How Disruption Works: Job Loss Isn't Really Job Loss

from the jobs-move-around dept

One of the key points in understanding how disruption works is to recognize that as old industries fail, new industries grow up to take their place. For a true free market to work, failure has to be not just accepted, but embraced. Tragically, in the crony capitalist system we have today, large incumbents go running to the government as soon as they're disrupted, whining about how the disruption is not the normal workings of disruptive innovation, but rather "the end of the world" and a sign of clear evil. It's why you hear talk of "too big to fail" and all sorts of efforts to paint new innovations as illegal, rather than just disruptive competition. Yet, as we've seen over time, disruptive innovation may move jobs around and cause certain sectors to diminish, but it tends to open just as many, if not more, opportunities elsewhere over time. I don't think I've ever seen that displayed quite as clearly in graphic form as in a chart that LinkedIn recently released, looking at what parts of the industry have been growing and which parts have been shrinking over the past few years:
This chart caught the attention of Paul Smalera, who specifically noted that newspapers are at the very bottom, but online publishing is right near the top on the growth side -- a near perfect showing of how jobs shift over time. He notes the classic Innovator's Dilemma issue with news companies, where they thought they were in the business of selling newspapers, and that held back their ability to innovate:
They have been trapped in a terrible mindset that they are in the business of selling newspapers. The leap from paper to digital may be vast, but to newspaper publishers, it seemed like vaulting to a different business entirely, one they were loathe to get into. No matter what kind of lip service newspapers paid to the digital transformation, the most prominent paywall model out there, that of the New York Times, still protects print subscriptions with a tiered digital pricing strategy – one so annoying that it motivated its former digital design director to complain publicly about the entire signup process.

The lesson online media companies have taken from newspapers’ slow, public death is to move beyond the idea of selling the product. Online sites are selling their audience. It’s a simple twist of the equation, but one that changes everything about how a media company is run. A CEO who has realized that her audience – her customers – is the most important thing the company has will stop at nothing to give those customers what they want. Anything to make them feel as if they’re getting value from the company. And although she’ll monetize their aggregate value with advertisers and marketers, she’ll also protect them from underhanded sales pitches or confusing pricing strategies that infuriate the web-savvy.
This is a really good point on multiple levels. Beyond the innovator's dilemma (and the key point of figuring out what the real product is), Smalera is also debunking one of the popular myths of the internet era: when you're selling a user's attention, companies will naturally abuse their users. What he notes is that companies that do this don't end up lasting through the long haul, because users get annoyed and go elsewhere. Even though it's become a common pejorative statement among neo-luddites to mock the idea that the "users is the product," one thing that is true when that happens is that the companies need to treat their users right, or they have a crappy product that they can't sell.

Similarly, Mathew Ingram uses this to discuss why it's so difficult for legacy businesses to adapt, noting that it's difficult to change business models on the fly. Not only do you have to make big bets on new things, but you also have to keep the legacy business running while at the same time trying to undercut it with the new thing. It's why so many companies fail the innovator's dilemma test. Unless you have incredibly visionary leadership who can push a company through with a strong and clear vision of why the company must move in that direction, the magnetic appeal of trying to prop up increasingly obsolete businesses is just too strong.

But, the failure comes not because of some new "threat" or because of some kind of disgraceful activity (no matter how much legacy players try to describe it that way), but because corporate leadership chose to let others innovate, rather than supporting a plan of out-innovating themselves. Very, very few companies are willing to cannibalize their own business models -- but the failure to do that just means that someone else cannibalizes it for you.

And it goes way beyond news. The chart above shows some other key areas of disruption as well. That clump of retail, automotive, construction, banking, telecommunications, pharmaceuticals and real estate represents prime feeding ground for the next decade of disruption -- much of which has already started. You don't necessarily see the corresponding growth points on the opposite side of the chart, but as with newspapers and online publishing, give it a few years, and those new jobs and industries will make their way up the chart, as the legacy players continue to shrivel up (and whine all the way down).


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    Hephaestus (profile), Apr 6th, 2012 @ 7:42am

    Accelerating Rates of Disruption

    During a discussion last week, gotta love Google+, we discussed the rate of technological change going on in the world and where it was headed. The consensus was that there would be a technological singularity between 2025 and 2035 and various forms of social media would make it impossible to stop.

    I bring this up for a simple reason, over the next few years the rate of disruption is going to accelerate making that chart slowly tilt vertically. Disruption will occur faster than lobbyists can push for new laws to protect the corporations they represent. Making any laws passed obsolete before they are enacted. Governments and corporations around the world are ill equipped for this.

