Policy by the Numbers: Build Economy

Study Highlights: "High Tech Employment in the European Union"

Wednesday, February 19, 2014

Joep Konings is a professor of economics at Katholieke Universiteit Leuven in Leuven, Belgium.In "High Tech Employment in the European Union," a new report by Ian Hathaway (Engine Advocacy) in collaboration with Maarten Goos and me, Joep Konings, (KU Leuven), we analyze* two datasets of worker-level labor market data in the European Union in order to explore the impact of high-tech employment across the EU economy. Our findings show that the high-tech supports economic growth in the EU, creating benefits across the economy. More importantly, the creation of one high-tech job in a local economy creates more than four additional non-high tech jobs in the same region. This includes workers of a variety of occupations, including lawyers, physicians, wait staff, taxi drivers, and school teachers.Our data also tell us that high-tech workers are a critical component of the European workforce. We found that in 2011, the 22 million high-tech workers employed in the EU-27 represented 10 percent of total employment. At 13.7 percent of total employment, Czech Republic had the highest concentration. Finland, Sweden, Denmark, France, and eight additional countries had high-tech employment shares above 10 percent of total employment.The January 29 launch event, hosted by Bruegel, provided an important platform for a policy debate on the issue of employment, which recognized the contribution of high-tech employment to the European economy. The policy discussion focused on the fact that while technology outmodes some jobs, it also significantly increases productivity, and creates new and better jobs as well as new ways of working. We saw vibrant discussion about empowering people to acquire the right skills and approach learning as a lifelong endeavor to remain valuable employees in the new tech-driven economy.

*Methodology is outlined in the appendix on page 21.

America’s businesses are growing. The web is helping.

Thursday, June 20, 2013

A common theme of this blog is the economic impact of the Internet, particularly how independent entrepreneurs flourish using online tools. Today, Google released its Economic Impact Report for 2012, and we are cross-posting the announcement from the Official Google Blog. While it's not a typical Policy By the Numbers post, we do believe that information like this is relevant as we think about regulatory frameworks that may affect the web and, subsequently, the people who benefit from it.Allan Thygesen is Vice President, Global SMB Sales, Google.

Michael Edlavitch was a middle school math teacher in Minnesota when he started a website with free math games to engage his students. With free online tools, a passion for math and an initial investment of just $10 to register his domain, www.hoodamath.com was born. Eventually Michael’s website became popular with more than just his students. So Michael gave Google AdSense a try as a way to earn money by placing ads next to his content. As word spread and traffic grew, the revenue generated from his site allowed Michael to devote himself full time to Hooda Math. Today, www.hoodamath.com has more than 350 educational games and has had more than 100 million unique visitors to the site. Beyond building a business for himself, Michael is helping students everywhere learn math while having fun.

Over in New York, Roberto Gil designs and builds children’s furniture—loft beds, bunk beds and entire custom rooms. Casa Kids’ furniture is custom designed for the family to grow along with the child. Roberto works out of his Brooklyn workshop and doesn’t sell to large furniture stores, which means the Casa Kids website is an essential tool for him to connect with potential customers.To grow even further, Roberto began using AdWords in 2010. In the first few months traffic to his site went up 30 percent. Today, two-thirds of his new customers come from Google. Meet Roberto and learn more about how he is making the web work for Casa Kids:

These are just two examples of how the web is working for American businesses. According to a McKinsey study, small businesses that make use of the web are growing twice as fast as those that are not on the web. That’s because the web is where we go for information and inspiration—from math games to practice over the summer to someone to design and build that perfect bunk bed for your kids. Ninety-seven percent of American Internet users look online for local products and services. Whether we’re on our smartphones, tablets or computers, the web helps us find what we are looking for.

Here at Google, we see firsthand how the web is helping American businesses grow and thrive. Through our search and advertising programs, businesses like Casa Kids find customers, publishers like Hooda Math earn money from their content, and nonprofits solicit donations and volunteers. These tools are how we make money, and they’re also how millions of other U.S. businesses do, too.

In 2012, Google's search and advertising tools helped provide $94 billion of economic activity for more than 1.9 million American businesses—advertisers, publishers and nonprofits. This represents a 17 percent increase from 2011. Check out the impact made in each state, along with stories of local businesses using the web to grow.

Whether it’s building skills or building furniture, Google helps to build businesses. We're thrilled to be part of such a vibrant industry and are committed to continuing to help make the web work for people and businesses everywhere.

Why economic policymakers in the UK should listen to what the data are telling them

