Imagine what your great grandparents would think if you were able to tell them that everyone would be connected to everyone and everything in the future. What if you told them that people would use a device in their hand that allows them to do voice & video broadcasting around the world in real-time, receive emails and text with anyone. They’d ask what is it and when you told them they’d say that’s absurd. They may even make a mockery of your representations.
Andrew McAfee and Erik Brynjolfsson write in their new book “Race Against The Machine” state: History has witnessed three industrial revolutions, each associated with general purpose technology. The first, power by steam, changed the world so much that according to historian Ian Morris, it “made mockery of all that had gone before.” It allowed huge and unprecedented increases in population, social development, and standards of living.
The second, based on electricity, allowed these beneficial trends to continue and led to a sharp acceleration of productivity in the 20th century. The third industrial revolution, which is unfolding now, is fuelled by computers and networks. Like both of the previous ones, it will take decades to fully play out. And like each of the first two, it will lead to sharp changes in the path of human development and history.
How Do We Measure The Value Being Created?
Even with all the advancements in general purpose technology and the value created in social development and standards of living little has been done to improve the way we measure the intangible value created by technological advances.
The standard methods for measuring economic output of change are accounting methods for capital and increase in per capita income and corporate profit. Our financial system, and the related thinking behind economic measures of tangible things are 500 years old while the changes fueled by technological advances have created a shift in value to the intangible things. It’s time we change the measures.
How do organizations place a value on things they can’t measure like enhanced customer relationships, improved brand image, knowledge, human and relationship capital? Though many organizations attempt to relate these intangibles directly to revenue, asset deployment, and costs, these are poor surrogates for the real value implications. As the song goes, we may be looking for value “in all the wrong places.”
Someday we may find the value of measuring the intangibles and look back and say as Ian Morris, said “it made mockery of all that had gone before.”