The World Economy and The IT Industry Presentation to Global Interdependence Center Trade Prospects and Problems in 2013 Portland, Oregon Paul Thomas January 15, 2013 Chief Economist Intel Corporation
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World Economic Challenges 1. The Great Recession of 2008-09 also known as the Panic of 2007 (Gary Gorton, Slapped by the Invisible Hand: The Panic of 2007). Panics are usually followed by slow, frustrating recoveries (Reinhart & Rogoff).
One worrying scenario says that we’re in the 5th year of a Lost Decade. Japan is the example here; it may be in the 22nd year of its Lost Decade… A more popular scenario says our growth rate will increase and unemployment and deficit fall once we form a new, reasonable policy consensus. 3
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World Economic Challenges 2. The “Advanced Economies” are aging. Social Security and Medicare liabilities in the U.S. are coming due. Discretionary spending shrinks as share of government budgets. On the other hand, the building increase in retirements will help lower the unemployment rate.
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World Economic Challenges 3. Slow economic growth and aging populations throw political consensus out the window. Ideological rifts lead to exhausting, and sometimes absurd, political battles in Advanced Economies. Policy uncertainty grows and leads to even slower growth.
www.policyuncertainty.com Scott Baker, Nicholas Bloom, Stephen Davis
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World Economic Growth William Dudley, NY Federal Reserve NABE Annual Meeting, Oct 15, 2012 “Two aspects of this exhibit are noteworthy. First, forecasters have consistently expected the U.S. economy to gather momentum over time. Second, with only one exception, the growth forecasts for each year have been revised downward over time, as the expected strengthening did not materialize.”
• World is caught in a growth slowdown in 2012 and projected to continue in 2013 •Accelerated growth expected in 2014
RGDP Growth 5.0 4.0 3.0 2.0 1.0
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
-1.0
2001
0.0
-2.0 -3.0
Source: IHS Global Insight
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RGDP Growth
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•2012 and 2013 were originally expected to grow at a moderate 4% rate •Both are now expected to end at about a disappointing 2.5% rate •Expectations for 2014 already falling
Annual Rediscovery of Hope and Happiness Underway? 7
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Source: Joe Weisenthal, Business Insider, Dec 28, 2012 (http://www.businessinsider.com/closing-the-deficit-is-painless-2012-12) 8
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World History from the Modern IT Perspective
(Millions of Units Sold)
500
400 DESKTOP MOBILE TABLET
300
200
100
0 1996
9
1998
2000
2002
2004
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2006
2008
2010
2012
The Device Category Debate
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Another Take on the Device Category Debate
with apologies to vegetarians and unhappy cows ‌ 11
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What’s with this transformation? • Is it “Creative Destruction” enabled by the Great Panic and the slow recovery in Advanced Economies? • Is it the Innovators’ Dilemma with OEMs and suppliers resisting the implications of the Cloud and the potential for tablets? • Is it an example of Someone Else’s Law? My estimate is that Notebook PCs are lately 4x as sensitive to the economy as Tablets. Will Notebook demand surge if the economy strengthens? • Are Tablets just enjoying the heady benefits of Bass’s diffusion process? Lots of “demonstration effect” and “network economics” with saturation just beginning in the richest markets? • OR are Tablets just really neat with the challenge to the IT industry being to make PCs neat also? 12
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Joseph Schumpeter!
Someone’s Else’s Law: Demand for durable goods is strongly pro-cyclical, except for NEW durable goods! (It’s unlikely that I’m the first one to point this out. But even if I am, Stigler’s Law of Eponymy means that Someone Else will get the credit.)
Frank Bass’s model:
dx/dt = Ax(M-x) where x is the penetration rate, A is a scale factor, and M is the asymptote. Growth accelerates until penetration reaches M/2 when it starts slowing.
Creative Destruction – Crises May Pave the Way for New Growth Engines 13
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PCs, Tablets, Smartphones, Software Creating the Information Universe
“Routing paths through a portion of the Internet as visualized by the Opte Project” http://en.wikipedia.org/wiki/Internet
CPUs, keyboards, displays, form factors, and software enable people to join the Information Universe. This is a virtuous cycle for those designers and manufacturers ready to act. 14
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