What no-one tells us about the jobs crisis

By Neil Patrick

Your vote won't help solve the jobs crisis - as long as politicians pull on the wrong levers.

Three big things have happened in my life in the last few months.

First, I finished writing my book, Careermageddon with Dr. Marcia LaReau of Forward Motion Careers. What started as a small project to try and create a helpful guidebook for people frustrated about their work opportunities, grew and grew as we uncovered layer upon layer of complexity as we sought to understand the real mechanics of the jobs crisis.

Then political events took over.

On Thursday 23 June last year, the EU referendum in the UK returned a result that almost no-one expected. Over 65% of registered voters voted, and the die was cast. Despite 'experts' warning that such a decision would be economic suicide for the UK, large swathes of the UK especially those who felt let down by their political leaders, voted to leave the EU.

The outcome of the US election was no less of a shock to most expert observers. Donald Trump campaigned largely on an anti-globalization platform. Jobs for US citizens and stricter border security were to be high priorities. These policy promises resonated with large numbers of non-metropolitan people in the US, left behind in a globalized economy which delivers immense wealth for a few, and less and less for most who either have a job or those who cannot get one.

The shocks of these two outcomes are still reverberating. I am not going to argue for or against Donald Trump or Brexit. Yes I have my opinions, but the point is they really do not matter.

I’ll say it again. My personal opinions and political beliefs do not matter.

Yet I’m very much in a minority. People on both sides of these arguments are endlessly busy championing their support for their choice, and denigrating those who have the opposite view. Meanwhile, the mainstream media under assault from Mr Trump is railing against fake news, quite oblivious to the fact that they are doing nothing at all to help provide greater understanding of the realities of the jobs crisis. They report ‘news’ (in reality arguments and scandal) but are truly hopeless at conveying insight.

These political outcomes have divided societies in the UK and the US, like none before. The reason it is pointless for me to argue for one political side or the other, is that the thing I care most about is jobs and incomes. Not about winning political debates. And jobs are not primarily made or lost by decisions about immigration, or who wields political power.

The jobs crisis is not fundamentally an outcome of political decisions. Yes Donald Trump is committed to getting jobs back for US workers. Yes the Brexit campaign succeeded because many people in Britain felt that unrestrained migration into the UK was creating unbearable pressure on our nation. They believed (contrary to much evidence), that immigrants were ‘taking our jobs’ and altering the fabric of our society for the worse.

The real drivers of falling incomes, long-term unemployment, and social unrest are nothing to do with immigration, or the UK’s membership of the EU, or who is in the White House.

We have a jobs crisis because the world is undergoing changes so immense that policy makers have no reliable models they can turn to with confidence that tell them what to do.

Pulling the traditional monetary levers of interest rates and money supply have proved completely incapable of reigniting sustainable economic growth. They have failed in the Eurozone, failed in Japan, failed in the UK and failed in the United States.

And that is because the changes going on are deep and structural. They are so deeply rooted that even the most sophisticated economic forecasting models and policy levers are completely inadequate to represent and remedy the complexity of what's happening and worse what will happen. They just don’t work in times like these.

In January this year, in an almost unheard of admission of failure, none other than Mark Carney, Governor of the Bank of England was forced to admit that the Bank’s economic forecasting models just didn’t work when a change as great as the Brexit vote occurred. These models work reasonably well in period of slow and gradual change. They fail completely when changes are large and rapid.

He went even further as I reported here. He admitted that up to half of all jobs in the UK would be eliminated by technology in the coming years.

The real drivers of job creation and destruction are what Marcia and I describe in detail in our book. We call them The Six Engines of Change. They are:

• Globalization and offshoring 
• Technology, artificial intelligence and robotics 
• Disruptive business models 
• Education and the speed of institutional change 
• Demographics and the aging population 
• Fiscal policy 

Firms are able to control their decisions about the first three of these. And they will make decisions based on their raison d’etre. I.e. they will do whatever makes the most money.

Government can do little other than play around the edges of these things unless we wish to submit to a centralized and totalitarian state. On the other hand, education, demographics and fiscal policy are areas where government policy can achieve greater leverage.

Yet none of these are a silver bullet which can reignite economic growth. They are blunt instruments as the central bankers would say. They impact slowly. Which is not helpful when people are struggling to make ends meet week in week out.

In a world which is changing faster than ever before, and where more and more people are feeling that their governments have failed them, we should not be surprised that politicians who promise sweeping change are able to win more votes than those who can only promise more of the same.

We can only hope that instead of playing to the gallery, they grasp the real fundamentals of what is happening and implement policies which truly reflect these complex realities of the 21st century world.

I really cannot predict what is going to happen next, but I have nagging feeling that real change is going to be harder to deliver than we’d all like.

Shock as Mark Carney spills the beans (and agrees with me)

By Neil Patrick

Bank of England Governor Mark Carney
Photo credit: World Economic Forum 

What is front page news today in the UK? Well it’s that the Governor of the Bank of England agrees with me about the jobs crisis.

Mr. Mark Carney’s speech last night in Liverpool was the first time I have ever seen one of the world’s most senior central bankers endorse the very things I have been banging on about here for the last four years.

But I am not gloating. There can be no joy in the confirmation that one’s worst fears are indeed reality. What’s tragic is that this demonstrates just how long institutions take to acknowledge that a problem exists. Let alone do anything about it.

And the Bank of England is falling back on its get out of jail free card to pass responsibility for solving the problem to the government. After all, monetary policy is a blunt instrument, as central bankers are always swift to remind us.

Anyway for fun (if such a thing is possible) on hearing this not so new ‘news’, I have taken a look at his main points and compared them to things I have said here, and when I said them.

The Daily Mail’s front page headline today read:

On 15 Sept 2015, I wrote:

“The endless rise of tech is one of what I call the “six pillars of job destruction”. The others are globalization, demographics, monetary and fiscal policy, educational lag and digital communications… “

The front page story by Hugo Duncan in the Mail went on:

‘In an alarming vision for workers, Mark Carney warned many jobs would be 'hollowed out' as huge technological advances meant roles could be automated instead.

‘The Bank has said the march of the machines in the workplace puts administrative, clerical and production staff most under threat.

On December 1 2014, I wrote:

“Whilst the whole of a job may be currently impossible for a machine to replicate, parts of that job may well be perfectly capable of being replaced or aided by technology. This fact in turn means that fewer people are needed to deliver the same amount of work.”

‘The Bank of England predicts that entire professions, such as accountancy, could be pushed to the brink of extinction as developments in computers make their roles redundant.

On 27 July 2016, I wrote in reference to the endless rise of tech:

“In the US and Europe in particular, this is why the middle class is becoming an endangered species”.

‘Mr Carney claimed that 'up to 15million of the current jobs in Britain' – almost half of the 31.8million workforce – could be replaced by robots over the coming years as livelihoods were 'mercilessly destroyed' by the technological revolution.

And in July this year I said:

“The last remaining argument for tolerance of the jobs carnage created by the tech tsunami is that the Wikipedia version of history tells us technological progress is inevitable, and has only ever resulted in greater wealth and a better society. But this assertion doesn’t bear much scrutiny if you have even a basic knowledge of economic history.”

Mark Carney again: 'The fundamental challenge is, alongside its great benefits, every technological revolution mercilessly destroys jobs and livelihoods – and therefore identities – well before the new ones emerge.

I said in 2014: 

“The jobs created by tech are totally different to the ones destroyed by it. Which means those who lose their jobs as a result of technology are largely unable to switch.”

Carney: 'This was true of the eclipse of agriculture and cottage industry by the industrial revolution, the displacement of manufacturing by the service economy, and now the hollowing out of many of those middle-class services jobs.'

