Accelerating Returns and the Future of Labor

Posted on | January 19, 2013 | No Comments

Technological innovation follows exponential curves.

That means, year over year, tech becomes twice as capable and is offered at half the cost.

In a Capitalist system, this is really good news. Every year, tech gets faster and better. Investments in technology today yields greater productivity and efficiency, and more profitability for shareholders.  Better tech yields less reliance on labor and more profitability.

Finally, these advances can be applied in parallel to many different segments of the economy.  Example: better smart phones can mean advances in medicine, electric vehicles with better battery life, and progress towards artificial intelligence.

There are three emergent technologies that I think everyone should be paying attention to. They’ll dramatically change the role of labor in nearly every industry over the next ten years.

• Mobile Self-Service. Telephones, tablets, and “phablets” will become the principal mechanism that we receive information and interact with retailers and producers. Our mobile devices will become digital wallets and tools for conducting self-checkouts. This will enable firms like Walmart to shift self-checkout away from labor and into the hands of consumers through smart phone apps. They won’t need as much labor to conduct checkout functions, helping them to reduce costs.
• Self-Driving Cars. Ford, Google, Volvo, and others are refining technologies that allow cars to drive themselves. Licenses for self-driving vehicles have already been issued by the States of Nevada and California. Think of it: instead of investing in labor like truck drivers, the distribution problem can be shifted to robotic vehicles that can perform the work 24x7x365 with no overtime, no need for sleep, no family to go home to.
• Wearable Computing. A smart phone is a gateway for other logic to be stored on the body. Glasses, shoes, and clothing is being developed that’ll leverage the smart phone’s connection to the Internet to interact. Clothing capable of downloading new patters; glasses capable of recording events in real-time; the ability to send real-time health status information to anyone. Google’s Project Glass is in development and will be released to early adopters later this year.

Taken together, these three broad categories of technology represent a significant challenge for labor.

• Existing employees can become increasingly efficient when their natural body becomes the interface to a computer – we don’t need to hire more people to take on more work;
• Information about us can be gathered through automation and distributed electronically to anyone, anywhere – we don’t need call centers, representatives, intermediaries, or cheeky-sales-people – everything can be self-serviced;
• Physical movement of goods and services can be served by artificially-intelligent robots – why pay for a person when a robot can do it better;
• The accessibility that we have to information systems becomes more biological, more natural, more ubiquitous – our natural language and movements will become the new interface – lowering the learning curve for acquiring and using technology.

What this means is producers will be able to do more with less, even more dramatically than what we’re experiencing today, providing fewer and fewer jobs, and a smaller and smaller employment base. In the next ten years, these technologies will expedite the acceleration of returns and further along the end of work.

R

Is There a Future For Libraries?

Posted on | October 21, 2012 | 3 Comments

The other night, I was engaged in a discussion (well, in actuality, it was more like a prolonged apology) concerning the fate of libraries. I wanted to expand upon my thoughts a bit.

Listen, I’m a realist.

Anybody can look at a number of factors:

1. Schools are eliminating libraries and library budgets. It turns out that maintaining a small warehouse of obsolete information in print costs money and isn’t an efficient use of floorspace.  Schools, particularly colleges, are eliminating libraries from their campuses so they can transform that space into classrooms.

2. States (like Louisiana) are reducing if not eliminating library budgets. All states are having to make serious choices due to falling revenues and increased expenses. Libraries are a natural target.

3. North American consumers are driving ebook adoption. These numbers reflect consumer preference: more and more people want books electronically and not physically.

4. Consumption patterns will drive up ebook revenue into the foreseeable future. Increased demand will force book publishers into becoming software companies. Those who can’t do this will be acquisition fodder.

