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How Computers Are Creating a Second Economy Without Workers

63 points by hobbyist 15y ago

rollypolly 15y ago
On the other hand, most developed countries have declining birthrates, so is there cause for alarm?
FelixP 15y ago
Link to source article in the McKinsey Quarterly (free, but requires registration) https://www.mckinseyquarterly.com/The_second_economy_2853 https://www.mckinseyquarterly.com/The_second_economy_2853 Also, see this piece from Jaron Lanier for a much more tech-oriented and cerebral treatment of much of the same subject matter http://edge.org/conversation/the-local-global-flip http://edge.org/conversation/the-local-global-flip
ekianjo 15y ago
BS alert. Another "machines are killing jobs/our future" rant. I'm pretty sure people said the same thing when Gutenberg developed the printing press. There's no "Second Economy". And the whole thing "it's just computers talking to computers" is ridiculous. The phone started with actual operators in every village, and then moved to fully automated systems. It did not void the economy of jobs. All productivity gains bring new opportunities, new business ideas, and new means to make profits. The biggest misunderstanding of this article is that the goal of business is not to "create jobs", it is to create wealth. Jobs are a means to create more wealth, because you need manpower and brains for many things that cannot be made by machines alone. That won't change for a while. Automation is simply removing a lot of these jobs that had very little value in the first place.
- mseebach 15y ago
  For future reference: http://en.wikipedia.org/wiki/Technological_unemployment#Early_in_the_Industrial_Revolution http://en.wikipedia.org/wiki/Technological_unemployment#Earl...
  - ekianjo 15y ago
    Thanks for that. Honestly, I sometimes wonder how such articles make it to the top of HN. Is it because people believe the ideas are "worth spreading", or simply to show how badly written pieces they are? This baffles me. And journalists who have never dealt with business whatsoever should seriously think twice before writing about new great theories of theirs. I don't think everyone necessarily needs to be an expert at something to have an opinion, but this kind of argument has been so over-used in the past that even a 5 minutes research should convince them it's nothing worth writing about.
  - Total_C 15y ago
    The Luddites were skilled laborers who protested technological change that made it possible for their work to be done by a larger subset of the population, spreading the wealth formerly concentrated within the Luddites. Today's technological change is making it possible for many people's work to be done by an ever-smaller number of people, concentrating the formerly distributed wealth in their hands. It seems to me that the technological change during the time of the Luddites was helpful for most people, while the technological changes occurring today is nearing a point where it is no longer helpful for most people, with respect to employment/unemployment. Sure, there will be 'new forms of commerce' etc. etc. but if the unskilled labor does not have the training/hardware/human-network-access to participate, what does it matter? rollypolly has a good point below that birth rates dropping can counteract this shrinking of the number of 'jobs' available. It's a perverse situation - can we die fast enough so that our jobs/roles are released to the few new people being born?
    - mseebach 15y ago
      The makers of the machines that the Luddites protested must be assumed to have been an even higher skilled, smaller subset than the Luddites, thus equivalent to todays engineers/software developers etc. It's obviously hard to be deterministic about but I would think it is safe to assume that having the unemployed Luddites 200 years distant helps a lot in deeming the technological developments then more "helpful" than the development today.
- ArtB 15y ago
  Yes, but what are the unskilled masses to do? Unless we start shovelling them money, are they to starve? What made America great was that an average person could have a house and car working 40 hours a week, what is going to happen to that?
  - ekianjo 15y ago
    The costs of living have been going down for the past 50 years at an incredible pace. And please refrain from using words such as "starving" - have you ever known anyone around you starving to death ? On the contrary, there seems to be more and more people who have plenty (and maybe too much) to eat. While productivity gains have been skyrocketing in the meantime. I didn't see people losing jobs by the truckload. And now even a person at the brink of the level of poverty in America has access to clean water, toilet, TV, mobile phone and for most of them, internet as well. We are not living in the 18th century anymore. Nobody knows what the future is made of, but obviously the world is moving toward a higher need for skilled labor. And the fact that more and more people are going to be connected to the very same network, everywhere with mobile devices, will create new potentials for exchanges, commerce and so on. I am not too worried.
    - monkeyfacebag 15y ago
      "have you ever known anyone around you starving to death?" Sample bias. Just because you do not perceive it, does not mean the thing does not exist. LMGTFY: http://ukpmc.ac.uk/abstract/MED/10064320 http://ukpmc.ac.uk/abstract/MED/10064320 Sure, it's not very recent, but nothing that happened during the 00s would leave me to believe the problem has somehow been solved.
      - ekianjo 15y ago
        I'd like to read the article to better understand the observations, but the full text and pdf links return "not found", so I won't trust an abstract without reading the whole thing. Please let me know if you have the article somewhere else. About the sample bias, I agree with you, but if noone around you has ever heard or anyone dying of starvation in their lifetime (including your grandparents), the "sample" becomes more significant. Now, when people die of starvation, it's so extraordinary that they make movies about it ("Into the Wild" by Sean Penn - excellent movie, by the way).
- hjhjhj 15y ago
  Ah, so maybe it's bad to have a system where if a person doesn't have a job they die?
- pmr_ 15y ago
  You still have to show that the same amount of opportunities for people are created as are lost by removing low-value jobs. I cannot see the brunt of the people that find themselves out off a job now transitioning into the high-tech sector. I agree with you on the basic principles. Most of those job losses do not hurt the greater picture, aside from the harm inflicted on the individual. But I think there should be planning for a world where most individuals don't have means or opportunity to make an income. I see nothing of that yet and if you still can publish an article in a McKinsey journal on something that is so blatantly obvious, I doubt the world is prepared.
  - Ryan_Shmotkin 15y ago
    No, you don't. If the amount of wealth increased (or even stayed the same) with less man-power required. We as 'humans' have lost nothing. (But rather gained some free time to pursue other interests). Only possible problem is that this might lead to higher inequality, which is a whole different problem that needs solving already (look at afrika)
    - v0cab 15y ago
      Or to put the problem of inequality another way: Some people have lots of money and thereby the ability to manipulate lawmakers and media to control me. I no longer have the ability to make any money. I do not have the ability to make those people give me their money. I am screwed.
      - nickik 15y ago
        Reform your democracy when lobbying is such a big problem. The more power in one place the more worth you get on lobbying. Change to a more democratic system and maybe smaller countries.
