I’ve been a technologist for over 30 years and have always felt a certain optimism about our country’s economic future. We humans have the ability to discover, invent and adapt. And our economic model rewards those successes like no other. It does so with wealth, job creation and an enhanced standard of living.
The exponential increase in the power and sophistication of information technology is proof that a capitalist system creates wealth and power through creation of productivity enhancement. It’s the power curve or exponential increase in infotech that is unique with capabilities on processing power increasing every 18 months. Our modern economy, for the most part, is based on Moore’s law.
Technology and productivity are directly proportional, linked together in a recursive dance each driving the other. The traditional economic thought process goes something like this:
Advancements in technology drive larger and larger increases in marginal productivity. Productivity is the main driver of improvements in standard of living and economic growth. Productivity is a destroyer of existing jobs, but a creator of wealth. Wealth enables spending on additional products and services, replacing jobs eliminated by advances in productivity.
Two years ago I began taking a deeper look at the economic fallout created by the financial meltdown of 2007 and 2008. I like to sift through data and maybe considered, by most, to be a data nerd. The data I focused on was: unemployment, productivity and gross domestic product (GDP).
As we emerged from the recovery I noticed that productivity peaked at the zenith of unemployment. This IS to be expected as the productivity curve has peaked at the height of unemployment during 4 out of the last 5 recessions. However, as unemployment began to fall, the productivity curve fell at a slower marginal rate than ever before. And employment rose more slowly than other recoveries and was at higher than expected levels given the rising GDP.
I blamed the disruptive technologies that were leveling the retail, publishing, manufacturing and many service industries. What else could it be?
I understood that technology had the power to destroy jobs; I didn’t think about it much, but I observed it first hand throughout the first decade of this century. I was always confident that technology would create more than it destroyed. However, during this recession, the reverse seemed to be true. Jobs were reappearing more slowly and there was no observable, proportional drop in productivity.
It was a form of systemic unemployment, not just a trough in the business cycle.
I’m not now nor nor have I ever been a Luddite. But I was confronted with evidence that was pretty startling. Others noticed too. John Hagel et al wrote in The Power of Pull about the incredibly shrinking economic phenomenon. They described the ease at which jobs are shipped to the lowest cost provider overseas, and how service industries, leveraging explicit knowledge bases, were replaced with technology or were globally relocated because of technology.
This phenomenon surfaced during the 2008 recession and it became obvious to me as I read the economic tea leaves from 2008-2011. So with regards to job growth technology can take, but what does it provide in return?
I believe the answer lies within social, collaborative technologies. These technologies enable the rapid dissemination of information and ideas from the edges of the social network transferring it to the social core. Technology promotes rapid learning, it lowers cost and eliminate the time/location constraints. The Power of Pull enables us to learn at our own pace, at any time from any place.
Is this a zero sum game? Can our labor force learn and develop new skills quickly enough to offset these systemic forces? Put another way: will the disruptive nature of technology overwhelm our economy’s ability to retool the labor force which has been disrupted? The rate of disrupiton is increasing. I’m not sure that our out-moded educational infrastructure can adapt.
So what’s the solution? I’d love to hear your thoughts.