In October this year I wrote:

  “We have to understand how technology is going to impact our area of professionalism and get ahead of the change curve”

‘Speaking at Liverpool John Moores University yesterday, the Governor also claimed workers had suffered '…the first lost decade since the 1860s', with living standards suffering the biggest squeeze since Dickensian times. Calling for the Government to tackle 'staggering wealth inequalities' through redistribution, he said: 'Real wages are below where they were a decade ago – something that no one alive today has experienced before.'’

‘Globally, the share of wealth held by the richest 1 per cent rose from a third in 2000 to half by 2010. In the UK, the income share of the top 1 per cent tripled from 5 per cent in the early 1980s to 15 per cent in 2009.

In September 2014 I reported how: 

“quantitative easing policies have benefited mainly the wealthy. About 40% of those gains went to the richest 5% of British households...exacerbating already extreme income inequality and the consequent social tensions that arise from it”.

‘Mark Carney went on to say: ”…globalisation has seen 'the superstars and the lucky' thrive while others have struggled. ..Now may be the time of the famous or fortunate, but what of the frustrated and frightened?”

On 8 April 2015 I wrote: 

“…the globalization of workforces means that many jobs which used to stay firmly in the domestic market are now spreading around the world. And it’s not just a cheap labor argument. I recently had lunch with an entrepreneur friend who told me that almost his entire workforce was now composed of freelancers based the Philippines. Yes it was cheaper than a UK workforce (by about 75%), but critically this wasn’t his main reason for the choice. He was in the business of web content production and he had found that his overseas workers were more diligent, more proactive and had better written English than the people he used to employ in the UK.”

And in January this year I wrote that:

“There will be many more super rich in the world, but also a great many more who used to be comfortable, becoming very uncomfortable.”

Carney again: “One of the things that I think contributes very understandably to the level of anxiety that households feel in this economy, in other economies, is the fact that it has for them been almost a lost decade of growth.”

On 15 November 2015 I said:

 “…persistent slow growth will continue to dampen employment prospects…real wages have stagnated across many advanced G-20 nations and even fallen in some.”

Carney: 'Real incomes in this country have not grown for the last ten years. That is incredible and that shines a light on inequalities that exist in this economy and make people question what is being done to address those and what are the fundamental causes of those.'

He added: 'For free trade to benefit all requires some redistribution. We need to move towards more inclusive growth where everyone has a stake in globalisation.'

For the first and I hope not the last time, I applaud Mark Carney for not mincing his words and spelling things out to the government. Even if he is a bit late in diagnosing the problems.

We need change and we need it fast.

The destruction and degradation of jobs is something I’ve been documenting here since 2012. Now four years later, we have an acknowledgement of the problem from someone who has the influence to do something about it. But we cannot wait another four years for practical solutions to begin to be implemented.

The machines aren’t going to wait and neither can we.

The trouble with tech is wealth destruction

By Neil Patrick

I love tech. But I hate what it is doing to jobs and wealth creation. Any voice of concern on this subject risks being shouted down as Luddite. But being branded a Luddite is not the worst thing that can happen; a whole society sleepwalking over a cliff is a far greater worry.

Robert Ludd: NOT my role model

There's a great deal of corporate and government spin about the impact of technology on jobs. If I didn’t default to the notion that cock-ups, not conspiracies, are man’s most common failing, I’d be signing up for the Loony Tunes’ New World Order Conspiracy news feeds.

At first, it was argued that technology would just enable higher quality and less costly goods. Then, when the first layoffs due to automation started happening, it was argued that only tedious and repetitive jobs would be displaced. As disruptive business models, artificial intelligence and robotics become increasingly advanced, both these defences have crumbled.

Then the really big changes started. Whole industries began to be disrupted by new tech-enabled business models. Travel agents are being disrupted by Trip Advisor and Airbnb. Cab drivers by Uber. Retailing by Amazon. Banking by PayPal. And worse, every successful disruptive business replaces a job heavy industry sector with a jobs-lite one.

The last remaining argument for tolerance of the jobs carnage created by the tech tsunami is that the Wikipedia version of history tells us technological progress is inevitable, and has only ever resulted in greater wealth and a better society. But this assertion doesn’t bear much scrutiny if you have even a basic knowledge of economic history.

The latest piece of expert group think I stumbled upon comes from none other than Deloitte. They published a paper in December 2014 entitled, ‘Technology and people: The great job-creating machine’ by Ian Stewart, Debapratim De and Alex Cole - all economists working at Deloitte; experts by most people’s definition.

An interesting footnote is that whilst the document is branded as Deloitte’s, it contains a disclaimer that the report is merely the personal views of its authors…do Deloitte’s legal team sense these views could be a bit controversial? Why would Deloitte wish to distance themselves in this way?

Anyway, the document makes the same old arguments that there is no historical situation which has shown that technology has done anything other than create more jobs and greater wealth. And by inference, anyone who argues that this time it’s different is a Luddite.

History can be an unreliable teacher. Is it really a good idea to place our faith in an argument, just because something has never happened before? That this ship is so vast and splendid it is unsinkable?

And just as a little reminder, the first industrial revolution in Britain didn’t actually create more jobs. It merely absorbed the millions of unemployed agricultural workers put out of work by Jethro Tull’s seed drill and other agricultural innovations.

When I looked at the evidence based on UK data presented by Deloitte, they helpfully show us how whilst some jobs are disappearing fast, others are growing rapidly. But looking at this data I also spotted a massively frightening detail. Here’s the table in question:

Notice anything about the nature of the jobs gained versus the ones lost?

It’s this. Almost all the new jobs are low pay and/or mostly in the public sector.

And most of the shrinking occupations are in the private sector.

By far the largest growth sector for jobs between 1992 and 2014 was nursing auxiliaries and assistants. The reason is simple and we all know that the aging population is driving this. Over this period, more than 270,000 new jobs materialised in this field. The second biggest growth sector added almost 420,000 extra jobs. Too bad then that these jobs were for educational assistants i.e. people who earn even less than teachers.

Low pay is bad enough, but public sector jobs pose an even bigger economic problem. They are paid for not by sales to domestic and overseas customers, but from taxes collected into the treasury. Public sector jobs support our society but are simply terrible as engines of economic growth. And growth is the one thing that economies worldwide are desperate to find these days.

Public sector jobs do not create economic growth and sustainable household wealth, they merely spend government (and our) money. Money taken from us and businesses in tax (unless you are Google or Amazon). It is then spent for us by the government on the things they decide we want and need. Sure some of this government spending trickles through to the private sector, but  there's a dreadfully expensive and inefficient pile of government bureaucracy acting as the middleman in this business model.

What is worse is that public sector jobs don’t make the nation richer. They are not exported. They are horribly complex to manage and operate not because the people are dumb, but because all large organisations struggle with efficiency. And more of them add to an already swollen and debt-burdened state which must borrow endlessly to sustain its spending.

You may well disagree with me. You may well trust that the experts in our governments and corporations have our best interests at heart. That the frequent cases of greed and exploitation by ruthless capitalist businesses are a more than adequate reason to reject my argument.

So in the interests of presenting a balanced view, here’s a quotation from the Deloitte report:

Change is the prerequisite for improving welfare. Until the eighteenth century the organisation of work was largely fixed and the material condition of the masses was miserable. It was the wrenching change of the industrial revolution, the application of steam power to production, urbanisation and the rise of manufacturing that brought improvements in material conditions and life expectancy for working people. Technology has transformed productivity and living standards, and, in the process, created new employment in new sectors. Machines will continue to reduce prices, democratising what was once the preserve of the affluent and furnishing the income for increased spending in new and existing areas.