        eli_gottlieb 15y ago
        But we're not talking about the democracy problem. We're talking about the capitalism problem.
- andyjohnson0 15y ago
  Just because past industrial developments (Gutenberg, in your example) were ultimately net job creators doesn't mean it will work that way in the future. It might, but it doesn't have to. You haven't justified your assertion, even though you might be right. "The biggest misunderstanding of this article is that the goal of business is not to "create jobs", it is to create wealth." The article doesn't say that. Business is certainly about creating wealth, but states and societies have legitimate public policy interests in ensuring that there are enough jobs (for some values of 'enough') to ensure that created wealth moves around, to give people something constructive to do, and ultimately to promote social stability.
  - ekianjo 15y ago
    Past industrial developments are not just examples, they are models of how an economy can change and still continue to grow nonetheless. Your argument is just like saying "it's not because you throw a rock 10 times and it falls, that the 11th will not go on orbit instead". Fundamentally, there is nothing very different between the past technological revolutions and the current one. All of them brought sudden, massive improvements of productivity suddenly. All of them suddenly rendered a number of the previous workforce redundant. Did it result into mass poverty ? No. Never. I'd like to see a clear argument why the internet, the mobile revolution and the ongoing automation going around us is going to kill more jobs than it creates. I urge people to read Bastiat's "That Which is Seen, and That Which is Not Seen". You'll understand that the implications are never THAT simple not predictable. http://bastiat.org/en/twisatwins.html http://bastiat.org/en/twisatwins.html ---> about your second point: The article may not say that directly, but the ending shows that the writer is going to give us a big solution on "how to create jobs in the second economy" or something. It's just going to be his next big thing. He misses the point completely.
    - drieddust 15y ago
      During the past industrial revolutions manual jobs were replaced by automation so workforce kept on moving to industries requiring basic brain power.This was the best fit as most people can function and use their brain at basic level. This time it may be different as most of such jobs will be eliminated so only a very small percentage of people may remain employable.
- flatline 15y ago
  While I agree, it doesn't mean that there's not a tipping point at which these fears actually become reality in some form. In the past, you would have a single innovation that threatened some particular worker population, and over time people would retrain, future generations would simply train for something else, and there was no enduring problem. As innovation in technology has accelerated, the level of education required to either create new opportunities or to retrain for existing ones has increased. It is possible that successful automation will eventually outpace the ability of the masses to retrain and adapt. Meanwhile the cost of traditional education continues to rise disproportionate to the rest of the economy, although we are seeing some other possible avenues open up on that front. I think it's an open question as to whether large scale, ongoing unemployment could result from technological innovation, given the right circumstances of rapid innovation and out of reach opportunities for education.
  - ekianjo 15y ago
    Concerning education, as you mentioned we see another revolution happening there. Online education, with almost zero-costs (khanacademy and other initiatives). This means the costs or re-conversion to another activity will be lower as well for anyone who wants to dedicate the right time to learn. There's multiple things going on in parallel, it's just hard to make a simple rationale like this article does.
  - tomjen3 15y ago
    Actually the cost of getting an education has crashed (and I do mean crashed) recently: between opencourseware, Khan Academy and Standfords "pay us a little bit of money and you get a certificate" getting an education has become a lot cheaper. With regards to your other assumption, note how much most programmers (to take a familiar subject) no longer have to care about -- manual memory management, micro optimizations, low level system interoperations to name a few -- because the price of a computer has dropped so much in relative terms. The masses will simply have to get their asses out of their seats and retrain. In some subjects they will have to specialize even more than we do today, which will enable them to overcome you issue, and in some areas computers will provide greater assistance than they previously have. Historically the factory represented an all-time low in the required skills of the workers -- many downshifted from farming or carpentry or some other skilled trade because factory work paid way more.
- DevX101 15y ago
  I fail to see how you're deriding the article as B.S. when you apparently agree with the main premise. | Automation is simply removing a lot of these jobs that had very little value in the first place. That's exactly what the author is saying. They just coined a term 'Second Economy' to describe businesses that have unusually high productivity due to computing.
  - ekianjo 15y ago
    Nope, I do not agree with the main premise. The article's point is that there are going to be less and less jobs because of productivity and innovation in the world of machines and computing. I do not believe it's that simple and straightforward. Rather, there will be more opportunities to exploit in a more connected world, and therefore more chances to make a living. The people who were operating phones before it was fully automated went on to do other jobs after. There are lot of conversions going around, and people learning skills on their own, trying to get to better jobs, to better situations. Nothing is static !
    - DevX101 15y ago
      You may be right in the long term (and I agree with this), but there will be a transition period that may be painful for many people. The value created by most companies is very concentrated amongst employees -- that is, there are relatively few people who create the most value in companies. As technology gives these high productivity people more leverage and displaces low productivity workers (the majority), many people will be (and are) losing jobs. I don't know how long this transition period will last, but let's not pretend it's not happening.
    - cube13 15y ago
      Here's a counterpoint: The traditional secretarial position has pretty much vanished in the workplace. A lot of offices had a TON of low-level administrative filing and assistant positions even in the 80's. But they've almost completely vanished now for mid to low-level managers or office grunts. The main reason? Outlook and email. A lot of the traditional roles of a secretary(dealing with mail, scheduling meetings, replying to people) are handled almost entirely by the application. Since almost everything is now handled through email, there isn't any reason to have gigantic mail rooms. None of those unskilled jobs have been replaced by anything other than technology. This is actually a new paradigm in history-traditionally, new technology has reduced the need for highly skilled jobs, for example, scribes were replaced by teams of less-skilled workers after Guntenburg's press. Now, technology is reducing the need for unskilled positions. The end result is that a lot of jobs that needed manpower simply don't anymore.
- ChuckMcM 15y ago
  From wikipedia: "The Luddite events of 1811 were the beginning of humankind's analysis of whether it is possible for technological unemployment to be other than temporary and confined to particular industries and firms. Contrary to the Luddites' fears, technological advancement did not ruin Britain's economy or systemically lower standards of living throughout the following decades of the 19th century. In fact, during the 19th and 20th centuries, the opposite happened, as technology helped Britain to become much less impoverished than before. For this reason, most economists think that the general Luddite premise is fundamentally fallacious, and thus they apply the term Luddite fallacy to it. Economist Alex Tabarrok summarises the neoclassical presentation of the possible fallacy as such: If the Luddite fallacy were true we would all be out of work because productivity has been increasing for two centuries." But the Luddites then, and their modern equivalents, are making an emotional argument not a rational one. Their emotion is very real, they do not see how their particular job goes forward, and in a society where one's job is an often integral to one's identity, that is a very threatening thing indeed.
- yukyukyuk 15y ago
  Did you read the article? The point is that the "information" sector needs far fewer low to medium skilled workers than other sectors. It is a statement about the distribution of wealth generated by recent economic growth.
- eli_gottlieb 14y ago
  Certainly you agree that productivity increases lower the amount of labor or labor-time necessary to produce the same output, right? Then let's follow how society has treated technology recently. We've kept improving our technology, while never shortening work-hours. This means outputs should be up. Indeed, outputs are up, but the demand for those outputs is not very far up at all. Why? Because the profits from the productivity increase didn't get divided in their original proportion, or evenly, between business owners and employees, they went almost entirely to the owners. Without more money in their pockets, workers mostly aren't demanding the increased output (and when they have, they've bought it on debt and damaged themselves in the long-term). So for the demand levels we've maintained, all we've accomplished with technology is obsoleting vast amounts of labor. That means businesses need to either shorten working hours, or lay people off. Shortening hours is a tragedy-of-the-commons, because then your competitors can always produce more output and capture more of the market than you by working longer. So businesses have pocketed the productivity as layoffs. We could fix this pretty easily by strengthening labor's interests in higher wages and shorter hours. We only refrain from doing so for ideological reasons, actually, not business ones.
jsnk 15y ago
Technology doesn't kill jobs. Over last two hundred years, the number of people on Earth exploded off the chart. We went from 1 billion to 7 billion. If anything, overall improvement in technology always create more jobs than it destroyed them. Most dramatic example comes from going from 6 billion to 7 billion in just 10 years or so. We still don't have dramatic increase in unemployment that reflect this whopping 1 billion increase. Technology always generated new problems people have to figure out that demands skills and human creativity. It creates jobs in areas that once weren't even thought of before.
- v0cab 15y ago
  Technology hasn't killed jobs YET.
  - kokey 15y ago
    Let's hope it does kill jobs before I'm at the current expected retirement age.
    - v0cab 15y ago
      If that happens, how do you intend to get money?
      - kokey 15y ago
        I wouldn't need much money, since the cost of things will be very low.
        v0cab 15y ago
        But you'd need some.
        v0cab 15y ago
        But you'd need some.
- radarsat1 15y ago
ef4 15y ago
Increasing productivity is ultimately good. There are always more unmet human needs and wants that can absorb all that new productive capacity. So there's no reason to believe that underemployment is a permanent situation. To the extent that anyone can master the new digital tools, there will be profitable work to employ them. There's no cap on the number of possible jobs. A sudden increase in the number of people with technical skill would cause entirely new industries to become possible. So it all comes down to skills and education. The education system we have is nearly the exact opposite of what we need. I fear that it has permanently damaged large swaths of the population by conditioning them for rote factory labor (the purpose for which it was designed) in a world that doesn't need it anymore. The pain of this transition is going to lead to nasty political problems. Most people do have the raw potential to do the kind of challenging work that pays handsomely in the digital world. They just get it beaten out of them at a young age.
- z0r 15y ago
  Much of what you have said here I would label as articles of faith. I think that there are limits to the powers of human consumption, which are at least bounded by the finite quantity of time available to each of us. I think then that it would follow that there is probably a cap on the number of possible jobs. I think that it is possible that the work of a small proportion of the total population could provide for the whole, with the right degree of automation. I don't disagree with any of the second half of your post, though!
  - ef4 15y ago
    Well, there are some pretty good reasons beyond faith to think that there's no practical upper limit on human wants. First, there's the drive for status. No matter how rich everyone is, demonstrating that you're slightly richer (usually to obtain a mate) is deeply ingrained in our psyches. Second, there's the historical precedent that people have been wrong about the "problem of overproduction" since the start of the industrial revolution. They continually fail to appreciate how wealth creates new demand, which creates new wealth, which creates new demand. Third, we rich westerners are walking existence proofs that at least X level of per capita consumption is possible. While this doesn't prove an unlimited cap, is proves a cap much higher than what the world has today. > I think that it is possible that the work of a small proportion of the total population could provide for the whole, with the right degree of automation. I'm not disagreeing with that statement. In fact, we've already achieved what you're describing. If you told a farmer in 1850 how productive the farmers of 2012 would be, he would assume that most of us are unemployed, because we have in fact reached the point where a tiny fraction of the population can use automation to "provide for" the whole. But of course we've invented entirely new forms of economic activity to keep the rest of us busy now that we don't need to all farm. I'm arguing that the same process is happening to wide swaths of our present economy.
moocow01 15y ago
I think we need to shift our mindset. Everyone gasps in horror when jobs get eliminated by tech - yes, that will mean that many won't have a paycheck for food tomorrow - I understand the sentiment. But eliminating a job where someone sits at a station and does the same mindless thing for 8 hours is a bad thing?? The bad thing is that society is failing to provide pathways to giving that person a more meaningful and fulfilling duty. That is what we should be gasping in horror at. And no I'm not suggesting we should be trying to put an out of work cashier/factory worker/etc onto a track to be a programmer/engineer/etc. We have all sorts of problems. We have swaths of elderly folks who need the most basic care, parents who barely have time to raise their kids, a seeming lack of reward/appreciation for cultural diversity and arts... I could go on and on. There are lots of things that people doing mind numbing jobs could do instead that would probably be better for society and better for them. The unfortunate part is that our system fails to make the connection in many instances.
