Welcome to the Post-Capitalist Society

welcome-to-the-post-capitalist-society

“In 2000, President Bill Clinton said in his last State of the Union address: ‘America will lead the world toward shared peace and prosperity and the far frontiers of science and technology.’ His economic team trumpeted ‘the ferment of rapid technological change‘ as one of the U.S. economy’s ‘principal engines’ of growth.”

I read an article in the Wall Street Journal entitled “The Great Unraveling | America’s Dazzling Tech Boom Has a Downside: Not Enough Jobs” by Jon Hilsenrath and Bob Davis. The premise is that the technology industry has not lived up to its promise of job creation – particularly since the year 2000. And, that this disappointment has led to political outsiders like Donald Trump and Bernie Sanders gaining momentum in this presidential race.

The article goes on to list some interesting facts and statistics:

“Google’s Alphabet Inc. and Facebook Inc. had at the end of last year a total of 74,505 employees, about one-third fewer than Microsoft Corp. even though their combined stock-market value is twice as big. Photo-sharing service Instagram had 13 employees when it was acquired for $1 billion by Facebook in 2012…

…The five largest U.S.-based technology companies by stock-market value—Apple, Alphabet, Microsoft, Facebook and Oracle Corp. —are worth a combined $1.8 trillion today. That is 80% more than the five largest tech companies in 2000.

Today’s five giants have 22% fewer workers than their predecessors, or a total of 434,505 as of last year, compared with 556,523 at Cisco Systems Inc., Intel, IBM, Oracle and Microsoft in 2000.”

On the surface, yes, it looks like the technology industry has failed to meet its promise. The younger technology companies founded after the year 2000 are employing less and less people. The jobs of the Industrial Revolution are being replaced by robots and software, and this will only accelerate with the long awaited maturation of artificial intelligence / machine learning. Every business today is (or should be) a technology business in some capacity to take advantage of the operational efficiencies (i.e. cost savings) that technology can provide.

But, a closer look shows that it’s not the technology industry that failed us. It’s our rhetoric and education that failed us. We read the tea leaves wrong about the transformation that technology would bring because we looked at the past to predict the future.

The First Four Revolutions
As I’ve written about before, economist Carlota Perez taught us that every half century, society has a “big bang moment” – a technological breakthrough – that ushers in a new technological revolution.

5 Successive Technological Revolutions of the Last 250 Years

If you consider the five successive technological revolutions we’ve had, starting with the Industrial Revolution in 1771, each created more jobs than the previous. And, this would make sense. With each revolution, we built more and bigger things, and we did it by hand. Physical labor was the currency of capitalism.

6th Technological Revolution Around the Corner

Why the Fifth Revolution Is Different
But, three things changed all that in our current revolution: the Age of Information and Telecommunications, which saw its big bang moment in 1971 with the Intel microprocessor, and which is at its tale end.

  1. Moore’s Law: An observation in 1965 by Intel’s co-founder, Gordon Moore, states that the number of transistors per square inch on integrated circuits had doubled every year since their invention and would continue to for the foreseeable future. This has decreased the size of our computing devices while simultaneously increasing their processing power exponentially for fifty years. And, it is only now beginning to slow.
  2. The Internet: Have you heard of this thing? It’s pretty amazing. Throughout history, innovation has been driven primarily through physical locations. “Hot spots”, as they’re referred to in network science, were typically found where there was a concentration of people and ideas colliding. These hot spots have popped up throughout history from the coffee houses in the Age of Enlightenment to the Parisian salons of Modernism. Some of these hot spots have also been industry specific like Silicon Valley for tech, Los Angeles for film and TV, and New York for finance. The Internet (and the World Wide Web) distributed the hot spot, so that its not restricted to a centralized location. The hot spot became decentralized, and has led to innovations like Safecast, which I mentioned in yesterday’s blog post.
  3. Cloud Computing: Then, cloud computing came in and decentralized computing infrastructure. Suddenly, you didn’t need to buy or lease expensive on-premise servers to build software. You simply rent what you need – and only what you need – when you need it. The price of software development dropped exponentially. Not only do you save on hardware (server) costs, but you save by not needing expensive people that know how to service the hardware.

So, what does this all sum up to? Since the rise of capitalism and throughout the first four technological revolutions, capitalism created more jobs because the primary economic resources were physical assets: gold, land, ships, railroads, skyscrapers, cars, etc. and the labor that was needed to build and manage them. But, while the fifth revolution started this way, it is ending by headed in the opposite direction. The economic force of capitalism, combined with Moore’s Law, the Internet and cloud computing, is driving a reduced need for employees. Today, one can build a highly valuable business with exponentially lower (near $0) infrastructure, supply chain and employee costs. Every non-critical resource simply becomes dead weight.

Capitalism Has Hit Its Tipping Point.
Consider this observation that Tom Goodwin shared in a 2015 TechCrunch article entitled “The Battle for the Customer Interface”:

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

something-interesting-is-happening

The Wall Street Journal article mentioned above highlights that Instagram had only 13 employees when it was acquired by Facebook for $1 billion in 2012, and WhatsApp had only 55 employees when it was acquired by Facebook for $19 billion in 2014.

The winners in the new capitalism are those that can create value with the least resources – including employees.