Machines will take on more repetitive and laborious tasks, but seem no closer to eliminating the need for human labour than at any time in the last 150 years. It is not hard to think of pressing, unmet needs even in the rich world: the care of the elderly and the frail, lifetime education and retraining, health care, physical and mental well-being. The stock of work in the economy is not fixed; the last 200 years demonstrates that when a machine replaces a human, the result, paradoxically, is faster growth and, in time, rising employment. The work of the future is likely to be varied and have a bigger share of social interaction and empathy, thought, creativity and skill. We cannot forecast the jobs of the future, but we believe that jobs will continue to be created, enhanced and destroyed much as they have in the last 150 years.

The trouble with this opinion is that the first technological revolution merely transferred labour from the agricultural and subsistence existence of the rural poor, to the impoverished drudgery of urban manufacturing centres. The owners of capital flourished and became wealthy. Cities expanded and became wealthy. Central and local government expanded and became wealthy. Workers did not. Urban slums and squalor replaced rural shacks and poverty.

So the first industrial revolution, didn’t actually create more jobs or better standards of living for workers. However, the second industrial revolution did. This was when mass communication in the form of TV, radio and the telephone enabled the rise of truly global businesses. These businesses coupled mass production economies of scale with vast global markets.

They needed huge numbers of middle managers to support and supervise their activities. And these are today the vast global corporations that are slowly but surely being disrupted to death by thousands of niche start-ups and new business models. In the US and Europe in particular, this is why the middle class is becoming an endangered species.

The key difference between this historical perspective and the reality of today is that the monetary basis on which society is built is different. And the biggest and most critical difference is debt. The debt of businesses. The debt of citizens and governments.

A debt burdened society can only survive when it has a stable and growing income. Stable to ensure debt repayments cans always be met. And growing to help lessen the total burden of debt as a proportion of income. Just like when we take out a mortgage to buy a house, we are gambling that our future income will be stable and reliable enough to meet the repayments for the next 25 years.

But today’s incomes are less stable and secure than ever before. A cotton mill worker might have endured terrible working conditions and low pay, but at least their work was relatively secure and they were not crippled with debt. Today, the combination of housing undersupply (not helped by the debt burden of house builders) and prices inflated by overseas speculators keeps young people out of home ownership. Student loans mean young people are hobbled by debt before they even land a job.

This financial dimension is inextricably linked to the nature of the threat of technology. And it’s something that cannot be unknown to anyone with even a basic grasp of financial and economic matters. Let alone someone working at Deloitte.

Which begs the question, ‘Why might the experts want to persuade us otherwise?’

That’s a question I am not going to attempt to answer. You can call me a Luddite if you wish. That I can live with. But I really have no wish to be classed a conspiracy theorist. For now at least.

Davos is depressed this year, and we should be too

By Neil Patrick

Welcome to an exciting brand new year. What does 2016 have in store for us? Well the world's top economic, business and government minds are all in Davos to figure it out for us.

Here in the UK, despite the government crowing about the record number of ‘jobs’ it has created (actually this is only true if we count what I call the 'self-unemployed'), there’s no sign that many normal people actually feel much better about things. In the US, a similar pattern is occurring; a slight uptick in hirings, but a persistent deterioration of incomes.

From my perspective it's all been rather obvious for a long time now: the world is trapped in a vicious circle of low growth, low interest, low inflation and low hope.

In September 2014, the World Bank finally decided the global jobs crisis was more or less ‘official’ as I reported here. According to their estimates, the global economy needs to create a further 600 million jobs by 2030, just to keep pace with population growth.

16 months later, and this topic is now one of the main themes of the World Economic Forum at Davos. This week, the world’s elite in business, government and rather weirdly IMHO, entertainment (Bono, Will.I.Am, and Leonardo DiCaprio are there too), have all gathered in this swanky ski resort in Switzerland. Not surprisingly, no-one invited me or anyone I know.

Davos in Switzerland - Where the world's elites are this week
Credit: de:Benutzer:Flyout

As the super rich engage in their own peculiar form of networking and schmoozing with their peers, the world’s stock markets are in turmoil, global investor confidence is tanking, interest rates seem to be stuck for at least another year, oil prices are in free fall and the wealth and incomes of ‘normal’ people are continuing to shrivel. Oh, and just to add insult to all this economic injury, here in Wales, it has been raining for the last 81 days…

But even the just modestly well-off are taking a hammering too as trillions have been wiped off stock values since the year began. Sir Martin Sorrel, chairman of U.K.-based advertising giant WPP was characteristically pragmatic saying:

"The new normal is a low-growth world"

Sorrell is worried that companies are not confident enough to invest in new projects that might create growth and jobs. Instead, they increasingly prefer to reward shareholders with dividend payments and share buybacks.

And consumers remain wary too; nearly eight years after the global financial crisis saw the collapse of many banking groups and triggered the deepest recession since World War II, many retailers have reported massively disappointing sales over the Christmas period.

But let’s not despair. Fortunately Swiss bankers UBS have come up with a 'keynote' report which deals with the main theme for this year’s Davos conference. It is titled excitingly, “Extreme automation and connectivity: The global, regional, and investment implications of the Fourth Industrial Revolution”.

Well I was excited by it…

I don’t expect you to read it, but if you are as nosy as I am and have some spare time, here’s the link to it.

The mainstream media is busy not reading it much either, either because they are too dazzled by the parade of rich and famous people they are itching to photograph, or because for them this is just another reporting gig and careful reading of such things takes too much time when they have tight editorial deadlines to meet.

However anoraks like me do read such things. Very carefully.

In case you are not familiar with the who’s who of global private banking, let’s just summarize UBS’s resume. UBS is the biggest bank in Switzerland, operating in more than 50 countries with about 60,000 employees globally. It’s the world's largest ‘manager’ of private wealth assets, with over CHF 2.2 trillion in invested assets. In other words, it’s the bank of choice for the world’s super rich.

Swiss banks do not care about the likes of you and me. They do care about things like making friends with the rich, powerful and influential folk at Davos. They work hard at this (aka spending lots of money). And they apply a lot of their considerable reserves of brain power too. The term ‘establishing our thought leadership’ was doubtless bandied around their offices a lot as the work was being done on this report.

Over the years, UBS has built up an extensive corporate resume of what Wikipedia rather euphemistically call ‘controversies’. These include laundering Nazi holocaust assets, tax evasion in the US, France, Germany and Belgium, LIBOR rigging, bond market rigging, currency benchmark rigging, FOREX manipulation, rogue trading, misrepresenting mortgage backed securities, and illegal arms sales money laundering.

There is a full description of all these accomplishments and more on Wikipedia here.

In the interests of balanced reporting I should point out that UBS is ranked in the US as amongst the top 100 best places for mothers with children to work and invests significant sums in the arts and cultural sponsorships. In October 2013, UBS Wealth Management was voted the Best Global Private Bank by Professional Wealth Management, while also being recognised as the Best Private Bank for Philanthropy Services, and the Best Global Brand in Private Banking.

A Thomson Reuters survey ranked UBS number one in all three of the key disciplines of research: Research ; Sales and Equity Trading and Execution. UBS was also named as the number one leading pan-European brokerage firm for economics and strategy research.

I will let you form your own views about the question, ‘If UBS was a person, who would they be?’

The UBS report sets out to forecast the impacts of current trends in technology, markets, business and politics to provide a view of the economic outlook for different countries around the globe.

The introduction proclaims:

“Previous industrial revolutions have been driven by rapid advances in automation and connectivity, starting with the technologies that launched the First Industrial Revolution in 18th century England through to the exponential increases in computing power of recent decades. The Fourth Industrial Revolution is based on the same two forces. The first is extreme automation, the product of a growing role for robotics and artificial intelligence in business, government and private life. The second, extreme connectivity, annihilates (interesting choice of verb – Ed.) distance and time as obstacles to ever deeper, faster communication between and among humans and machines.”

