06/01/94

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Humans not great at assessing new technology, economist says

STANFORD -- Those who believe they know how the information highway or other new technologies will shape the future should review a little history, according to Nathan Rosenberg, an economist of technological change at Stanford University.

Those who witnessed the birth of the telephone, radio, laser, computer, steam engine, VCR and countless other inventions didn't always accurately imagine their social and economic impacts, Rosenberg told a gathering of economis ts at Stanford on Friday, June 3 during a conference on economic growth and development.

In hindsight, the future was "obviously not obvious" to contemporaries of most major 20th century inventions, he said. Among human failures to anticipate the future uses and markets for innovations, he listed these:

• The inventor of the radio, Guglielmo Marconi, expected its users to be steamship companies, newspapers and navies who needed directional, point-to-point communications. Another early radio industry leader also could not imagi ne a purpose for broadcasting, except possibly to aid preachers in delivering Sunday sermons.
• Alexander Graham Bell's 1876 telephone patent "did not mention a new technology at all. Rather, it bore the glaringly misleading title 'improvements in telegraphy.' Western Union turned down the chance to buy the patent for a mere $100,000," Rosenberg said. The lack of enthusiasm that greeted the telephone was most likely rooted in the failure of the human mind to imagine a long-distance communications device that served more social purposes than those alr eady served by the telegram.
• The jet engine, in 1940, looked like a dud to a committee of the National Academy of Sciences, because it would have to weigh 15 pounds for each horsepower delivered, compared to only slightly more than a pound each for inter nal combustion engines. "Within a year the British were operating a gas turbine that weighed a mere four-tenths of a pound per horsepower," Rosenberg said.
• The invention of the transistor was not front-page news but a tiny item in a weekly column on "News of Radio" buried inside a 1947 edition of The New York Times. The device, the article predicted, "might be used to develop be tter hearing aids for the deaf."
• Electricity and lasers took decades to find major uses because both were newly discovered phenomena that did not represent "an obvious substitute for anything that already existed."
• Ten to 15 orders was all IBM envisioned for the computer in 1949. Even by 1956, a Harvard physicist involved in developing the machine for solving differential equations said he would be surprised if the billing departments o f department stores could ever make use of such a number cruncher. The fact that early machines relied on 18,000 vacuum tubes, and that the semiconductor had yet to be invented, probably limited everyone's imagination, Rosenberg said.

• The future prospects for communication satellites looked bright in the early 1970s but declined quite unexpectedly in the 1980s with the introduction of fiber optics cable. Fiber optics, meanwhile, has lost its lead in medica l diagnostics, as newer visualization technology such as magnetic resonance imaging takes hold. These examples illustrate that "one of the greatest uncertainties controlling new technologies is the invention of yet newer ones," Rosenbe rg said.
• Developers of the technology underlying the video cassette recorder - now widely known as the VCR - thought its commercial market was limited to television stations. Matsushita and Sony made thousands of small improvements in design and manufacturing, which made it ultimately salable to households.

The difficulties of applying technology help explain why approximately 80 cents of every dollar spent on research and development goes toward "improving the performance of technologies that have been inherited from the past," R osenberg said, rather than to the invention of new products.

The examples also should lead to some skepticism, he said, about the ability of the U.S. government or private investors to reliably "pick winners" among new technologies. The uncertainty of predicting their potential is one re ason venture capitalists scatter their investments.

History indicates at least five constraints on human ability to predict the value of new technological developments, Rosenberg said. Those are:

• The initial primitive understanding of innovations.
• The specialized use to which many are initially applied.
• The complementary and competitive relationships among technologies.
• The limited capacity for humans to envision entirely new technological systems, rather than simply improvements to existing systems.
• The need for technologies to pass economic as well as technological tests of their value.

New technologies "come into the world in a very primitive condition," Rosenberg said, with not all of their "properties and characteristics" understood.

The laser, for example, "represents at one level, simply a light beam formed by the excitation of atoms at high energy levels," he said, "but it has turned out that laser action can occur with a wide range of materials, includi ng gases, liquids and solids. The uses to which this capability has been put have been growing for 30 years" and will likely continue to grow.

Medicines are another example, he said. Aspirin has been around for nearly a century "but only in the last couple years has its efficacy been established for reducing the incidence of heart attacks as a consequence of its blood -thinning properties."

Medical imaging technology, such as CAT scanners, magnetic resonance imaging and echo cardiography, often also takes time-consuming additional research before it can be reliably used to diagnose disease conditions.

New innovations also create incentives for the owners of old technologies to make improvements, Rosenberg said. The greatest improvements in wooden sailing ships came after the introduction of iron hull steamships, and in gas l amps after the introduction of incandescent electric light bulbs.

In telecommunications, he said, "every major transmission system - a pair of wires, coaxial cables, microwaves, satellites, fiber optics - has been subject to extensive later improvements in message-carrying capabilities, often with only relatively minor modification of the existing transmission technology." The improvements in the old transmission technology frequently led to postponing the introduction of a new, he said.

Complementary new technologies suddenly can breathe new life into old ideas as well. "The telephone has been around for more than 100 years, but only recently has its performance been significantly enhanced by facsimile transmi ssion, voice mail, conference calls and '800' numbers."

"The need to develop complementary technologies," Rosenberg said, "may have a great deal to do in the last couple decades with the apparent failure of computer technology to raise the level of productivity growth in the Untied States above its rather dismal recent levels." If that is so, he added, the economic pay-off from the computer may still lie ahead.

The significance of some inventions may have been underestimated initially, he said, because they were proposed as solutions to very narrow problems.

"The steam engine was invented in the 18th century specifically as a device for pumping water out of flooded mines," he said. It took many years before other sectors of the economy improved the engine to power factories and tr ansportation.

Railroads are an example of a major innovation that initially was conceived as a small improvement - as a feeder system to canals rather than as an entirely new transportation system, Rosenberg said. "Time and again, contempora ries of a new technology are found to have thought about it as a mere supplement that would offset certain inherent limitations of an existing technology."

Ultimately, he said, "what is called for is not just technical expertise but an exercise of the imagination. Understanding the technical basis for wireless communication, which Marconi did, was a very different matter from anti cipating how the device might be used to enlarge human experience."

Those who improve inventions often are thought of as "mere imitators," Rosenberg said, which underestimates the creativity involved in making technology useful to society. The best definition of a major innovation, he said, ma y be one that "establishes a new framework for the working out of incremental innovations" which often lead to an entirely new industry.

This definition, he said, "highlights the difficulties in foreseeing the eventual impact" of any innovation, "since that will depend on the size and the direction of future complementary innovations and associated investments."

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