    Looking at the history we have lived through over the past several months, and the way governments have handled events you can forecast how things are going to go. They will take a typical head in the sand, ignore the peoples concerns, followed by a huge over reaction. It will solve nothing, and make them believe they are still in control. By the time they get it, it will be to late.

    Until last week I felt sorry for them, now the word Karma echos in my head ...

     

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    Anonymous Coward, Apr 6th, 2012 @ 8:09am

    Internet, eh?

     

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  3.  
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    Anonymous Coward, Apr 6th, 2012 @ 8:18am

    Re:

    Yes sir I make and sell internets, how many can I put you down for? Make a great present for your kids! Don't run out of internets buy some today.

     

    reply to this | link to this | view in thread ]

  4.  
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    Anonymous Coward, Apr 6th, 2012 @ 8:19am

    'those new jobs and industries will make their way up the chart, as the legacy players continue to shrivel up (and whine all the way down).'

    unless of course, they have managed to kill off innovation, if not completely, but to the point that almost no one is able to move forward with anything without fear of being bankrupted by law suits or imprisoned.

     

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    Anonymous Coward, Apr 6th, 2012 @ 8:26am

    Most of the things on the losing side of the scale are there because of the economy. Restaurants, retail, supermarkets, construction, and banking will all make comebacks as the economy improves. Some things on the positive side will see declines as the economy improves as well - philantropy, e-learning, and management consulting.

    It's interesting to see that telecommunications has been purging jobs surpassing every industry except retail in number of jobs lost. It's frightening to think that in an age when people are constantly demanding more data bandwidth, that these industries are laying off workers.

     

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    Anonyous Anonymous Coward, Apr 6th, 2012 @ 8:26am

    Where are the Gadget Makers?

    I don't see manufacturing on the list, on either side. What is happening to the gadget makers? Is all the hype over new cell phones, Isomethings, tablets, 3D tv's just hype. Did we stop making cars? I think there might be fewer cars, but quality has extended the life of the average car so there must be some slip there.

    The list does not appear to be comprehensive. I wonder what else they left out.

     

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  7.  
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    Grog, Apr 6th, 2012 @ 8:29am

    Progress is hereby ordered to Stop - NOW!

    I and fellow members of The Stone Wheel Manufacturers' Guild will work tirelessly to have the governments pass severe laws that will force cheaters (you are ALL guilty) to buy my stone wheels! Punishments for violation will include death by stoning, death by burning at the stake and death by crucifixion.

    There is no option. By our decree: The March of Progress will be halted immediately! Time will be reversed to 1,000,000 BC.

    People belong in loin cloths, living in caves and being eaten by wild beasts.

    It's how The God Who Makes The Sky Rumble and Flash And Makes The Water Droplets Fall From The Heavens intended it.

    We are the Stone Wheel Manufacturers Guild. You will be assimilated. All of your wheels are belonging to us.

     

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    Hephaestus (profile), Apr 6th, 2012 @ 8:36am

    Re: Where are the Gadget Makers?

    Manufacturing continues to grow as more people become affluent. Car sales continue to grow, again due to rising affluence. Gadget makers continue to gain ground, Samsung actually posted better than expected earnings due to the galaxy series. Both manufacturing and cars fluctuate slightly due to the economy.

    Also, the chart is about industries being disrupted by technology. So Manf and Auto should be left out.

     

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    mdb07a (profile), Apr 6th, 2012 @ 9:33am

    Not quite that simple

    The circle representing lost newspaper jobs is noticeably larger than the circle for online publishing job gains. That sums up the flaw in this philosophy. The new industries are almost always more efficient than the industry they replace, including being able to do more work with fewer employees.

    Some of the displaced journalists will be able to find work in online publishing, but there aren't enough jobs for all of them. And even the journalists who get lucky enough to find a job in the new industry will be paid far less than in their previous jobs due to leaner profit margins, a large and desperate pool of newly-unemployed journalists, and downward wage pressure from bloggers willing to work for nothing more than the satisfaction of being published.

    As for gadget makers, nearly all consumer electronics and parts are manufactured overseas, and have been for several years. Any job gains or losses resulting from phone and tablet sales will show up in China, Korea, or Thailand, not America.

     

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    Jeremy2020 (profile), Apr 6th, 2012 @ 10:23am

    "Some of the displaced journalists will be able to find work in online publishing, but there aren't enough jobs for all of them. And even the journalists who get lucky enough to find a job in the new industry will be paid far less than in their previous jobs due to leaner profit margins, a large and desperate pool of newly-unemployed journalists, and downward wage pressure from bloggers willing to work for nothing more than the satisfaction of being published."