So far, so what? If you have been alive and awake at all in the last few years, this is as obvious as the fact that night follows day. And as anyone who has followed this blog from the beginning knows, I have being banging on about this for over three years.

They continue:

“These changes will have very different effects on nations, businesses and individuals. Automation will continue to put downward pressure on the wages of the low skilled and is starting to impinge on the employment prospects of middle skilled workers.”

It isn’t starting guys, it’s been happening for the last ten years at least (But I know, you’ve been a bit distracted).

But wait, there’s good news (sort of):

“By contrast the potential returns to highly skilled and more adaptable workers are increasing.”

Interesting that the word ‘potential’ is used here. This is a word bankers love, because it’s a get out of jail free card. “Highly skilled and adaptable” is also code for willing to move anywhere, accept work on any terms and be able to do the work at a pace and level of excellence beyond our that of our peers. Good news for all you wunderkinds. Not such good news for everyone else.

“Among corporations, a wide range of traditional businesses – especially those that act as intermediaries – can be expected to suffer. Many labor-intensive firms should be able to boost profit margins as they substitute costly workers for cheaper robots or intelligent software (my emphasis).

Now we are getting to the real problem. So called “traditional businesses” are ones that have successfully grown over many decades and employ(ed) lots of people. And yes, they are shrinking, automating and collapsing faster than ever. Those that are still alive are seeking to slash costs and boost profits through more and more deployment of technology.

But don’t worry, it’s all going to be okay because:

“… a range of entirely new companies and sectors will spring into existence. For nations, the largest gains from the Fourth Industrial Revolution are likely to be captured by those with the most flexible economies, adding a further incentive for governments to trim red tape and barriers to business.”

The key to economic success for nations and individuals alike in the future is flexibility. I agree with UBS on this point. But this is also where the whole hopeless vision falls apart. Because we can’t even keep up with the pace of tech change today, let alone tomorrow; as anyone familiar with Moore’s Law also knows, these changes are only going to accelerate.

How many Ubers, Googles, Trip Advisors, Air B’n’Bs does it take to create just a million jobs? Every single one of these ‘disruptive innovators’, (or whatever MBA style label you wish to put on them), ‘work’ - at least for a short time - because they need very few employees relative to their revenues and capital. Unlike traditional businesses, their capital is not in human assets, it is in tech assets. Robots are not paid a salary. And they don’t go shopping.

Worse, the traditional industries that they disrupt are people heavy. It’s a double whammy of the job-lite businesses destroying the job-heavy ones. This is the horrible economic reality of disruptive business models.

And neither UBS nor any commentator I can find, has any practical remedy for this cannibalization of jobs. The only glimmer of hope is that as costs of living continue to fall, the strangulation of household incomes will effectively be loosened.

The trouble is that achieving this flexibility is fraught with difficulty. And making it happen quickly enough is almost impossible when we consider the different speeds at which technology and our people, organisations and institutions are capable of moving.

UBS can see that they will do very nicely if their vision or anything like it actually materialises. There will be many more super rich in the world, but also a great many more who used to be comfortable, becoming very uncomfortable. The first group matters to UBS. The rest of us do not.

Happy New Year.

The unemployed - they are absolutely not who you think

By Neil Patrick

The whole reason that I started this blog was vindicated for me this week in just one paragraph by my good friend, Twitter star and fellow blogger Andrew Ginsburg (Twitter @GinsburgJobs) within an email he sent me. Here’s an excerpt:

“I was recently at a birthday party and realized almost all of the men were unemployed. I am the youngest of all of them, but most are Harvard Law or Business School grads, even a friend who I grew up with who has been a very successful investment banker in New York for the last 30 years was laid off last year. He has the luxury of having tens of millions of dollars in the bank so he can seek out a different path. Most of us don’t have that. Even another friend, who went to Harvard undergrad and Business school said that many of his colleagues have been let go.”

This single paragraph would be unthinkable even a just a few years ago. People who have worked hard for decades and achieved professional success in their chosen careers are today facing unemployment in their hundreds of thousands. 

This situation isn’t because of the recession. It’s not going to suddenly get ‘better’ if and when our economies improve. Economists call this “structural unemployment”, and Wikipedia defines it thus:

“Structural unemployment is a form of unemployment where, at a given wage, the quantity of labor supplied exceeds the quantity of labor demanded, because there is a fundamental mismatch between the number of people who want to work and the number of jobs that are available.”

Most of us never think about types of unemployment. If you have a job, or work for yourself, you are considered to be employed. If you don’t, you are either retired, in education or unemployed. But today, structural unemployment is devastating the group that is popularly considered the most over-privileged in the world – white, middle-aged, middle class men.

I can almost hear the heckling of the young, working class and under-privileged now saying “Haha! Welcome to our world suckers! You created this mess, so now you can suffer with the rest of us”.

Such twisted triumphalism gets us nowhere. Those who’ve played by the rules they were given, worked hard and contributed the most to society (not to mention the government’s coffers) deserve neither condemnation nor vilification.

And letting them rot on the scrap heap is the worst thing we can let happen. If there is any long-term solution to reigniting economic growth in the US and Europe it won’t be based on low skill jobs and even lower wages. If there is economic salvation available, it will be because we are able to out-perform the rest of the world in our creativity, competitiveness, innovation, entrepreneurialism and critically, our ability to evolve and lead in what Jeremy Rifkin calls “The Third Industrial Revolution”.

Anarchy, revolution or class war won’t deliver any prospect of this. Neither will groupthink or any amount of youthful enthusiasm. But re-engaging the experience, maturity and brainpower of those greying guys on the scrapheap just might, if we ask them nicely (and provided they learn how to function in the digital age).

The jobless recovery continues

By Neil Patrick

If redundancies are slowing and hiring is rising, how come no-one feels much better about the outlook?

There are confusing signals coming out right now around the supposed economic recovery. We know that hiring rates are rising. Incomes and spending are on the up too. We also know that workers are increasingly feeling confident enough to quit jobs they don’t like. This fact alone pushes up the volume of hiring activity. So this part of the situation can be at least partially explained.

An oft-quoted opinion about the persistence of unemployment is that workers don’t have the right skills. If this were true, then we’d expect to see that in some sectors, the numbers of unemployed workers would be dwarfed by the numbers of job openings. Employers would have no choice but to settle for less than ideal candidates and many vacancies would remain unfilled.

So is this the case?

Here’s the breakdown for Feb 2015 by industry sector in the US:

What we can see here is that with just one exception, namely Healthcare and Social Assistance, the number of unemployed workers still massively exceeds the number of job openings.

For example, in construction, the number of unemployed workers exceeds the number of job openings by five and a half times. In the enormous sector of retail, unemployed retail workers exceed job openings by around two to one.

This is a jobless recovery. And the lack of any significant recovery in the US labor participation rate confirms this:

So what is going on? Here’s my hypothesis.

First there is a flight to technology investment over investment in human capital. In the seven or so years since the onset of the Great Recession, technology has made huge strides. The result is that most organisations can today accomplish the same or a greater amount of work with a smaller workforce than they did even just a few years ago.

Second, the globalization of workforces means that many jobs which used to stay firmly in the domestic market are now spreading around the world. And it’s not just a cheap labor argument. I recently had lunch with an entrepreneur friend who told me that almost his entire workforce was now composed of freelancers based the Philippines. Yes it was cheaper than a UK workforce (by about 75%), but critically this wasn’t his main reason for the choice. He was in the business of web content production and he had found that his overseas workers were more diligent, more proactive and had better written English than the people he used to employ in the UK.

