Wealth Management for Individuals, Families and Organizations

Boston Portfolio Advisers, LLC

Six Beacon Street, Suite 725, Boston, MA 02108

The Schwab Impact conference in Boston last month gave us incredible insight into so many issues within the investment universe, but also within the US economy and our daily lives. One stock manager discussed the decline in US productivity and questioned whether we are measuring productivity correctly. He then held up his iPhone and declared that the computing power in his iPhone was equal to a $1.5 million dollar computer in 1991. He continued by stating that more pictures will be taken in 2015 than have been taken since the start of photography. He then displayed a graph showing that sales of digital cameras have plateaued and are now falling as smart phones now dominate picture taking.

Much has been written about declining productivity within the US economy. Although the quarter to quarter numbers are notoriously choppy, the data seems clear. Between 1995 and 2004 productivity grew at a 2.9% quarterly rate. From 2005 through 2014, productivity growth decelerated to a quarterly growth rate of 1.5%. Of course, the Great Recession was in the middle of this two-decade period.

Predictably, productivity increased significantly immediately following the Great Recession, but has been increasing at a much lower rate since. Much has been written about the slowdown in productivity growth because it impacts our quality of life and real wage growth. Despite being a complex topic, it is clear that higher productivity growth rates lead to higher rates of economic growth and higher standards of living. One popular, recent theory has been that technology can’t boost productivity as it did in the past. While that theory makes some good points, such as it will be hard to duplicate the advent of the Internet again, higher levels of economic growth would certainly help boost productivity. While we wait for higher rates of economic growth, keep buying multi-million dollar smartphones and using them to take those digital pictures.