In a recent Harvard Business Review article, ‘The Great Decoupling,’ Erik Brynjolfsson and Andrew McAfee, authors of, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, face the reality of wage stagnation in average incomes in the United States and the elimination of many mid-level jobs.
Early in the article Brynjolfsson says: “Digitization is creating new types of economic disruption. In part, this reflects the fact that as computers get more powerful, companies have less need for some kinds of workers. Even as it races ahead, technological progress may leave some people—perhaps even a lot—behind.”
And McAfee follows with: “There’s no economic law ensuring that as technological progress makes the pie bigger, it benefits everyone equally. Digital technologies can replicate valuable ideas, processes, and innovations at very low cost. This creates abundance for society and wealth for innovators, but it diminishes the demand for some kinds of labor.”
Three Issues with The Great Decoupling
We have to ask ourselves if this is inevitable. For the most part I like this. Anything that can be automated means I can do something else. There are three areas that bother me though. First, is personal motivation. If someone loses their job to automation, are they motivated to learn a new skill to engage in a new role, so that they can continue to positively contribute to society. The second factor is tougher, because we have to ask, that as the industrial age wanes, and the digital age takes over, what will people value. In other words, will the kind of work people find fulfilling be something that society values.
And third, we have to address wealth distribution. As U.S. corporate profits rise to heights in the aftermath of the great recession, we are not even seeing labor’s share of GDP keep up with that trend, and in fact, it has fallen. Wages as a percentage of GDP are ten percent lower than they were in 1950. Corporations, however, are accumulating great amounts of capital that has not been taxed and that isn’t being invested in anything.
Innovation in Wealth Distribution
We have to ask if legislators need to insist that the large holders of cash in the technology industry redistribute their wealth—or better, do companies like Apple and Microsoft, Google and Facebook — including not-for-profits like the Gates Foundation — start investing their money in creating the new skills required to really use technology effectively rather than to just create it. I think we really need to look not at solutions where government redistributes wealth, but how to encourage businesses do it better. The companies that can do that will be winners. Unfortunately, they have their own investment portfolios and advisors that aren’t great at looking at these issues. As I said, we will need to encourage, and we will need to be patient.
The work displacement is real, and it isn’t all in repetitive factory jobs. It can also be seen in the service industry. Let’s take a look at an example of a bakery. In traditional bakeries, a person working there would get to know the clients, they would greet them personally every day and anticipate their orders. Today, we do this with technology and loyalty programs. The person you have never met sees you are coming to the counter and anticipates your order. But this person isn’t necessarily knowledgeable about baking or customer service, or even interested in becoming so. The traditional bakery worker would stay perhaps their entire career at one bakery, earning higher wages every year. Today, that person is probably a part-time college student with no interest in a career. It isn’t at the same scale as people being replaced by robots in a factory, but it is just as much a labor displacement where automation makes it less expensive, but results in multiple reductions in knowledge and customer experience. But if we only look at the profits of the bakery, their margins, then everything looks OK, at least for now.
The next issues becomes what to do with the profits. That margin goes back into the capital. What happens to that capital? Who do you give that to? If an organization accumulates huge surpluses that go beyond a capacity or willingness to expand the business, do they in turn encourage personal investment in the people they know—do they encourage people to study or explore new areas where they want to create value? Do they go as far as creating new definitions of value?
One way we are seeing this happen is through “B” corporations. These corporations can get around the traditional view of shareholders, who ultimately expect financial returns, and focus on social and environmental performance, accountability and transparency.
Redefining the Relationship to Work
But we also have to redefine our relationships with those who work. We have to encourage engagement, we need to ask how long we tolerate those who avoid participation. I create an environment where I don’t require people to attend meetings. People choose which meetings they need to attend. What do we do with the employee who chooses to never attend a meeting? This approach is set-up to encourage personal responsibility, not to let people avoid it. We have to consider this question when considering how to re-engage displaced workers.
In many ways, the population isn’t ready. We have been giving them junk food and stupid TV. If we end up redistributing wealth, it can’t just be a check for doing nothing. It has to be tied to people doing something positive to contribute back.
If we think about new forms of value, I think we are seeing the resurgence in creative skills too, which is really encouraging. It’s already there in some ways. It probably isn’t as strong as what we are seeing with the push for STEM, but the creative piece is back also with innovation. If we don’t have people who can create and collaborate, then we can’t create new value. Businesses are starting to realize this.
Investing in Leveraging Technology, not just Making It
I think we have to really worry about a zero-sum game where technology companies only focus on creating technology and not how it is used. If we end up bankrupting the economy, no one will have the means to use the technology, let alone the interest in anything beyond survival. We need to create a new set of values that are more holistic, and more connected. We need to help people imagine innovative ways to take advantage of the technological capabilities that go beyond simple ideas of productivity.
I’m all for eliminating the complexities of the digital economy, so I can concentrate on bringing value to the human economy.