Ireland is holding the successful annual international conference, the 'Dublin
Web Summit,' this week and while yesterday's dodgy wifi service at the RDS
conference centre was slightly embarrassing, a hardware problem posed a more
enduring embarrassment - - the rationing of water at hotels and restaurants.
Policy makers have given the high tech and web sectors top priority for
enterprise funding to meet their elusive dreams of finding a new jobs engine to replace
the property bubble while Enda Kenny, taoiseach, bizarrely declared Ireland the new 'capital
of digital world.'
Enda Kenny also announced 330 new high tech jobs (or more accurately jobs in
high tech firms) that had nothing to do with the conference but the expected
headlines were delivered. IDA Ireland had packaged 9 announcements for maximum
However, it's striking how little data is available on performance of the
indigenous tech sector and on employment in foreign-owned high tech firms, while Kenny's claim
that Ireland is the new 'capital of digital world' is in simple terms a joke
with overall patent applications in 2012 at a 30-year low! This type of delusion doesn't come cheap but in
billions of euros.
The tech sector is important but so are several other sectors - - some
are more important given the potential value added such as the food industry.
Briefly, 95% of headline Irish services exports are made by foreign-owned
firms mainly American; in Ireland high tech firms such as Apple, Google and
Facebook mostly hire administration staff, who mainly come from other European
countries, because of poor language skills among Irish residents - -
data isn't published on the breakdown but it could be as much as 75% of the
The digital services companies do not do any significant research in Ireland.
Kenny isn't the only leader who delusionally believes
that high tech can
become a jobs engine.
McKinsey Global Institute
said in a 2010 report:
While many policy makers see innovative technologies as the answer to the
challenge of job creation, our analysis indicates that governments are likely to
be disappointed in such hopes.”
In the US and UK, high growth firms are not typically in high tech
all the hype about companies such as Google and Facebook.
Indigenous companies in high tech manufacturing and services have added only
about 1,600 full-time jobs since 2007.
reports give relevant detail on jobs in the FDI sector being at a
13-year low; science and innovation policy and the false data that
sustains Enda Kenny's dreams:
Evidence of science policy failure mounts
- - the issue here is not on what should be spent on science but on
the obsession of public enterprise policy with high tech and the
commercialisation of research.
US company profits per Irish employee at $970,000;
Irish tax paid at $25,000 - - FDI is no
longer a jobs engine; corporate tax avoidance is distorting key
metrics of economic performance while beyond crisis fire-fighting,
ministers can only depend on others to deliver 'rocket' growth.
Top 5 US tech firms held $515bn in cash at end June
2013 - - US non-financial companies rated
by Moody's held $1.48tn in cash at the end of June 2013, the rating
agency says in a new report, "Cash Pile Still Growing, at $1.48tn"
(only available to clients). The amount sets a new record, having
climbed from $1.45tn at the end of 2012. The top 5 tech firms held
$515bn and 61% of the total cash hoard is technically held overseas
to avoid paying US corporate tax.
Google booked 41% of global revenues in Ireland in
2012; A leprechaun's gold? - - Google booked 41% of
its global revenues excluding Motorola, in Ireland in 2012. This
manna from the heavens is officially a result of increased
competitivness and a related plunge in unit labour costs. It is
neither and from an Irish viewpoint it is wealth that is as durable
as a leprechaun's gold.
Irish Innovation: Taxpayer to fund more
than 70% of €300m joint public-industry project centres
Irish Innovation: No boom in STEM jobs in Ireland
- - Irish Innovation: Almost two-thirds of the 9.3m
people in the US workforce who had STEM (science, technology,
engineering, or mathematics) degrees in 2010 were employed in
non-STEM occupations while in many countries including Ireland and
Australia, the importance of producing more maths and science
graduates is often stressed. However, in both Ireland and Australia,
there haven't been jobs booms in the sector despite warnings from
insiders and high levels of public funds.
UK tech employment at 3.6% of total workforce
- - Jobs in UK tech
companies rose from 915,000 out of a total workforce of 27m in 2010
to over 1m from 28m in 2013 - - 3.6% of the current workforce,
according to a report from Markit, the research firm, produced for
KPMG, the Big 4 accounting firm.
Japan, Finland top in literacy and numeracy skills;
Ireland among laggards - - A groundbreaking international survey of numeracy and
literacy skills in 24 countries, organised by the Organisation for
Economic Co-operation and Development (OECD), has found that Japan
and Finland were in the lead while Ireland was below average.
Women, African-Americans and Hispanics/ Latinos are
unwanted in Silicon Valley - - It's not new news
that women, African-Americans and Hispanics/ Latinos are generally
unwanted by the tech elites in the Silicon Valley area of Northern
California but following the announcement of Twitter's planned IPO
(initial public offering) renewed focus has been given to the issue
because of a public spat between Dick Costolo, Twitter's CEO, and
Vivek Wadhwa, an Indian-born entrepreneur turned academic, over the
lack of women on both the board of the micro-blogging site and its
Number of early-stage entrepreneurs in Ireland is low
and falling - - The proportion of people
in Ireland who are early stage entrepreneurs has fallen (6.1% in
2012 from 7.3% in 2011) and Ireland’s ranking against other
countries has declined. Ireland is now ranked 18th among the 34
mainly developed OECD countries, 14th of the EU-27 countries (of 22
countries included) and 6th of the pre-2004 EU-15 countries.
A commenter on an Irish Times piece with a transcript of
speech given in Dublin by the
president of Bloomberg, responded to my statement that jobs in both the FDI and
indigenous internationally trading sectors were at a 13-year low despite a 20%
increase in the workforce:
Quite simply, a very modern company (Ireland is full of them) is likely to
employ far fewer people, highly skilled, clever or competent, working at a
decent rate, producing far more than 20 times their number did in the past.
