Jobs excerpt from my book “Pardon the Disruption. The Future You Never Saw Coming”, published in November, 2013. This abbreviated section describes the complete disconnect between government – at all levels – and the private sector in the efforts to create jobs.
Somehow, with all this intense focus on the economy, employment, and jobs, analysts suffer a total blindness to any causative factor other than a traditional recession. And the measures undertaken today to counteract a slowed economy and massive joblessness are little different from the WPA program implemented by Franklin Delano Roosevelt in 1935. The theme plays over and over again: pump enough money (and cheap credit) into the marketplace, and the multiplier effect of the stimulus will reinvigorate the American economy.
Every generation has seen disruptive technology enter the marketplace and disrupt industry sectors, dissolving related jobs. It just seems to be happening faster now (again, the exponential effect of Moore’s Law). Masses of telephone operators, secretarial pools, the elevator operator, the full-service gas station attendant, the milkman, home ice delivery, chimney sweeps – all eliminated from the economy by some form of technological advancement (and some operational advances in business that promoted self-service when possible).
A central theme throughout the economic section has been that technology – whether it be robotic, 3-D printing, internet connectivity and retailing, Artificial General Intelligence, advances in medical science, or something else – will destroy both industry and jobs. History has always confirmed that, as new technologies come along, older ways of doing things (and the associated labor) diminish or disappear. But history has also taught us that as the older classes of jobs disappear, new jobs arise with the new technology that replace – and sometimes even increase – the level of employment. It’s always worked this way, and whenever it seems that technology has overtaken the capacity of humanity and the economy to recover, economists assure us that this round will be like all the others and we’ll be fine. A whole new realm of employment opportunities will appear in the replacement industries, and the economy will move on. And again, it always has. Until now.
Here’s why it’s different now. It all comes back to the aforementioned concepts of Moore’s Law and exponential growth. Linear growth explains things that are on an absolute (or projected) increasing path at the same rate. It can show a rising age or any other numeric progression and generally rises as a straight line at a 30-45 degree angle. That is where we have been throughout history – again, until now. For most of the path of exponential growth, the slope resembles that of linear growth. Then it curves upward, rising from the straight line at a sharper and sharper angle. We are entering the last period of the exponential curve, before its slope becomes almost vertical. This is a phenomenon we have never experienced. This growth in technological advancement – Moore’s Law playing out – changes the game. Today’s economists, pundits, and soothsayers refer to the old paradigm where the next generation of jobs seemingly just materializes at the demise of the old order. Proven right time and again, there is an arrogant confidence that it will happen again. But when computers, robots, AGI, and other technological advancements can self-replicate, self-generate, and create on their own, the game has changed. They no longer need our input into the economy at the levels to which we’ve grown accustomed. There is no “next job” for us to migrate towards; they are already filled by an entity that can do it better, faster, cheaper and more reliably. That is the big difference. Ray Kurzweil’s technological Singularity is playing out.
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It is shocking to see how poorly government understands the mindset of the private sector. Harder still is figuring out whether government gets its opinion from the citizenry or vice versa, because both groups consistently cite job creation as today’s most important economic and political issue.
So let’s set the table. Most reasonable people believe there is good reason to have public sector employees. We believe we should have teachers and firemen, police and the military. The vast majority of our public sector employees fit one of these categories. The cuts to these groups as well as to other public sector employment have had a measurable effect on joblessness in the US.
Most reasonable people also agree that long-term employment – long-term productivity – is centered in the private sector. This is where the vast majority of us should be interacting with the economy. So, politicians and the public are both chanting Jobs! Jobs! Jobs! But they don’t seem to see this from a potential employer’s perspective. Politicians keep trying to induce potential employers to take on laborers that they don’t want or need, and the public keeps blaming the politicians for not having successfully done so.
