Economists And Analysts Have No Idea..

Apologies to Henry Blodget for borrowing the title of his column and making it even more provocative. He talks about poor short term forecasts from market watchers. I would say that is the equivalent of showing up on wrong bank of the right river. I am afraid many are on the wrong river with dated definitions and data.

My upcoming book has 3 chapters on how economists, analysts and regulators are straining to keep up with with the rapidly changing technology world.

Some examples from the book:

Regulators: During the Toyota sudden acceleration investigation last year, the US Department of Transportation had to bring in NASA engineers to help review the Electronic Throttle Control System. Expect much more of this as cars are more about software, sensors and satellites than solenoid. The Patent office is clearly overwhelmed. Our 911 services are only now facing up to the fact that landlines are a small part of our communications portfolio. The book has many more examples from other industries and from around the world.

Economists: As an ADB Institute report points out according to currently applied methodology for calculating trade statistics, the U.S., the country that invented the iPhone, is classified as an importer. China, which assembles the product with components from Japan and many other countries, gets most of the export credit. Economists also don’t measure technology jobs accurately. Apple creates jobs in malls, its App Store ecosystem, at Foxconn in China, in its component suppliers – these are many times what it has on its own payroll. Several of the case studies in my book – 3M, Boeing, Corning, UPS – should technically be shown as technology employers. As the CEO of UPS says “Often when I’m talking to investors I tell them that we’re about half a transportation company, half a technology company. “ Its DIADs, franchise stores, planes and data centers reek of technology.

Analysts I showcase the CFO of 3M presenting its 46 technology platforms and a senior HP executive presenting its global supply chain to financial analysts. You have to wonder how many analysts who follow each company keep up with those intricacies. While the quants on Wall Street could talk Jeff Bezos under the table, you have to wonder how many Amazon analysts could keep up with his 2010 shareholder letter which talked about “Random forests, naïve Bayesian estimators, RESTful services, gossip protocols, eventual consistency, data sharding, anti-entropy, Byzantine quorum, erasure coding, vector clocks” .  Frank Scavo who I interviewed for the book distinguishes between financial and industry analysts in a recent column.  But industry analysts are in many ways even more siloed and focused on their narrow market definitions and TLAs.

Getting forecasts right? Honestly, we need a much bigger change in the technology watcher arena.