Why Our Rhetoric and Education Is Wrong
For longer than I can remember, political rhetoric around economic growth has been about job creation and good education to fill those jobs. This made sense given our history. But, what you see today is a frustration that those jobs aren’t being created – at least not in the technology industry. If anything tech is displacing those jobs.

In our new economy, employment looks more like a shorter long tail. As Chris Anderson, author of The Long Tail describes…

“The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of “hits” (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-targeted goods and services can be as economically attractive as mainstream fare.”

longtail

Anderson wrote his original article about the long tail in 2004, describing the effects of the Internet on commerce. iTunes and Amazon are prime examples in the music and CPG categories respectively. But, twelve years after the original article, we can now see that the same effects are happening to employment.  At the head of the tail are the largest employers – slow, lumbering legacy companies with immense overhead. Further down the head are the new class of technology companies – except that they are employing less people than their predecessors. They look more like a small, passionate and nimble tribe – with a minimal number of full-time employees supplemented by an army of flexible, contract workers (to whom you don’t have to provide expensive benefits). Consider companies like Uber, Lyft, Instacart, Luxe and Favor. Then, you get into the long tail. And, these are less so companies; more so, individuals that have learned to make a living through the digital economy. They’re building mobile apps for iOS and Android, creating subscription e-commerce businesses through Cratejoy, or selling craft goods on Etsy. They may even be content creators on YouTube, Instagram or podcasting. Indeed, the Wall Street Journal article highlights that “An Apple spokeswoman says it is ‘creating jobs in new industries like the App Economy.'”

Peter Drucker predicted such a change. In his book “Landmarks of Tomorrow”, he talked about the shift to the “post-capitalist society” where knowledge would become the primary economic resource over land, labor and financial assets. This gave rise to the concept of “knowledge workers” that is so common in management and consulting today. 

Where We Go from Here

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime.”

So, our rhetoric needs to shift away from “get an expensive education, so you can get a good job and have a nice, long career” to “learn to learn, so that you can create your own income and be self sufficient.” The United States was built on entrepreneurship – on life, liberty and the pursuit of happiness. If we want to prepare our people for the pursuit, don’t give them a skill and hand them a job; teach them the game of business and let them play.

Live Entrepreneurially: 5 Questions to Help You Find Purpose

Rockefeller Centre - Pursuit of Happiness

My Twitter profile states, “Live entrepreneurially”, and I thought I’d provide some insight into what that means to me. This is part 1 of 2 in the “Live Entrepreneurially” series, but I’m thinking of making this an ongoing, weekly Monday series. So, I welcome your feedback.

“Live entrepreneurially” is my mantra. It means to create purpose driven luck.

When I was thinking about leaving the movie business and was trying to figure out what I wanted to do with my life, a friend who received his Acton MBA in Entrepreneurship showed me this video of his professor Steven Tomlinson describing living a life of meaning. If you have 15 minutes, this video is well worth your time. It started me on a journey of defining my purpose.

Defining Purpose

Purpose is the sum of your intrinsic motivations. Brad Feld, a prominent VC, describes his intrinsic motivation and how he uses that as the lens through which he lives his life here. I would venture to say that his motivations are actually narrower than just learning, but rather learning specifically about technology and entrepreneurship. And, this has led him to become a VC, a blogger, the Co-Founder of accelerator, TechStars, and the author of two entrepreneurship books, “Do More Faster” and “Venture Deals”.  All of these activities give Brad an opportunity to teach. And, if “the best way to learn is to teach”, then Brad is learning an awful lot about technology and entrepreneurship.

Philosophical anthropology and improving the human experience are my motivations (perhaps that’s why I named my blog ReciprocityTheory after the concept of reciprocity in social psychology). Everything I’ve ever had an intrinsic motivation to learn about or do – the reason I began screenwriting and pursued a career in film, the reason I jump at the opportunity to speak with students, the reason I “coach and mentor” as a management philosophy and the reason I work in social media – simply comes down to better understanding human behavior in order to improve people’s lives in some capacity.

Identifying Your Purpose

If you are unsatisfied with your career, or just beginning your career, and wondering what you want to do with your life, I urge you to think about those things you truly, intrinsically enjoy. Here are 5 questions to help guide your thinking:

  1. What gets you out of bed in the morning?
  2. What activities do you pursue even if you aren’t getting paid for them?
  3. What aspects of your previous jobs have you liked? disliked?
  4. What are you good at? (answer honestly!)
  5. Who has a career that you find interesting and would like to emulate?

“Luck is what happens when preparation meets opportunity.” – Seneca

Be Prepared
Preparation

Having defined your purpose, you can now prepare, or, as I like to say, “self-educate”. Read: the The Wall Street Journal or The New York Times, blogs or join Twitter and follow people discussing topics involving your purpose. Find books on Amazon that can educate you on topics related to your purpose. Watch: online videos, documentaries, educational TV related to your purpose. Listen: to podcasts that discuss elements of your purpose. Be resourceful. In the Web 3.0 world, there’s no reason you can’t educate yourself on topics, industries, skill sets, etc. And, if what you’re reading, watching or listening to truly fits within the lens of your purpose, then you’ll actually enjoy the process.

In part two, I’ll discuss using purpose and preparation to creative opportunity and luck.