More facts from the American Library Association - an online survey of chief officers of state library agencies in November 2011 elicited responses from 49 of 50 states and the District of Columbia. Among the findings:

• Twenty-three states reported cuts in state funding for public libraries from 2010–2011 to 2011–2012. For three years in a row, more than 40 % of participating states have reported decreased public library funding.
• Only two states reported increased funding, but one did so with a caveat. This state had experienced two cuts the previous year, followed by a legislative action to reset its program to a lower funding level.
• Seven states and the District of Columbia do not provide state funding.
• Sixteen states reported there had been no change in funding from 2010–2011 to 2011–2012.
• Only nine states anticipated decreased funding for 2012-2013 — 21 % of last year’s respondents, compared with 37 % of the previous year’s. That may be the light at the end of the tunnel . . . or a train coming.

Thus, it’s really difficult to argue: changes in demand (consumer preference) will radically transform consumption patterns in the long run, offering revenue incentives to producers to produce more ebooks; meanwhile, cost constraints in maintaining physical catalog of books will force schools and municipalities into making choices against funding libraries; there are revenue incentives for ditching libraries all together.

This is fact. Now, for speculation.

I think the free market and capitalism will do what it does best: it will gravitate towards preferring the most efficient units of production and distribution to reward producers with profit; it will force the State (who isn’t influenced by the profit motive) to make more competitive choices; it will destroy what we perceive as a library. It cannot be a place where there’s a huge catalog of physical books, magazines, and newspapers. Maintaining something like that grains against efficiency and even what we see in terms of consumer expectations.

And realistically, can the government altruistically continue to fund libraries for the poor and “information-have-nots”? In an age of constrained revenue growth from taxes and a dwindling tax base? I’d seriously doubt it. Although libraries serve a grand idealistic purpose, somebody, somewhere, has to pay for it. Taxpayers are going to have competing priorities that’ll force hard choices, like, closing libraries, or, issuing municipal bonds, or, borrowing money to pay for it.

Now, does this mean libraries will go away. I feel, no. And NPR and Seth Godin wrote about this last year. Libraries will adapt. They must adapt. Where they can, they’ll transform themselves into cultural and information hubs where technology can be used by the public to access information, and, where legacy, physical books can be found. It’ll become a place to swap stories and information, drink coffee, and access electronic resources. Where they can, they’ll become places for community. Where they can, they’ll offer the “have-nots” a public onramp to the information superhighway.

Still, I’m realistically hesitant to think that all libraries everywhere will receive the funding and attention to transform in this way; again, see the story on Bobby Jindal’s approach for Louisiana, or, the Governor of the State of Indiana’s push to consolidate libraries. In light of rising federal, state, and municipal debt, diminishing tax revenues, changing consumer preferences, and substitution effects going on right now in the book industry, it’s extraordinarily difficult to perceive a future where warehouses of books are kept open to the public because “they’ve always been there”, or, “a lot of people still don’t own computers and iPads” (which is a funny complaint because 25 years ago nobody owned personal computers but more than 90-percent of American households own them today and have access to broadband capacity – I question whether libraries exist in their entirety to serve the poor).

My argument is simple: libraries must and will change; they won’t entirely disappear but that they won’t look much like a library looks today and there’ll be fewer of them; that the role of the librarian as a digital sherpa will become more important, helping to guide people to specific sources of information; that libraries will face increasing competitive forces that will force them to radically transform to remain useful and relevant.

R

When Israel Attacks Iran

Posted on | September 24, 2012 | No Comments

You may not realize it, but there’s a flashpoint about to manifest in the Persian Gulf.

It is looking increasingly likely that Israel will attack Iran in the fall; alternatively, Iran has vowed to preemptively attack Israel should they feel attack is imminent. The United States would immediately be involved in the defense of Israel, and US bases in the Gulf would be obvious targets for Iranian attack.

Over 20-percent of the world’s oil supply borders Iran or passes through the Persian Gulf. Should Iran attack oil tankers and mine the Gulf, oil prices could double for US consumers.

The US would release petroleum from its strategic oil reserve to counter price increases but the markets would immediately drive into speculation activities, pushing futures even higher before the market could be off-set with reserves.

An energy shock to the fragile US economy would cause businesses to assume a defensive posture. Instead of hiring, businesses will move into an expense-containment strategy. Consumers – already strained in all areas of fixed and disposable income, with little access to savings or credit, and generally unable to yield their consumption habits – will be heavily hit as prices at the pump double or more.

