The Productivity Paradox

The Davos World Economic Forum 2015
Lawrence "Larry" Summers, former U.S. treasury secretary, speaks during a session on day two of the World Economic Forum (WEF) in Davos, Switzerland, on Thursday, Jan. 22, 2015. World leaders, influential executives, bankers and policy makers attend the 45th annual meeting of the World Economic Forum in Davos from Jan. 21-24. Photographer: Jason Alden/Bloomberg via Getty Images
Photograph by Getty Images

Long day yesterday, beginning with a discussion between Larry Summers and Glenn Hubbard on productivity at the New York Fed. The breakfast was off the record, so I can’t share details. But my takeaways:

–We under-measure productivity gains, and probably by more than we did in the past.

–Measurement problems notwithstanding, U.S. productivity is in an historic slump, holding back increases in wages and living standards.

–Technologies like mobile computing, big data, internet of things, machine learning, etc., are transforming businesses of all stripes, which should produce productivity gains in the future, but probably with a significant lag.

–Improvements in policies – tax reform, regulatory reform, infrastructure investment, etc. – can help, but it’s not clear by how much.

–The best way to grow productivity is to grow the economy.

 

Separately, we begin today publishing pieces from Fortune’s annual Investment Guide, including our recommendations of stocks to buy for tough times. Among them: Delta, Virgin America, DuPont, Charles Schwab, Microsoft and even battered Exxon Mobil. Details here. (Warning: Like all stock pickers, our record is less than perfect – last year’s choices were down 7%, hurt by a premature bet on a pickup in oil and mining. Index funds, anyone?)

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