Your iPhone Will Take Your Job

“Maybe not today…  maybe not tomorrow…  but soon and for the rest of your life…”*

   

Technology -- driven by customer interaction or some algorithm much smarter than we are – is taking our jobs.  It’s been going on for decades.  We gladly did the work of a bank teller in exchange for 24/7 access to an ATM beginning in the 1970’s.  No more standing in line to cash our paychecks.   More recently, we quickly adopted the convenience of using a kiosk rather than dealing with an airline employee to get our boarding passes or better yet printed them at home. 

In economic theory, capital investment creates jobs.  Yet, technology investment is booming and employment languishes. 

Ken Jennings, who famously won over $2 Million on Jeopardy, was soundly whipped by an IBM computer dubbed Watson on that same game show.  Combine Watson with the Siri app on your iPhone and guess what happens next.  Your doctor’s job is in jeopardy.

If you think the technology is too rudimentary, consider this.  Visionaries like MIT’s Andrew McAfee point out that Moore’s Law correctly predicted that computing power would double every 18 months way back in the 1960’s.  And Moore was right.  Now, apply that theory to Siri and Watson.  If I ask my doctor about a particular drug, he looks it up on his iPhone.  It’s a short hop to the iPhone looking it up and giving me clinical advice.

In the 20^th Century, science assumed an important role in society.  Great inventions  were born at institutions like Bell Labs or MIT.  Today, the Internet has taken the process of innovation global.  This democratization portends great progress – both economic and social.  McAfee suggest we will “live more lightly on the planet” and “eradicate poverty”.

Yet, I am not so easily convinced that the progress of innovation will mean progress for everyone.  America, the land of opportunity, has been sliding backwards in terms of upward mobility.  The OECD’s latestreport on economic mobility rates the U.S. poorly on that score.

Germaine Smith-Baugh

How will great technological progress provide for the poor uneducated masses in the developing world and in our own inner cities?  A good friend, Germaine Smith-Baugh, is CEO of the Urban League of Broward County.   Their mission?  “To assist African-Americans and other disenfranchised groups in the achievement of social and economic equality.”

I am overwhelmed by the enormity of the task.  Yet, Germaine and her underfunded organization soldier on undeterred.  I asked her how she goes about making a difference.  “I start with a family,” she says.  “If I can get a family, I can get a block.  If I can get a block, I can get a neighborhood.  If I can get a neighborhood, I can get a community.”  And so on.

But the problems of income inequality are much bigger than the Urban League and its like across the U.S. can solve.  For all to thrive, for the middle class to remain a stable economic and social force in this country, we need to address the structural impediments to the solutions. 

Those solutions lie in the need for massive investments in education and infrastructure.  Conservatives eschew such investments by government in favor of free market solutions.  Liberals misallocate funds to projects that focus on social outcomes rather than economic ones. 

A college degree is so expensive to obtain that many people are beginning to doubt there is a financial return.  And colleges themselves seem stuck on providing a great 20^th Century education.  For this country to thrive in the 21^st, our education system must be revamped to train more engineers, moreentrepreneurs and more technicians. 

Budget cutting fervor has reduced aid through Pell Grants and student loan interest rates have skyrocketed because, in the absence of government guarantees, bankers will not loan money to poor students whose prospects are not certain.   If we are to produce a better educated workforce, we must identify the skills and knowledge valued by enterprise.  If government were to work hand and hand with industry to provide graduates with the skills that are in demand, the landscape would change.

Government spending on infrastructure is funneled to unproductive projects by politicians who want to make sure that their district gets a share of the pork that’s being doled out.  If we were to focus our infrastructure investments on the large urban centers that produce a return, we must overcome a political battle over how funds are allocated. 

For sure, non-profits like the Urban League must play a role in bolstering a sense of family and community among our nation’s poor.  However, our dysfunctional government structure and its sour relations with corporate America must be resolved before we can make substantial progress on behalf of the middle class and those less fortunate.

WHO WILL LEAD?

*One of my favorite lines from the movie Casablanca.