Volatile fuel prices would significantly affect Internet pure-plays who depend on inexpensive transportation arrangements with UPS and others to ship their materials. Intuitively, there would be a corresponding increase in shipping cost born by the consumer, or, an erosion of profit – either of which would have a drastic impact on shareholder equity and consumer confidence.

And all of this would be arriving at the time of a US presidential election and the holidays, constraining travel and spending, further slamming the US economy over the head with a baseball bat. It would be setting the stage for another recession.

More recession means “more cowbell”: the private sector will retract and shed workers; the public sector will spend itself into debt over services it hasn’t the tax base for; deficit spending at all levels of government will rise; skittish investors will re-allocate their capital elsewhere.

None of this is good for the United States, but it’s particularly bad for the PIGS (Portugal, Italy, Greece, and Spain) whose economies are extraordinarily fragile and being kept afloat by IOU’s.

It can’t end well.

I think about what steps I and my family have taken to absorb the shock and to prepare for a possible recessionary impact on the US economy:

1. We recently invested in an 100-percent electric vehicle and benefitted from $10k in tax credits. We’re betting that electric generation in the pacific northwest (one of the most inexpensive areas around) won’t be immediately impacted by an oil shortage. Although the car payment is offset by the reduction in gas expenses, it will allow us to get around without being impacted by the oil shortage.

2. We’ve undergone an energy audit for our house and we’ll be winterizing for efficiency.

3. We’ve spread financial risk and pooled resources by taking on renters in our home.

4. We’ve shifted our eating habits to 100-calorie meals, generally eating just one large meal a day. In the process, I’ve lost 70 pounds, my wife 75, and another adult in the household well over 130.

5. We recently ditched phone service, cancelled television services, re-arranged our cellular service, and  only kept Internet. This diminished expenses on telecom by nearly $225/month.

6. Both my wife and I work out of our home. I’ve transitioned most of my business to be remotely operated through remote control tools common in my industry.

7. We’ve set up a community of friends and intentional family to both help and be helped.

8. We’ve got emergency kits and rations set aside in our garage.

9. We’re re-thinking a lot of our extraneous expenses and shutting down non-necessities.

That’s what we’re doing. What are you doing? If not to prepare for the eventuality of an extended military adventure in the Gulf, then for the problem of recessionary impacts in the United States?

R

You’ve Got to Be Able to Scale

Posted on | September 19, 2012 | No Comments

I’m a big fan of everything entrepreneurial.

Anybody that wants to go out there, stick out their neck, and attempt to own their own work – hey, I’m all over it.

So I was driving down the road the other day and encountered a pickup truck with some signage on the back that suggested this guy could help repair reclining chairs. If you’ve got a broken reclining chair, he’ll apparently come out and fix it for you.

I ended up pondering this business model for a while.

Let’s say for a minute that our guy here – the recliner repair guy – charged $100 for his recliner repair. Anything more than that would probably be seen as justification challenge by the consumer since that’s about 1/3rd of the cost of a new recliner.

Now, let’s take taxes into consideration. Let’s take 20-percent off the top to net $80.

Then, let’s pick off some expenses: gas about $5.00 a visit, 30 minutes of repair labor, and 45 minutes of travel time round-trip – because nobody’s going to call who lives right next to each other. He’s going to have to travel around town.

Let’s pretend for a minute that he looks at earning $15/hr a minimum return, that’d be $11.25 for the idle drive time, and $7.50 for the labor.

So that’d be $80 net less $23.75 in expenses per visit, or roughly $56.25 net profit per visit.

There’s only eight hours in the working day so, if he’s doing this by himself, and he takes breaks, he can maybe get five visits in a day. That’d be $281.25 net profit on a great day. That’s if he’s working his butt off.

It’s more likely, however, that few people will know about his services because he markets on the back of a pickup truck. Further, it’s more likely that only a certain segment of the market owns a reclining chair, and only a smaller segment of that would have a broken one, and even a smaller segment would find value in repairing their recliner rather than replacing it.