Please, do not equate the loudness of speech or the apparent depth of sincerity about addressing unemployment issues with the ability to do so in any politician, business leader or private citizen. I will say it another way: Government has spent out. They don’t have the money to hire directly. Unless and until government – at any level, against the private sector’s will and to the detriment of its bottom line – can force the private sector to hire people, or induce hiring at an outrageous cost, substantial progress to place people in “jobs” will not succeed. And, of course, economists – you know, the ones sitting in the captain’s chairs that completely missed the call on the Great Recession – are chiming in: Jobs! Jobs! Jobs!
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“Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much.”
- Ben Bernanke, Princeton Commencement Address, 2013
“… ‘Do we economists know anything?’ And it is a very legitimate question. Because if you don’t know enough to capture the most extraordinary event, economic event, in all of our lifetimes, what in the world do we really know?
- Alan Greenspan, on economists. CBS Sunday Morning October 20, 2013
Many theorists admonish local business and government leaders to take an active role in curing local shortcomings in economic development – and this provides all the confirmation that politicians need that they can have a dramatic impact on the economy. Doing “something” is certainly more acceptable than sitting idly by. Too often, in those collective aggressive attempts to do “something” – to have more entrepreneurs, more creative class members or successful industry clusters, more Jobs! – the natural response is to try to induce them through sheer willpower and determination. But pushing the rope of artificially creating entrepreneurship, a creative class and cluster development is not working. The eternally-failing Global TransPark near Kinston, North Carolina is a glaring example of doing “something,” by encouraging the development of a cluster with little thought to the ultimate outcome. As evidenced by that project, over-aggressive efforts to do “something” may lead to bad mistakes and can be very expensive.
To my surprise, former North Carolina Governor Bev Perdue has shown a fuller understanding of the true reality of productivity than most elected officials. At the North Carolina Economic Developers Association conference in March 2009, the newly-inaugurated governor was a featured speaker. She expressed supreme optimism about the areas of the economy that she believed would be central to North Carolina’s economic future: green industry, the military, and aeronautics.
Then she went on to display an understanding of the economy that very few of our leaders possess. (Paraphrasing) “I believe the textile industry in North Carolina can still thrive,” she explained. “They might have to cut the workforce to increase efficiency and profitability, but…” WHOA! She said it! She said what every business in America has said for the last five years. Workers, with their rising healthcare and other costs; workers, who represent a huge percentage of business costs and unproductive overhead during tough times; workers, who are the human measure of these “jobs” elected officials fall all over themselves talking about; workers, who represent the biggest cost to virtually every company; yes, workers may have to be cut in order for the company to survive and prosper. Businesses are charged with making profits (and in this economy, surviving). Their disposition toward creating jobs is: “You’ve gotta be kidding. I’m trying to stay in business.”
I’ll give you an example of what I mean. In your next thoughts about job creation, try a little word exchange. I want you to replace the word “jobs” with the term “payroll expense.” Because isn’t payroll expense exactly what those jobs mean to a potential employer? Try it and see how it feels to say this: “We need more payroll expense!” or “Why haven’t you created more payroll expense?!” It sounds weird, doesn’t it? But, again, isn’t that what a “job” represents to a company struggling to make it? That’s what’s truly relevant because that’s how a potential employer sees the labor force. Her company is in survival mode in this economy; increased profitability is by comparison a lofty goal of secondary importance. Nowhere in our free-market economy or in any company’s set of goals is the objective to simply create jobs.
This disconnect between governmental attempts at job creation and retention through spending and other stimulus – and the virtually opposite goals of those who are expected to do the heavy lifting that solves the unemployment problem (the private sector) – is undoubtedly the most confounding economic enigma today. And it has not been even remotely discussed.
I can’t emphasize this enough. The public sector – all the politicians from President Obama to Congress to Governors and state houses to local mayors and council members – all identify “job creation” as their highest priority. The public at large agrees and holds the officials responsible for addressing the high unemployment rate. And none of the above believe that the best means to do this is to undertake yet more deficit spending to hire a meaningful number of citizens in government jobs. So the efforts at “job creation” and lowering unemployment are left to the private sector. And the last thing the private sector wants to do is to add more payroll expense. Guess what? It’s not working. Go figure.