The Jobless Boom?

By | December 7, 2010
Groupon logo.

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We’ve talked about the idea of a jobless recovery leading to a long-term lack of jobs, but how about something even stranger — a jobless boom. Our buddy Alvis Brigis lays it out in a piece that is somewhere between blog post and manifesto. The salient points, neatly summarized by Alvis:

    •  American  job losses will continue due to a convergence of big forces including offshoring  and automation driven by accelerating change.  Service sector jobs will  generally not return.
    •  Social  web business models are flourishing and point the way to new jobs and efficiencies.
    • A new class of Super Prosumer companies like Groupon are poised to explode and return more value to people, creating more jobs, but driving price points lower.
    • We need to encourage the development of Super Prosumer companies on U.S. soil across various industries and become a Prosumer Nation.

Actually, “jobless” boom is not quite accurate. Alvis states that the very trends and technologies which are eliminating jobs are simultaneously fueling the growth of social networks and a whole new economy around them. Unfortunately, that economy is going to have to boom, boom, boom — which it may well do — to generate the kind of economic activity we’ll need to get all those who’ve lost jobs back on their feet.

FarmVille

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Even then, I’m not clear on what a “booming” prosumer economy looks like. How do we make our money? Our new infrastructure has to enable the creation of new value, extrinsic value. I don’t see how we can all make a living playing Farmville or clipping coupons. Somehow, that feels like an economy based on taking in each other’s washing.

On the other hand…

Some portion of the economy and the workforce will have to continue to be devoted to the production of actual stuff (unless / until we can each produce our own stuff.) Another large segment of the workforce will be devoted to adding value to that process. But in a prosumer model, everybody adds value, all the way down the chain. So as long as automation and new efficiencies are creating lots of stuff, while human beings create new ideas, content, ways of interacting — all of which add value — maybe we CAN have an economy where a signficant portion of the “workforce” makes a living playing games or clipping coupons.

This sounds crazy, but when we discussed these transformations a few months ago, we narrowed it down to a few alternative scenarios:

  1. A huge welfare state wherein the government pays us all to keep consuming.
  2. A booming corporate economy in which the vast majority of us work completely made-up and meaningless jobs* which the companies all support just to keep consumer activity alive.
  3. A massive depression in which rampant automation kills the majority of jobs and destroys the economy in the process
  4. A ”lucky break” scenario where we hit some form of equilibrium, allowing large numbers of human beings to continue to make a meaningful contribution to the economy and be rewarded accordingly

Maybe the Prosumer Nation model is one way of getting a lucky break. I certainly like the idea of people playing Farmville or clipping coupons for a living better than those other three possibilities.

Alvis has some thoughts on the success of Groupon, recently valued at around $6 billion:

This is a MIND-BOGGLING figure, especially for a company that many scoffed at not too long ago and that initially set out to “organize collective action around social or charitable causes”.  Never before has a company reached $2 billion in annual revenue in just 2 years time.  Never before has a company been offered $6 billion just 2 years into its existence (other than spin-off companies).

Particularly interesting is the trendline of valuations.  Going back just one decade we can see acceleration at work.  Youtube was purchased by google for $1.65 billion after just 18 months of existence.  Farmville creator Zynga is said to be worth $5.5 billion just 3 years into its life.  Secondary market shares of Facebook are reported to be trading at a value of $50 billion after 6 years. And now Groupon has claimed the crown of fastest growing company in the history of planet Earth. The speed at which a company can be organized and scale is clearly accelerating.

How far can that go? It’s hard to say. Robin Hanson makes the case that in the not too distant future, the acceleration of economic growth will provide us an economy that doubles once a week – or maybe even more rapidly than that.

Combine that prediction with the idea of a Prosumer economy and there’s a jobless boom for you — a future in which no one cares about whether they get to be famous for 15 minutes, because we each (and I mean every single one of us) get to own our own multi-billion-dollar startup.

Works for me!

 

UPDATE: More thoughts on all this from Will Brown.

 

*Insert obvious snarky comment about your own job here.

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  • stephentg

    “I’m not clear on what a “booming” prosumer economy looks like.”

    I’ll hazard this guess: we each are less involved in our own productivity.

    We already know what that looks like. Imagine each of us as CEO’s at the head of our own corporation “manned” by robots and AI’s. We delegate tasks to these underlings and are involved in high level decision making. We become figure-heads as the AI’s improve.

    We spend a lot of time on the golf course.

  • damndirtyape.myopenid.com

    stephentg,

    That’s an enticing scenario, but what does each CEO-company actually do or make? as in what tangible goods do they produce that other people (foreigners primarily) will buy?

    What we are doing now doesn’t work. A high tech, but debt and credit based economic model is an illusion. At some point America will have to actually create real goods and services to sell to other countries to reverse the trade gap and get out of worlds largest debtor nation status.

    Not sure how any of this prosumer stuff really creates anything new. It might result in more efficient allocation of select resources and capital, but that will have a minor impact on pure GNP output compared to say, being the world’s leader in car manufacturing and selling again (not that it will ever happen of course). Prosumer trends are not gonna accomplish that.

