I came across a fascinating read that juxtaposes two of my favorite subjects: enterprise IT and macroeconomics.
In "How The Internet Is Making Us Poor", Christopher Mims reprises an excellent case around how progressively more use of enterprise IT is fundamentally restructuring our economy, and -- more importantly -- our labor force.
Vast categories of familiar middle-class jobs ('cognitive workers') are now at risk around the globe, thanks to software eating the world. It's happened before (e.g. agriculture, manufacturing) but perhaps never at this pace and scale.
While I'm not advocating a Luddite stance, perhaps we all should be somewhat more cognizant of the macro changes we are collectively enabling, one modest IT project at a time.
The Essence Of The Argument
In many circles, technology has now become the third ingredient of the classic two-part recipe of capital and labor. In essence, the intelligent use of technology maximizes the economic output of the other two ingredients: less capital and labor required for a given level of value creation.
The author argues rather persuasively that we are well beyond the critical mass of widespread use of technology, especially in more developed economies.
Examples are everywhere: activities once thought to be the sole domain of humans are quickly being replaced by smart software and cheap hardware. Travel agents today, personal financial advisers tomorrow.
Think about that the next time you see a Google self-driving car, and how many taxi drivers there are in the world. Or maybe medical advice from Watson?
The evidence is everywhere -- we are starting to see the macro effects: stubborn unemployment, income inequality, restructuring of entire industry segments, social costs and so on. Christopher Mims' thoughts are largely based on the landmark book "The Race Against The Machine" by Brynjolfsson and McAfee. A great read for your Kindle, BTW.
I have spent my entire adult career helping to figure out ways to use technology to make organizations more productive, more efficient, more competitive, etc. Between my efforts and many millions of other like-minded people -- we have succeeded -- but there's a now a cost to be paid.
While we could debate as to whether or not is a good thing or a bad thing, that's irrelevant from my perspective: it's a thing that's happening, so adjust your plans accordingly.
Stepping Back A Bit
If one studies how one of the more familiar ingredients -- capital -- is produced, distributed and consumed -- you'll notice a wonderfully efficient and mature market. Capital inevitable seeks out the greatest (risk-adjusted) returns, and largely flows frictionless and unimpeded. Smart uses of capital are rewarded; ill-advised ones are punished. And there is a multi-trillion dollar industry associated with the production, distribution and consumption of capital.
Moving next to labor, we have a similar -- but perhaps less efficient -- market. Governmental policies aside, we'd like to think there is a global market for skills and expertise. We (as individuals) produce; organizations consume.
How we think about education and our careers is very different now than just a few decades ago. Do we now go to school to learn, or learn how to learn? And, of course, there is a multi-trillion dollar educational sector that ostensibly should be training us for what we will need in the future.
And, finally, technology. Historically, the widespread use of technology was inherently difficult: expensive, complex, skilled-labor intensive, inflexible, etc. Entry costs were high. But, of course, the internet and the cloud service model is changing all of that very quickly: sophisticated technology services are now starting to resemble their other counterparts in terms of efficiency and scale.
All you need to spin up a thousand servers these days is a credit card, and someone who knows how to use it :)
If existing trends continue, we can start to appreciate an economic world where all three inputs: capital, labor and technology -- are supplied as a service, with a global and efficient marketplace. They become the new commodities in any modern business model.
There Is No Turning Back
One might think that perhaps we ought to slow down the pace of technology-driven transformation. But it's not going to happen. We -- as individuals and organizations -- are highly motivated to improve the state of of our world. We inevitably look for better ways of doing things, new things to do, etc.
We get rewarded both financially and emotionally for making our little worlds better places by building and improving things. That's the engine that drives the world.
The technology is there (and getting ever-better), it's getting ever-more accessible -- how can we possibly resist? The answer is -- we can't, and we shouldn't.
How Might We Think About Things Going Forward?
The phrase "digital optimist" comes up frequently when discussing this vexing topic -- the assertion is that -- in the big scheme of things -- this reformation of our economy a very good thing. I certainly am a digital optimist. Why?
First, the societal pie is inevitably bigger. More efficient production and value creation from the same number of inputs creates economic wealth -- at least at a macro level. More resources are theoretically available to address the challenges that society faces. A rising tide floats all boats. That should give us a bit of optimism.
Second, a new form of differentiation will be rewarded. A disproportional amount value will be likely created from two groups of people. First, the people who know how to use technology resources intelligently to create outsized value for the organizations they work for. Previously, I've dubbed this "executive digital literacy", and -- well -- it appears to be in very short supply these days.
But let's not ignore the supply-side either: technologists who know how to deliver differentiated solutions in support of the first group will *also* create disproportionate value -- whether they be IT people, vendor people or anything else along those lines.
Not to be over-general, but in the financial world people who are very good at supplying and leveraging external capital do quite well. As do people who know how to find and leverage unique skills and labor expertise. The pattern is somewhat familiar.
Grappling With Social Dislocation
Marc Andressen has a sobering quote:
“The spread of computers and the Internet will put jobs in two categories,” said Andreessen. “People who tell computers what to do, and people who are told by computers what to do.”
I guess I know which category I'd like to be in.
Every prior economic reformation produced social consequences: great numbers of displaced workers who found it difficult to find work in the new economy. And I don't think anyone is trying to minimize this unfortunate effect this time around.
Most of the recipe has to be educational: re-thinking how we educate and continually improve people's skills throughout their lives vs. just at the outset.
If you are any form of a knowledge worker, you're aware of the need for a life-long education approach towards doing your job using modern tools and methodologies.
There will always be in-demand skills and expertise -- you've just got to figure out how to keep your inventory as fresh as possible.
But the rate of change appears to be far greater than our collective ability to re-skill and re-deploy our labor forces. Unemployment (and it's close relative underemployment) is likely to be endemic for decades to come.
The predictable response from many is that perhaps the government should "do something", but government policies have historically been very ineffective in dealing with fundamental economic shifts. You can perhaps minimize a bit of the damage, and perhaps accelerate progress in a few areas, but that's about it.
I shudder to think when we'll see some misguided legislative proposal at some point to either (a) discourage the use of technology, or (b) force organizations to hire more people.
No, I don't have any sort of good answer here. Many millions of job categories and associated skills will become obsolete very quickly, to be replaced with strong demand for a smaller number of more highly-skilled people.
Managing The Social Backlash
Any form of societal disruption tends to result in the impacted lashing back at the disruptors. Those that accelerate economic disruption will more likely become the target of crusades and agendas against evil profit-makers everywhere.
In one sense, it's almost paradoxical -- the better you do as an organization in using technology to change the way work is done, the more you potentially expose yourself to criticism and legislative agendas.
Charting Your (And Your Organization's) Course?
Not to be too self-centered, but even on airplanes they tell you to take care of your own oxygen mask before helping someone else :)
I've already shared most of my thinking on this topic -- the world is changing, what should we do?
Start be thinking about how you'll build (or improve) your digital business model. Taking the topic of digital literacy as a matter of importance. Transforming IT to be the IT service provider of choice and becoming a value-creation center for the organization. Figuring out how you'll become more analytically proficient in a world of big data. And probably more.
For those of us involved in the technology world -- building or using -- we should count ourselves as somewhat fortunate.
But that doesn't absolve us of our responsibility to fully consider the changes we are collectively wreaking on society at large.