Thursday, December 13, 2012

Hasan Bakhshi is Director, Creative Economy and Juan Mateos-Garcia is Research Fellow in Nesta’s Policy & Research Unit.Boston Consulting Group says that the UK is the largest nation in the G20 as a percentage of GDP—8.3% compared to an average of 4.1%. The UK is a nation of e-shoppers, with almost two-thirds of consumers reporting having purchased goods or services online in the previous three months. That’s almost twice the average for the countries in the Eurozone. The UK was also the first country in the world where online advertising spend overtook TV advertising in 2009.Yet, a recent study of digital readiness from Booz & Co. puts the UK in an unimpressive twelfth place and ranks the nation eighteenth on average broadband connection speeds. They find that two-thirds of UK SMEs have "little or no presence online." Only 14% of UK SMEs sell online compared 30% in Norway. Eurostat data confirm that UK businesses are not among the leading pack of countries in e-commerce markets.Our new research on how UK businesses collate and use their online customer data adds to this picture of lagging engagement with digital. Our findings suggest that collection of data is patchy, and that four out of five businesses with active online operations are not making full use of their data for decision making.Even in our Internet-active sample, only 38% of businesses collect comprehensive transactions data. In the majority of businesses, the analysis of online data is only basic and descriptive. For example, only 27% run A/B experiments and other controlled trials and an even lower 13% use statistical techniques such as regression analysis.Only 41% of businesses in our sample use online data to inform their business strategy, and fewer use it to optimise prices. Even among the sub-sample of firms for whom e-commerce makes up more than half of overall revenues, less than four in ten use their online customer data to set prices.However, 18% of businesses in our sample—the 'datavores'—are showing the way. They are likely to collect, analyse, and, above all, act on their online customer data. They appear to be investing more aggressively in data capabilities than other firms, suggesting that companies who don’t learn to use data will be left even further behind.Datavores are four times more likely than intuition-driven companies to report a positive contribution from their online data and are even more likely to be product innovators. The implication here is that that there may be an immediate benefit to the UK economy if more businesses made use of online data.What might all this mean for policy?Policymakers need to think about how to create a regulatory environment that strikes the right balance for consumers between data privacy and the potential benefits to be gleaned from data use, like more efficient pricing of products and rapid product innovation. Concerns about data privacy and security ranked highly as a barrier to greater use of online data by the datavores in our survey.Policymakers should also heed the importance of sound analytical and management skills if the wish to encourage data-driven business. They should ask whether the education system attaches enough importance to such skills, and whether the system is prepared to cope with increasing demands as more businesses begin to unlock the value of data.

Technology Works: The Importance of High-Tech Jobs in the United States

Friday, December 7, 2012

Ian Hathaway is a Research Manager at the Bay Area Council Economic Institute in San Francisco.Yesterday my colleagues and I at the Bay Area Council Economic Institute published a report detailing the importance of high-tech employment to the U.S. economy. It is the first of two studies aimed at providing a better understanding of job creation and business formation in America today—in particular the role that high-tech plays in the process. Part two will focus on the job creation dynamics of high-tech startups and will be released in a few months. Both reports are made possible by a generous contribution from our friends at Engine Advocacy.Below is the executive summary of the report as well as some key graphics. We hope you’ll find it as interesting as we do. Enjoy.This report analyzes patterns of high-technology employment and wages in the United States. It finds not only that high-tech jobs are a critical source of employment and income in the U.S. economy, but that growth in the high-tech sector has increasingly been occurring in regions that are economically and geographically diverse. This report also finds that the high-tech sector—defined here as the group of industries with very high shares of workers in the STEM fields of science, technology, engineering and math—is an important source of secondary job creation and local economic development. The key findings are as follows:

Related content:
— Tech hiring creates other jobs (San Francisco Chronicle)
— Technology Works for Startups and Our Economy (Engine Advocacy blog)

Seed-DB: A tool for monitoring seed accelerators

Tuesday, November 27, 2012

Jed Christiansen is Head of Channel Sales for Emerging Markets at Google and founder of Seed-DB.In the summer of 2005, Paul Graham and three partners kicked off the “Summer Founders Program.” They aimed to combine seed-stage investing in startups with mentorship for young entrepreneurs. What made this program unique was that investments occurred synchronously via “classes” of startups funded at the same time and advised together. Their program became Y Combinator.Their success kicked off a global movement of institutions that combined funding and education for entrepreneurs, commonly known now as seed accelerators. Seed accelerators are invaluable to generating economic growth and fostering entrepreneurial culture in communities. To demonstrate their importance, I created Seed-DB to track programs and the companies that have graduated from them. As of today, we’re tracking 134 seed accelerators in 33 countries. These accelerators have funded over 2000 startups, and seed companies have raised over $1.6 billion in funding. One hundred of these companies have already sold for an estimated total of over $1 billion.In a thesis I wrote on seed accelerators in 2009, I surveyed entrepreneurs that had gone through seed accelerators. One of the more interesting results was that the funding they received was the least important aspect of the program. What mattered more was the community they were accepted into via the accelerator. As more and more startups go through each program, the alumni network becomes bigger, more diverse, and stronger. Thus, each class of startups receives more value than the class before it, building a virtuous circle.Seed accelerators also affect their local economies through job creation. New jobs in the SMB sector are very important to society: Between 1980 and 2005 all net job growth came from firms less than five years old. And in times of economic downturns, small businesses can buck overall trends by creating new opportunities instead of scaling back.The startups that have gone through seed accelerators have created over 4800 jobs. These are brand-new, high-value knowledge worker jobs. And even if an individual startup fails, founders’ experiences will be very valuable to traditional corporate employers.Though the data in Seed-DB isn’t 100% complete (it relies on startups self-reporting), some important conclusions can be made. Seed accelerators are a new kind of institution that promote and celebrate a culture of entrepreneurship. Most programs fund 10-20 startups per year, educating between 20-50 entrepreneurs. Programs and entrepreneurs support each other through challenges, make key introductions for each other, and build communities that give startups the best chance of success. Were all accelerators to self-report, I estimate the number of jobs created would be more than 7,000.From just one accelerator in 2005, to a handful in 2007, to over 130 around the world today, seed accelerators—and the jobs they create—are a positive change in the economic infrastructure of the technology industry.Get in touch with Jed with any questions or suggestions for Seed-DB via Google+ or by e-mail jed.christiansen[at]seed-db.com.