Would that segment-of-a-segment-of-a-segment scale to many great days every month? That’d be 25 new clients every week, nearly 100 every month; at the end of the year, roughly 1,200 would have to call this guy as new clients – not repeat business – to repair a recliner.

Impossible!

This guy’s business won’t scale well.

First, there’s no repeat customers and no benefit for consumer loyalty. if he does his job well, he erodes his market for the life of the asset; it’s unlikely somebody’s going to throw more money at a second-round repair.

Second, it’s improbable of think of so many people finding this guy (roughly 100 month) from advertising on the back of his pickup truck. It’s even more improbable to think there are that many consumers in the market willing to repair their recliner.

It’s more likely this guy is going to get maybe 3 clients a week. That’d work out to $168.75/week or roughly $675/net a month, with a declining average on business prospects over time as he erodes what little market share he has.

And in the unlikely event that he gets more market share, at most, he’ll only be able to take on 5 clients a day. There’s only so much of his time.

This isn’t a business even worth starting! It won’t scale well. So why even do it?

Watch for scale in your business ventures. Only get involved with business plans that achieve scale: more and more products and services can be sold at contained/capped expenses. Digital enterprises are great at this. Otherwise, trading your time and labor for more sales is a losing proposition.

R

NPR Scott Simon Talks About the End of Work

Posted on | September 1, 2012 | No Comments

On NPR News this weekend, Scott Simon spoke about how work gives us identity as well as a purpose. He also points out how that identity, purpose, and income is changing in light of displacement technology. Good listen/article describing the End of Work. http://www.npr.org/2012/09/01/160401247/our-work-our-identity

Welfare Payments Will Rise Regardless of Election

Posted on | August 31, 2012 | No Comments

One of the political arguments this season revolves around welfare (transfer) payments.

These are payments made from the government to the less fortunate in our society. It includes spending on unemployment insurance, food stamp programs and WIC, social housing programs and utility reimbursements, and work placement programs.

The Republican narrative attempts to convince us that increase privatization will lend to greater efficiency in the economy, increase aggregate wealth, and raise the standard of living of all, reducing welfare spending. Make the rich richer and they will spend, leading to benefits for all.

Meanwhile, the Democratic narrative suggests a Keynesian solution: government spending on infrastructure will hire people, transfer wealth in the form of wages to the people, and raise aggregate demand through spending. The poor transitions to the middle-class and the middle-class gets larger, leading to benefits for all.

Neither of these narratives are bad or inaccurate – there is room for truth in both. However, what neither party are talking about are the systemic changes that will increase the welfare state and reward Keynesian thinkers. What am I talking about? Well, here’s a breakdown:

1. Companies invest in technology to reduce their labor requirements and increase efficiency.

2. Increased technology spending and capability means doing more with less – becoming more productive.

3. More productivity with less labor increases profitability.

4. Profitability is the goal of Capitalism. It is a reinforcing cycle that demands increasing growth in returns.

5. That means companies and stakeholders are rewarded when technology investments yield greater reduction in labor and more profits.

6. This cycle perpetuates the diminishing role of labor in the workforce.

7. More people exiting the workforce means lower spending and lower aggregate demand.

8. More people chewed up and spit out by Capitalism means more transfer payments: the government must send money to these people so that they can continue to survive in the economy, and, spend, maintaining/sustaining aggregate demand.

9. More transfer payments means an increased welfare state.

Both parties cannot escape the systemic forces at work. Neither political agenda expressly suppresses Capitalistic forces. Capitalism will continue to do what it does best: rewarding risk-takers with higher profits for increased innovation and efficiency.

This means we can respond to this problem in one of two ways:

1. Ruthlessness/Competitive. Ignore the masses of unemployed. Cut them loose. Diminish the welfare state. Allow masses of families to survive on the street or on the generosity of friends, families, and neighbors. That would shrink welfare spending but diminish aggregate demand – fewer people would be buying stuff – sending the economy plummeting.

