What the history of the electric dynamo teaches about the future of the computer.

The economic mysteries of daily life.
June 9 2007 6:18 AM

The Shock of the New

What the history of the electric dynamo teaches about the future of the computer.

Bulb.
Electric light bulbs were available in 1879

Alfred Chandler, the great business historian, died in May. One of his many achievements was to highlight the way technology influenced the organization of corporations. Chandler realized that "the railroad and the telegraph, the steamship and the cable" had made it possible for companies to grow to a vast scale. That in turn meant handing control of the corporations over to professional salaried managers in place of owner-entrepreneurs.

Naturally, the story did not end with the railroad and the telegraph. Economists believe that technology and business performance shape each other. If history is any guide, the impact of the latest technologies on business organization is likely to be vast; it is also likely to be more gradual than the rolling hype of the last decade suggests.

Advertisement

Paul David, an economic historian at Stanford, presented a brief, prescient research paper to the American Economic Association back in 1990, titled "The Dynamo and the Computer." Professor David's aim was to persuade economists that the history of the electric dynamo would tell them something about the ongoing information revolution.

Electric light bulbs were available by 1879, and there were generating stations in New York and London by 1881. Yet a thoughtful observer in 1900 would have found little evidence that the "electricity revolution" was making business more efficient.

Steam-powered manufacturing had linked an entire production line to a single huge steam engine. As a result, factories were stacked on many floors around the central engine, with drive belts all running at the same speed. The flow of work around the factory was governed by the need to put certain machines close to the steam engine, rather than the logic of moving the product from one machine to the next. When electric dynamos were first introduced, the steam engine would be ripped out and the dynamo would replace it. Productivity barely improved.

Eventually, businesses figured out that factories could be completely redesigned on a single floor. Production lines were arranged to enable the smooth flow of materials around the factory. Most importantly, each worker could have his or her own little electric motor, starting it or stopping it at will. The improvements weren't just architectural but social: Once the technology allowed workers to make more decisions, they needed more training and different contracts to encourage them to take responsibility.

David showed that World War I, which led to immigration controls and choked off the supply of cheap but untrained immigrant workers, was one of the spurs to make these changes. U.S. productivity growth eventually leapt in the 1920s, four decades after the commercialization of electricity. Productivity growth rates in U.S. manufacturing in the 1920s were more than 5 percent per year, a rate that makes the "new economy" look laughable, at least for now.

But David's research also suggests patience. New technology takes time to have a big economic impact. More importantly, businesses and society itself have to adapt before that will happen. Such change is always difficult and, perhaps mercifully, slower than the march of technology.

More recent research from MIT's Erik Brynjolfsson has shown that the history of the dynamo is repeating itself: Companies do not do well if they spend a lot of money on IT projects unless they also radically reorganize to take advantage of the technology. The rewards of success are huge, but the chance of failure is high. That may explain why big IT projects so often fail, and why companies nevertheless keep trying to introduce them.

Brynjolfsson recently commented that the technology currently available is enough to fuel a couple of decades of organizational improvements. Even if technology stands still—it will not—there are already big changes stored up for us.

TODAY IN SLATE

Politics

Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

The One Fact About Ebola That Should Calm You: It Spreads Slowly

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?
Music

How Even an Old Hipster Can Age Gracefully

On their new albums, Leonard Cohen, Robert Plant, and Loudon Wainwright III show three ways.

How Tattoo Parlors Became the Barber Shops of Hipster Neighborhoods

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Moneybox
Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
  News & Politics
Politics
Oct. 1 2014 7:26 PM Talking White Black people’s disdain for “proper English” and academic achievement is a myth.
  Business
Buy a Small Business
Oct. 1 2014 11:48 PM Inking the Deal Why tattoo parlors are a great small-business bet.
  Life
Outward
Oct. 1 2014 6:02 PM Facebook Relaxes Its “Real Name” Policy; Drag Queens Celebrate
  Double X
The XX Factor
Oct. 1 2014 5:11 PM Celebrity Feminist Identification Has Reached Peak Meaninglessness
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 1 2014 9:39 PM Tom Cruise Dies Over and Over Again in This Edge of Tomorrow Supercut
  Technology
Future Tense
Oct. 1 2014 6:59 PM EU’s Next Digital Commissioner Thinks Keeping Nude Celeb Photos in the Cloud Is “Stupid”
  Health & Science
Science
Oct. 1 2014 4:03 PM Does the Earth Really Have a “Hum”? Yes, but probably not the one you’re thinking.
  Sports
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?