In Robert Gordon’s two-pound tome, The Rise and Fall of American Growth, the self-proclaimed “prophet of pessimism” predicted the era of ever-increasing prosperity is over. “The revolutionary century after the Civil War was unique in human history,” he wrote, “unrepeatable because so many of its achievements could happen only once.” 

The ICT revolution, Gordon argued, is less important than any one of the five great inventions that powered economic growth from 1870 to 1970: electricity, urban sanitation, antibiotics and vaccines, the internal combustion engine, and modern communication. 

Productivity growth jumped in 1920 to 3 percent and remained high for a half-century. This slowed to 1.4 percent from 1974 to 1995, sped up to 2.6 percent from 1996 to 2005, followed by a two-step slowdown to 1.7 percent through 2010 and the dismal 0.8 percent rate from 2010 to 2019. 

“Because the basic data are unambiguous in registering a significant and deepening growth slowdown, the book’s title has become a statement of fact,” Gordon concluded in 2016.  

Source: BLS, Pew Research, US Census, Goldman Sachs

But the pandemic-induced digitization and reorganization of work has made Gordon more optimistic: “I think we’re going to see a period of considerable growth in overall productivity statistics.” He anticipates annual productivity growth of about 1.8 percent this decade.

There were several decades of lag time between Edison’s first light bulb in 1879 and the productivity growth of the 1920s due to electric manufacturing. The same lag is likely happening with the recent quantum leaps in computing and artificial intelligence. We are on the cusp of another revival. 

The pandemic accelerated technological adoption, bringing us to a turning point in the productivity J-curve—the historical pattern of initially slow productivity growth after a breakthrough technology is introduced, followed years later by a sharp takeoff. 

A global survey of executives by McKinsey & Co. revealed that they were a “shocking” seven years ahead of where they planned to be in terms of the share of digital or digitally enabled products and processes. An increase in automation will be an economic legacy of the pandemic.

Amazon is using software to not only manage workers in its warehouses but to oversee contract drivers. Robots are picking groceries for Krogers’ customers. Voice-recognition algorithms are taking orders at fast-food outlets. It would be folly not to be aware of the changes going on around us.

No one foresaw the potential of new technologies and the digital revolution better than venture capitalist Marc Andreesen. He’s bullish on productivity growth.

First, COVID is the ultimate cover for restructuring—what my friend and former CFO Peter Currie used to call “shake and bake.” It’s an opportunity for every CEO to do all the things he/she may have wanted to do in the past to increase efficiency and effectiveness—from fundamental headcount resizing and reorganization, to changing geographic footprint, to exiting stale lines of business—but couldn’t because they would cause too much disruption. The disruption is happening anyway, so you might as well do everything you’ve always wanted to do now.

Second, it’s hard to overstate the positive shock that remote work works. Remote work isn’t perfect, there are problems, but virtually every CEO I’ve talked to over the last year marvels at how well it works. And remote work worked under the extreme duress of a pandemic, with all of the human impact of lockdowns and children unable to go to school and people being unable to see their friends and extended families. It will work even better out of COVID. Companies of all shapes, sizes, and descriptions are retooling their assumptions on geographic footprint, where jobs are located, where employees are located, how offices are configured, and if there should be offices at all. 

Combining these factors, it’s possible that we’ll see a huge surge in productivity growth over the next 5 years. This productivity growth is, in my view, the key to a strong “roaring 20’s” thesis—that we are going to see an amazing economic boom in the US over the next several years, even on top of the incredible boom of 2009-2020. I don’t think that’s a certainty, but I think it’s possible, even likely.

So what does this say about the future? Everyone lives happily ever after. Nice and simple.