2. Compassionate/Socialistic. Look after the masses of unemployed. Prop them up. Increase the welfare state. Transfer money into the hands of the unemployed in effort to boost aggregate demand at the consequence of increasing welfare spending.

The US is entering a new era. Will the US allow Capitalism to do what it does best and destroy the middle-class? Will the US transform itself into more of a Socialistic model?

Regardless of the outcome of the election, one of these two choices will be made. Neither of these choices are particularly appealing to labor. Both choices lead to one inevitable conclusion: less opportunity, less work, greater dependence on transfer payments for survival.

R

Wearable Computing Will Rapidly Destroy More Jobs

Posted on | August 27, 2012 | No Comments

Something that I’m talking about in classes these days is the impact wearable computing will have on labor.

Wearable computing reflects smart technology that’s embedded in our clothing, or, it’s worn effortlessly on the body. Like Google’s Project Glass.

Wearable computing reflects the next evolution of interface with computers. Some call it the “4th Screen”. It means the computer/human interface becomes more ubiquitous and less cumbersome.

On the practical scale, what it means is we can ditch the time and effort that it takes to lift a barcode scanner, let’s say, and scan a pallet of materials. We just look at the pallet and the wearable computer scans the barcode for us, accessing the appropriate details. We can then perform transactions with our voice or the movement of our eyes.

If you think of a sales process. Somebody walks up and meets you, shakes your hand, and you exchange information manually. Wearable computing will allow for facial recognition and immediate access to your social profile.

Think of a shopping experience where you’re scanning a UPC code and comparing it to an Amazon listing with your phone. Now, imagine that experience happening automatically as you look at a book, a stereo, or a car, and comparable listings automatically pop up.

Finally, imagine for a moment the time that it takes to transcribe information from one information system to another. Like, paper to a computer. Imagine now that being augmented by wearable computing where hand-writing is OCR’d (Optical Character Recognition) into text and inserted into another electronic information system.

Labor becomes increasingly efficient with wearable computers. So much so that we’ll need drastically less of them to do more. We’ll be able to kill off jobs remarkably quickly without the necessity of replacing them with more labor.

The future is wearable and mobile. Are you ready?

R

Rethink the Basic Bargain

Posted on | May 17, 2012 | No Comments

Robert Reich calls it the basic bargain.

The basic bargain is what we’re fed in high school. It’s the promise that a good day’s labor will produce a day’s worth of livable wage.

Work hard and you’ll succeed.

Devote yourself to the ambitions of the company (and the profitability of its owners) and you’ll be taken care of.

It’s a promise … or, well, sorta.

Maybe it’s more of an implied agreement that can be terminated at will by the people who’re offering it.

Anyway, the basic bargain is how we’ve structured our education system. It’s also how most of us have structured our lives.

Our system makes really good employees for our labor market. We teach people how to be efficient, devoted, and dependent cogs in exchange for the basic bargain.

Pretty suckish if you ask me.

Inasmuch, we make really piss-poor entrepreneurs. After all, we’re shown that truly inspired individuals abandon formal education. That’s because entrepreneurialism, philanthropy, or values-based employment for a non-profit or religious institution, have nothing to do with the basic bargain. Instead of trading time for money and and money for security, you’re working for a purpose; an ideal.  Well, inspired souls working for a higher purpose doesn’t make them highly dependent.

Reich and others call for a return to the basic bargain … to balance income inequality and restore the American economy.

I’d suggest that – in unfettered Capitalism – the basic bargain is a sham. 2011′s record-high corporate profits should underscore my point. At no time will the welfare of employees ever be as important as profit to the Capitalist. In fact, Capitalists will undo labor for greater profitability at any time.

So instead of a return, we should rethink the basic bargain.

We should encourage students to pursue their principles, their ideals – every one of their dreams and ambitions – even if they’ve nothing to do with greed.

We should teach them to survive on their own without making them dependent on banks, supermarkets, or corporations.

We should forget the basic bargain. We should build a nation of independent thinkers,  dreamers, and inspiring visionaries instead of a nation of uninspired cogs.