nickik 15y ago
If Technology ever really kills jobs. We should be happy because we are getting pretty close to utopia where nobody has to work anymore.
- maeon3 15y ago
  Standard issue average humans power down and self destruct almost immediately without gainful employment. Idle hands are the devils workshop. Go visit a government projects area with a high rise of people on welfare, none of them work, it is a cesspool of drugs, guns, and destruction. If you do not threaten people with slavery and death, your average human will not work a day in their lives. Instead of making a utopia, no jobs destroys all hope for it.
  - deleted 15y ago
    [deleted]
  - eli_gottlieb 15y ago
    If you do not threaten people with slavery and death, your average human will not work a day in their lives. I never knew there was someone as unspeakably, impossibly evil as you. You would enslave everyone simply to keep them from having free time! Go visit a government projects area with a high rise of people on welfare, none of them work, it is a cesspool of drugs, guns, and destruction. According to your hypothesis, the idle rich should be a cesspool of drugs, guns, and destruction.
- virmundi 15y ago
  The problem is that we do not have a system in place to handle this. All of our wealth allocation and therefore resource allocation are based around the concept of working. If people don't work, how will they get money? Without money how will they eat? We can move to a socialist system, but for many in Amereica that idea won't fly.
  - nickik 15y ago
    1. There will be enougth jobs 2. I don't know about america, soon or late a revolution has to happen there and other places too. I think Basic Income is a nice solution (http://en.wikipedia.org/wiki/Basic_income_guarantee http://en.wikipedia.org/wiki/Basic_income_guarantee). In Germany the Pirate Party supports this and in Switzerland a Initiative just lunched (a way for "normal" people to create laws) that wonts this too. I don't think it will pass the vote but it will rase awairness. Its an almost optimal social system. Garantie minimal for everybody and then just let them be as free as possible. Talkes away the stigma of poor people leeching on the system.
ajankelo 15y ago
The question is what do we do with all these people that were doing "unskilled labor"?
tomjen3 15y ago
That is a completely unfair rant. This process creates jobs. Good jobs too -- the kind that you need to go to college for -- system administrators, programmers, database admins, etc, etc. Sure it kills no-skills jobs, but that leaves those people free to get better jobs elsewhere (once they have upgraded their skills). The only people with reason to complain are those unwilling, or in a few cases unable, to change.
- bdunbar 15y ago
  This process creates jobs. Good jobs too -- the kind that you need to go to college for -- system administrators, programmers, database admins, etc, etc. Correction - you don't need college for these jobs. The most one needs for any of the listed jobs is a vo-tech course and continuing training.
Symmetry 15y ago
To a first approximation all material progress comes from eliminating jobs. People were able to go to having indoor plumbing and cars because of a huge elimination of jobs in the agricultural sector brought on by the tractor. We have more material goods now because we need less factory workers to produce the subset of material goods we used to have. We have more Yoga instructors and teachers and health workers because they aren't needed to work in factories. The thing is, there are always more things that could be done. People in 1900 didn't know that they would want social media or video games, but we're employing people making them. Losing one's job is traumatic and its good to have a social safety net to make it less unpleasant, but its also the engine of progress.
- eli_gottlieb 15y ago
  Well yes. The ultimate goal can and should be to work less. But then we have to get our culture and our socioeconomic system on board with the idea of reducing work instead of venerating it as we currently do.
motti_s 15y ago
"One of its main byproducts is the replacement of low-productivity workers with computers." This is the main fallacy of this article. It's actually "high-productivity workers", who build technology, which replaces "low-productivity workers". For that to happen, more "high-productivity workers" are required. Do they realize how hard it is to find talent in tech these days? The economy is ever evolving and becoming more efficient. There is really nothing new here, this has been happening for decades and centuries. With some adjustments, this article could be published 100 years ago and probably 100 years into the future. One problem is that it's hard for people, especially at a certain age to adapt their skill set. So while some sectors are struggling to find employees, others have too many. It's the friction that is created by economy's evolution. But we have to look beyond the cold numbers. This is a social problem. With 8% unemployment rate, an unemployed person is not 8% unemployed, he is 100% unemployed. That's a person like you and me, with family and dreams. However, I believe that in the future this friction will actually become lower. With technology and internet becoming prevalent, high quality, relevant education will become accessible and affordable. In other words, when education finally becomes part of that "second economy" (and it will), things will get better, not worse. When this happens, then ironically this "second economy" could actually solve the problem the article says it creates.
- eli_gottlieb 15y ago
  Do they realize how hard it is to find talent in tech these days? It's not that hard if you look somewhere other than Silicon Valley.
  - motti_s 15y ago
    I've never even been in silicon valley, actually. It's hard to find talents in many regions, though maybe not all of them.
hessenwolf 15y ago
My firm policy is to program myself out of a job. I do it all the time, and you know what happens? Even more work lands in my lap. Funny that.
DanielBMarkham 15y ago
"...As sobering as the Second Economy scenario is I believe the trend is reversible..." Ugh. Here I was thinking that the writer had at least a partial understanding of reality and then we get to that nonsense. I'm not going get into this creative destruction, why-are-there-no-more-buggy-whip-manufacturers argument. It's been done to death, and if you don't understand it after hearing it a dozen times, there's not much I can do to help you with it. But what interests me is the terms of the political discussion. Not politics -- that's mostly picking a team -- but the language that is being used to discuss employment and job creation. Frankly I don't think politicians and economists have a clue to what they are doing when it comes to the technological and digital revolution. Not only are there less jobs, they are scattered all over the world. It's increasingly impossible to make some kind of political change, say putting in a highway, and have it directly bring in jobs of a certain industry. Jobs just aren't centralized like they used to be. There are a lot of industrial and technology parks across the U.S. that are going to remain mostly empty. We see SV and the other startup hubs and think that all the action is there, but I remain convinced that those guys are just the tip of the iceberg. For every Instagram there are ten thousand tiny companies with a thousandth of their users. They don't appear on TV, they don't join the chamber of commerce, many of them don't even incorporate. They are invisible. I don't see how we can have a discussion about jobs and such when all the terms and models we use don't match up to what's really happening. Watching the language of the debate evolve over the next decade or two should be very interesting.