Modeling the Costs of Cloud vs. On-Premise Computing

Wednesday, October 24, 2012

Andrew McAfee is a principal research scientist at the Center for Digital Business at the MIT Sloan School of Management. He also authored Enterprise 2.0 and co-authored Race Against the Machine.To advance the dialogue surrounding the costs of cloud computing, I, together with Google and Analysis Group, created a comprehensive model that estimates the cost of the cloud for small and medium-sized businesses (SMBs). Using this model, I find that SMBs stand to realize significant cost savings by moving on-premise IT to the cloud.By concentrating on SMBs, I focus on 99.6% of businesses in the U.S.¹ that account for 82.7% of non-farm and non-government employment.² SMBs lack the constraints and legacy costs of their larger counterparts, allowing them choose the type of IT that fits best; thus, SMBs are typically the bellwethers for the future of enterprise computing. My comparative cost model includes common characteristics of businesses, such as the size of their company and the age of their on-premise IT, and allows users to adjust and tailor the model to their business. To determine how the costs of the cloud compare to on-premise IT, the model allows users to select a number of cloud computing services that cover the most common needs of SMBs, including email, office productivity software, accounting and finance software, CRM software, and file and print functionality.One of my principal findings, reported in my paper “Is the Cloud Cheaper?,” is that while the total cost savings associated with cloud migration increase with firm size, the largest percentage savings are realized by small firms. The chart below illustrates this latter point by showing that the average cost reduction for the smallest businesses (with 1 to 15 computer users) is approximately 71%, compared to 44% for medium-sized businesses (with 101 to 500 computer users), when all IT is moved to the cloud.

The chart above, which shows the percentage cost difference between cloud computing and on-premise IT over a five-year period by number of computer users, plots both the output from the model (in blue) and a smoothed, fitted line (in black). At times, the model output is discontinuous because some costs support multiple users and therefore are only added at certain thresholds. As the number of users increases, firms may, for example, install extra on-premise servers to provide sufficient IT resources to their users.I also find that expected reductions in IT staff are important determinants of the total cost savings associated with moving to the cloud, but that savings are available even absent IT staff reductions. In addition, while these savings decline as a firm’s cloud data storage requirements or the costs of storing data in the cloud increase, I find that even with a 10x increase in cloud subscription costs, the cloud continues to offer significant savings when compared to traditional, on-premise IT. Thus, although savings vary based on an SMB’s characteristics, they are generally significant and suggest that companies will benefit by moving their IT to the cloud.¹ United States Bureau of Labor Statistics, “Table G. Distribution of private sector firms by size class: 1993/Q1 through 2011/Q1, not seasonally adjusted,” http://www.bls.gov/web/cewbd/table_g.txt.
² United States Bureau of Labor Statistics, “Comparison of All Employees, Seasonally Adjusted, before and after the March 2011 Benchmark,” ftp://ftp.bls.gov/pub/suppl/empsit.compaes.txt.

The Economics of Government Transparency

Tuesday, October 16, 2012

Dorothy Chou is a Senior Policy Analyst at Google.Almost 20 years ago, Francis Fukuyama wrote a book called Trust, which claims that social capital and shared values and ethics create conditions necessary for modern economic growth. He argued that societies that facilitate stronger relationships of trust are able to innovate and scale more effectively than those that do not.Two factors contributing to trust in society are structural: legal certainty and transparency about how laws are enforced. Together, these elements grow trust in a way that encourages investors to take necessary risks when it comes to businesses and markets. By contrast, when information is incomplete or not readily available, people are unable to make informed decisions or accurate forecasts for the future, making them more risk averse or creating moral hazard.To see if that theory applies today, the Milken Institute provided us with a preview of data being assembled for the Opportunity Index: Access to Global Capital which will be released in early 2013. To help us look for correlations between measures of government transparency, foreign direct investment, and GDP, they assessed 34 different indicators that fell into four general categories: transparency of business, the political and legal system, the policymaking process and quality of regulation.Here are a few of their observations about the data from 2011:

For all countries, higher scores in the composite and in three of the four transparency categories (business, political and legal system, and policymaking) correlate to both higher GDP per capita and FDI per capita.

Among advanced countries, Singapore, New Zealand and Hong Kong remained the best-performing countries in transparency from 2007 to 2011.

The U.S. ranking slid from 12th in 2007 to 16th in 2011. Two of the factors behind this decline were increased controls on international capital markets and lower scores on the quality of its credit market/securities exchange regulation.

Bahrain, Malaysia and Botswana were the three most transparent emerging and developing countries in 2011.

Albania witnessed the greatest jump in transparency scores, improving in all four categories. Its strengths included more disclosure, a lower burden of government regulation, more public trust of politicians, lower costs from terrorism/organized crimes and more transparency in the policymaking process.

China and Azerbaijan both improved their transparency rankings by 19 places. China gained ground in all four categories from 2007 to 2011, with the most improvement in transparency of policymaking. Public trust of politicians and a dramatic reduction in time spent paying taxes are other key contributors to China’s success. In Azerbaijan’s case, transparency of doing business and quality of regulations showed the most improvement. Specific strengths were less time/money spent starting a business, better credit/securities market regulation and better investor protections.

surveys

Ranking 2007-2011

Score 2007-2011

Advanced Countries Ranking

Emerging Countries Ranking

DataScatterPlot

Milken Institute

Alleviating Youth Unemployment Through Entrepreneurship

Thursday, October 11, 2012

Brittany Smith is a Policy Associate at Google.Unemployment numbers are pretty grim all around, but unemployment among youth is a particularly worrisome trend. In the United States, numbers from a recent jobs report indicate how hard it is for teens and early twenty-somethings to find work. The chart below, from The Atlantic, sums up the findings:

In Europe, youth unemployment numbers are even worse. As of May 2012, nearly 11 million young people were out of work across OECD countries. Youth unemployment has reached an alarming rate of 17.1%, more than double the unemployment rate affecting the general population. Greece and Spain have fared the worst, burdened with youth unemployment rates of more than 50%. And the near-term outlook is not much better: In, 2015, approximately 660 million young people will either be working or looking for work—an increase of 7.5% over the 2003 figure. What can we do to change course? We can start by creating an economic environment that nurtures entrepreneurship. While not a cure-all for general economic malaise, data supports the assertion that entrepreneurs are net job creators in an era with high unemployment and an economy that can’t create jobs at a sufficient pace to employ everyone entering the workforce. As new entrants to the workforce, youth and recent college graduates are particularly susceptible to slow job creation. Entrepreneurship is critical for economic growth, and its appeal to youth is something that policy initiatives should address. The notion of entrepreneurship as the solution to youth unemployment is gathering steam globally. One recent article describes tech startups as the “last refuge of Spanish optimism,” and another on CNN as being nearly the only option for young university graduates in Greece, who are pioneering a “digital renaissance” and aiming to reinvent the Greek economy. These articles point to an inspiring trend: Not only does entrepreneurship get young people into jobs, it means they’re creating jobs for everyone else, too. The challenge of realizing the economic benefits of youth entrepreneurship is (at least) two-fold: individuals and society need to embrace the reality of risk and the fear of failure, and we need an increased institutional capacity for rewarding entrepreneurial attitudes and cultivating an environment that makes entrepreneurs successful and enables recovery from failure. Innovative sites like Young Entrepreneur and Teens in Tech are playing a vital role in this regard, creating tools, resources, and networks for youth to create innovative businesses. By bringing resources tailored toward youth entrepreneurs online, youth can find and join a community of other entrepreneurial youth with whom to vet ideas, learn new skills, and fail and start over. Increasing the number and scope of programs like these will be important for bringing more youth into the entrepreneurial fold, shifting cultures and attitudes about what it means to be an entrepreneurial and what it means to be successful.While the global economy struggles to recover and many young people are unable to secure employment, encouraging entrepreneurship is a sustainable policy objective that can ensure growth. If you’ve seen other sites, companies, or resources dedicated to this issue, let us know in the comments!

Internet Outlook: Good

Thursday, October 4, 2012

Derek Slater and Betsy Masiello are Policy Managers at Google.The Internet is the most powerful infrastructure we’ve seen yet for the creation, exchange, and implementation of new ideas. By facilitating access to information and collaboration at previously unimaginable scale, one small idea shared online can quickly grow into a world-changing one. As a result, the Internet has become a wellspring of innovation and renewal across the economy, and the numbers prove it.Today the OECD has released its 2012 Internet Economy Outlook, a comprehensive look at the Internet’s ongoing role in transforming the global economy. The report opens with a landmark chapter on measuring the Internet economy. This is a significant addition to the research literature on this subject in part because, as the OECD notes, “there is still no widely accepted methodology for assigning an economic value to the Internet.” They find that up to 13% of business sector value added in the United States in 2010 could be attributed to Internet-related activities—as much as transportation, construction and utilities combined.Ongoing data analysis of the sort undertaken by the OECD here can help inform government priorities and policy developments. Earlier this summer, we released a paper outlining a set of policy ideas that put key qualities that have made the Internet such a vibrant source of innovation at the center of driving economic growth and renewal. With more data demonstrating the value of the Internet to global economies, policymakers will have even more evidence that policies to encourage the development of a robust internet economy to thrive will result in huge economic returns.

Supporting the entrepreneurship ecosystem: Google for Entrepreneurs

Wednesday, September 26, 2012

Brittany Smith is a policy associate at Google.There are about as many ways to define "entrepreneurship" as there are entrepreneurs developing new businesses and creating more jobs for our economy. One definition in particular proposes that entrepreneurship is "the pursuit of opportunity without regard to resources currently controlled."Whether it's gaining access to capital or finding new employees, the availability of resources is a defining factor in an entrepreneur’s ability to grow and scale a business. The Internet has been pivotal in this regard, decentralizing information in such a way that not only can anyone have access to helpful information about the peculiarities of running a business, but such that anyone can be an entrepreneur. Even in countries where Internet access is limited, entrepreneurs are thriving. 150,000 Internet businesses are started each year in aspiring countries, and entrepreneurs are driving much of the growth of Internet ecosystems around the world.With that said, it takes much more than money and ideas to help these entrepreneurs sustain and grow their businesses. An entire ecosystem of elements must work together to provide the financial capital, human capital, markets, and policies that bring resources to entrepreneurs and create conditions under which resources can be the most productive. In a survey, the number of respondents who said they would be willing to start their own businesses if they had some help jumped 37%, supporting the notion that interventions at varied places in the ecosystem are necessary to give existing and would-be entrepreneurs the support they need to start a business.The launch of Google for Entrepreneurs is an exciting step in the right direction for entrepreneurship ecosystems around the world. We know that startups and entrepreneurs have the power to build technologies and creative solutions that transform the world, making more resources available to those small business owners is critical. The new site will be an umbrella for several dozen programs and partnerships around the world that support startups and entrepreneurs, bringing programs, partnerships, and Google products to startups and entrepreneurs. The growing number of programs and partnerships will help to build strong organizations to serve entrepreneurs in local communities, bring Google teams and tools directly to entrepreneurs, and helping support startups as they're getting off the ground.There's never been a better time to be an entrepreneur, and partnerships and programs like those that will evolve from Google for Entrepreneurs will open doors to new entrepreneurs and provide support for those seeking for networks and opportunities to facilitate building business around innovation.

What Gets Measured Gets Noticed: The need for more gender data in policy & development

Thursday, September 20, 2012

Policy and development initiatives to address women’s economic empowerment face staunch barriers in a lack of relevant and reliable data to inform advocacy for gender-sensitive policy. “Sex-disaggregated data” offers essential insight into the ways that policies on paper come to life in the experiences of a particular community. Such data also allows for parties to make appropriate decisions and accurate conclusions. The lack of such data precludes the advancement of informed and high-impact gender policies, thus impedes the integration of more women into the global economy. Gender equality and female empowerment are increasingly recognized as core development objectives and key to effective outcomes across a range of issues, from food security to climate change. Thus, demand for sex-disaggregated data will only increase over time.The World Economic Forum’s Global Gender Gap report provides a measure of economic participation and opportunity, but as noted here, we still need more data. We need data that captures women's economic status across countries, data that takes into account variables such as participation in the informal economy, and data around access to assets such as land or finance. Steps in the right direction are in place—there exist key initiatives focused on improving the availability of gender indicators, centralizing data held by different entities, identifying gaps in knowledge and new indicators, and expanding national capacity to collect and analyze sex-disaggregated data. Knowing where these gaps exist is important, and the onus to fill them falls jointly on the public and private sectors to expand capacity for gathering and consuming sex-disaggregated data for policy and business objectives.Data shows policymakers how to better integrate women into economies and can be a motivating factor behind the advancement of gender-inclusive development. According to the World Bank’s 2012 World Development Report: Gender Equality and Development, gender equality is simply smart economics. The report asserts that greater gender equality can enhance productivity, improve development outcomes for the next generation, and make institutions more representative. At 40% of the global labor force and more than half of the world’s university students, overall productivity will increase if women’s education and economic participation are enhanced. Greater gender equality also enhances and improves other development outcomes. For example, eliminating barriers against women working in certain sectors or occupations could increase output by raising women’s participation and labor productivity by as much as 25 percent in some countries—just through better allocation of womens’ skills and talent.In order to take advantage of accelerated growth that women’s economic participation can bring to economies, it is important to design and implement policies that empower women to overcome existing barriers. In remarks about the gender data gap, US Secretary of State Clinton recalled an old adage that what gets measured gets noticed, and it couldn’t be more fitting. Data provides evidence for not only what’s needed but also what’s possible. When we consider what’s possible by economically empowering women, data must inform what we do and how we do it.

Jack and Jill the Innovator: Greg and Julie Baka

Thursday, September 13, 2012

Adrienne St. Aubin is a policy analyst at Google.A business born in a garage is one of the Internet economy's most cherished creation stories. But it turns out garages aren't just for low-rent software development. Some entrepreneurs use their garages to make things—physical things—and not just as a hobby, but to make a living.Case in point: searching for a better-than-average clothes-drying rack—one that could reduce energy usage by holding an entire load of laundry and last for decades—led Greg and Julie Baka of Columbia, Missouri to design a more sustainable version themselves. Now anyone on a similar quest to reduce their laundry footprint can find Baka’s rack online at the aptly named bestdryingrack.com.

What Greg and Julie Baka are doing in their Columbia, Missouri garage is simultaneously old-fashioned and cutting-edge. They designed the rack after studying antique versions that had weathered generations, a sharp contrast to the flimsy models that dominate the current market. Using small-scale manufacturing, they sell all of their inventory, including a line of hand tools, directly to consumers online. The Bakas have created a successful business at a scale that is much smaller than most manufacturing, but big enough to make a difference in the world (and to make a living).How does this work? Networks are important for entrepreneurs around the world (and for venture capitalists). Similarly, the Bakas understand that successful small-scale manufacturing involves working together in a big way. Large suppliers often aren't interested in working with smaller manufacturers, especially fledgling operations whose growth can be hard to predict, so it makes sense for small manufacturers to work with small suppliers who have greater flexibility. To avoid buying expensive machinery you share machinery whenever possible, and work with parts your suppliers can produce. For the Bakas, this means making their rack from American-made parts and thinking and using networks creatively to put the pieces together.Because of economies of scale, it can be challenging and expensive to manufacture goods in the dozens or hundreds. However, the ability for producers and consumers of niche goods to find each other online makes it possible for smaller manufacturers to connect with customers who don't want mass-produced goods. As Greg Baka puts it, "Now that the Internet works as it does, it's really a whole new world for running a business."Of course, American industry has experienced decades of painful change (manufacturing employment dropped 8 million workers in just 30 years) and pundits disagree about whether manufacturing revival is an achievable dream for America or just a Pollyanna fantasy that plays well on the campaign trail. Small-scale manufacturing doesn't promise to replace all the jobs that have been lost as so much large-scale manufacturing has migrated overseas. But it does show promise to help enrich communities, lower barriers to entry, and bring new products to market.At $39.99 the Bakas' drying rack is more expensive than shoddy alternatives you'll find in a big-box store. It's built to last, and that means it costs more than what many of us are accustomed to paying for household goods—so many of which are designed for intentional obsolescence rather than durability. Although we're not all looking for the best—or even any—drying rack, there are enough of us to keep the Bakas' garage busy, producing an old-fashioned object in a thoroughly modern way.