    This is a sense of entitlement. Journalists are not guaranteed jobs as journalists. They must adapt and improve.

    Also, there is another fallacy here...the circle is smaller 'now', but what makes you believe it won't eventually eclipse the other number?

     

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    Mike Masnick (profile), Apr 6th, 2012 @ 11:16am

    Re: Not quite that simple

    The circle representing lost newspaper jobs is noticeably larger than the circle for online publishing job gains. That sums up the flaw in this philosophy. The new industries are almost always more efficient than the industry they replace, including being able to do more work with fewer employees.

    I'd look at the trends over time. The new industries tend to create more jobs in the long run. There may be a temporary imbalance, but overall, it works out to being more jobs.

     

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    Richard (profile), Apr 6th, 2012 @ 12:05pm

    Re: Accelerating Rates of Disruption

    The consensus was that there would be a technological singularity between 2025 and 2035 and various forms of social media would make it impossible to stop.


    The only technological singualrity I see coming by then is the one where all tech simply stops working because it has to spend alll its time updating itself to the latest version.

     

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    Richard (profile), Apr 6th, 2012 @ 12:08pm

    Re: Re: Not quite that simple

    The new industries tend to create more jobs in the long run. There may be a temporary imbalance, but overall, it works out to being more jobs.

    Why does everyone worship at the totem of jobs?

    Surely the need for labour is not in itself a goal.

    The problem we face is our inability to find a means of fair distribution of available wealth by any means other than payment for labour. If we could fix that problem we wouldn't need jobs!

     

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    Richard (profile), Apr 6th, 2012 @ 12:09pm

    Re: Re: Not quite that simple

    The new industries tend to create more jobs in the long run. There may be a temporary imbalance, but overall, it works out to being more jobs.

    Why does everyone worship at the totem of jobs?

    Surely the need for labour is not in itself a goal.

    The problem we face is our inability to find a means of fair distribution of available wealth by any means other than payment for labour. If we could fix that problem we wouldn't need jobs!

     

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    heyidiot (profile), Apr 6th, 2012 @ 1:38pm

    Re: Not quite that simple

    "...the journalists who get lucky enough to find a job in the new industry will be paid far less than in their previous jobs due to leaner profit margins, a large and desperate pool of newly-unemployed journalists, and downward wage pressure.."

    Hmmm. You say it like it's a bad thing.

     

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  16.  
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    Anonymous Coward, Apr 6th, 2012 @ 4:43pm

    It's an amusing graph because it uses a couple of different scales that don't relate, in a manner to try to give an impression that one or the other is more impressive.

    Percentage of increase / decrease is nice, but a somewhat misleading stat when you have things like supermarkets (which have a huge number of employees up against something like venture capital operations (which generally do not).

    Combining that with the size of the circles create the false impression that "the internet" is massively creating jobs and leading everything. But damn, that's just hard to imagine, the internet itself didn't get much bigger, it's not like we are hiring millions of surfers each year. It's just odd.

    Further, "the internet" is such a general category, that it likely is a mix of other categories that have been marked as "down", such as retail and telecommunications.

    Perhaps a little background as to what makes up these overly broad categories would help. This seems at this point to be more of someone trying to make the data say something they wanted to say, rather than a fair representation. After all Mike, aren't you the one that objects to adding "on the internet" to the end of something and calling it new? Attributing jobs to "the internet" seems equally stupid, don't you think?

     

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    Suzanne Lainson (profile), Apr 6th, 2012 @ 8:05pm

    Re: Re: Re: Not quite that simple

    The problem we face is our inability to find a means of fair distribution of available wealth by any means other than payment for labour. If we could fix that problem we wouldn't need jobs!

    I totally agree. In fact, that's where my focus is these days. The entire economic system is or should be evolving.

     

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  18.  
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    Suzanne Lainson (profile), Apr 6th, 2012 @ 8:14pm

    Renewables

    Look at where renewables are on this chart and look at the political money coming in from wealthy individuals who want to prolong our dependence on fossil fuels as long as possible. And who have demonized even things like bike riding.

    Unfortunately the longer we wait to phase out fossil fuels, the more damage we're doing to the environment. I think there are much bigger issues concerning the world than fights over the music and newspaper industries. They are an interesting sideshow, but not as environmentally damaging as what is happening in other industries.

     

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  19.  
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    Bastiat's Ghost, Apr 6th, 2012 @ 9:48pm

    What to do, what to do...

    The real issue at play is "what do people want to be done about the situation?"

    Sometimes it is best to accept that things are simply out of our control, and in some cases beyond our comprehension. This is called accepting uncertainty.

