In a conversation with Tyler, Stanford professor Nicholas Bloom discusses the intricacies of management practices, productivity techniques, and the influence of uncertainty on companies and countries.
He also explores the impact of remote work, the potential of wearable technology in healthcare, and the effects of COVID-19 on research.
Scientific Progress Slowing Down
There is a noticeable slowdown in scientific progress, with new fields not emerging quickly enough to counterbalance this decline.
This is evident in the case of Moore’s Law, where it now requires 18 times more scientists to maintain the rate of progress, indicating a slowdown.
Historical Perspective on Productivity Growth
Productivity growth began to accelerate after the Industrial Revolution, peaking in the 1950s at 3-4% a year.
Since then, productivity growth has been falling, a trend that has been partially offset by increased investment in research.
Stable Wages of Scientists
Despite the declining efficacy per researcher, the wages of scientists, particularly in the private sector, are not declining.
This suggests that factors other than the increasing complexity of research, longer training periods, and rising regulation costs may be at play.
American firms in particular just fantastically well managed… American multinationals around the world are well managed and they make a lot of profits where they’re located… that’s helping keep the U.S economy afloat. – Nicholas Bloom
Patents as Indicators of New Technologies
Patents can serve as a useful tool to identify new technologies, as they often don’t cite much prior work and are therefore considered ‘radical’.
However, progress in ‘old’ sectors can be driven by advancements in related areas.
IT’s Impact on Productivity
Despite the widespread use of IT, productivity growth rates have been declining.
This could be because society needs to change to fully harness the potential of IT, a process that can take time.
Decreasing Efficacy per Researcher
Efficacy per researcher is declining by about 5% a year, attributed to the increasing difficulty of finding new ideas.
Despite more resources being poured into research, productivity growth has been slowing over the last 50 years due to the increasing complexity of research, longer training periods for researchers, and rising regulation costs.
American Firms’ Competitive Advantage
American firms have an edge over their international competitors due to their superior management practices.
These practices are taken abroad by American multinationals, contributing to their success.
Government’s Role in Funding R&D
The government should fund more public R&D, as this tends to focus on research with long-term benefits.
However, government funding for R&D has been declining as a share of GDP, even though it has been growing in absolute terms.
Value of Management Consultants
Management consultants provide value by helping firms improve their management practices.
Good management is a form of intangible capital that can help firms succeed both domestically and abroad.
It’s harder and harder to find ideas. We’re putting more inputs into labs but actually productivity growth is falling. – Nick Bloom
Shift from Public to Private Goods
The share of research and development (R&D) funded by the government has been declining over time, with private firms taking over.
This shift could be affecting productivity as government R&D tends to focus more on research, which has more long-term benefits and spillovers, while private R&D focuses more on development.
Universities’ Role in R&D
Elite universities with large endowments are increasingly funding early-stage R&D, filling the gap left by the government.
This has led to growth being driven by knowledge flows out of these universities, particularly in the high-tech sector.
Member discussion: