Start Ups are key to long term relative economic viability and growth

What the boom could mean for the economy. The last time the United States saw a significant uptick in productivity growth was in the 1990s during the dot-com boom. Productivity growth means we can make more stuff in less time, which causes products and services to be more abundant and cheaper. It's like fairy dust being sprinkled on the economy, lifting society's standard of living. "The first thing that happened back in the early 1990s was not increases in productivity and the like," Haltiwanger says. "That came later." What came first, he says, was a surge in new startups. He says startup booms are a "leading indicator" of this virtuous cycle for the economy. Startup booms, Haltiwanger says, are both a reflection of technological innovation and a huge driver of innovation. Startups figure out how to use new technologies. They experiment and develop new products with those technologies. They force competitors to adapt and innovate. I should mention, however, that when I spoke to Haltiwanger back in 2021, he was also bullish that the startup boom would result in a long-awaited boost in productivity growth. But three years later, he admits, we still aren't seeing it. "The productivity statistics are pretty anemic," he says. There's a cliché used in articles when discussing whether technological innovations will ultimately lead to productivity increases: references to the late economist Robert Solow. In the late 1980s, when the personal computer was spreading like wildfire through the U.S., Solow famously wrote, "You can see the computer age everywhere but in the productivity statistics." Haltiwanger stresses that Solow wrote this back in 1987. And, he says, "The productivity surge didn't really show up until the mid-1990s." It takes time. The economist Erik Brynjolfsson and others have done research suggesting that the effect of new technologies on productivity growth may even follow a "J-curve." That is, productivity may actually dip before it shoots up, because businesses need to invest in the new technology and spend time figuring out how to use it. Only then will they and the broader economy see tangible results.