain high and overall employment remains weak is that technology, not people, is doing more of the work.
Venture capitalist Marc Andreessen even describes the future as a world of two classes: those who program the machines, and those who are programmed by them.
In all, we are now veering toward the world that computer theorist J.C.R Licklider foresaw back in 1960: "In not too many years, human brains and computing machines will be coupled together very tightly," he wrote, and "the resulting partnership will think as no human brain has ever thought and process data in a way not approached by the information-handling machines we know today."
All this is really happening now, and fast.
You don't need numbers to understand that if you create friction in today's system, these forces will eventually hunt you down and they will eliminate you.