Brain power is getting cheaper all the time
By EDWARD HUGH and MARCELO RINESI FOR THE STRAITS TIMES
OUR shared understanding of today's economy is based on the twin master currents of the 1990s: Moore's Law (computer power gets exponentially cheaper over time), and its implied corollary (brain power gets exponentially more critical, and hence expensive, over time).
As much as the former, the latter assumption still underlies most of our business structure, from the economics of spam to the location and nature of high-wage jobs.
It is, of course, wrong. Businesses - at least those which will survive the next few years - actually know that things have changed. But for most of them, this awareness takes the form of tacit knowledge that nevertheless still leaves them free to moan and complain about India and China's 'unfair competition'.
All the success stories of the present, in fact, have strategies that build upon the fact that brain power - human insight or whatever you might want to call it - has become suddenly cheaper overnight.
Consider the mighty Google, which became the planet's preferred interface to the Internet simply because it worked much better than any other search engine available at the time.
Some of its competitors, perhaps the most advanced of the breed, used sophisticated computer programs to analyse and try to 'understand' as much content and context as possible. This made lots of sense: Indexing things, after all, seemed like one of the multitude of repetitive, boring tasks computers were bound to take away from humans.
HUMAN SOLUTIONS
GOOGLE'S stroke of genius was to give up on most of that and instead let the humans do the indexing. Humans love to index things on the Internet. It's called linking, and we are actually quite good at doing it. So instead of trying to index pages from scratch, Google takes into account all that human indexing and shows it back to us, looking mighty smart in the process.
A more modern example would be the host of new 'social software' programs like Friendster, which are based on the simple idea that it's much cheaper to convince humans to map social relationships than to teach computers to do it. Indeed, there are the ubiquitous weblogs themselves, the 21st century version of the earlier dream of content agents - only powered by willing, enthusiastic humans.
But the most contemporary example is to be found in the massive and systematic bypassing of the tests designed to discriminate between humans and 'spiders' or automated surfing programs.
These tests are often used in an attempt to prevent the automated creation of free mail accounts or robotic access to e-commerce sites. They work by asking the surfer to type in a word presented as a somewhat distorted image. As it turns out, doing it is very difficult for programs, while fairly trivial for humans.
SIMPLER ALTERNATIVE
AN 'OLD new economy' approach would have been to try and write a sophisticated computer program, running on a very powerful computer, to 'crack' the problem.
But the 'new new economy' way - one that recognises that well-educated human minds are as much of a commodity as any standards-compatible central processing unit - involves software written by bright maverick programmers (maybe tucked away in an East European 'transitional economy'), the incredibly cheap communication infrastructure of the Internet, and literal warehouses of Indian mechanical-mental workers typing away for what to us may appear as bargain basement wages (but which are still more than they could otherwise earn).
This is how individual ingenuity, cheap technology and cheap intellectual labour defeat corporate R&D and expensive technology. Any American company that insists on playing by the old new rules, using a top cadre of shut-in experts, geographically centralised operations and sub-planetary mindsets, will find itself outflanked, outsmarted and eventually outstripped by a few guys with the right network.
Politicians and losing businessmen call it 'unfair competition', while the businessmen that are making money out of it prefer the expression 'emerging outsourcing platforms'.
We see it simply as an extension of Moore's Law to human beings, which can be put simply like this: The knowledge, expertise and ingenuity that you can rent for US$10,000 (S$17,300), or US$1,000, a year is rising exponentially.
LOW-COST TALENT
OF COURSE, this is somewhat of a misuse of words, as human insight can't be quantified. But let's put it this way: The cost of hiring a certified public accountant, MBA or PhD holder, programmer or technical support technician is falling faster with each passing year.
If your human resource department isn't taking this into account, if your management is planning to compete five years from now with a 'corporate IQ' of the same order of magnitude as the one it currently boasts, then they aren't simply failing to prepare for the future, they are grotesquely blind to the realities of the lived present. It's a reality that won't go away any time soon, or just because you file a couple of anti-dumping claims.
In the end, everything here boils down to the laws of supply and demand. The current, ongoing impact of the Internet seems to reside in the fact that it has spawned a global mental labour force of hundreds of millions, with high and rapidly rising educational standards (in everything from English language skills to advanced research) and lower wages than in the developed countries.
Remember when American-made computer chips and electronic devices were replaced en masse by cheaper, equally good Asian versions? Now the time has come for lots of jobs, potentially each and every one of them that can be done using a computer over the Internet. In a knowledge economy, that's a lot of them.
It's easy to see how politicians will play this out for personal advantage, and it's also easy to sympathise with those who lose their jobs. But, leaving aside the huge social and geopolitical changes that these trends are bringing about, let's not forget that this has happened before to the United States, and every time it has answered back by creating new, better-paid jobs in revolutionarily profitable industries, starting the cycle anew while each time raising the living standards of the entire country.
They say there's nothing Americans like so much as taking risks in the face of a real challenge. This being the case, there is no reason to doubt America can do it again. After all, that's exactly what happened once before, and not that long ago, with a curious thing called the 'personal computer'.
Edward Hugh is an economist at the University of Barcelona. Marcelo Rinesi is a mathematics student at the Universidad de Buenos Aires.