Paul Donovan - Chief Economist at UBS Global Wealth Management

“In this period of dramatic structural change, I do not care about technology”

“Tech is the least important part of the next 20 years,” Paul Donovan, Chief Economist at UBS Global Wealth Management, said at Calcalist’s Meet &Tech event. “The economic transformation, the economic change, does not come from technology, but how we use it.”

Paul Donovan
(Tal Azulay)

Paul Donovan, Chief Economist at UBS Global Wealth Management, does not mince words. In his address at Calcalist’s Meet & Tech, a Tel Aviv event featuring representatives from Calcalist’s “50 Most Promising Startups - 2022”, he boldly stated “I do not care about technology.” As the stunned audience stared at him quizzically, Donovan explained what he meant was that “the economic transformation does not come from technology, but how we use it.”
The 4th industrial revolution
Donovan’s topic was the economic outlook in what he believes is “the most dramatic structural change that the global economy has experienced in 250 years, the 4th industrial revolution” and how automation, robotics, digitalization, and social media are transforming the way the global economy works.
Donovan prefaced his remarks by saying, “I am very conscious of the audience that I am speaking to when I utter the next words: In this period of dramatic structural change, I do not care about technology. Tech is the least important part of the next 20 years. Because the economic transformation, the economic change, does not come from technology, but how we use the technology. And that means that the focus for the next 20 years is on having the right person in the right job at the right time.”
Lessons from the 1st industrial revolution
“We can see the importance of implementing technology rather than just tech, from the 1st industrial revolution,” Donovan explained. “In the 1st industrial revolution, James Watt comes along with the steam engine and industrialization comes to the fore. But James Watt did not invent the steam engine. The steam engine was invented 1,600 years earlier by Hero of Alexandria. That creates the change. That creates the transformation - but it's not implemented properly. And it's only when Watt came along in the 1760's and implemented that we actually got the economic disruption.”
“What this means,” Donovan continued, “is that we now have to concentrate on creating a culture, a corporate culture, a labor market, which focuses on getting the most out of people. If you get that right, success can be huge. If you get that wrong, it is an unmitigated disaster.”
Going back to Bletchley Park
Donovan then took his audience back to the end of WWII. “We have a classic example from the dawn of modern computing. In 1945, the UK led the world in computer technology by a huge margin. No country came close to the UK back then. That was because of the work at Bletchley Park, cracking the German “Enigma” code, an action which reduced the length of the Second World War by at least two years.”
Donovan explained that Bletchley succeeded in taking existing technology and using an extraordinarily diverse range of people to turn that technology into something that really changed the world. “Bletchley had people from different ethnic backgrounds, different religions. It had different social classes represented. The leader of the programming program was Alan Turing, who was openly gay. There were even women at Bletchley Park - and by 1945 standards that was extraordinary. And this allowed the technology to be applied in an innovative and creative way which produced stellar results.”
However by 1955, the UK technology sector was over. “It was finished – and it never recovered,” Donovan said. “And it was over because of a shortage of manpower. The problem was most of the technology experts in 1945 were women and after 1945 women weren't allowed to work once they got married. The rules changed. They went back to the old prejudiced way of doing things and that human capital that had the power to transform technology into economic success was just thrown away.”

The key: Diverse workforces
Absorbing the lessons from 1945, Donovan brought the topic back to today. “This means that as we look ahead, I think it is going to be increasingly important to have diverse workforces implementing the technology in order to achieve economic success. If you have decision-makers sitting around a table, all of whom are white, Anglo-Saxon, middle-aged, bald men – clearly a demographic I am not opposed to (he said with a self-deprecating smile) – you are going to end up with a mono-culture of thinking and in that environment you are going to miss the opportunities that tech is going to be providing. And what’s worse, you are going to be missing the risks.
“We need to focus on the diversity and the inclusive nature of human capital, if we are going to maximize the economic potential of technology,” Donovan said. “This applies in Israel as much as any other country in the world. In my view, Israel has made significant strides in the last 15 years or so that I have been coming here, in implementing its ideas, taking the innovations further, but it is a journey that is still incomplete.
“We often hear about the war for talent, the struggle to find the people we need,” Donovan said, “but all too often there is the pool of talent available, it's just that they don't look exactly the same as we do and we don't utilize them properly. So in my view, Israel, along with many other countries is moving in the right direction, but if it is going to succeed in the 4th industrial revolution, it is the human capital, more than the technology itself, which is going to define the parameters of that success.“
You can watch Donovan's full presentation in the video above.