    If people don't accept uncertainty, and "want something to be done to fix the situation" then so be it. But there is a price. There is always a price. If we are to protect newspapers, or big music, or big movie makers, then we do so at the expense of something, whether it is the "internet" in general, or "web publishers", or "e-retailers", someone will pay as a consequence.

    Eventually, centralized measures to control the market always introduce a new unpredictability. Instead of "disruptive" innovation, we have "disruptive" regulation, pet lobbyists and congresspeople, and a whole of people bitching and moaning about "we need to get money out of politics" when it was their desire to control the market that produced this issue in the first place.

    At the end of the day, the hardest thing for people to do is nothing at all, even if that is the appropriate response.

     

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  20.  
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    Suzanne Lainson (profile), Apr 7th, 2012 @ 12:21am

    Re: Re: Re: Re: Not quite that simple

     

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  21.  
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    Anonymous Coward, Apr 7th, 2012 @ 5:05am

    Re: Re: Re: Not quite that simple

    "Why does everyone worship at the totem of jobs?"

    "The problem we face is our inability to find a means of fair distribution of available wealth by any means other than payment for labour. If we could fix that problem we wouldn't need jobs!"

    Well comrade, let's see. That system has existed as a theoretical for a long time, pure socialism, most often shown out as communism. Even in it's purest of forms, it is non-functional, for a lot of reasons.

    The biggest reason however is in the motivations of the workers and the reward system in place for working. If you get the same results for working hard or for doing nothing and passing your day in the men's room, sooner or later everyone is sitting on the porcelain chair reading the paper. Oh wait, there is no paper, because the paper guys are doing the same thing.

    Jobs are jobs, the money they pay (reward) is what drives people to do a good job, to actually accomplish things, and to as a result feed products into the system, which in turn moves things forwards in the economy.

    Jobs are very important - motivated workers are the key to the economy moving forward.

     

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  22.  
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    Richard (profile), Apr 7th, 2012 @ 5:50am

    Re: Re: Re: Re: Not quite that simple

    Jobs are very important - motivated workers are the key to the economy moving forward.

    You are making an assumption here - that it is necessary for everyone in a community to work in order that sufficient wealth is created. That was true in the past - and in the era when communism was (supposedly) tried and found wanting.

    However we are now moving to a world in which that is no longer true.

    I would certainly agree that we need some well motivated people to drive the economy forward - whether the whole population need to be involved is another issue.

     

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  23.  
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    Suzanne Lainson (profile), Apr 7th, 2012 @ 8:23am

    Re: Re: Re: Re: Not quite that simple

    Some of the concepts that Techdirt advocates can be pushed further to a more dramatic transformation of the world economy.

    If you want to see some ideas, go here.

    The Foundation for P2P Alternatives - P2P Foundation

     

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  24.  
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    Gregg, Apr 7th, 2012 @ 3:30pm

    From the article/post by Paul Smalera: "The lesson online media companies have taken from newspapers’ slow, public death is to move beyond the idea of selling the product. Online sites are selling their audience."

    What exactly does that suggest for the future of "news" organizations. Clearly the focus isn't proper news reporting, right? It's just whatever gets the most eyes/ears...which means is exactly why much of the news is the journalistic equivalent of a TV "reality" show. Which is why fewer and fewer people trust mainstream media. And the more they focus on gaining viewers at the expense of proper reporting, the more damage they do to their credibility.

     

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  25.  
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    A Guy (profile), Apr 7th, 2012 @ 11:11pm

    Re: Renewables

    I don't think we're damaging the environment that badly overall.

    The real problems is that in the not too distant future, fossil fuels will stop being economical due to a combination of supply and demand and the simple energy in/energy out physics of extracting them from the earth.

    Unless there is a massive expansion of renewable technologies or a huge technological leap forward in our understanding of nuclear energy, there will be a large excess of population that we will no longer be able to feed.

    That will lead to either starvation or war, depending on how the politics work out.

     

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  26.  
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    JMT (profile), Apr 8th, 2012 @ 1:09am

    Re: Not quite that simple

    Let me fix your statement for you:

    The circle representing lost 'ANY OLD TECHNOLOGY' jobs is noticeably larger than the circle for 'ANY NEW TECHNOLOGY' job gains. That sums up the 'REALITY' in this philosophy. The new industries are almost always more efficient than the industry they replace, including being able to do more work with fewer employees.

    What makes newspaper jobs so special? Why should we do anything more to protect newspaper jobs that we have with countless other industries affected by disruptive technologies.