That creates its own problems, but at least is ahead of the curve in having so
many companies. The shock that will hit the UK for example, when companies
modernize their equipment /processes and find they don 't need 30 to 50% of
their workforce :("
There is no evidence to suggest that new companies are offsetting the slack.
Two thirds of the Irish workforce is in non-exporting SMEs in traditional sectors and
the level of entrepreneurship is poor.
Jaron Lanier, author of 'Who Owns the Future?'
writes in The Irish Times today:
If we were honest about where value comes from, we’d be
creating new ways for people to make their livings as a matter of course, since
people are still needed. Instead, we love the idea of artificial intelligence
and the experience of getting things for free, so we must pretend that people
are worthless. This didn’t used to be true. It used to be that new technology
meant new kinds of jobs. But our current fantasy life is precluding the obvious
A compounding problem is that it’s just so tempting to get
rich by having a big computer that routes the big data that runs our modern
world. It used to be that the richest people owned oil fields or transportation
systems. Now, the top new wealth is accruing to those who own information hubs.
The richest people own mobile phone networks, social networks, or some other
kind of platform from which to gather everyone else’s data."
Big US companies are no longer big employers. For example,
General Motors had over 618,000 employed in the US in 1979 - - in well-paid
jobs; today, General Electric employs 133,000 ; Apple and Google employ about
47,000 each. The US needs to add about 90,000 new jobs monthly to just meet the
natural growth of the workforce. General Motors' worldwide employment in 1979
was 853,000. Today it is about 202,000 with 80,000 employed in the US.
In February 2011, President Obama met leaders of
high tech firms at a dinner in California. Each guest was asked to come with a
question for the president but as the ailing Steve Jobs spoke, The New York
Times reports that President Obama interrupted with an inquiry of his own: what
would it take to make iPhones in the United States? Apple had once boasted of
its products being made in America. But few were by 2011 and the president
asked: "Why can’t that work come home?" Jobs’s reply was unambiguous. “Those
jobs aren’t coming back,” he said, according to another dinner guest.
the flexibility, cost, skills, diligence and overall productivity of the
assembly by Foxconn of Taiwan in China, made it a non-starter. The other key
aspect of the Apple eco-system is its Apps Store that has made the iPhone and
iPad powerful resources. It has grown from 500 apps in 2008, the year it was
launched, to almost 800,000 today. As with the Foxconn workers, the Apps
developers also come cheap. Very few hit the jackpot.
Apple said last
With more than 700,000 apps and more than 35bn
downloads in four years, the App Store has created an entirely new industry:
iOS app design and development. The app revolution has added more than
291,250 iOS jobs to the US economy since the introduction of iPhone in 2007.** And
Apple has paid more than $6.5bn in royalties to developers through the App
Store. We also provide app developers with the tools and distribution they
need to bring their best ideas to tens of millions of iOS customers
The New York Times
reported that for many
of the developers not working at traditional companies, “job” is a misnomer.
Streaming Color Studios, a game developer, did a survey of game makers late last
year. The 252 respondents, while not a scientifically valid sample and
restricted to one segment of the app market, indicated what many people had
suspected: the app world is an
ecology weighted heavily toward a few winners.
A quarter of the respondents said they had made less
than $200 in lifetime revenue from Apple. A quarter had made more than $30,000,
and 4% had made over $1m.
A few apps have made it extremely big, including
Instagram, the photo-sharing app that was bought by Facebook in April for $1bn.
When app developers dream, they dream of triumphs like that.
Most developers, however, make their money when
someone buys or upgrades their app from Apple’s online store, the only place
consumers can buy an iPhone or iPad app.
The Times said Apple keeps 30% of each app
its job creation report trumpets the $6.5bn the company has paid out in
royalties, it does not note that as
much as half of that money goes to developers outside the United States. The
pie, while growing rapidly, is smaller than it seems.
“My guess is that very few developers make a living
off their own apps,” said Jeff Scott, who runs the Apple app review site
148Apps.com and closely tracks developments in the field.
Of the $6.5bn that Apple has paid to app developers,
only 25% made more than $30,000 and 4% made more than $1m.
Derek Thompson in The Atlantic
It's the Economics of Superstars law, applied to
apps: In a crowded international field, small differences in talent can
translate to huge differences in outcomes. The most popular photo app,
Instagram, was bought by Facebook for $1bn. The 10th best photo program
probably isn't worth 1% of that figure, since networking effects will
encourage users to cluster around the most popular apps. But the wealth is
in the reach. Just as in music, where a global audience for the top artists
vastly increases the number of markets where they will make money, the
international market for smartphones (Apple sells more than 60% of its
iPhones outside the Americas) means that the small number of big hits will
find an audience around the world."
Jaron Lanier illustrates the use of big data by
health insurance companies to screen applicants and then the government
struggles to counter such practices.
As the extent of US government surveillance
remains a current controversial issue, Facebook has confirmed to users that
they are products, making it clear that "things like your name, profile
picture and content may be used in connection with ads or commercial content."
How many of the estimated 1bn users of the social network know that there is no
such thing as a free lunch, is hard to know? It is likely a lot. Facebook is
also deliberately deleting information to make more of a big hassle for users to
change their privacy settings. The privacy controls are still buried in at least
six different menus.
Meanwhile as the high tech sector thrives
for the superstars, with the benefit of tax avoidance, public research spending
is under siege and the inflation-adjusted income of the typical US household in 2012
was below the 1989 level.
The project that resulted in the genesis of
Google and the funding of the education of one of the co-founders at Stanford University, was financed by a science agency of the United States government.
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