David Perell

The Future of Work

David Perell
The Future of Work

The Future of Work

Sometimes, it feels like we're living in a science fiction novel. Robots and sophisticated computer algorithms have workers around the world fearing automation. This widespread distress has contributed to today’s turbulent political environment and specifically, many of the issues that Americans grapple with today. 

The digital revolution is a fiercely powerful trend. A World Economic Forum study noted that 65% of students entering primary school today will end up working jobs that don’t exist yet. Yuval Noah Harari, author of Homo Deus: A Brief History of Tomorrow argues that 99 percent of human qualities and abilities are simply redundant for the performance of most modern jobs.

By nature, technological change leads to an exponential rate of change. Automation, speed, globalization, and complexity increase non-linearly over time. The result is an interconnected environment that is seemingly random and complex.

The law of accelerating returns says that human progress moves faster and faster over time. The law states that the rate of technological change doubles every year. Linear thinking has made sense until recently. The natural world changes in a slow and gradual fashion. Humans are biologically fit for a simple world with linear change. The modern world is complex and change is non-linear. We need fresh ways of thinking about the nature of work to succeed in this complex and rapidly evolving new world.

Today, skills that were once relevant for a lifetime are only relevant for decades. Soon, these skills will only be relevant for a few years. Ask anybody who is over the age of 50, and they will tell you that they are overwhelmed by technological advancement. Many of them “just do not get it.” The differences in how generational gaps think, learn and communicate expand every year. An eternal state of chaos and complexity is emerging. This reality of exponential non-linear change challenges the foundational institutions born out of the 20th century — namely education and jobs.

As the rate of change shoots skywards, computers and mobile technologies are uniquely enabled to process and synthesize these paradigm shifts.

How we prepare and respond to these changes will determine our ability to prosper in the 21st century work environment.

This new emerging work environment rewards an entrepreneurial, nimble mindset. Business owners and brand owners are plugging into existing technologies and selling their products to diverse populations around the world. The commoditization of distribution has given rise to global marketplaces that aggregate hundreds of thousands of unique individuals. Geographically limited and remote markets have turned global.

In this new world, people are incentivized to produce customized and diversified work for distinct niche markets. The next decade will give rise to companies and entrepreneurs that can connect with consumers on a more personal level. We are already seeing the end of mainstream, “one size fits markets — examples include razors, music, philanthropy, media, clothing, and cosmetics.

Routine tasks are increasingly being automated by powerful machine learning algorithms or low cost labor around the world. The result is a market that rewards human ingenuity and creativity, making it more possible than ever before to focus on what we, as 21st century workers, “do best.”

Alec Ross, the former Senior Advisor of Innovation for former Secretary of State Hillary Clinton explains how geographical areas are adapting to the 21st century. In his book, Industries of the Future, Ross contrasts attitudes to show how two regions prepared for the 21st century. Ross compared his home state of West Virginia, with 1.8 million citizens, to Estonia, an Eastern European country with fewer than 1.5 million citizens.

The State of West Virginia hung on to coal as its main industry export even as it became automated. The state of Virginia is built on the coal industry in the same way Pittsburg is built on the steel industry, and Detroit for automobiles. In the early 1900s, West Virginia expanded into chemical and plastic production. These were stable industries that provided prosperity to local citizens. For a century, the “Chemical Valley,” which neighbored Charleston, hosted the highest concentration of chemical manufacturers in the United States including Union Carbide, DuPont and Monsanto. However, the end of the 20th century, the economy ceased to flow as these industries collapsed. Machines replaced coal miners and chemical companies relocated their plants to India and Mexico in search of cheap labor and fewer regulations. West Virginia saw a rapid rise in unemployment, degraded infrastructure and cultural distress. From 1960 to 1990, the state capital of Charleston lost 40 percent of its population. By 1988, West Virginia’s unemployment rate was close to double the USA’s national average.

Across the world, the powerful forces of globalization hit manufacturing hubs hardest. Charleston flourished through years of stable economic growth in the early 20th century, only to be hit hard by technologically induced capital and production flight. The downfall of Pittsburgh’s steel sector contributed to rapid migration and a stagnation in job growth. In Detroit, the population declined from 1.8 million to 700,000 as automobile manufacturing jobs moved elsewhere. Manufacturing hubs like Charleston, West Virginia struggled to face a downward turn, while geographical centers that embraced technology advancements thrived into the 21st century.

