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@blebelle
Nov 8, 2017

Exponential Technologies which are fuelling the 4th Industrial Revolution are about to make a large chunk of today’s job obsolete and not replenishing with new ones to the same degree… but how much does it pause a threat to our Capitalist economic system overall?

I believe, and it will take courageous leaders, that companies have to embark on an Innovation Journey and that they have a strong responsibility in defining and helping shape the jobs of the future and the future of jobs if we want our capitalist eco-system to survive.

One of the most profound messages delivered by Singularity University Canada Summitwhich took place in Toronto recently, is that Exponential Technologies are reshaping our world as we know it, and will continue to have a more profound impact with time.

Powerful Leaders have recently voiced their concerns on the implications of these Exponential Technologies for the job market and advocate for governments to implement a Universal Basic Income (UBI) mechanism.

What could be the long-term impact of UBI implementation on companies’ potential growth as less people will have discretionary income to spend on expensive products & services? If we go full scale on UBI, will this put a cap or even an end to our capitalist system?

A] Exponential impact requires speed-of-light adaptability capability

Humanity, both from a societal dimension (how we decide to live together and under which system) and an economical dimension (how we create value and how do we redistribute it) has already survived 3 Industrial Revolutions. With each revolution, Humanity has adapted on both dimensions, tweaking the system's components and how they operate to ensure overall stability.

Looking back at the history of Industrial Revolutions, it is clear that the 1st revolution made a large amount of agricultural jobs redundant and that the 2nd Industrial Revolution destroyed a lot of factory labor jobs.

But in each of these revolutions, the time factor favored Humanity, giving it the required breathing space to adjust our social system's underlying components such as Education, Healthcare, Government structure and the like, alongside technological advancements.

Every Industrial Revolution’s impact led to greater jobs extinction than creation but seldom in the same scale as what’s about to happen. If we factor in the Exponential Vs Linear nature of this 4th Industrial Revolution we can likely expect that even if new jobs were to be created, their overall number wouldn’t even remotely be sufficient to compensate for the lost ones.

A recent forecast by The World Economic forum [1] states that by 2020 the 4th Industrial Revolution will lead “to a net loss of over 5 million jobs in 15 major developed and emerging economies”.

That is for 7.1 million jobs forecasted to be destroyed, only 2.1 million new jobs will be created. And those will be mainly in more specialized “job families, such as Computer and Mathematical or Architecture and Engineering”. That is a 3 for 1 ratio in terms of creative destruction.

Another recent article from the MIT Tech Review [2] focuses on India’s concern for their economy as AI capabilities increase, disrupting their primary source of GDP: a service sector which other nations currently leverage for IT outsourcing.

In a nutshell, when AI become massively implemented, it could knock-down a significant portion of what makes the wealth of the Indian nation both in terms of GDP and discretionary income for it's citizens.

These headlines are not of the Doomsday-type any more, they’re real. In previous Industrial Revolutions, these adjustments of our social system's components (Education, Healthcare…) happened over the span of a couple of generations. But is such an exponential rate of change compatible with our risk-adverse reptilian-brains, and are we ready to perform the necessary quick turn-around to reshape today’s society?

The Wild Wild West Dilemma: The rate of change in Exponential Technologies today only give us a decade, at the most, to perform the next necessary adjustments for both societal and economical dimensions. If there is no structured approach, fierce competition will take place globally between nations.

B] Universal Basic Income could put a cap on companies’ long-term financial growth

With the 4th Industrial Revolution having a greater impact on jobs than the previous ones, the need to provide a Universal Basic Income has been voiced by many including Bill Gates [3] and Mark Zuckerberg.

As we free humanity from the slavery of work, and therefore have more time to pursue non-economic driven projects, we will still need to provide everyone with the means to have a decent standard of living. From a moral standpoint, we should only embrace Exponential technologies if we have first insured that they will not create a dystopian 2-tiers society with a few lucky “have” people and an overwhelming number of “have not” that verge on poverty.

Experiments with Universal Basic Income (UBI) have already started in the countries like Finland. For UBI to be a sustainable answer in the long-run, from a systemic perspective, a significant number of underlying hypothesis need to be true.

That is before we go ahead and adopt UBI across the globe, it is important that as a society we ask ourselves the following questions:

  • If UBI distributes equal wealth, where does this wealth comes from in the first place? Who is creating it?
  • Is it the responsibility of the lucky individuals that still hold “regular” jobs to support the rest of the “care-free” part of society?
  • Is society to tax ”job-stealing robots” to compensate for missing income-tax revenue of replaced workers –see the US/Canada take [4] and the EU’s position [5]?
  • Should we have income tax on people benefiting from UBI, at least to have a sense of being part of the overall community?

The Wall-E Dilemma: All these questions require appropriate answer to define how could we implement UBI. But they don’t describe how would UBI translate in terms standard of living nor it’s impact on our capitalism system.

C] Capitalism, as an economical system, can only have a future if companies embark on their innovation journey

What we can also learn from previous Industrial Revolutions is that traditionally newly created jobs usually have a positive impact creating other types of jobs. For example, 1 job created at Intel Oregon Production plant could end up creating 3 jobs in adjacent services [6].