    Creating a better AI driven “smart” adwords system etc. does no good if everyone in your economy is using their credit cards or phantom real estate assets to click and buy Asian made goods. The wealth leaves your own economy and your country gets poorer regardless of how many AI agents are driving the sales or doing market research or designing web pages.

    Now if you mean actual full-on humanoid “robots” doing real work, as in full manufacturing and 3D printing etc.. well that’s a ways away and Asia /India will still be able to do it cheaper since their standards of living and cost of goods are cheaper. They have a had a huge lead since the 70′s on us.

    America is in a world of hurt (and debt). No easy way out from the hole we have dug for ourselves.

  • alvisbrigis

    Phil, I dig the 4 scenarios you’ve generated and listed. My thinking is that a Super Prosumer economy will eventually bring about #4, but that we’ll need to go through #3 to get there. There’s simply to much systemic entropy to overcome in a very short time. That said, I also think it likely that prosumer models and web tech will help take the edge off the downturn.

    I wonder is it’s no accident that this period of change is coinciding with socio-economic pain. Perhaps the pain is a necessary driver. This would be unfortunate, but make sense from a creative destruction standpoint. (Schumpeter was one smart fellow, in addition to being a really fun guy.)

    I also need to clarify about the best-case scenario I envision re: American prosumerism. I don’t think it’s likely that we’ll see a jobless boom in which we contribute value passively playing Farmville or clipping coupons. Rather, I’m imagining the next generation of prosumer companies (eg Groupon 3.0 that extends to all sorts of businesses – including manufacturing and farming, FB with micro-credits,etc) enabling Americans to scrape out a living and minimize the effects of globalization and automation. These web technologies will drive price points lower – it’s in their nature to squeeze out waste, up efficiency. And this could well be a subjectively ruthless process. Later on, once the economy stabilizes and subsequent generations of prosumer enabling tech unlock additional value, I imagine we’ll see a steady increase in income / resources flowing our way, followed by the welath explosion predicted by Hanson and Toffler, but there’s no avoiding the big near-term correction and effects of globalization and automation. We’ve over-extended and will likely need to pay the commensurate price in the near-term. :(

  • alvisbrigis

    Stephen, “I’ll hazard this guess: we each are less involved in our own productivity.”

    Hmm, I’ve read similar compelling arguments, such as Juliet Schor’s belief that “Getting to sustainability will require slowing down the pace of life, which means working less.” and that social media will be key to this. But I remain unconvinced. I think economic pain will force people to participate and be very active. It’s quite possible that people will need to work more in the coming decade, to restore national productivity. Rather than being an easy solution, social media may instead point us in the direction of max value creation, much of which could be very labor and brain intensive.

    damndirtyape, “Not sure how any of this prosumer stuff really creates anything new. It might result in more efficient allocation of select resources and capital, but that will have a minor impact on pure GNP output compared to say, being the world’s leader in car manufacturing and selling again (not that it will ever happen of course). Prosumer trends are not gonna accomplish that.”

    Right on, for the near-term. The current generation of prosumer companies only serve to create more efficiency in existing sectors, surely dominated by Retail / Services. This is the most frequent observation by readers of my post. It will take the ongoing evolution of these models to enable the creation of new industries that meaningfully contribute to GNP. That said, it is possible, and probably in the next few years – acceleration at work. But we may not have that long before the pain builds up to a frenzy. And it may take that frenzy to reciprocally catalyze the next-gen super prosumer models we’ll need. Prosumer trends may drive real deep growth, but not in the super short-term.

    “America is in a world of hurt (and debt). No easy way out from the hole we have dug for ourselves.”

    Absolutely.

    Final thought, inflation and rising fuel prices may contribute to a return to local manufacturing / productivity. If it becomes to costly to buy and ship goods from overseas, that’ll encourage the re-constitution of local and regional industry.

  • dwwood76

    More than anything else, automation will lead to a return to local manufacturing. It is already happening. Factories in China are being out-competed by 1st world countries using more automation. First World workers can’t compete with third world workers, but third world workers can’t compete with first world robots.

    But the thing is, local production increasingly does NOT mean more jobs. Those manufacturing jobs are not coming back. Automation continuing to enter every manufacturing sector and warehouses. Not to mention retail, mining, agriculture, oil and gas, maintenance, construction, health-care, security, military, transport, the list goes on.

    I don’t see us crowdsourcing or prosumering our way out of this situation.

    alvisbrigis: I want to point out that in an increasingly automated world, “re-constitution of local and regional industry”, though a very good thing, does not equate to more domestic jobs. (Not sure if you were implying that.) We either have to get the money out through taxes and redistribution, or dividends through stocks, it won’t be through selling our labor to industries though.

  • dwwood76

    Where do you get the capital to buy the robotic workforce if automation put you out of a job? Eventually your robots are going to become outmoded and you’ll want newer models. Where do you get the money for them? Sell the goods you produce, but if the goods you produce with your outmoded robots are sub-standard, who will buy your goods so you can get the money to upgrade your robotic workforce?

    What’s the way out of that Catch-22 besides ‘make sure you are the winner in that competing market or invested in that winner’?