Thirdly, endlessly falling marginal costs of production mean that revenues and inflation are acting as a brake on spending levels and wage growth. Both have a negative impact on incomes, spending and government tax receipts.

The forty-thousand dollar question is will business growth and continued recovery result in more jobs for humans being created or will the robots steal them?

Stephen Hawking on the threats of artificial intelligence

By Neil Patrick

It was an odd co-incidence that yesterday I posted a piece sub-titled “Is your job at risk of being taken by a machine? A few hours later Professor Stephen Hawking was featured on the main BBC evening news with an even more gloomy prediction that artificial intelligence could be the greatest threat to the very existence of mankind.

Hawking, one of Britain's pre-eminent scientists, went much, much further than I was brave enough to do. He said that efforts to create thinking machines pose a threat to our very existence. He told the BBC: "The development of full artificial intelligence could spell the end of the human race."

Hawking is a theoretical physicist, who has the motor neurone disease amyotrophic lateral sclerosis (ALS) and is currently using a new AI assisted speech system. His warning came in response to a question about an upgrade of the technology he uses which was developed by Intel.

Machine learning experts at the British company Swiftkey were also involved in its creation. Their technology, already employed as a smartphone keyboard app, learns how he thinks and suggests the words he might want to use next. ("God help us" seems like it might be useful).

Hawking believes the basic forms of artificial intelligence developed so far have proved very useful, but he fears the consequences of creating something that can match or surpass humans.

"It would take off on its own, and re-design itself at an ever increasing rate," he said.

Professor Stephen Hawking

Ever mindful of its commitment to balanced reporting, the BBC was quick to find an expert commentator with an opposing view. Rollo Carpenter, creator of Cleverbot added to the debate saying,  "I believe we will remain in charge of the technology for a decently long time and the potential of it to solve many of the world problems will be realised." 

Cleverbot is software that is designed to chat like a human would. Its  software learns from its past conversations. In tests, it fooled a high proportion of people into believing they were talking to a real person.

Carpenter asserted that we are still a long way from having the computing power or the algorithms needed to achieve full artificial intelligence. But even he believes it will come in the next few decades.

"We cannot quite know what will happen if a machine exceeds our own intelligence, so we can't know if we'll be infinitely helped by it, or ignored by it and sidelined, or conceivably destroyed by it," he said.

I need to be braver in my position I think. And my opinion inclines more to Hawking for the simple reason that he has absolutely no vested interest in allaying concerns about the threats of technology.

I don't fear being physically killed by an out of control robot. I do fear that our whole economic system and the jobs within it will be killed if we don't do something.

I don't need to contemplate the distant future. Even today's 'basic' AI and technology is destroying jobs right now every day. Hawkings and Rollo are both contemplating the future decades ahead.

But that’s academic. The distant future isn’t the issue. Today is.

The top 30 jobs most at risk from technology

By Neil Patrick

Is your job at risk of being taken by a machine?

As technology continues to take jobs from people, so I’ve accelerated my research to try and figure out what this means for the future of work and what we can do about it.

I spend a lot of time talking to diverse experts who have insight on this subject and digging out relatively obscure research. This is far away from mainstream media which is high on attention grabbing headlines, but low on valuable insights.

So I was pleased today to discover a research paper by Oxford University academics Carl Benedikt Frey and Michael A. Osborne published in September 2013. Their research examines how susceptible jobs are to computerisation.

Their paper is titled: The Future of Employment: How Susceptible are Jobs to Computerisation?

You can read the whole document here.

Frey and Osborne developed a model which examined the current and anticipated capabilities of technology and then compared the tasks involved in carrying out over 700 different jobs. This enabled them to then rank each job by its vulnerability to being reduced or eliminated by technology in the future.

Of course, robots and IT systems are still unable to match the depth and breadth of human perception. While basic pattern recognition is reasonably mature, enabled by the development of sophisticated algorithms, sensors and lasers, significant challenges remain for more complex perceptive tasks.

So some jobs are at high risk. Others are currently relatively immune.

Computers are not so good for example at identifying objects and their properties in a cluttered field of view - hence the very nature of those annoying Captchas... Similarly, tasks that involve a complex and unstructured work environment make jobs less susceptible to computerisation.

The least at risk jobs therefore include:

Recreational Therapists

Supervisors of Mechanics, Installers, and Repairers,

Mental Health and Substance Abuse Social Workers

Audiologists

Occupational Therapists

Orthotists and Prosthetists

Healthcare Social Workers

Oral and Maxillofacial Surgeons

First-Line Supervisors of Fire Fighting and Prevention Workers

Dietitians and Nutritionists

Choreographers

Sales Engineers

Physicians and Surgeons

Psychologists,

First-Line Supervisors of Police and Detectives

Dentists

Elementary School Teachers

But even these jobs are indirectly at risk. Whilst the whole of a job may be currently impossible for a machine to replicate, parts of that job may well be perfectly capable of being replaced or aided by technology.

This fact in turn means that fewer people are needed to deliver the same amount of work.

And business has a habit of quickly finding ways round current technological limitations. If a human task cannot be replicated exactly by a machine, then why not just adapt the task so it can be?

So the limitations of perception by machines can sometimes be sidestepped by clever task design. For example, Kiva Systems, acquired by Amazon.com in 2012, solved the problem of warehouse navigation for its robots by simply placing bar-code stickers on the floor, informing them of their precise location. Problem solved! And fewer humans needed…

Anyway, the title of this post promised the top 30 most at risk jobs as identified by the research.

And here they are (and I sincerely hope your job is not on the list).

672. Legal Secretaries

673. Radio Operators

674. Driver/Sales Workers

675. Claims Adjusters, Examiners, and Investigators

676. Parts Salespersons

677. Credit Analysts

678. Milling and Planing Machine Setters, Operators, and Tenders, Metal

and Plastic

679. Shipping, Receiving, and Traffic Clerks

680. Procurement Clerks

681. Packaging and Filling Machine Operators and Tenders

682. Etchers and Engravers

683. Tellers

684. Umpires, Referees, and Other Sports Officials

685. Insurance Appraisers, Auto Damage

686. Loan Officers

687. Order Clerks

688. Brokerage Clerks

689. Insurance Claims and Policy Processing Clerks

690. Timing Device Assemblers and Adjusters

691. Data Entry Keyers

692. Library Technicians

693. New Accounts Clerks

694. Photographic Process Workers and Processing Machine Operators

695. Tax Preparers

696. Cargo and Freight Agents

697. Watch Repairers

698. Insurance Underwriters

699. Mathematical Technicians

700. Sewers, Hand

701. Title Examiners, Abstractors, and Searchers

702. Telemarketers

Is artificial intelligence the greatest threat to human existence?

By Neil Patrick

Here’s a clip from the Rubin Report in which Elon Musk states “AI is like summoning the demon”.

Interesting coming from someone who more than most people is at the forefront of understanding and developing high tech future businesses.

Does he know something we don’t?





The ensuing discussion in the clip seems to miss the point. Rubin’s mates have been watching too many dystopian movies and playing too many computer games in which robots go on killing sprees I suspect.

I wonder if the real reason Elon Musk is so cautionary about AI isn’t because we’re at risk of being slaughtered by evil robots, but because he can see that technological development is now outstripping the abilities of our current political, economic and social systems to keep up.

And that this situation means we have 21st century technology but 20th century political, education, economic, social and legal systems.

The outcome of this two speed society is that jobs will disappear faster than ever…and no jobs equals no money. And in our world, no money is effectively extinction…?

Is this what he’s really hinting at?

Is it ageist that you may be turned down for a mortgage because you are over 40?

By Neil Patrick

Daily Mail 25 Nov 2014: “Over 40? Then you CAN'T have a mortgage: Banks are now rejecting borrowers who would still be paying off loan in retirement”.