Another study on Service Jobs creation impact by Enrico Moretti - in his book The New Geography of Jobs – also show interesting findings with a ratio of 1 high-tech job to 5 service jobs.

What’s even more interesting is that according to Moretti [7] “Two of the jobs created by the multiplier effect are professional jobs—doctors and lawyers—while the other three benefit workers in nonprofessional occupations”.

Such a higher, more attractive ratio, towards creating local high-end jobs when Service companies establish themselves in an area, is one of the primary reasons cities are fighting each other to attract high-tech companies. The bid for Amazon’s next Headquarters triggered a fierce battle between major cities across the US and Canada as this will lead to adjacent jobs creation by ripple-effect.

As technology become more advanced, and as corporations go through the learning curve of mastering its application, cost of production for goods drops over time. Declining production cost combined with the Baby-Boom following the 2nd World War has given companies an expanding customer base to service… And this has been a primal fuel for the Capitalist System.

But we have to remember that one company’s employee is also another company’s customer. When you zoom out from looking at just one industry sector, you can see how all corporations are interlinked via their shared worker/consumer base.

All this would be good and well if we were looking at 20th century style Service companies but companies leveraging Exponential Technologies, need less people to operate than their elders. And even if they were to raise the salary of those who are still in jobs, would this balance out the loss of purchasing power that derived from discretionary income of the destroyed jobs?

The downside of Exponential Technologies is that as it required less manpower to create products and value, there will be less need for workers. So companies might embrace the temptation of fully scaling down their organization and the number of employees on their payroll….

There's no economic law that says 'You will always create enough jobs or the balance will always be even." - Erik Brynjolfsson [8]

Sure, the end goal of a capitalist system is to ensure that corporations bottom line – and shareholders benefits – can grow year over year through market leadership and sustained consumer spending. But what if only the workers with above “Universal Basic Income” salaries can afford to consume his/her (or another) company’s products and services?

If this was to happen, it would mean that people living Universal Basic Income won’t have sufficient purchasing power to sustain the growth of capitalist corporations. In the long run, as technology-enabled machines take over more jobs, it means that the number of people who can afford these companies' products will dwindle overtime unless new, never existing before, jobs are to be created…

Government funded jobs always relay on wealth being created by the private sector to fund through income and revenue tax, so they’re not a long-term self-sustainable solution. We know that we can't solely rely on Governments to tackle job creation alone … we need entrepreneurial agents to build and expend companies.

Startup job creation seems to be booming but when you take the buzz out of it, a fair chunk of them die within their first 5 years. On top of this, most startup employees do not earn high-end revenue on a constant basis. The get-rich promise relies on the startup’s stock future valuation and that is part of the traditional risk-package (lower salaries but you have equity). So, startups are not a sustainable solution to create new jobs on a large scale.

The Atlas Shrugged Dilemma: If we end up with Exponential technologies combined with Universal Basic Income we could risk putting a cap to companies’ long-term financial growth… and that is by nature the very antithesis of a Capitalist system!

So what now? Companies need to invest in the future jobs and in jobs of the future.

My personal belief is that corporations need to embrace innovation and find the courage to venture in new technologies, new markets and new products to create the opportunity for new decently / well-paid jobs. That is, if they still want to have a large customer base to sell to in the long run.

Who will be the 1st company to have the courage to setup a Blockchain or AI syllabus partnership with a major university?

Companies shouldn’t just stop at imagining the new jobs but also look at how to train / retrain the existing workforce to deliver them. They need to venture in Academic partnership to try to adjust and enable the Education system to being closer to delivering job-ready students.

The Future of Capitalism rest upon the shoulder of corporations themselves – they need to have the courage to reinvent the job machine from the inside!

Follow me on Twitter : @blebelle

Photo Credit: Angelo Pantazis - Icon credit: Gregor Cresnar via The Noun Project

  1. World Economic Forum https://www.weforum.org/press/2016/01/five-million-jobs-by-2020-the-real-challenge-of-the-fourth-industrial-revolution/
  2. Indian and AI https://www.technologyreview.com/s/609118/india-warily-eyes-ai/
  3. Bill Gate and Universal Income https://futurism.com/4-bill-gates-thinks-countries-arent-ready-for-basic-income-yet/
  4. Is it time to tax job-stealing robots http://www.cbc.ca/news/technology/robots-automation-tax-jobs-1.4269221
  5. European parliament calls for robot law, rejects robot tax http://www.reuters.com/article/us-europe-robots-lawmaking/european-parliament-calls-for-robot-law-rejects-robot-tax-idUSKBN15V2KM
  6. Economic Impact of Intel’s Oregon Operation https://www.intel.com/content/dam/www/public/us/en/documents/reports/intel-oregon-economic-impact-report.pdf
  7. Enrico Moretti – The new Geography of Jobs https://www.amazon.com/The-Geography-Jobs-Enrico-Moretti/dp/0547750110
  8. Why AI could destroy more jobs than it creates, and how to save them https://www.techrepublic.com/article/ai-is-destroying-more-jobs-than-it-creates-what-it-means-and-how-we-can-stop-it/