After regaining independence in 1991, Estonia benefited from a fresh perspective and new ways of thinking about the future. Estonia leaned and stretched into the future through a national embrace of computer science education, digital currencies, and digital transparency. A collective culture of innovation was born. Estonian students learned to code beginning in the first grade, and government services, including voting, were conducted online. These tech-friendly policies had a powerful impact. Estonia now holds the world record of startups per person, yearly tax returns take less than five minutes, and the country enabled startups such as Skype which sold to eBay for $2.6 billion in 2006. These results speak for themselves.

How cities, states, and countries respond to this new rate of change will impact their level of political and economic preparedness for the 21st century landscape. In the same way, how we prepare and adapt to 21st century labor trends will dramatically shape our quality of life. Leaning into the future is the only option. Let’s be like Estonia, not West Virginia.

The industrial revolution brought dramatic acceleration to the economy. Before 1850, connections and communications were local. Most citizens never traveled farther than 50 miles from their original birthplace. They personally knew the farmers that grew their food, they frequented the same merchants that sold their goods, and they wore clothes that were locally manufactured. Most communities were relatively self-sufficient.

The 20th century kick-started globalization. People, products and ideas could travel across the world efficiently and quickly at lower costs. Shipping containers, interstate highways and networked telecommunications infrastructure connected the world and reshaped the playing field. Throughout the latter half of the 20th century, economic and production advancements accelerated GDP growth. The epoch was dominated by multinational corporations, stock market investments and growth, driven by consumerism of the western world. The world was transformed by, advancements in communication technologies, electricity and the automobile.

As Thomas Friedman wrote in his 2005 book, The World is Flatwe are entering a brave new world defined by an unprecedented rate of change. An entirely new and global playing field that will disrupt well-established theories of economics, politics, and work. Friedman says we are entering the third wave of globalization. Globalization 1.0 was spurred by countries and governments while multinational corporations led Globalization 2.0. Now, we are on the brink of Globalization 3.0. This third wave will be defined by complex global supply chains and increased competition. The emerging abilities of individuals and developing countries will reshape the global economic landscape. Due to the competitive nature of this new world, individuals who differentiate themselves will do best.

The rapid pace of technological change has lowered the “half life of skills”, which is the period of time with which existing skills are likely to be superseded by better ones.

Source: Benedict Evans

Source: Benedict Evans

This photo shows a scene in the movie, The Apartment, a 1960s film featuring a clerk in a large New York insurance company. This office depicts hundreds of workers with telephones, Rolodexes, typewriters and large electro-mechanical calculating machines.

Today, the jobs of most all these workers have been replaced by Excel spreadsheets, laptops, high capacity servers and mobile handheld devices.

In medieval times, skills extended over many centuries. In the industrial economy, skills extended over many generations. Now, skills last less than a career, and very soon, they will last less than a decade. Skills are becoming ephemeral and impermanent. The “half-life of skills” has never been lower and will continue to decrease.

The digital revolution, which took off with the introduction of the iPhone is largely encapsulated by the instant spread of ideas and information, inspired significant workplace changes. With exponential population increases in emerging growth nations, the result is an abundant global supply of low wage workers. Millions of technological jobs have been outsourced. India, Bangladesh, Turkey, Southeast Asia and China have become skilled manufacturing hubs, while the United States has emerged as a hub for design, innovation and new ideas. This is a good thing for people who can adapt to change. However, this trend is a challenge for those who cannot. In the USA and Western Europe, routine tasks, from manufacturing to processing, to accounting to medical procedures, are being automated by robots and intelligence algorithms managed and stored on cloud-based servers. The result in the USA is a climate of labor abundance.

Three recent books on the economies of the future, Industries of the FutureThe Future of Professionsand Inventing the Future all came to the same conclusion: robots are taking our jobs and it is going to happen soon. Robots surpass human capabilities on multiple levels. They can work 24 hours per day with more precision at a lower cost. Jeff Bezos, the CEO of Amazon, who purchased a robotics company in 2012, recently stated “it’s hard to overstate how big of an impact robots are going to have on society over the next twenty years.”

Robots are already fulfilling hundreds of thousands of orders every day for Amazon Prime customers. Large robotic arms take care of routine tasks that can be automated. Humans are responsible for cognitive, non-routine tasks that require problem solving and flexibility.