This headline caught my eye today. And as is often the case with the Daily Mail, it’s a thinly disguised attempt at sensationalism. Nonetheless, I think it is very significant news, but not because of the implied injustices it alleges.

The essence of the "story" is that new research found that people aged over 40 seeking a standard 25-year mortgage are finding their options restricted because (assuming their mortgage runs its full term - which they rarely do) they will be borrowing beyond the “normal” retirement age of 65.

The new Mortgage Market Review (MMR) rules, which came into force in April, mean that lenders have to spend more time considering whether home buyers can afford the mortgages they are applying for. - not a bad thing at all in my view.

The report released yesterday by the Intermediary Mortgage Lenders Association (IMLA) stated that "interpretations" of the MMR have convinced many banks that lending into retirement now carries extra risk if borrowers go on to find that their retirement income is less than expected.

Mortgage lenders have typically applied an upper age limit of 65 for decades now. So this point isn't really anything new.

I think the real story here isn’t about mortgages and whether or not we get accepted or rejected for one when we apply. The simple facts are that lending is and always has been priced according to lenders’ rules around risk assessment. Basically, the higher the perceived risk, the higher the cost of the loan.

But if one lender rejects your application, there will almost always be others that will accept it, albeit at a higher price and/or on different terms.

Banks and lenders get a hard time from the media. Often, it is justified. Sometimes it’s not. In this case, they are damned if they do and damned if they don’t. If they were not making stricter assessments, they’d be criticised for encouraging over-indebtedness. By applying tougher rules, they are criticised for making mortgages less easily available to some people.

So as far as the new assessment rules are concerned, it’s really not a story.

No, the real story is far behind the headlines.

What is significant I think is what this news reveals about how banks currently view the financial prospects for people aged over 40 in the UK.

Looked at in this way, this news is a bombshell.

Forget the MMR rules, this news tells us that as far as the banks are concerned, the income prospects of people over 40 are very weak. Make no mistake, if a bank is happy that you can afford to repay a mortgage or other loan, they’ll be happy to lend you the money (and of course take the interest too).

So the MMR gripes are a smokescreen. And this isn’t a new form of age discrimination.

But it is a very troubling indication, that those whose business it is to understand the outlook for our incomes have decided that despite rising house prices, the outlook for most peoples' incomes remain very fragile indeed.

It's now official - The Global Jobs Crisis is real

By Neil Patrick

When I set up this blog, I was convinced that the subtitle – Global Jobs Crisis was appropriate and justified.

But many of my friends online and offline commented that they thought I was being rather apocalyptic. Even sensationalist. After all it does rather fit with the sort of conspiracy theory stuff which abounds in the online media world.

But I stuck with it nonetheless. Not because I wanted to be alarmist or a doom-monger. On the contrary. I wanted to raise awareness of the problem and try to find solutions that would work for people at a personal level.

It was simply the most appropriate tagline I could come up with which described the unfolding situation as I saw it. And with every week that passes I see more evidence that it remains the right subtitle.

So today I was interested to see that two years after I started this blog, none other than the World Bank has issued a report which describes the global jobs crisis in forensic detail.

I’d forgive anyone for not noticing it. It went more or less unremarked upon by the mainstream media. It’s titled in typical government speak and somewhat benignly: “G20 labour markets: outlook, key challenges and policy responses”.

The World Bank, Washington
By Shiny Things [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)] via Wikimedia

Behind the dull bureaucratic title is the starkest confirmation I've yet seen which describes in depressing detail, the true nature of the problem.

The world is facing a global jobs crisis that is killing the chances of reigniting economic growth. Worse there is no magic bullet to solve the problem.

The Study was released at a Group of 20 (G-20) Labor and Employment Ministerial Meeting in Australia in September 2014. The Bank says an extra 600 million jobs need to be created worldwide by 2030 just to cope with the expanding population.

"There's little doubt there is a global jobs crisis," says the World Bank's senior director for jobs, Nigel Twose.

"As this report makes clear, there is a shortage of jobs — and quality jobs.

"And equally disturbingly, we're also seeing wage and income inequality widening within many G-20 countries, although progress has been made in a few emerging economies, like Brazil and South Africa."

He said that overall emerging market economies had done better than advanced G-20 countries in job creation, driven primarily by countries such as China and Brazil, but the outlook was bleak.

"Current projections are dim. Challenging times loom large," said Twose.

Who says something really matters

Local mainstream media is so heavily influenced by national government spin that we cannot take anything that is said at face value. And I do my best to expose the most blatant deceptions about jobs and employment news that I come across.

Which is why this report has to be taken seriously. The World Bank isn’t beyond the influence of key stakeholders with their own agendas. Many have argued that the World Bank which has had an American as its President ever since its creation in 1946, promotes a US based world view.

And I have concerns that the World Bank still clings to a largely discredited view on monetary systems.

But critically, the World Bank isn’t controlled by politicians. And that’s the most important thing in my view. No-one at the World Bank is trying to win votes from citizens. They gain no benefit by telling people that things are better than they really are.


100 million unemployed

The report, compiled with the OECD and International Labor Organization, said more than 100 million people were unemployed in G-20 economies and 447 million were considered "working poor," living on less than US$2 a day.

It said despite a modest economic recovery in 2013-14, global growth was expected to remain below trend with downside risks in the foreseeable future, while weak labor markets were constraining consumption and investment.

The persistent slow growth will continue to dampen employment prospects, it said, and warned that real wages had stagnated across many advanced G-20 nations and even fallen in some.

"There is no magic bullet to solve this jobs crisis, in emerging markets or advanced economies," said Twose.

"We do know we need to create an extra 600 million jobs worldwide by the year 2030 just to cope with the expanding population.

"That requires not just the leadership of ministries of labor but their active collaboration with all other ministries — a whole of government approach cutting across different ministries, and of course the direct and sustained involvement of the private sector."

The Group of 20 leaders have called for each member country to develop growth strategies and employment action plans. They emphasized the need for coordinated and integrated public policies, along with resilient social protection systems, sustainable public finance and well-regulated financial systems.

"Coordinated policies in these areas are seen as the foundation for sustainable, job-creating economic growth," says the report.

So there we have it. The responsibility for solving the problem has been passed to national governments. And they are urged to adopt a cross-departmental approach to solving the problem.

Given the nature of governmental silos and the painfully slow way in which government policies are formulated and implemented, I’m not holding my breath for any big breakthroughs anytime soon.

And sadly the subtitle of this blog seems to be one thing which isn’t about to become redundant for a long while yet.

Why politicians won’t solve the jobs crisis

By Neil Patrick

Politicians simply don’t get the nature of work in the 21st century.

Let’s just dismiss the idea they just don’t care because they’re too busy looking out for themselves. The more worrying evidence suggests that they don’t understand the nature and pace of the evolution of technology. And how this is reshaping the world of work.

Today in the UK, self-employed people represent the fastest growing sector of employment. 

These people exist completely outside the politicians’ bubble. But politicians do little or nothing to support them. After all, very few will become big enough in the politicians’ term of office to make any impact on either employment levels or the treasury’s income.

The politicians therefore have little incentive to pay attention to this change. They see the future as a world which is somehow a newer, shinier version of the old one. A world which is big, bold and full of promise. It makes them feel like they are being visionary. The architects of a better future society.

So, they get busy implementing big, “important” projects . They like big things after all. But the 21st century world is a fragmented one. And it’s getting smaller not bigger. Microchips will soon be just one atom and ultimately subatomic. (Yes. Look it up). Big corporations are being nibbled away by much smaller faster moving competitors. And devolution is showing that people want smaller more local governments, not bigger more federal ones.