The Clothesline Paradox and the Hidden Economies of the Web

Thursday, September 6, 2012

Nick Grossman is the founder of the Connected Innovation Network, visiting scholar at the MIT Center for Civic Media, and "activist in residence" at Union Square Ventures.This Spring, we hosted an event at Union Square Ventures called Hacking Society, which brought together a small group of entrepreneurs, activists, academics, investors, and policy wonks to discuss how networks are changing everything—and what that means for future of policy, advocacy and politics. The archives are worth spending some time with if you have a few minutes.At the event, Tim O'Reilly launched a discussion around the issue of "visualizing the web's hidden economies." You can see the full 13-minute video of the conversation here, but for this post, I'll focus on one particularly relevant section where he calls out a phenomenon known as "the clothesline paradox": [The Clothesline Paradox] was about solar energy and the notion that we put our clothes in the dryer and collectively that adds up to some amount of energy that we measure on our utility bills and collectively as a society adds up to our fossil fuel economy.

We take our clothes out hang them on the line. They don't get moved to some kind of solar ledger. They just disappear. We don't measure them at all. And it seems to me there's a lot of economic value on the Internet that is like that clothesline paradox.This becomes a policy issue when we start to see concentrated harm (typically in industries being disrupted by networks) paired with diffuse, difficult to quantify benefit (new, awesome things that are happening on and because of the web). Having better data to support this transition is critical to making effective policy arguments.Lucky for us, the web is good at solving information problems. So we should think about what we can do that can help us "quantify sunshine"—i.e., produce, collect and distribute the data and stories that make the invisible visible and start to tell a fuller story of what's happening with the web.Web platforms already publish their own stories and impact metrics. AirBnB's Global Growth infographic highlights 5mm in monthly bookings, and their Life page surfaces stories of economic empowerment; the impact page for Donors Choose shows $122mm raised to support 7mm students; Khan Academy's stories page catalogs individual stories of advancement made possible on the platform; Google's economic impact page highlights $80bn in economic activity touching 1.8mm businesses; Twitter's stories page only touches the tip of the iceberg of amazing things made possible because of their platform.So, the bones are there, but we need to do a better job assembling the full skeleton. We have an opportunity—and increasingly a need—to build this distributed data collection and storytelling into a more cohesive, complete, and real-time platform. We should do this in a way that's consistent with the web's characteristics and strengths (distributed, built on standards, social, layered, networked), and build permanent, open infrastructure to help solve this information problem in a web-scale way.We're working on one slice of a solution here, and I encourage you to join us. But more importantly, let's think about how we as a community can build an open platform for data that supports informed policymaking across the web.

This Week in Data: 8/24/2012

Friday, August 24, 2012

Fresh Water, a Cleveland-based e-magazines that covers happenings in Northeast Ohio, highlighted a project at Case Western University's Center on Urban Poverty and Community Development called NEO CANDO.

NEO CANDO, a publicly accessible database, provides one-stop-shopping for anyone looking to research property information in their neighborhood. The site allows users to go beyond researching individual properties and look at snapshots of neighborhoods—including which properties are at risk of foreclosure and which have been condemned. The site also contains social, economic and census data.

The site is a resource for public officials, academics, and residents alike to understand trends in local communities.

On Computerworld, Sean Chai, Kaiser Permanente's director of innovation technology for the Innovation & Advanced Technology Team, discusses the social and data-driven direction for innovation in the healthcare sector. Social data is becoming an increasingly important source of information for patients and for professionals. He writes:

According to a recent Pricewaterhouse Coopers survey, about 33 percent of U.S. consumers use social media websites like Facebook and Twitter to obtain health information and track/share symptoms. Seventy-two percent of respondents said they would use social media sites for scheduling physician appointments, and 42 percent of respondents reported they have used social media to look up consumer reviews of health treatments or physicians.

This week, the White House announced its first group of Presidential Innovation Fellows. A subgroup of fellows will be working on the White House Open Data Initiatives, meant to "accelerate and expand Administration efforts to make government data more publicly accessible in 'computer-readable' form and spur the use of those data by entrepreneurs as fuel for the creation of new products, services, and jobs." Fellows will work within and across issue areas—health, education, energy, etc.—to make government data more usable by researchers, journalists, innovators, and the public at large. Video of the Fellowships ceremony below.

Growing entrepreneurship in Europe

Thursday, August 16, 2012

The Economist recently published an extensive piece on the obstacles faced by European entrepreneurs. The data is gloomy, but the authors do highlight signs of growth coming from the Internet industry. For instance, while most start-ups find it hard to attract top-tier American venture firms, the audio and sound sharing platform Soundcloud has bucked the trend, receiving funding from Twitter-backer Union Square Ventures.The Economist points out that, "For the €1.5m-4m that firms need to work an idea up into a real business model, though, money is in desperately short supply." Access to capital is a core challenge for start-ups, especially in Europe, where attitudes toward venture capital investment differ. In an Ivey Business Journal article last year, Hatim Tyabji and Vijay Sathe explained:In 2001, a survey comparing the practices of 104 VC firms in Europe with 67 American VC firms found that the former had a smaller percentage (38 percent) of early-stage investments in their portfolios than the latter (50 percent). However, the difference was greater for older VC firms (those established prior to 1997; 31 percent for Europe vs. 48 percent for America) than it was for younger VC firms (45 percent for Europe vs. 53 percent for America).The authors go on to conjecture that this is largely due a culture of EU investors who are more averse to risk in the US investors, and as such, they are more inclined to invest in established ventures. Thus, attracting top-tier VCs en masse to a new venture is particularly difficult in the EU, but it may not be necessary. A 2009 study by Harvard Business School researchers examined the relative success rates among entrepreneurs and venture financing in the US. They write:… entrepreneurs in second or later ventures have a 4.1% higher probability of succeeding than first-time entrepreneurs. At the means of the other variables, entrepreneurs in their second or later ventures have a predicted success rate of 25.0%, while first-time entrepreneurs have a predicted success rate of 20.9%.