63 points by hobbyist 15y ago

On the other hand, most developed countries have declining birthrates, so is there cause for alarm?

Link to source article in the McKinsey Quarterly (free, but requires registration) https://www.mckinseyquarterly.com/The_second_economy_2853 https://www.mckinseyquarterly.com/The_second_economy_2853 Also, see this piece from Jaron Lanier for a much more tech-oriented and cerebral treatment of much of the same subject matter http://edge.org/conversation/the-local-global-flip http://edge.org/conversation/the-local-global-flip

ekianjo 15y ago

BS alert. Another "machines are killing jobs/our future" rant. I'm pretty sure people said the same thing when Gutenberg developed the printing press. There's no "Second Economy". And the whole thing "it's just computers talking to computers" is ridiculous. The phone started with actual operators in every village, and then moved to fully automated systems. It did not void the economy of jobs. All productivity gains bring new opportunities, new business ideas, and new means to make profits. The biggest misunderstanding of this article is that the goal of business is not to "create jobs", it is to create wealth. Jobs are a means to create more wealth, because you need manpower and brains for many things that cannot be made by machines alone. That won't change for a while. Automation is simply removing a lot of these jobs that had very little value in the first place.

mseebach 15y ago
For future reference: http://en.wikipedia.org/wiki/Technological_unemployment#Early_in_the_Industrial_Revolution http://en.wikipedia.org/wiki/Technological_unemployment#Earl...
- ekianjo 15y ago
  Thanks for that. Honestly, I sometimes wonder how such articles make it to the top of HN. Is it because people believe the ideas are "worth spreading", or simply to show how badly written pieces they are? This baffles me. And journalists who have never dealt with business whatsoever should seriously think twice before writing about new great theories of theirs. I don't think everyone necessarily needs to be an expert at something to have an opinion, but this kind of argument has been so over-used in the past that even a 5 minutes research should convince them it's nothing worth writing about.
- Total_C 15y ago
  The Luddites were skilled laborers who protested technological change that made it possible for their work to be done by a larger subset of the population, spreading the wealth formerly concentrated within the Luddites. Today's technological change is making it possible for many people's work to be done by an ever-smaller number of people, concentrating the formerly distributed wealth in their hands. It seems to me that the technological change during the time of the Luddites was helpful for most people, while the technological changes occurring today is nearing a point where it is no longer helpful for most people, with respect to employment/unemployment. Sure, there will be 'new forms of commerce' etc. etc. but if the unskilled labor does not have the training/hardware/human-network-access to participate, what does it matter? rollypolly has a good point below that birth rates dropping can counteract this shrinking of the number of 'jobs' available. It's a perverse situation - can we die fast enough so that our jobs/roles are released to the few new people being born?
  - mseebach 15y ago
    The makers of the machines that the Luddites protested must be assumed to have been an even higher skilled, smaller subset than the Luddites, thus equivalent to todays engineers/software developers etc. It's obviously hard to be deterministic about but I would think it is safe to assume that having the unemployed Luddites 200 years distant helps a lot in deeming the technological developments then more "helpful" than the development today.
ArtB 15y ago
Yes, but what are the unskilled masses to do? Unless we start shovelling them money, are they to starve? What made America great was that an average person could have a house and car working 40 hours a week, what is going to happen to that?
- ekianjo 15y ago
  The costs of living have been going down for the past 50 years at an incredible pace. And please refrain from using words such as "starving" - have you ever known anyone around you starving to death ? On the contrary, there seems to be more and more people who have plenty (and maybe too much) to eat. While productivity gains have been skyrocketing in the meantime. I didn't see people losing jobs by the truckload. And now even a person at the brink of the level of poverty in America has access to clean water, toilet, TV, mobile phone and for most of them, internet as well. We are not living in the 18th century anymore. Nobody knows what the future is made of, but obviously the world is moving toward a higher need for skilled labor. And the fact that more and more people are going to be connected to the very same network, everywhere with mobile devices, will create new potentials for exchanges, commerce and so on. I am not too worried.
  - monkeyfacebag 15y ago
    "have you ever known anyone around you starving to death?" Sample bias. Just because you do not perceive it, does not mean the thing does not exist. LMGTFY: http://ukpmc.ac.uk/abstract/MED/10064320 http://ukpmc.ac.uk/abstract/MED/10064320 Sure, it's not very recent, but nothing that happened during the 00s would leave me to believe the problem has somehow been solved.
    - ekianjo 15y ago
      I'd like to read the article to better understand the observations, but the full text and pdf links return "not found", so I won't trust an abstract without reading the whole thing. Please let me know if you have the article somewhere else. About the sample bias, I agree with you, but if noone around you has ever heard or anyone dying of starvation in their lifetime (including your grandparents), the "sample" becomes more significant. Now, when people die of starvation, it's so extraordinary that they make movies about it ("Into the Wild" by Sean Penn - excellent movie, by the way).
hjhjhj 15y ago
Ah, so maybe it's bad to have a system where if a person doesn't have a job they die?
pmr_ 15y ago
You still have to show that the same amount of opportunities for people are created as are lost by removing low-value jobs. I cannot see the brunt of the people that find themselves out off a job now transitioning into the high-tech sector. I agree with you on the basic principles. Most of those job losses do not hurt the greater picture, aside from the harm inflicted on the individual. But I think there should be planning for a world where most individuals don't have means or opportunity to make an income. I see nothing of that yet and if you still can publish an article in a McKinsey journal on something that is so blatantly obvious, I doubt the world is prepared.
- Ryan_Shmotkin 15y ago
  No, you don't. If the amount of wealth increased (or even stayed the same) with less man-power required. We as 'humans' have lost nothing. (But rather gained some free time to pursue other interests). Only possible problem is that this might lead to higher inequality, which is a whole different problem that needs solving already (look at afrika)
  - v0cab 15y ago
    Or to put the problem of inequality another way: Some people have lots of money and thereby the ability to manipulate lawmakers and media to control me. I no longer have the ability to make any money. I do not have the ability to make those people give me their money. I am screwed.
    - nickik 15y ago
      Reform your democracy when lobbying is such a big problem. The more power in one place the more worth you get on lobbying. Change to a more democratic system and maybe smaller countries.
      - eli_gottlieb 15y ago
        But we're not talking about the democracy problem. We're talking about the capitalism problem.
andyjohnson0 15y ago
Just because past industrial developments (Gutenberg, in your example) were ultimately net job creators doesn't mean it will work that way in the future. It might, but it doesn't have to. You haven't justified your assertion, even though you might be right. "The biggest misunderstanding of this article is that the goal of business is not to "create jobs", it is to create wealth." The article doesn't say that. Business is certainly about creating wealth, but states and societies have legitimate public policy interests in ensuring that there are enough jobs (for some values of 'enough') to ensure that created wealth moves around, to give people something constructive to do, and ultimately to promote social stability.
- ekianjo 15y ago