But the politicians carry on making uninformed and anachronistic decisions about the things that shape every aspect of our lives and how companies and individuals function. Don’t believe me? Here are just three examples.

There’s no recovery in jobs, at least not the type of jobs government understands.

In June, the Office for National Statistics released figures which show that flexible working is at a record high in the UK. The headline figure from the ONS is that 14% of the UK workforce is now either working full time from home or use home as a base. This represents a 1.3 million increase over the six years since the onset of the recession.

Total jobs growth in the same period was around 1.8 million. In other words, over two thirds of the UK jobs created since the recession began have been self-employed or based at home.

Note to government: This is NOT the future of work...
Source: Wikipedia.  Credit: Chris Brown http://500px.com/zoonabar

The Government is claiming this as a victory for its legislation. They want us to believe their foresight has enlightened bosses in helping employees find a better work life balance.

In an interview,  Co-Chair of the LibDem Parliamentary Party Committee on Work and Pensions and a Deputy Government Whip, Jenny Willott said that: "Current workplace arrangements are old fashioned and rigid. Extending the right to request flexible working to all employees will drive a cultural shift where flexible working becomes the norm and is not just for the benefit of parents and carers."

But government legislation isn’t what’s driving this change.

Clearly, this is spin. It's not government policy but in fact the explosion of homeworking that is driving Britain’s rapidly expanding army of freelancers and micro-businesses. The recent increase in employment levels is almost entirely down to a huge surge in the numbers of people who are self-employed.

In the last quarter of 2013 alone, the number of people identified as self-employed rose by a staggering 211,000 while the number of employees fell by 60,000. There are now around 4.5 million self-employed people in the UK. 

These people aren’t working from home as an alternative to going to work in an office for an employer. There is no office and no employer, so employment legislation is of no use or relevance to them. They are doing what they do in spite of what the government is doing with regard to flexible working, not because of it.

Technology is an enabler for small business but a nightmare for large organisations

Start-ups and small businesses reap huge rewards from the tech revolution. Digital media enables immediate and fast deployment of a whole range of powerful tools from video conferencing to online sales platforms.

But transitioning big bureaucracies from paper based systems to digital ones is very different. It’s a huge, complex and expensive task. As a result, we can be pretty confident that when a new government digital system actually goes live after running millions over budget and being delivered late, it still won’t work properly.

Recently, the think tank Policy Exchange reported that the UK public sector could save £24 billion a year by offering the UK population universal fast broadband and migrating all Government information and services to digital platforms.

One of a handful of politicians who do get tech, Nadhim Zahawi is quoted as responding to the report by saying: “The internet and technology is shaping the way everyone interacts, transacts and reacts and has been doing so for at least a decade… well, everyone, that is, except government.”

There is movement of course, but it is painfully slow because the Government knows just how complex, expensive and disaster prone these transitions actually are. And when reducing government debt is a priority, such initiatives have pretty low appeal.

But the good news for government is that if they shifted their attention to the small business sector, things are much less scary and there are lots of quick wins to be had. But this involves breaking the habit of thinking big and instead thinking small…

Like the relatively simple task of getting fast broadband available everywhere in the country. Not only would this transform Government services, universal fast broadband is simply the single most important piece of infrastructure the UK could introduce.

So if home working and digital technology is the future, why is the government looking to invest in 20th century infrastructures?

One of the most extreme examples of how governments make bad decisions around the future of work is the high speed rail network approved in 2012 connecting Manchester and Leeds with Birmingham and Birmingham with London. This is known as HS2.

This high speed rail network will enable people to save time moving across the UK. Some journey times such as Manchester to London are expected to be reduced by almost 50%. 

HS2 Railroutes
Source: Wikipedia   Credit: Cnbrb

But by 2033, when the project will allegedly complete, how many people are actually going to want or need to make such journeys at all? By then it seems a safe bet that current technology trends will likely have developed to a point where such journeys are too expensive, too slow and too prone to disruption if not on the train journey then in the travel to and from the stations?

June 2013 saw the original projected cost of HS2 rise by £10bn to £42.6bn and, less than a week later, it was revealed that the DfT had been using an outdated model to estimate the productivity increases associated with the railway, which meant the project's economic benefits were massively overstated.

Peter Mandelson, originally a major advocate of HS2 when the Labour Party was in government, declared shortly afterwards that HS2 would be an "expensive mistake" and also admitted that the inception of HS2 was "politically driven" to "paint an upbeat view of the future" following the financial crash. He further admitted that the original cost estimates were "almost entirely speculative" and that "Perhaps the most glaring gap in the analysis presented to us at the time were the alternative ways of spending £30bn."

Boris Johnson similarly warned that the costs of the scheme would be in excess of £70 billion. The Institute of Economic Affairs estimates that it will cost more than £80 billion. Incidentally, that figure is pretty much the same as the entire GDP of New Zealand…

But there are non-financial arguments too to conclude that HS2 is a really bad idea. HS2 is not designed for the world of 2033, when it will be complete. It’s designed for a world in which people travelled to meetings. A world in which businesses were big and business was managed via top down command and control hierarchies and nationally dispersed teams.

Thanks to the politician’s disconnect with the reality of 21st century work, the UK is now saddled with a hugely expensive white elephant that will almost certainly end up costing even more than the worst case projection so far of £80 billion. And deliver far fewer benefits than even the most cautious estimates.

It really is time for our leaders to ditch their big ideas and start thinking small.

Are our employers and institutions ready for the New Machine Age?

By Neil Patrick

Researching for my post on the zero marginal cost society led me to the great work of Erik Brynjolfsson and Andrew McAfee. They have painted a dazzling picture of the digital future and described the changes that people and society need to make in order to prevent being left behind. I think the potential is bright too, but today as the dog days of summer retreat, I’ve got a nagging feeling about one thing…

MIT’s Erik Brynjolfsson and Andrew McAfee have coined the term and titled their book, The Second Machine Age. It describes an almost utopian future. It’s a very uplifting vision of how technology holds the potential to fill the world with more possibilities than we can even imagine.

I featured Andrew McAfee’s great TEDx talk here a couple of weeks ago.

But can this vision be realised? Technology frees us up to achieve more than we ever could have dreamt of, but will organisations be able to keep up? After all, apart from the goods and services we consume, most of us rely on organisations for one other very important thing…our jobs.

People, organisations and societies have to keep up with the speed of technological change

The Second Machine age will require constant change, delivering at speed, innovative thinking, fast-paced learning and cross functional collaboration like never before.

So my worry isn’t with technology per se. My worry is that the pace of technological change is moving so fast that people cannot keep up. Let alone corporations and society as a whole. And if organisational thinking can’t keep up, how on earth can organisational culture?

The future’s here, ready or not

Brynjolfsson and McAfee paint an optimistic picture of the future. As the full impact of digital technologies is felt, they profess that we will realize an immense bounty in the form of dazzling personal technology, advanced infrastructure, and near-boundless access to cultural items that enrich our lives.

They admit that amidst this bounty will also be wrenching change. Professions of all kinds, from lawyers to truck drivers will be relentlessly downgraded and delisted. Companies will be forced to transform or die. But will they spot the need to transform quickly enough to respond? I think it's safe to predict that some will and some won't and will suffer the consequences. Recent economic indicators already reflect this shift; fewer people are working, and wages are falling even as productivity and profits recover.

But will organisations and employers keep up?

I don’t doubt the guarantee of technological transformation. What I doubt is the capability of organisations to transform fast enough to keep up. Let alone institutions and legal systems…

On the one hand technology is enabling things to be made and done faster and cheaper than ever before. At the same time, this speed is outpacing people’s ability to extract enough money from the system to live.