This finding is consistent with the existence of learning-by-doing in entrepreneurship. In this view, the experience of starting a new venture—successful or not—confers on entrepreneurs some benefits (skills, contacts, ideas) that are useful in subsequent ventures. The authors note that presence of top-tier VCs matters when it comes to first time entrepreneurs and entrepreneurs whose previous venture failed. But with EU investors favoring more mature businesses over infant start-ups, perhaps a jolt of expertise to cultivate a community of successful entrepreneurs could create a positive feedback loop in which success breeds success, thus changing attitudes toward investment in early companies. Look at it this way: if Europe can create a healthy base of entrepreneurs like those that started Soundcloud, then the money will follow. Success will, too.Derek Slater is a Policy Manager at Google.

Choosing a college for the job that comes after

Monday, June 25, 2012

This piece appeared in longer form as a May 2012 blog on the Washington Post's website.High school students across the country are now making choices about the colleges they will attend next fall. Whether choosing from among elite private colleges and flagship public universities, or from a list of open-access state four-year and community colleges, how will they and their families make those decisions?Until now, it has been almost impossible for students to include in their deliberations what graduating from specific colleges and their programs is likely to yield in terms of post-graduation jobs and salaries. But that is starting to change. This year, new information will begin to become available that will enable students to say: “If I go to College X and earn a degree in Y, I’m more likely to get a good-paying job after graduation than if I receive the same degree from College Z.”The primary source of new information the Wage Records Interchange System 2, a Labor Department-driven, data-sharing partnership among states. This data system could allow colleges to work with their states to track the success or failure of their alumni, no matter where they live. Twenty-two states have signed on so far. However, the data sharing system will only work if all 50 states sign the agreement. For students thinking about where to go to college, this could help them pick programs more likely to lead to earning a decent living. This is especially important for the growing number of minority and low-income students today on America’s campuses, largely at community colleges and open-access four-year colleges.But students are not the only ones who can benefit from this new information. Colleges will have a chance to examine whether their degrees are matched to labor market needs. In March of 2012, the US Bureau of Labor Statistics reported 3.74 million unfilled jobs. The National Association of Manufacturers reports 600,000 jobs go unfilled because there are not workers available with the skills to fill them. Colleges that assess employment outcomes for their graduates can see where such jobs are in their communities and expand programs that lead to solid jobs. This does not require dismantling philosophy, visual arts, or other disciplines that instill critical and creative thinking employers want. It does mean evaluating whether students can get what they need for good jobs while paring certain programs whose graduates are not getting jobs.Colleges can also use labor market information to assess and improve program quality. If an assessment of the local labor market matches college programs but program graduates aren’t being hired, that suggests a problem with program quality. Colleges can use employment data to understand which programs need improvement—whether in their information technology, engineering, or history degree programs—and then speak to employers about what graduates are missing that may be keeping them from being hired or earning competitive wages.That is a quantum leap from where we have been, and will begin to make labor market outcomes a key metric of value and excellence in the college sector. It’s time for states to make sure this happens by entering the data-sharing agreement. It’s the right thing to do for colleges striving to get better. It’s the right thing for students, their families, and the students’ future employers.Josh Wyner is executive director of the College Excellence Program at the Aspen Institute, an international nonprofit that seeks open-minded dialogue and enlightened leadership.

How the Internet powers German small businesses

Tuesday, April 24, 2012

(Cross-posted from Google's European Public Policy Blog)
In Germany, we’ve long believed that the Internet helps create innovative new small businesses - and that SMEs that go online, grow faster, export more and create more jobs than their offline competitors. But to prove it, we needed solid evidence. So we commissioned the Institute of the German Economy in Cologne (IW Cologne) to find out how the Internet has benefited SMEs - and the German economy.

The findings, released this week, are startling. Since 2007, they estimate that German entrepreneurs have founded 28,000 new businesses using online services from Google and other web companies. These new businesses have created nearly 100,000 new jobs and in 2010 generated EUR 8.6 billion in sales.
As part of the research, the consultants more than 11,000 Google customers in Germany. About two-thirds of them already sell their products online, a much higher proportion than the German average (a quarter of German businesses engage in ecommerce). Our customers report that selling online has kept them nimble and able to react quickly to new opportunities, reaching new customers (78%) or even new markets (35%).
The new study suggests that online business is particularly effective for small companies with up to nine employees. On average, these small businesses generate 42% of their sales via online advertising, while companies with more than 50 employees tend to generate only around 15% of their revenues via online.

Small, Internet-savvy businesses are also more innovative than the German average. In 2010, 20% of Google customers had their own research and development operations - nearly twice as many as at the average German company. Those same companies achieve 36% of their turnover with new products and services that they developed themselves, compared to only 23% for companies for whom the Internet plays a minor role.