  Past industrial developments are not just examples, they are models of how an economy can change and still continue to grow nonetheless. Your argument is just like saying "it's not because you throw a rock 10 times and it falls, that the 11th will not go on orbit instead". Fundamentally, there is nothing very different between the past technological revolutions and the current one. All of them brought sudden, massive improvements of productivity suddenly. All of them suddenly rendered a number of the previous workforce redundant. Did it result into mass poverty ? No. Never. I'd like to see a clear argument why the internet, the mobile revolution and the ongoing automation going around us is going to kill more jobs than it creates. I urge people to read Bastiat's "That Which is Seen, and That Which is Not Seen". You'll understand that the implications are never THAT simple not predictable. http://bastiat.org/en/twisatwins.html http://bastiat.org/en/twisatwins.html ---> about your second point: The article may not say that directly, but the ending shows that the writer is going to give us a big solution on "how to create jobs in the second economy" or something. It's just going to be his next big thing. He misses the point completely.
  - drieddust 15y ago
    During the past industrial revolutions manual jobs were replaced by automation so workforce kept on moving to industries requiring basic brain power.This was the best fit as most people can function and use their brain at basic level. This time it may be different as most of such jobs will be eliminated so only a very small percentage of people may remain employable.
flatline 15y ago
While I agree, it doesn't mean that there's not a tipping point at which these fears actually become reality in some form. In the past, you would have a single innovation that threatened some particular worker population, and over time people would retrain, future generations would simply train for something else, and there was no enduring problem. As innovation in technology has accelerated, the level of education required to either create new opportunities or to retrain for existing ones has increased. It is possible that successful automation will eventually outpace the ability of the masses to retrain and adapt. Meanwhile the cost of traditional education continues to rise disproportionate to the rest of the economy, although we are seeing some other possible avenues open up on that front. I think it's an open question as to whether large scale, ongoing unemployment could result from technological innovation, given the right circumstances of rapid innovation and out of reach opportunities for education.
- ekianjo 15y ago
  Concerning education, as you mentioned we see another revolution happening there. Online education, with almost zero-costs (khanacademy and other initiatives). This means the costs or re-conversion to another activity will be lower as well for anyone who wants to dedicate the right time to learn. There's multiple things going on in parallel, it's just hard to make a simple rationale like this article does.
- tomjen3 15y ago
  Actually the cost of getting an education has crashed (and I do mean crashed) recently: between opencourseware, Khan Academy and Standfords "pay us a little bit of money and you get a certificate" getting an education has become a lot cheaper. With regards to your other assumption, note how much most programmers (to take a familiar subject) no longer have to care about -- manual memory management, micro optimizations, low level system interoperations to name a few -- because the price of a computer has dropped so much in relative terms. The masses will simply have to get their asses out of their seats and retrain. In some subjects they will have to specialize even more than we do today, which will enable them to overcome you issue, and in some areas computers will provide greater assistance than they previously have. Historically the factory represented an all-time low in the required skills of the workers -- many downshifted from farming or carpentry or some other skilled trade because factory work paid way more.
DevX101 15y ago
I fail to see how you're deriding the article as B.S. when you apparently agree with the main premise. | Automation is simply removing a lot of these jobs that had very little value in the first place. That's exactly what the author is saying. They just coined a term 'Second Economy' to describe businesses that have unusually high productivity due to computing.
- ekianjo 15y ago
  Nope, I do not agree with the main premise. The article's point is that there are going to be less and less jobs because of productivity and innovation in the world of machines and computing. I do not believe it's that simple and straightforward. Rather, there will be more opportunities to exploit in a more connected world, and therefore more chances to make a living. The people who were operating phones before it was fully automated went on to do other jobs after. There are lot of conversions going around, and people learning skills on their own, trying to get to better jobs, to better situations. Nothing is static !
  - DevX101 15y ago
    You may be right in the long term (and I agree with this), but there will be a transition period that may be painful for many people. The value created by most companies is very concentrated amongst employees -- that is, there are relatively few people who create the most value in companies. As technology gives these high productivity people more leverage and displaces low productivity workers (the majority), many people will be (and are) losing jobs. I don't know how long this transition period will last, but let's not pretend it's not happening.
  - cube13 15y ago
    Here's a counterpoint: The traditional secretarial position has pretty much vanished in the workplace. A lot of offices had a TON of low-level administrative filing and assistant positions even in the 80's. But they've almost completely vanished now for mid to low-level managers or office grunts. The main reason? Outlook and email. A lot of the traditional roles of a secretary(dealing with mail, scheduling meetings, replying to people) are handled almost entirely by the application. Since almost everything is now handled through email, there isn't any reason to have gigantic mail rooms. None of those unskilled jobs have been replaced by anything other than technology. This is actually a new paradigm in history-traditionally, new technology has reduced the need for highly skilled jobs, for example, scribes were replaced by teams of less-skilled workers after Guntenburg's press. Now, technology is reducing the need for unskilled positions. The end result is that a lot of jobs that needed manpower simply don't anymore.
ChuckMcM 15y ago
From wikipedia: "The Luddite events of 1811 were the beginning of humankind's analysis of whether it is possible for technological unemployment to be other than temporary and confined to particular industries and firms. Contrary to the Luddites' fears, technological advancement did not ruin Britain's economy or systemically lower standards of living throughout the following decades of the 19th century. In fact, during the 19th and 20th centuries, the opposite happened, as technology helped Britain to become much less impoverished than before. For this reason, most economists think that the general Luddite premise is fundamentally fallacious, and thus they apply the term Luddite fallacy to it. Economist Alex Tabarrok summarises the neoclassical presentation of the possible fallacy as such: If the Luddite fallacy were true we would all be out of work because productivity has been increasing for two centuries." But the Luddites then, and their modern equivalents, are making an emotional argument not a rational one. Their emotion is very real, they do not see how their particular job goes forward, and in a society where one's job is an often integral to one's identity, that is a very threatening thing indeed.
yukyukyuk 15y ago
Did you read the article? The point is that the "information" sector needs far fewer low to medium skilled workers than other sectors. It is a statement about the distribution of wealth generated by recent economic growth.
eli_gottlieb 14y ago
Certainly you agree that productivity increases lower the amount of labor or labor-time necessary to produce the same output, right? Then let's follow how society has treated technology recently. We've kept improving our technology, while never shortening work-hours. This means outputs should be up. Indeed, outputs are up, but the demand for those outputs is not very far up at all. Why? Because the profits from the productivity increase didn't get divided in their original proportion, or evenly, between business owners and employees, they went almost entirely to the owners. Without more money in their pockets, workers mostly aren't demanding the increased output (and when they have, they've bought it on debt and damaged themselves in the long-term). So for the demand levels we've maintained, all we've accomplished with technology is obsoleting vast amounts of labor. That means businesses need to either shorten working hours, or lay people off. Shortening hours is a tragedy-of-the-commons, because then your competitors can always produce more output and capture more of the market than you by working longer. So businesses have pocketed the productivity as layoffs. We could fix this pretty easily by strengthening labor's interests in higher wages and shorter hours. We only refrain from doing so for ideological reasons, actually, not business ones.

