New research: The Technology Paradox: Why More Investment Hasn’t Delivered More Productivity

There is something deeply paradoxical about the moment we find ourselves in. The organisations of the mid-2020s have access to technology of extraordinary power. Artificial intelligence tools that would have seemed implausible a decade ago are now available to anybody with a laptop. Yet by the most important measure of economic health – productivity growth – the advanced economies are performing no better than they were before any of this technology arrived. In some respects, they are performing worse.

This is not a new observation. The productivity puzzle – the persistent failure of advanced economies to return to the growth rates of the postwar decades – has been discussed since the failure to pull out of the slump caused by the 2008 financial crash. What is new is the scale of the investment being made in technologies that are explicitly supposed to solve it, and the growing urgency with which that solution is needed. Working-age populations are shrinking. Fiscal pressures are mounting. Geopolitical volatility is disrupting the global trading relationships on which economic growth has depended.

This report is PARC’s attempt to make sense of the paradox. It draws on a substantial body of economic research, organisational theory and emerging evidence on the deployment of artificial intelligence in organisations, to ask why technology investment has so consistently failed to deliver commensurate productivity gains and what conditions would need to be in place for that to change.