Quarterly Business Report: Do Computers Really Save Money?

• Share

(3 of 4)

Erik Brynjolfsson, a professor of management at M.I.T. who has done extensive surveys of individual companies on this issue, asked senior executives what they hoped to get out of their investments in computer power. Their four top goals: to improve service to customers, target new customers, improve quality of products or services, and reduce total costs. Only the fourth objective would have much effect on productivity statistics as they are currently measured, which reflects an old-fashioned bias toward things that can be readily counted. Nowadays, simply counting widgets doesn't tell us what's going on. Brynjolfsson likens that approach to the reasoning of the drunk in an ancient joke: he looks for his lost keys under a streetlight not because that's where he dropped them but because the light is brighter there.

Robert Gordon, an economics professor at Northwestern University, argues that computer-driven productivity gains may be undermeasured, but so what? They are no more wrongly estimated, he says, than in precomputer decades. Besides, computers are not exactly brand-new: commercial mainframes date back more than 40 years; PCs, 15 or 20 years. In all that time, they should have had greater impact, even on measured productivity.

Why haven't they? In Gordon's view, "what keeps computers from being truly productive is that these damn human beings keep getting in the way." Many jobs cannot be fully automated: "Planes will always need two pilots and trucks a driver." Computers cannot replace beauticians, gardeners or restaurant chefs. Moreover, there is the law of diminishing returns: the latest PCs do not represent as great an advance over earlier computers as the first did over typewriters, or as typewriters did over writing by hand. Says Gordon: "I cannot type or think any faster than I did with my first personal computer in 1983, although it contained only one-fiftieth of the memory and operated at one-thirtieth the speed of my present model."

Experts also point out that much investment in computers does not even aim at increasing productivity. It is intended to expand or protect market share. Computers can be misused too, especially by businessmen who buy them to keep up with the corporate Joneses. "We have clients who buy the most expensive laptops and systems and then just run an ordinary word-processing program," says Alex Reppen, a New York computer consultant, who notes, "People try to automate things that really have no business being automated."

Ben Jarvis, a California businessman, gives an example. A clerk at a tire shop once told him he would have to pay a bill in cash. "I told him I had an account there," says Jarvis, "but the guy said he had already punched the order up as a cash sale and it would take 10 minutes to redo the whole thing in the computer. Funny thing is, if the system were mechanical, you'd simply cross out cash and write in charge. The guy said, 'Yeah, that's what we used to do.'" Such experiences have persuaded Jarvis to keep computers out of his own company, Accelerated Business Forms, a 14-employee manufacturer of business documents. "If you've got any kind of repetitive operations, a computer is perfect," he says, "but if you handle custom orders, a computer does more harm than good."