jsnk 15y ago

Technology doesn't kill jobs. Over last two hundred years, the number of people on Earth exploded off the chart. We went from 1 billion to 7 billion. If anything, overall improvement in technology always create more jobs than it destroyed them. Most dramatic example comes from going from 6 billion to 7 billion in just 10 years or so. We still don't have dramatic increase in unemployment that reflect this whopping 1 billion increase. Technology always generated new problems people have to figure out that demands skills and human creativity. It creates jobs in areas that once weren't even thought of before.

v0cab 15y ago
Technology hasn't killed jobs YET.
- kokey 15y ago
  Let's hope it does kill jobs before I'm at the current expected retirement age.
  - v0cab 15y ago
    If that happens, how do you intend to get money?
    - kokey 15y ago
      I wouldn't need much money, since the cost of things will be very low.
      - v0cab 15y ago
        But you'd need some.
      - v0cab 15y ago
        But you'd need some.
radarsat1 15y ago

ef4 15y ago

Increasing productivity is ultimately good. There are always more unmet human needs and wants that can absorb all that new productive capacity. So there's no reason to believe that underemployment is a permanent situation. To the extent that anyone can master the new digital tools, there will be profitable work to employ them. There's no cap on the number of possible jobs. A sudden increase in the number of people with technical skill would cause entirely new industries to become possible. So it all comes down to skills and education. The education system we have is nearly the exact opposite of what we need. I fear that it has permanently damaged large swaths of the population by conditioning them for rote factory labor (the purpose for which it was designed) in a world that doesn't need it anymore. The pain of this transition is going to lead to nasty political problems. Most people do have the raw potential to do the kind of challenging work that pays handsomely in the digital world. They just get it beaten out of them at a young age.

z0r 15y ago
Much of what you have said here I would label as articles of faith. I think that there are limits to the powers of human consumption, which are at least bounded by the finite quantity of time available to each of us. I think then that it would follow that there is probably a cap on the number of possible jobs. I think that it is possible that the work of a small proportion of the total population could provide for the whole, with the right degree of automation. I don't disagree with any of the second half of your post, though!
- ef4 15y ago
  Well, there are some pretty good reasons beyond faith to think that there's no practical upper limit on human wants. First, there's the drive for status. No matter how rich everyone is, demonstrating that you're slightly richer (usually to obtain a mate) is deeply ingrained in our psyches. Second, there's the historical precedent that people have been wrong about the "problem of overproduction" since the start of the industrial revolution. They continually fail to appreciate how wealth creates new demand, which creates new wealth, which creates new demand. Third, we rich westerners are walking existence proofs that at least X level of per capita consumption is possible. While this doesn't prove an unlimited cap, is proves a cap much higher than what the world has today. > I think that it is possible that the work of a small proportion of the total population could provide for the whole, with the right degree of automation. I'm not disagreeing with that statement. In fact, we've already achieved what you're describing. If you told a farmer in 1850 how productive the farmers of 2012 would be, he would assume that most of us are unemployed, because we have in fact reached the point where a tiny fraction of the population can use automation to "provide for" the whole. But of course we've invented entirely new forms of economic activity to keep the rest of us busy now that we don't need to all farm. I'm arguing that the same process is happening to wide swaths of our present economy.

moocow01 15y ago

I think we need to shift our mindset. Everyone gasps in horror when jobs get eliminated by tech - yes, that will mean that many won't have a paycheck for food tomorrow - I understand the sentiment. But eliminating a job where someone sits at a station and does the same mindless thing for 8 hours is a bad thing?? The bad thing is that society is failing to provide pathways to giving that person a more meaningful and fulfilling duty. That is what we should be gasping in horror at. And no I'm not suggesting we should be trying to put an out of work cashier/factory worker/etc onto a track to be a programmer/engineer/etc. We have all sorts of problems. We have swaths of elderly folks who need the most basic care, parents who barely have time to raise their kids, a seeming lack of reward/appreciation for cultural diversity and arts... I could go on and on. There are lots of things that people doing mind numbing jobs could do instead that would probably be better for society and better for them. The unfortunate part is that our system fails to make the connection in many instances.