     

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  27.  
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    Anonymous Coward, Apr 8th, 2012 @ 6:39am

    Re: Re: Re: Re: Re: Not quite that simple

    "However we are now moving to a world in which that is no longer true."

    I think it is more that "you wish we are moving to...", because the world in fact appears to be moving much more solidly towards capitalism, and not towards a socialistic "we all work together" system.

    You only have to look at places like China to understand that capitalism, no matter how it's couched, is still the system that generates the most advancement for a society and the most motivation to keep it going.

    You only have to look at a place like Cuba to understand what the more socialistic view of the world gets you. Everyone is taken care of in theory, but nobody wants to get off their ass to actually make things better. The only places their economy works is capitalistic hotels and of course prostitution.

    We aren't wired for pure socialist living. We are wired for self-motivation, capitalist style. It gets us the most as individuals and as a society.

     

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  28.  
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    Suzanne Lainson (profile), Apr 8th, 2012 @ 8:19am

    Re: Re: Renewables

    Khosla Ventures: The US is Massively Underfunding the Innovations Critical to Its Energy Future

    "In the coming decades, the efficient and effective use of energy is going to be a real determinant between winners and loser across the global landscape. Affordable, sustainable energy will increasingly determine the prosperity of world powers -- and America is at a growing relative disadvantage until it starts talking honestly with itself about the un-sustainability of its current energy policies and prioritizing its resources (both monetary and human) accordingly."

     

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  29.  
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    Richard (profile), Apr 8th, 2012 @ 12:20pm

    Re: Re: Re: Re: Re: Re: Not quite that simple

    Way to totally misread everything I have said.

    "However we are now moving to a world in which that is no longer true."

    Was NOTHING TO DO with socialism or capitalism - rather it was to do with the amount of labour needed to create sufficient wealth for the population - a matter of technological FACT not a matter of politics.

    Please stop trying to fit my statements into your own pre-conceived ideas about what you think I said and look at what I actually said for a change.

    We aren't wired for pure socialist living. We are wired for self-motivation, capitalist style. It gets us the most as individuals and as a society.

    and actually you are wrong here too - If I was poor and ill I would defintely be better off in Cuba than in the USA.

    Plus - capitalism is never universal. No-one applies capitalist principles in their own family - and inside most "capitalist" companies the organisation is rarely capitalist.

    The reality is that we are wired for co-operation. Extremes of competition get you nowhere. Look at the success of the John Lewis partnership or the Mondragon co-operatives and learn.

    The thing that failed in eastern europe was not socialism it was authoritarian centralisation - nothing to do with socialism.

    By the way, did the recent failure of the capitalist banking system pass you by?

     

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  30.  
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    Suzanne Lainson (profile), Apr 8th, 2012 @ 1:13pm

    Re: Re: Re: Re: Re: Re: Re: Not quite that simple

    Also, I will add to what Richard is saying. Those of you who think nothing will replace capitalism in its current form are falling into the same trap as those industries that can't see themselves replaced.

    As machines replace workers at an accelerating pace, we will likely have less need for workers other than for jobs that no one currently wants to pay much for (e.g., childcare, care of the elderly). So unless we elevate the pay for those jobs (and then find ways to put money into the pockets of everyone else so they can pay workers to do those jobs), we end up with an economy that is technology-focused. The possible scenarios: Everyone gets to work less and still maintain their standard of living. Or we end up with an even more unequal system where there are some very wealthy people and everyone else scrapes by.

    The goal of the system right now is to replace workers with machines whenever possible because the machines can work 24 hours a day, don't need medical care, the ROI tends to be higher, etc.

    What jobs do you envision in the future that will be better done by people? Yes, there still are some now, but think about a future where machines replace people and then figure out an appropriate economy. That's what Richard and I are talking about.

    The entire world economy is influx and what we have grown accustom to the past may well change dramatically in the future.

     

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  31.  
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    Richard (profile), Apr 8th, 2012 @ 2:34pm

    Re: Re: Re: Re: Re: Re: Re: Re: Not quite that simple

    Agreed - I was disappointed by the attempt to characterise everything other than "red in tooth and claw" capitalism as "socialism/communism" and to equate that with the Soviet Union and its satellites.

    Those countries failed not because of the flaws of their (supposed) ideals but because the ideals were hijacked early on by people who were only interested in personal power.

     

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  32.  
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    A Guy (profile), Apr 9th, 2012 @ 7:30am

    Re: Re: Re: Renewables

    The US is actually in a pretty good position right now. We definitely need to take steps, but it is more likely that the starvation/war will happen elsewhere first.

     

    reply to this | link to this | view in thread ]


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