“Of course there is no app for business success. But it is clear that savvy Internet use has massive advantages”, says Rene Arnold of the IW Cologne. “The internet is the steam engine of the 21st century.”

posted by Ralf Bremer, Senior Communications Manager at Google Berlin

Crowdsourcing job creation

Monday, April 9, 2012

With last week’s signing of the JOBS Act, startups will, for the first time, be able to raise capital from ordinary people through crowdfunding. Crowdfunding is the crowdsourcing of investment in growing companies. Crowdfunding expands the pool of capital available to startups by including unaccredited investors and pushes the whole process online so it doesn’t matter whether you are in San Francisco, California, or Sioux City, South Dakota.
Crowdsourcing is used successfully to solve difficult scientific problems and to answer everyday questions. Taking the process of innovating and accessing information out of siloed government and corporate institutions, crowdsourcing provides solutions in an efficient way while simultaneously gathering valuable social proof from a large sample size.
While often ineligible for regular bank loans because of lack of assets, startups in this country have a couple of options when seeking financing as they grow. SBA-backed lending and community development banks offer loans to small businesses; however, these loans can be 3.5% above market. For high-growth startups, equity financing makes more sense, but less than 3% of startups receive any financing. Less than 1% of Americans are angel investors. But, if Americans invested 1% of their total existing savings and investment capital in startups, there would be more capital available than all VCs and angel networks combined.
The U.S. stands to gain from having more startups. According to the Kauffman Foundation and the National Bureau of Economic Research, new companies are the primary driver of job growth in this country. An NBER study on job creation found that new companies create three million new jobs a year while older companies lose one million jobs annually.
As President Obama said last week when he signed the bill into law, “new businesses account for almost every new job that’s created in America.” So, let’s crowdsource job creation. Let’s crowdsource the financing of the companies creating jobs. This is the new meritocracy of financing—where anyone can compete and everyone stands to win. The U.S. is a nation of entrepreneurs, so let’s invest in each other.Posted by Melanie Plageman, Co-Founder of Motaavi

Pinball & data-driven public policy

Wednesday, March 21, 2012

Over the last 40 years, copying technology decimated an industry that was once bigger than Hollywood.

What should public policy have to say about the fall of the pinball industry and the technological changes that led to it? Obviously, no one would support a Pinball Protection Act—but why not? If you care about data-driven public policy, it’s an interesting exercise.

As you can learn about in the documentary film, Special When Lit (Hulu; Netflix), pinball made more money for the American economy between 1955-1970 than the movie industry. Though pinball was illegal in many major markets during this time (with New York leading prohibition-style raids on arcades), teenagers went in droves down to “honky tonks” to get their fix, and popular media like Happy Days and Tommy encouraged the trend.

But as video game platforms flourished, the pinball industry faded, and now only a single company manufacturers pinball machines in the U.S.

If we measure innovation by whether competitors copied to get an edge or whether particular competitors were harmed, we’re measuring it wrong. After all, developers for systems like Nintendo copied the idea of pinball and adapted it to their systems; similarly, pinball came preloaded with Microsoft Windows 95, without a license fee being paid to pinball’s original creators. But even though this copying removed some incentive for kids to trek down to arcades and thus clearly harmed traditional pinball companies over the long run, we wouldn’t consider it bad for society.

The right measurements would focus more on the net economic and social impact of a technological shift. Of course, a portion of the impact was negative for some people, but the net impact of the video game industry has been extraordinary. Consider these metrics, for example: video games alone are now an $80B industry; consumers spend more time enjoying games than ever before; and “the art of video games” is now an exhibit at the Smithsonian.

This is a simple example that is meant to illustrate a simple point, because it’s a lesson that has implications for public policy more generally. Technological changes that may initially seem like a net negative to some sectors may end up being huge net positives for those same sectors. In order to harness those changes and expand their impact on society even further, public policy needs to measure them right. Only then can we start to make data-driven policy a reality.

Posted by Derek Slater, Policy Manager at Google

To grow the Internet economy, focus on small businesses

Friday, January 27, 2012

Over the past year and a half Google has invested significant resources in studying the impact of the Internet on economies around the world, the highlights of which are illustrated at www.valueoftheweb.com.

But we didn't have any insight into the Internet's impact on less developed economies. For example, how does the Internet’s impact on the economy in Turkey or Mexico compare with its impact in France? McKinsey & Company recently analyzed the economic impact of the Internet in 30 “aspiring” countries with both the scale and dynamism to be significant global players in the near future.

Roughly half the world’s Internet users are in aspiring countries according to McKinsey. But 64% of the people in these countries aren’t even online yet! That means there is enormous opportunity to increase Internet penetration in these markets, and in fact, penetration has been growing at 25% per year for the past five years. This growth potential is not limited to users, either—143,000 Internet-related businesses are created every year in these countries.

What should policymakers in these countries do to support the growth of the Internet economy? First and foremost, focus on getting small businesses online. 1.9 million jobs are already associated with the Internet in aspiring countries, but it’s astounding how quickly job growth occurs in comparison to more developed markets. Whereas in European countries we see 2.4 jobs created per job lost, this statistic jumps to 3.2 jobs created per job lost in the SME sector in aspiring countries. In a survey of SMEs across eight aspiring countries, McKinsey found that those spending the most on Web technologies have grown nine times as fast as those spending the least over the past three years.

A few minor policy changes would make it easier to get SMEs online in aspiring countries. First, governments should take steps to reduce the cost of doing business online. It cost $143 to register a domain in Malaysia, compared to $24 in the United States. In Nigeria, it takes 31 days to start a business, compared with seven days in Egypt. Making it more affordable for small businesses and entrepreneurs to get started and online quickly will have an immediate impact. Second, we need to encourage the development of human capital and improve access to financial capital. Digital literacy is low in countries like Morocco and Hungary, while Argentina lags behind its peers in access to loans and venture capital—barriers that lead to fewer people starting businesses online. Finally, access to the Internet in general needs to be more affordable and open. The baseline cost of access to the Internet in Turkey is almost twice the Central and Western European average, while half of Mexicans surveyed cite the cost of access and hardware as the primary barrier to getting online.

It’s clear that the Internet is quickly becoming a critical part of growing the economy for both developed or aspiring countries. Adopting the right policies to facilitate innovation should be top of mind for anyone considering Internet regulation.

posted by Betsy Masiello, Policy Manager at Google