Greed Is Still Good

True confession: I used to work at Goldman Sachs. Yup, the evil empire, the scourge of the Occupy Wall Street (OWS) protesters. So, I have a bias.


So many pundits, editorials and reporters have made the obvious observations about this now national (or maybe global) movement that I find it difficult to add any new thoughts. They are righteous… they are wrongheaded… they should be marching on Washington…. Maybe they just want jobs… Or, maybe they just want to get laid. (Well, this last observation is mine. But then I am old enough to remember the anti-war demonstrations of the 60s.)

I’m in the camp that thinks they should be marching on Washington. But where specifically? The White House? The Capitol? The Fed? The Department of Treasury? Too complicated. Let’s just occupy Wall Street.

Another obvious observation: they have worked hard and played by the rules and feel screwed by the system. They need jobs.

But, here’s the problem. The jobs aren’t coming back and it has nothing to do with Wall Street. It has to do with technology and the Internet in particular.

Have you been to an airport lately? If you have, you probably checked in to your flight at a kiosk which spit out a boarding pass and directed you to your gate. Remember how many people it used to take to check you in? Do you think those people are getting their jobs back?

This is just one of the examples of “The Second Economy” identified by the McKinsey Quarterly (you can get a free copy by clicking HERE and creating a login). The Internet has disrupted a lot of old methods of doing business. Thousands, if not millions, of jobs have vanished by way of the use of RFID technology, websites that have replaced travel agents, retail stores, schools and data centers. Yes, even Info Tech professionals have been affected. Our data is moving to “the Cloud”. We don’t know where it is and, apparently, we don’t care.

What server holds your Facebook page and all your photos? Don’t know? Neither do I.

Speaking of Jobs, lots of comment about the adoration among the OWS of the recently departed billionaire, Steve Jobs. It’s easy to focus on the contradiction. After all, Apple wouldn’t exist if it weren’t for junk bonds, hedge funds, IPOs, secondary offerings, derivatives and the like.

I find it more interesting to look at Apple as a microcosm of the global economy. Think of it this way. Apple creates the product – the design, the engineering, the operating system, etc. The products, the iPod, iPhone or iPad, are manufactured primarily by Foxconn in China. In the industrial economy that started to vanish from these shores about 20 years ago, the manufacturer would be a very valuable company in stock market terms. Yet, Apple is the most valuable (or second most valuable behind Exxon Mobil) company in the world. Not Hon Hai, parent company of Foxconn, which has over 400,000 employees worldwide.

I don’t think the OWS protesters are focused on Steve Jobs the billionaire or on Apple, the company. They are just turned on – like the rest of us – by all the power that the iPhone places in the palm or our hands.

Michael Douglas as Gordon Gekko

Which brings me to Gordon Gekko and the “Greed is Good” speech from the movie Wall Street. In context, the famous Gekko speech was an interpretation of Schumpeter’s Law of Creative Destruction. Here is what Gekko said, in part:

“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.”

Here’s a quick overview of Schumpeter’s law cribbed from Wikipedia: “In Schumpeter's vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies and laborers that enjoyed some degree of monopoly power derived from previous technological, organizational, regulatory, and economic paradigms. Schumpeter also elaborated the concept, making it central to his economic theory.”

It wouldn’t make a very good movie script, would it?

But, whether you prefer Gekko’s version of it or Schumpeter’s, the fact is that email destroyed the Post Office, Netflix destroyed Blockbuster and the guys who invented that airport kiosk destroyed all those airport jobs. And, all of us are willing participants.

Oh, and by the way, if you have an iPhone, you can even skip the airport kiosk. How’s that for power in the palm of your hands?

So, here’s the real problem. To replicate the success of Apple Computer and Steve Jobs, we need to train more engineers and designers. And, we aren’t? According to a Kaufman Foundation study, more than half the students in technical masters programs are foreign. And, now they don’t have to stay here to find jobs in their field. They can go back to China, India, Korea or South Africa to find meaningful work.

So, maybe the protesters should be marching on the Department of Education.

What do you think?