R

Expert Systems and Filters

Posted on | April 3, 2012 | No Comments

Expert Systems are a form of artificial intelligence.

These are computer systems that are designed to answer questions on  specific topic through collecting data using a set of cascaded questions, or, analyzing a predictable set of data.

Take an expert system for a doctor as an example. Collecting basic biometric data from a cell phone, along with basic Q&A on symptoms, may yield enough information for the software to draw conclusions for a diagnosis.

You can also imagine an expert system for a lawyer. Basic Q&A or data collection could yield a preliminary opinion on a certain circumstance or situation.

Now, the state of memory and processing capabilities on cell phones – combined with bandwidth – are rising to the level necessary to support AI like Expert Systems. We’ve seen it in SIRI on the iPhone4s.

Now imagine an AI/ES that asks basic questions about your health and can answer basic questions in a similar format to SIRI; or, using an app, it collects biometric data and captures that data in a telemedicine format. It can then be analyzed by a server somewhere in the clouds and the AI/ES can inform the patient of a preliminary diagnosis. Therein, the AI/ES can notify appropriate health and medical professionals if the patient’s condition becomes dire; it can even recommend or prescribe base medications, an appointment, or schedule a referral to a specialist.  Imagine what an AI/ES could be in terms of a filter – allowing the doc to be freed up from routine diagnosis an prescription activity in favor of automation that screens for suspicious or dire cases? It would help target medicine, reduce costs, and contribute to the electronic profile of a patient without opening up a new clinic . It may even allow for early diagnosis and treatment.

If you can see that any professional service can be front-ended by an AI/ES (lawyers and attorneys, psychologists, architects, IT professionals, accountants, business coaches and consultants, nutritionists, mechanics) – all of these are expert professions that could benefit from a similar structure. Meanwhile, consumers would have a channel to reach out to these experts through channels manned by the AI/ES. Imagine notices and alerts coming in to a marketplace of providers who’re needed to answer questions that the AI/ES can’t field, connecting consumer to provider?

It’s easy to see where the AI/ES could become the gateway filter for channeling consumers to professionals for any need.

Two things here:

1. If you’re a professional that could easily be displaced by AI/ES technologies, what will you do to provide more value than a cell phone?

2. If you’re a professional, how could you use AI/ES to extend value to your customers, save time and money, and extend your reach using automation?

R

The Future of Work is In Your Pocket

Posted on | March 13, 2012 | No Comments

In the future, work won’t need you to get up at 5am, commute through 8am, and report to your desk by 8:30am. Instead, your work will be in your pocket.

It’ll be on a cell phone, tablet, or other mobile device.

Work will be everywhere you are.

You’ll access your work instantly and make decisions, provide advice, attend conferences, read and watch updated materials, approve and disapprove of daily activities, research product details, interact with customers, and – yes, make work-related phone calls – all from your cell.

You won’t need a desk. You won’t need an office. Your business won’t require a building.

It won’t need heat, electricity, water, sewage, or maintenance either. You won’t pay taxes on something you don’t own. You won’t pay for more space just to expand your capacity.

You won’t need a commute, a car, a parking space, or oil.

You’ll just grab your cell phone and solve a problem.

Of course, this very utopian picture of future of work relates to knowledge workers - people who exchange their knowledge, skills, talents, and ability for money.

If you’re not a knowledge worker then you’re trading your time for money, or, your physical labor for money.

Think about the competitive disadvantages as compared to the knowledge worker – what the laborer will have to spend as compared to the knowledge worker to keep working. Even working and owning a job will create expenses that are not born by a section of society: the knowledge class.

And if you’re a business owner … if you haven’t moved most of your business processes to mobile applications and platforms … and your competitor does, then you’re slower, unresponsive, and have all of those fixed cost structures your competitor got rid of. Your competitor can even attract and retain talent better than you can because, let’s face it, the employee is going to want to be unteathered from the office.

If you’re a worker, are you trading your time and labor for money? Or are you a knowledge worker?

If you’re a producer, are you ready to compete against virtual organizations with nearly zero fixed costs?

R