Ricardo Hausmann is asking one seminal question this week, one of those difficult questions that, according to Peter Thiel, can anticipate the future. If we can call, email, Skype, or even have a telepresence, why do companies spend more than $1.2 trillion a year—a full 1.5% of the world’s GDP—for international business travel? And why is business travel growing faster than the global economy, at 6.5% per year? Why do we need to move the brains, and not just the bytes?
Haussman puts forward two closely related reasons:
- A lot of our brain activity happens unconsciously. Attending a meeting f2f we receive and process much more information and we are better able to evaluate, empathize, and bond in person than we can with today’s communication technologies.
- The brain is designed to work in parallel with other brains. That is why we have design teams, advisory boards, inter-agency taskforces, and other forms of group interaction. Conference calls cannot match direct interaction.
In other words, bytes weigh too much and/or are too sticky to move easily across current communication technologies. The amount of travel would then be related to the amount of know-how, or tacit knowledge that needs to be moved around:
The fact that business travel is growing faster than the global economy suggests that output is becoming more intensive in know-how and that know-how is diffusing through brain mobility.
César Hidalgo and Ricardo Hausmann developed a view of economic growth and development that gives a central role to the complexity of a country’s economy. The complexity of an economy would be related to the multiplicity of useful knowledge embedded in it. Tacit knowledge plays a key role in technology, and is what constrains the process of growth and development. This knowledge is costly to acquire and transfer.
The answer to Haussman’s question is key, not only to explain why we spend so much in travel, but also why economies of agglomeration still play a pivotal role in the digital economy. And particularly, why do cities exist at all and, in fact, we expect them to continue to grow during this century?
The fact that information technologies favour more concentration of the economic activity instead of a more distributed economy is completely counter-intuitive. And it is likely a clue that our current digital tools are not rich enough yet:
Media naturalness theory argues that since our Stone Age hominid ancestors have communicated primarily face-to-face, evolutionary pressures have led to the development of a brain that is consequently designed for that form of communication. Other forms of communication are too recent and unlikely to have posed evolutionary pressures that could have shaped our brain in other direction. Using communication media that suppress key elements found in face-to-face communication, as many electronic communication media do, thus ends up posing cognitive obstacles to communication. This is particularly the case in the context of complex tasks (e.g., business process redesign, new product development, online learning), because such tasks seem to require more intense communication over extended periods of time than simple tasks. (Wikipedia, “Theories of Technology”)
Now let me change the question: will the evolution of communications technologies be eventually able to overcome the present limitations of remote collaboration, or—as Hausmman provisionally concludes—, will we continue to travel even more to cope with the increasing complexity of the global economy?
I cannot answer this question, though I have a hunch that sooner rather than later we will see with surprise that a lot of what we are forecasting about business travel will turn out to be wrong.