Tag: economy

Peak employment and the political challenge

The current angst about employment in an age of automation is a political, not technological, problem

This week’s edition of The Economist asks about the Future of Employment and where the jobs are in a society where work is increasingly done by machines.

For the Economist the conclusion is that the future of employment is ‘complex’ and observes economists and politicians haven’t given enough thought to the effects of the changing workplace and the dislocation of many workers.

Much of the Economist’s story is based around the ideas of professors at MIT Erik Brynjolfsson and Andrew McAfee in their upcoming book “The Second Machine Age”.

The race with the machines

Professor Brynjolfsson gives his view at TED 2013 in the key to growth? Race with the machines, a presentation countered by Robert Gordon in the ‘death of innovation, the end of growth’ and followed by an excellent debate between the two.

Brynjolfsson cites the dilemma of bookkeepers being displaced by software applications such as Intuit Turbotax as an example of where service sector staff are being displaced.

“How can a skilled worker compete with a $39 piece of software?” Brynjolfsson asks.

“She can’t. Today millions of Americans do have cheaper, faster, more accurate tax preparations and the founders of Intuit have done very well for themselves. But 17% of tax preparers no longer have jobs.

“That is a microcosm of what’s happening not just in software and services, but in media and music, in finance, manufacturing, in retailing and trade. In short, in every industry.”

The great decoupling

Brynjolfsson’s key point is that workers’ wages have been decoupled from productivity and that the workforce isn’t sharing the rewards of improved practices and increased wealth.

That is certainly true over the last forty years, however that may not be a technological effect, but the business consequences of liberalising the financial sector which has seen massive pay increases to the banking industry and managerial classes that has been way out of kilter with the rest of the workforce.

It may well be the current golden era of high executive salaries is a transition effect of an evolving economy, albeit one where our grandchildren will puzzle over an era where a failed executive can receive a $100 million payout on being fired.

As The Economist points out technological change itself tends to create new jobs that make up for those displaced in old industries, this is a view supported by GE’s Chief Economist Marco Annunziata.

The main problem that Brynjolfsson identifies is the medium term issue of dislocated workers finding themselves out of work with superseded skills and, as The Economist point out, it’s clear the developed world’s political leaders haven’t though through the consequences of that transition.

In almost every sense, the current crisis of confidence about employment prospects is more a political and social problem rather than technological.

Helping displaced workers is going to be the greatest challenge for today’s generation of business and political leaders, the real question is are they up to that task?

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Who pays for the internet of things?

Our assumptions about where the money will be made from the internet of things may turn out not be so.

“If there’s one number I’d like you to remember, it’s 19 trillion.” Cisco CEO John Chambers told the 2014 International CES during his keynote speech earlier this week.

Chambers was referring to the economic value of the Internet of Things or machine to machine technologies as they get rolled out across society, but who pays for the connectivity?

In the case of the smart home, office, factory or farm the data costs go onto the existing internet bill, but once you get out of the office or on the road then the bills start mounting up as systems start connecting to a cellular or satellite network.

Certainly the telcos see the opportunity with Ovum Research predicting telco’s M2M revenues will grow to reach US$44.8bn over the next five years.

While for logistics companies and similar businesses this will be just another cost of doing business, for many consumers being stuck with an expensive mobile data plan with their smart car might not be attractive.

As car manufacturers start to push their vehicles as being more like smartphones, suddenly the choice of network provider, compatibility with apps and operating systems starts to become a valid concern.

In that world, choosing a car on the basis of which telco it connects to is a sensible idea.

Of course it may be that consumers may not own cars by the end of the decade. The vision of companies like Zip Car and Uber is that we just call for a towncar or pick up a share car when we need one.

Certainly that vision makes sense from an economic perspective and the trends right now show that millennials are nowhere near as interested in cars as their parents and grandparents were.

As with every technological change, it’s not always obvious in the early days how things will pan out. In 1977 the founder of Digital Equipment Corporation Ken Olsen said, “there is no reason anyone would want a computer in their home.” Within 15 years he was proved very wrong.