Brynjolfsson and McAfee recognise that to adapt, society must change rapidly. This includes revamping education so that it prepares people for the next economy instead of the last one, designing new collaborations that pair brute processing power with human ingenuity, and embracing policies that make sense in a radically transformed landscape.

I agree that this is needed. What I struggle with is the idea that persistent ideas and attitudes left over from 20th century top down command and control structures can possibly evolve fast enough to prevent giant chasms opening up between technology and policy and culture.

From the time I have spent teaching business in universities, I took away a lot of learnings. And one of these was that the smallest unit of time measurement used in the management of educational institutions is a year. And that's just far too slow to keep up with the world of tech.

But educational institutions are not alone in being slow to change. Commercial businesses are so focussed on day to day and week to week revenues, that the medium and long term changes they need to make are deprioritised. And this makes them vulnerable. And this will leave many people exposed to redundancies, lower incomes and longer periods without work.

Our organisations have got to embrace this new economic reality or they will die. And one way they can do this is to hire more people who understand what's going on and how to capitalise on this new economic era not be crushed by it. And this creates a whole new world of economic winners and losers.

Who will respond and who will not?  That's the most interesting and important question I think...

Andrew Keen’s interview with Erik Brynjolfsson and Andrew McAfee here may help you decide for yourself:

Why we all need to rethink our career plans right now

By Neil Patrick

We all need to think differently about our jobs and careers in the 21st century. This isn’t something which is ever talked about in the mainstream media. They are too busy reporting job losses and hunting down stories about new jobs being created. At best you’ll find tips about interviews or resume writing. None of this information deals with the fundamental shifts in society that we seeing today and which will become more and more dominant in the future. Worse, none of this really helps people who are desperately searching for jobs and trying to figure out why even if they have great qualifications, they still can’t find work…

What is REALLY going on?

Part of the reason for this tragic state of affairs is that the world is undergoing a radical transformation. It’s a change so great that nothing like it has happened for over two hundred years. It’s the endgame of a complex interplay between technology, energy sources, demographics, communications, globalisation and the biosphere.

Jeremy Rifkin’s latest book, “The Zero Marginal Cost Society” has set out an immensely insightful view of what’s really going on in the world today. And it has nothing to do with selfish businesses, greedy bankers or corrupt politicians.

As Rifkin says, “We are just beginning to glimpse the bare outlines of an emerging new economic system, the collaborative commons. This is the first new economic paradigm to emerge on the world scene since the advent of capitalism and socialism in the early 19th century. So it's a remarkable historical event. It has long-term implications for society”.

Technology will continue to make goods and services cheaper and cheaper until they are almost free

The trigger for this global change is something called “zero marginal cost”. Marginal costs are the costs of producing an extra unit of a good or service after your fixed costs are covered. All business people are familiar with marginal costs, most of the public isn't. And as I discussed here, marginal costs have been falling consistently for decades as technology progressively replaced expensive human labor and drove down the cost of production. I distinctly recall wanting a flat screen television about twelve years ago. I never bought one then, because they cost about £15,000. Today I could buy a bigger and much better TV for less than £1000.

Books used to be another thing I would spend a lot of money on. It wasn’t unusual for me to fork out £20, £30 or even more to buy a printed copy of a book that really interested me. Today I can download an electronic version usually for around £5. CDs would cost me £10-£15 each back then. Today, most CDs are about half that price and legal downloads even less.

Endlessly falling marginal cost means consumer goods and many services will continue to get cheaper and cheaper, heading ever closer to zero. Zero or near zero marginal cost is going to dramatically affect every single person in the world in the coming years in every aspect of their life.

A new economic paradigm is on its way right now

There's a paradox embedded in the heart of the capitalist market system that’s pretty much never discussed. This paradox has been responsible for the tremendous success of capitalism over the last two centuries. But here's the irony; the very success of this paradox is now leading to an end game and the new paradigm emerging is what Rifkin calls, “collaborative commons”.

In a traditional market, sellers are always constantly probing for new technologies that can increase their productivity, reduce their marginal costs so they can put out cheaper products and win over consumers and market share and beat out their competitors and bring some profit back to investors. So business people are always looking for ways to increase productivity and reduce their marginal cost.

But they simply never expected in their wildest dreams that there would be a technology revolution so powerful that it might reduce those margins of cost to near zero making goods and services essentially free, priceless and beyond the market exchange economy. That's now beginning to happen in the real world.

And the internet is at the heart of this transformation

The first inklings of this zero margin cost phenomenon was with the inception of the world wide web from 1990. Millions of consumers became prosumers with the advent of the Internet. Today, they produce and share their own videos, their own news blogs, their own entertainment and their own knowledge with each other. In these lateral networks, this is done at near zero marginal cost. It’s essentially free, completely bypassing the capitalist market.

This zero marginal cost phenomena wreaked havoc first on publishing businesses. Newspapers went out of business; they couldn't compete with near zero marginal costs. Magazines went out of business. Record companies went out of business.

But free stuff cannot easily be converted into stuff which earns us money

The strange thing about it is that at first a lot of industry watchers said this was a good thing. They argued that if we give out more and more information goods free and people are producing and sharing it free, these “freemiums” will stimulate people's appetite to want premiums and then upgrade this free goods and information by getting more customized information.

Musicians gave away their music free when they started to see this happen hoping that they would get a big loyal fan base and then their fans would be enticed to go to their concerts and pay the premium in order to be there in person. We saw a similar strategy with newspapers. The New York Times will give you ten free articles a month, hoping that you'll then upgrade to premiums and join their subscription service. It just didn't happen on any large scale.

This was very naïve by industry watchers. Sure, some people have moved from freemiums to premiums but when more and more information goods are out there nearly free shared with each other, music, film, arts, information and knowledge, the attention span and scarcity is not there to motivate people enough to want to pay for the premiums when they have so much available already for free.

What does this mean for jobs in the future?

All the while that this has been going on, jobs have become scarcer for more and more people. Even where human skills are required to deliver services, like healthcare, the ever increasing efficiency of the technology they use to provide care, means fewer and fewer people are needed.

The implications of the zero marginal cost society are huge. We all need to think differently about how we will earn a living in the coming years. There are several implications as I see it:

1. Even if we are working full time currently, it is almost certain that the number of people organisations require to do the type of work we do will continue to reduce. 
2. As traditional jobs continue to become scarcer, competition for the remaining jobs will continue to become fiercer. 
3. The loss of a job is likely to result in longer periods without work. The loss of income coupled with continuing outgoings, will continue to bankrupt many people. 

Placing our entire faith in our skills and qualifications that have enabled our careers until now, will therefore not guarantee our incomes in the future. We all need to plan for this eventuality and the start point for this planning is how we assess the personal assets that we have to deploy. And these may be very different assets to the ones which have enabled our careers up to now.

I believe that we can keep ahead of this tsunami of job destruction if we embrace three essential ideas about our careers in the internet age:

The importance of connectivity and personal networks. The internet facilitates the development of our personal networks. The largest numbers of opportunities will accrue to those who are the best connected people. This is why Linkedin and other social media is so important to all of us.

Collaborative approaches will yield greater returns than competitive ones. Building our opportunities will be less and less as a result of competition. More and more they will be the result of collaborations. People do business with people they like. And helping others out is the best way I know to develop the necessary goodwill for a relationship which has future value to both parties.

Personal intellectual capital and especially forms of creativity that cannot be easy replicated by technology will be the most resistant to erosion. We tend to think of intellectual capital as a very corporate thing. But every one of us has personal intellectual capital which is ours and ours alone. It might be great cooking recipes. Or a gift for oratory, or the ability to show great empathy. The list is endless. But more than ever before we need to clearly understand what our personal intellectual capital assets are. This will be the only way we can figure out how we can leverage our value and continue to earn money in a zero marginal cost society…