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Yo is so-so. So what?

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Worstall on Wednesday The comical success of the messaging app Yo is apparently proof perfect that Silicon Valley is doing everything wrong.

It is supposedly proof, if any were needed, that the hypercapitalism of the tech scene means that people just hunt for the next quick flip rather than attempting to grapple with the real problems that besiege and oppress humanity.

This is what we're told by an impressively credentialed* professor writing in the Washington Post.

There are two major problems with this, the first being that it's not taking account of what people actually do value. The second is that it's also not taking account of what that hypercapitalist tech scene is actually achieving out there in the real world.

From the article:

My concern is that the adulation and funding that the Yo app has received will send a terribly wrong message to entrepreneurs all over the world, encouraging them to misdirect more investment into building more silly apps and other equally meaningless, mindless projects.

Entrepreneurs with world-changing ideas usually have a very hard time gaining funding from venture capitalists.  That’s why they have to resort to crowdfunding websites such as Kickstarter and Indiegogo, appealing directly to the public for investment.  Even there, some of the most promising ideas don’t get funded, either because it is hard to explain their value or because they are too risky.

The world has many problems to solve.  Billions live without reliable energy and lack adequate access to water, health care, and education. More people die from lack of clean water than from war. Our food system, the primary source of income for billions, must grow to meet the needs of another two billion people. Poverty is endemic on the planet. These are some of humanity’s grand challenges. And it is not just the developing world that endures these ills: many parts of the developed world do too, particularly in relation to health care, education, and poverty.

The first point to make is that no one can decide what represents value for other people. Other people get to decide what is value for them. I might well have decided, for example, that Facebitch is of no value whatsoever and I might even be right about that. The fact that 1 billion people disagree with me, however, means that it does have value for them. And so it is with all technologies, all entertainments: that people voluntarily watch a Simon Cowell show proves that he produces value – much as that idea might stick in the craw.

Value-added snacks

So is there any value in the Yo app? It took just eight hours to code but, when the story broke, it had 50,000 users – which would indicate that there is. How many of us can claim to have amused or entertained, let alone engaged, 50,000 people as the result of only one day's work? That value could be transient, maybe it's going to be wiped out in the future by the El Reg-based “Ni” app suggested in the comments thread attached to the article. But users have valued this app to some point and thus value has been created. It is consumers, and consumers only, who determine what has value.

The second, much more important point is that there is a blithe ignorance of what Silicon Valley has actually managed to pull off in this past decade. There has been value creation going on.

Once again, we go back to the economics books. There are all sorts of ideas out there about what creates economic growth. Karl Marx wanted to insist that it was all about capital accumulation, primitive or otherwise. Back in the 1700s, Adam Smith insisted that it was about the division and specialisation of labour, while 19th century Brit economist David Ricardo formalised the arguments about the resultant trade. Current economics ace Deepak Lal likes to distinguish between Smithian and Promethean economic growth, the latter fired by fossil fuels and the multiplicative effects of freedom from the limitations of human and animal muscle power. There are entire schools looking at the institutions of law and custom that promote growth or impede it. There's even a current idea that if we take all the cash from the rich and give it to the poor then this will create growth as the formerly impoverished spend it, creating demand.

But every economist agrees that these aren't the secret to "catch-up growth". Catch-up is the process by which the currently poor places become like the currently rich places, and how they can be moved from their current destitute state towards the technological boundary.

All of the aforementioned economic theories have varying influences upon growth in places already at the technological boundary, yes, but the secret there is simply the diffusion of knowledge. Catch-up occurs when the process moves from “Fuck Me! Is that really possible?” through to the “Aha! So that's how you do it!”. There is thus a move from the knowledge of how to dig a long-drop latrines through to the details of how you make rare earth magnets out of that funny hill over there. The two most important and vital functions for growth are that people know what can be done and are able to find out how to do it.

And these two functions have been fulfilled by the tech industry (and Cambridge is perhaps as important as the Valley here) just recently. The iPhone is only seven years old and ARM is predicting that there will be perfectly functional smartphones available for $20 quite soon. Ericsson has estimated that there will be 5.9 billion of them globally connected in only five years' time. This is the fastest adopted technology in the history of our entire species.

And what, really, is this technology going to allow people to do? Well, at heart, it puts the accumulated wisdom of mankind into the pocket of every landless labourer around the globe. Which, if we're accurate in our assessment that knowledge diffusion is what creates economic growth, means that we've pretty much cracked that particular problem.

We've even some good empirical evidence about the value just of the communications side of mobes. Back when feature phones were still a pretty neat idea, research showed that getting just a standard mobile into the hands of 10 per cent of the population raised GDP growth rates by 0.5 per cent. By 0.5 per cent of GDP, that is, not just increasing the extant growth rate by half a per cent (that's in countries without a landline network, of course).

Yo? Sure, it's trivial, but a day's work to provide innocent amusement for tens of thousands doesn't sound like such a bad idea. To propose that it means the tech world isn't dealing with the larger problems is to be amazingly ignorant of what that tech world has achieved.

We're wiring up the world, and it wouldn't surprise me in the slightest if the resultant knowledge diffusion ended up being as much of a promoter of the industrial revolution as the discovery of electricity. ®

* Are you not impressed by this? Vivek Wadhwa is Vice President of Innovation and Research at Singularity University, Arthur & Toni Rembe Rock Center for Corporate Governance fellow at Stanford University, a Visiting Scholar at the University of California-Berkley School of Information, Director of Research at the Center for Entrepreneurship and Research Commercialization, Exec in Residence at Duke University’s Pratt School of Engineering, Senior Research Associate at Harvard University’s Labor and Worklife Program and Distinguished Visiting Scholar at Emory University’s Halle Institute of Global Learning.

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