The motor car drove western society during the Twentieth Century and to assume we’ll continue to use it the same way in the 21st is as flawed as believing a hundred years ago that we’d continue to use horse carriages the same way as previously.

So the assumptions about where money is to be made with the Internet of Things may turn out to surprise us all.

 

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Chinese earthmovers move up the value chain

The Chinese construction equipment industry shows how the nation is moving up the value chain

After yesterday’s post on the motor industry’s relevance in the 21st Century, a related article about Chinese construction equipment appeared in The Economist.

According to CLSA – formerly Credit Lyonnais Securities Asia and itself now fully owned by Chinese investment house CITIC – the quality of Chinese construction plant is rapidly approaching that of the Japanese and US industry leaders.

The Chinese have achieved this in a short period through a combination of joint ventures and strategic takeovers and that should worry its more established competitors.

How the Chinese have moved up the value chain in construction plant is a small, but important example, of how the country is positioning itself as a higher level producer as its economy and workforce matures.

For trading partners and competitors it’s worthwhile thinking how a more affluent and higher tech China is going to affect their businesses, thinking of China as just a cheap source of low quality labour isn’t going to cut it for much longer.

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Reflections on our good fortune

The UN Millennium goals are still some way off being achieved and it’s something we should all think about.

In his Christmas message, investment analyst John Mauldin quotes GaveKal’s Louis Gave on the good news in the global economy, that the UN has achieved some of its Millennium goals of alleviating global poverty.

The UN has eight goals that were set out at the beginning of the century and in a progress report issued in September, United Nations Secretary-General Ban Ki-moon laid out the program’s successes.

Of the eight goals, Ban Ki-moon cites reducing poverty, increasing access to safe water, improving the lives of slum dwellers and achieving gender parity in primary schools as being successes under the plan, although there’s much room for improvement.

“The picture is mixed,” Mr. Ban said. “We can do better. The best way to prepare for the post-2015 era is to demonstrate that when the international community commits to a global partnership for development, it means it and directs its resources to where they are most needed.”

A sad statistic is that aid to the 40 poorest countries fell by 7.9% in 2012 and the Doha round of global trade talks, where the hope is trade liberalisation will help the most disadvantaged economies, remains stalled.

From a technologist’s point of view the adoption of the internet and IT is of interest with the report claiming the number of internet users in the developing world grew 12% while broadband penetration increased by a quarter.

While those numbers are encouraging, it’s hard though not to think that in the poorest countries access to more fundamental agricultural technologies and infrastructure – such as reliable electricity, water and roads – is more critical to development than the internet and ICT.

At Christmas, it’s worthwhile those of us in the affluent developed world consider how fortunate we’ve been to be born in a place and time that makes us the best fed and most comfortable humans that have ever lived.

That good fortune isn’t shared by everyone on our planet and that’s something we should be considering when we look at the consequences of our personal economic, political and technology choices.

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When entrepreneurship gets old

As the baby boomers retire, the cruel reality of demographics is forcing them back into business

As part of their series on America’s aging population, Bloomberg looks at the story of 61 year old Lee Manchester who lives in a friend’s basement.

While the Bloomberg story focuses on the contrast between Lee and her father who benefitted from the post World War II economic boom, the real story is Lee’s work history.

Key to her work history is her setting up a business in 1986, that business failed in the late 1980s recession and Lee ponders what might have been had she not made that investment.

Lee sometimes can’t help dreaming about the trips she’d be planning if she’d invested the $150,000 she spent to start a construction company.

This is the downside setting up your own business that those currently peddling the cult of the entrepreneur don’t mention. If the business fails, and many do, then the costs can be high in lost savings and damaged career opportunities. Being an entrepreneur is high risk, hard work.

We may well find though that more people find themselves launching businesses in their older years as the economic realities of the post baby boom era start to be felt by communities.

In many respects though Lee is ahead of the curve, the generation behind her have no expectations of a long and affluent retirement, “the government will abolish the pension about two years before I retire” is the common theme among Gen Xer and Ys.