 

Amazon Robots

Amazon Robots

We are already seeing the second order effects of globalization reflected in tense political climates around the world. We have seen a backlash from Britain, to Hungary, to the United States. The backlash has come in the form of nationalism, closing borders, and rising political tension. In Britain, the people who voted for Brexit were, disproportionately older, less educated, poorer, and working class. CNN political analyst Fareed Zakaria believes we are seeing the emergence of a new political divide between openness towards globalization and technological change, and national sovereignty and border control.

The new divide is likely to shape Western politics for the next 50 years and will only become stronger due to technological advancements.

We are just beginning to see the ancillary effects of automation. Increasingly ambitious, technically precise, customized tasks require fewer and fewer people. One needs to look no further than Amazon, worth more than $400 billion, with less than 350,000 employees. By contrast, WalMart, a staple of the post World War II boom is valued at $211 billion with over 2.3 million employees worldwide.

The numbers are even more staggering in the software businesses. Blockbuster, formerly a retail giant distributing videos and CD’s from big box retail stores employing 60,000 jobs, gave way to Netflix an online subscription delivery model, employing 2,000 jobs.

The returns for a small cohort of winners are increasing exponentially as companies scale more efficiently at lower costs. Once prestigious work is being displaced by technology. JP Morgan & Chase Co. software automates the tedious and routine interpretation of commercial-loan agreements. These tasks once consumed 360,000 hours of work each year by lawyers and loan officers.

According to some estimates, the changes brought to the global economy in the next two decades could be as impactful as the entire industrial revolution, which took more than a century and a half to materialize. This rapid change marks the advent of increasing complexity, unpredictability and randomness. We must confront reality as it is, not as we wish it were.

Robots and computers far exceed human capabilities when similar processes are repeated multiple times, over and over again. The good news is that creativity and ambition can now be realized like never before. Creative work is more likely to be enjoyable and creatives are less likely to lose their jobs to robots.

The Internet has opened the door for niche businesses that tap into human creativity. Recent guests on my podcast, the North Star, have included some creative talent who stay on top of emerging niche opportunities — stop motion animators, illustrators, and two self-published authors to name a few.

The history of human automation shows us that new and better jobs are created when automation replaces traditional workers. This will continue. As the number of people participating on both the supply side and the demand side of the global market grows, economic opportunity emerges at the edges where algorithms cannot replicate human creativity and only motivated and talented individuals can build their own businesses. Unskilled, soon-to-be commoditized labor is not a great career plan.

The old world, defined by assembly lines and large work environments rewarded manual and routine work. Manpower was everything and workers adopted the 9-to-5 schedule which arose out of the need to coordinate worker hours and facilities uses. An Oxford University research paperconcluded that machines will take over nearly half of the work done by all humans.

To date, automation has helped overall standards of living, improved literacy rates, lengthened the average life span, and contributed to fallingcrime rates. In 1908, it took about 4,800 hours of work to purchase a Model T. Today, the average person has to work about 1,000 hours to buy a car that is much better than the Model T. By 2030, robots won’t just build our cars. Robots will drive them too. They will replace taxi drivers, truck drivers, and train conductors.

The new, emerging world rewards cognitive, non-routine work that reflects a creator’s individuality, which cannot be automated. Even routine knowledge work in the areas of accounting, medicine, and law are becoming automated. Workers in these occupations may be intrinsically motivated to try to advance their careers, while the forces of automation and technological advancements will put them and millions of other general skill and manufacturing workers out of jobs and leave hundreds of companies without a future — if they don’t adapt.

 

The rapid arrival of new technologies is unpreventable. Humans will compete directly with machines and algorithms that continuously improve and operate 24 hours per day. The world emerges with more connected, complex, non-linear, interrelated, adaptive and spontaneously evolving networks with each passing day, giving humans who conduct cognitive, non-routine, quick to market, high value work a tremendous advantage in the 21st century economy.

To thrive in this new world, we must respond to the rising value of individual creativity and the adaptive power of robotics, personalization, customization and mobile automation which will iterate and evolve at a rapid pace.

Differentiated workers will perform best. They will harness the unique capabilities of the internet and build their careers around the new realities of the modern world. We should build our careers and work styles around the inevitabilities of globalization, abundance, and automation.

Sources:

  1. http://www.newyorker.com/magazine/2016/12/19/our-automated-future
  2. http://www.newsweek.com/2016/12/09/robot-economy-artificial-intelligence-jobs-happy-ending-526467.html
  3. www.cnn.com/2016/06/27/opinions/western-world-after-brexit-vote-zakaria/
  4. http://www.economist.com/news/books-and-arts/21685437-why-economic-growth-soared-america-early-20th-century-and-why-it-wont-be