Buckle in. This is a bit of a heavy topic. While a company blog may not be the most appropriate forum for this, the conversation has to start somewhere. Since the last recession, as people wondered aloud when the jobs would be coming back, I have been saying to anyone that would listen that I really think they may not be coming back in the way, shape or form that we have normally expected. My reasons were advances in technology and how people purchase products and from whom.
Traditionally, you had retailers in various shapes and sizes set up shop in local communities and people would drive to those stores to look for and purchase product. More and more people are simply buying online and forgoing trips to the local merchants.
When you pull the covers back on that process, you see some very scary things from a jobs perspective. For starters, the majority of online sales are concentrated with just a few big players with Amazon being the largest. For the most, part Amazon does not have a brick and mortar presence in local communities. That change is huge in so many ways that many may not have considered.
First, since Amazon was built from scratch, completely from a technological perspective, it was able to use its investors’ money to build extremely lean processes, without the legacy systems, structures, and physical locations that traditional retailers are all stuck dealing with. I don’t have the numbers, but I think one could reasonably assume that Amazon needs far fewer workers to produce and complete an average sale than any other merchant in existence. Just look up some of the stories that have been done on the software and robotic systems that run in their warehouses and you will see what I mean.
Combine this need for far fewer employees to get the job done with the fact that there is no real need for a local store, and you have a whole cascade of changes to the local economy. I am not talking about just small businesses here. As much grief as Wal-Mart has taken over the years, it does own stores and real state in just about every city in America, along with other merchants. All of them pay real estate taxes and those tax revenues help pay for infrastructure in those towns. These businesses are also likely involved in the local community, donating to support local organizations and causes. The list goes on of how these dollars spent in the local community stay to work within that community. That is even before you factor in the multiplier effect of these businesses employing people in these communities and those people use that income to support families, buy additional products and services within that community, and so on.
All those local dollars more and more are being spent at far away places with no local commitment and those dollars are getting more and more concentrated into fewer and fewer hands. These changes, along with massive changes in technology, are eliminating many jobs completely, while also creating some other employment opportunities. That ratio seems to be changing to the negative in terms of total human employment. To be sure, new types of jobs are created but increasingly, these are more selective and with far fewer numbers of positions than the jobs being lost. That is a problem, as not everyone can be a software engineer.
One only has to look at changes in industries like music to see what I am talking about. When my generation was growing up, albums (and after that, CD’s) were released that were produced by humans. You went to a retail music store in the mall to make the purchase. Imagine the jobs in that chain from band to production facility that made the albums or CDs, printers that made the album sleeves or inserts for the CDs, distributors and shipping companies that shipped the products, brick and mortar retail stores that sold the product, employed locally, and paid real estate taxes. Then along comes digital and iTunes. No need to make anything, no need for stores, and no local jobs needed to sell a physical product. Gone. There are many, many examples like this and it is happening across wide ranges of industries. Think cab drivers and Uber.
Just look back twenty years ago at the market capitalization or just the total sales produced relative to the number of employees needed to produce those sales at a giant like GE. Compare that to a company like Amazon today. Two very different types of organizations or business categories I know but I do think these are changes are interesting to contemplate in terms of jobs created relative to sales produced not that long ago as compared with today.
Technology has always been disruptive, but I think that we have hit a potentially critical turning point. Technological advances in decades past seem to have created/shifted as many or more jobs than were lost. That no longer seems to be the case. The promise of technology freeing us up to work less and play more seems to be here. The problem is we forgot that work itself offers us humans a sense of purpose and satisfaction. Not to mention we need money to be able to buy things, pay taxes, and keep this system working. Don’t get me wrong; I LOVE technology and full disclosure, I do shop on Amazon from time to time. That said, I have taken pause as of late to question whether I am really being a responsible consumer when it comes to my own self-interests and those of the community. I think we all need to be asking ourselves that question. Is this sustainable?
It amazes me that this topic has barely been touched upon in all the debates for the 2016 Presidential Election. I am guessing that is because politicians do not have a clue as to how to address this issue. How can you be a free market person and take this on? On the other hand, if survival of the fittest means only those that have the resources to invest heavily in technology win at the expense of human labor, don’t we all lose in the end when very few people are employed? This will hit a tipping point where action may be required, but if we wait until then, this could get very painful indeed. The Bank of England recently stated that machines could take over 80 million American jobs over the next 10-20 years. That is roughly 50% of the workforce! Surely, we must all hope that this prediction is off base.
We humans do not have a great track record in always acting in ways that take into account long-term consequences and our own best interests until it is nearly an emergency. We need to have a national dialogue on this. What are the solutions? Is there ever a limit to just how efficient we want to be if that efficiency results in ending a way of life and how our society functions as a whole interactive organism? I truly believe that one starting point for this will be a movement and maybe someone has already started it, where, like the Green Movement, a few voices start saying, “This is not sustainable for society.” It may well be that there is a movement that pushes to get people to think about spending their dollar at places that are not only local (Buy Local) but also perhaps businesses that purposefully choose less efficiency and employ human beings! What would it be called, “Buy Human”? Think that is far fetched? We now have cars that can drive themselves. If shipping companies can save billions on not having to pay wages to truck drivers, do you seriously think they would pass on getting those savings? When all those blue-collar jobs in industry after industry go away, where will people work? Think you are safe as a college educated, white-collar worker? Think again. I just read an article that stated that current Artificial Intelligence (AI) can do the tasks of a 100 IQ person. Ten years from now, that may be 120 and so on. Remember, AI does not need health insurance, does not need to take breaks during the workday, does not need vacation time, does not call in sick, etc.
I believe strongly in the power of creativity that we humans possess and I am not a pessimistic person, but this needs to be discussed at kitchen tables, at local levels, state levels and in national politics. Will we need to update regulations to address some of these issues? Is there any stopping or modifying the potentially negative impact of these changes while keeping the positive parts? All I know for sure is that we are in the midst of a major change that will clearly have greater consequences in how our society functions than past advances or disruptions. Are we just going to just go along for the ride and not even discuss it? I for one want to have the discussion and debate and I see that there are others starting to take note. Billionaire Jeff Greene was mentioned in an article I read recently as having big concerns on this topic and is hosting a conference this December that will discuss this and the impact on the economy. This topic should be a concern for everyone. Yes, even billionaires. What sort of investment and business climate will we have if consumers do not have jobs and money to spend?
And the song that relates to all this is, of course, is the very first music video showed on MTV: “Video Killed the Radio Star” by the Buggles. Lead band member and writer of the song, Trevor Horn, said this about the song: “It came from this idea that technology was on the verge of changing everything. Video recorders had just come along, which changed people’s lives. We’d seen people starting to make videos as well, and we were excited by that. It felt like radio was the past and video was the future. There was a shift coming.”
Such an innocent change don’t you think? Well we’ve come a long way since, but it is due time we talk about where we think we are going with all these technological changes. Let me know what you think.