nickik 15y ago

If Technology ever really kills jobs. We should be happy because we are getting pretty close to utopia where nobody has to work anymore.

maeon3 15y ago
Standard issue average humans power down and self destruct almost immediately without gainful employment. Idle hands are the devils workshop. Go visit a government projects area with a high rise of people on welfare, none of them work, it is a cesspool of drugs, guns, and destruction. If you do not threaten people with slavery and death, your average human will not work a day in their lives. Instead of making a utopia, no jobs destroys all hope for it.
- deleted 15y ago
  [deleted]
- eli_gottlieb 15y ago
  If you do not threaten people with slavery and death, your average human will not work a day in their lives. I never knew there was someone as unspeakably, impossibly evil as you. You would enslave everyone simply to keep them from having free time! Go visit a government projects area with a high rise of people on welfare, none of them work, it is a cesspool of drugs, guns, and destruction. According to your hypothesis, the idle rich should be a cesspool of drugs, guns, and destruction.
virmundi 15y ago
The problem is that we do not have a system in place to handle this. All of our wealth allocation and therefore resource allocation are based around the concept of working. If people don't work, how will they get money? Without money how will they eat? We can move to a socialist system, but for many in Amereica that idea won't fly.
- nickik 15y ago
  1. There will be enougth jobs 2. I don't know about america, soon or late a revolution has to happen there and other places too. I think Basic Income is a nice solution (http://en.wikipedia.org/wiki/Basic_income_guarantee http://en.wikipedia.org/wiki/Basic_income_guarantee). In Germany the Pirate Party supports this and in Switzerland a Initiative just lunched (a way for "normal" people to create laws) that wonts this too. I don't think it will pass the vote but it will rase awairness. Its an almost optimal social system. Garantie minimal for everybody and then just let them be as free as possible. Talkes away the stigma of poor people leeching on the system.

ajankelo 15y ago

The question is what do we do with all these people that were doing "unskilled labor"?

tomjen3 15y ago

That is a completely unfair rant. This process creates jobs. Good jobs too -- the kind that you need to go to college for -- system administrators, programmers, database admins, etc, etc. Sure it kills no-skills jobs, but that leaves those people free to get better jobs elsewhere (once they have upgraded their skills). The only people with reason to complain are those unwilling, or in a few cases unable, to change.

bdunbar 15y ago
This process creates jobs. Good jobs too -- the kind that you need to go to college for -- system administrators, programmers, database admins, etc, etc. Correction - you don't need college for these jobs. The most one needs for any of the listed jobs is a vo-tech course and continuing training.

Symmetry 15y ago

To a first approximation all material progress comes from eliminating jobs. People were able to go to having indoor plumbing and cars because of a huge elimination of jobs in the agricultural sector brought on by the tractor. We have more material goods now because we need less factory workers to produce the subset of material goods we used to have. We have more Yoga instructors and teachers and health workers because they aren't needed to work in factories. The thing is, there are always more things that could be done. People in 1900 didn't know that they would want social media or video games, but we're employing people making them. Losing one's job is traumatic and its good to have a social safety net to make it less unpleasant, but its also the engine of progress.

eli_gottlieb 15y ago
Well yes. The ultimate goal can and should be to work less. But then we have to get our culture and our socioeconomic system on board with the idea of reducing work instead of venerating it as we currently do.

motti_s 15y ago

"One of its main byproducts is the replacement of low-productivity workers with computers." This is the main fallacy of this article. It's actually "high-productivity workers", who build technology, which replaces "low-productivity workers". For that to happen, more "high-productivity workers" are required. Do they realize how hard it is to find talent in tech these days? The economy is ever evolving and becoming more efficient. There is really nothing new here, this has been happening for decades and centuries. With some adjustments, this article could be published 100 years ago and probably 100 years into the future. One problem is that it's hard for people, especially at a certain age to adapt their skill set. So while some sectors are struggling to find employees, others have too many. It's the friction that is created by economy's evolution. But we have to look beyond the cold numbers. This is a social problem. With 8% unemployment rate, an unemployed person is not 8% unemployed, he is 100% unemployed. That's a person like you and me, with family and dreams. However, I believe that in the future this friction will actually become lower. With technology and internet becoming prevalent, high quality, relevant education will become accessible and affordable. In other words, when education finally becomes part of that "second economy" (and it will), things will get better, not worse. When this happens, then ironically this "second economy" could actually solve the problem the article says it creates.

eli_gottlieb 15y ago
Do they realize how hard it is to find talent in tech these days? It's not that hard if you look somewhere other than Silicon Valley.
- motti_s 15y ago
  I've never even been in silicon valley, actually. It's hard to find talents in many regions, though maybe not all of them.

hessenwolf 15y ago

My firm policy is to program myself out of a job. I do it all the time, and you know what happens? Even more work lands in my lap. Funny that.

DanielBMarkham 15y ago

"...As sobering as the Second Economy scenario is I believe the trend is reversible..." Ugh. Here I was thinking that the writer had at least a partial understanding of reality and then we get to that nonsense. I'm not going get into this creative destruction, why-are-there-no-more-buggy-whip-manufacturers argument. It's been done to death, and if you don't understand it after hearing it a dozen times, there's not much I can do to help you with it. But what interests me is the terms of the political discussion. Not politics -- that's mostly picking a team -- but the language that is being used to discuss employment and job creation. Frankly I don't think politicians and economists have a clue to what they are doing when it comes to the technological and digital revolution. Not only are there less jobs, they are scattered all over the world. It's increasingly impossible to make some kind of political change, say putting in a highway, and have it directly bring in jobs of a certain industry. Jobs just aren't centralized like they used to be. There are a lot of industrial and technology parks across the U.S. that are going to remain mostly empty. We see SV and the other startup hubs and think that all the action is there, but I remain convinced that those guys are just the tip of the iceberg. For every Instagram there are ten thousand tiny companies with a thousandth of their users. They don't appear on TV, they don't join the chamber of commerce, many of them don't even incorporate. They are invisible. I don't see how we can have a discussion about jobs and such when all the terms and models we use don't match up to what's really happening. Watching the language of the debate evolve over the next decade or two should be very interesting.