For GenYs and Xers this attitude is realistic, the demographic sums that worked for Lee’s father are now working against them while the post war economic system that guaranteed Lew Manchester a safe job and company pension ceased to exist in the 1980s.

Had boomers like Lee been thriftier, they would have still been hurt by a shift to 401(k) accounts from pensions in the 1980s. Thirty-seven percent of the elderly in the U.S. collect pensions, which provide some guaranteed income until they die. Fewer than 10 percent of boomers collect pensions, and that number is quickly shrinking.

Lew’s generation were the lucky ones, while the boomers – particularly the early boomers born between 1945 and 55 – believe they are entitled to similar benefits as their parents, their reality is going to be a much harder and precarious existence into old age.

While Lee is paying the price for interrupting her career with a stab at running her own business, in many ways she’s better prepared for a future that is going to require people of all ages to be more entrepreneurial.

In fact, many of those baby boomers forced to become entrepreneurs may well enjoy it, “launching the business was the most fun I ever had and my way to fight a frightening medical diagnosis” says Lee.

As the reality of their financial situation dawns upon them, many of Lee’s contemporaries are going to find themselves launching businesses long after the age they thought they were going to settle into a sedate retirement – lets hope they have fun too.

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Cities of Industry

Governments are beginning to recognise manufacturing is part of any advanced economy, some though are struggling to abandon the last thirty years of ideology.

The latest Decoding The New Economy interview feature Laurel Barsotti, Director of Business Development at the City of San Francisco discussing how the city refound it’s entrepreneurial mojo.

A notable point about Laurel’s interview is how she has similar views to Barcelona’s Deputy Mayor Antoni Vives about the importance of industry to San Francisco.

For some time it was an article of faith in the Anglo-Saxon world that the west had become post-industrial economy where manufacturing was something dispatched to the third world and rich white folk could live well selling each other real estate and managing their neighbours’ investment funds.

“Opening doors for each other” was how a US diplomat described this 1980s vision according to former BBC political correspondent John Cole.

It’s clear now that vision was flawed and now leaders are having to think about where manufacturing, and other industries, sit in their economic plans.

Barcelona’s and San Francisco’s governments have understood this, but others are struggling to realise this is even a problem as they hang on to dreams of running their economies on tourism, finance and flogging their decidedly ordinary college courses to foreign students.

For some political and business leaders this is a challenge to their fundamental economic beliefs. It’s going to be interesting to see how they fare in the next twenty years.

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It’s only technology

We’re doing ourselves a disservice when dismissing new technology stories

“We treated Bitcoin as a tech story but now it’s become a much more serious economic story,” said a radio show compere earlier today when discussing the digital currency.

One of the great frustrations of any technologist is the pigeon holing of tech stories – the real news is somewhere else while tech and science stories are treated as oddities, usually falling into a ‘mad professor’, ‘the internet ate my granny’ or ‘look at this cool gadget’ type pieces.

Defining the world we live in

In reality, technology defines the world in which we live. It’s tech that means you have running water in the morning, food in the supermarket and the electricity or gas to cook it with.

Many of us work in jobs that were unknown a hundred years ago and even in long established roles like farming technology has changed the workplace unrecognisably.

Even if you’re a blacksmith, coach carriage driver or papyrus paper maker untouched by the last century’s developments, all of those roles came about because of earlier advances in technology.

The modern hubris

Right now we seem to be falling for the hubris that we are exceptional – the first generation ever to have our lives changed by technology.

If technological change is the measure of a great generation then that title belongs to our great grandparents.

Those born at the beginning of last century in what we now call the developed world saw the rollout of mains electricity, telephones, the motor car, penicillin and the end of childhood mortality.

For those born in the 1890s who survived childhood, then two world wars, the Spanish Flu outbreak and the Great Depression, many lived to see a man walk on the moon. Something beyond imagination at the time of their birth.

It’s something we need to keep in perspective when we talk about today’s technological advances.

Which brings us back to ‘it’s only a tech story’ – it may well be that technology and science are discounted today because we now take the complex systems that underpin our comfortable first world lifestyles for granted.

In which case we should be paying more attention to those tech stories, as they are showing where future prosperity will come from.

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