The real threat to the working class

My dad coming home from work at one of the big furniture factories in Grand Rapids circa 1959.

My dad coming home from work at one of the big furniture factories in Grand Rapids circa 1959.

In the endless litany of analyses over why Donald Trump was elected president, the winner seems to be the cultural subgroup known as “the working class.” All the nostalgia over making America great again was targeted to this group, people who once participated in the American Dream but have lost out to foreign manufacturing, among other things. As a working class guy and a transplant to the South, I can tell you this is serious business down here. Textile mills that used to dot the landscape have moved where labor is cheaper, leaving behind a legion of good people without a way to provide a middle class lifestyle for their families.

Mr. Trump blamed trade agreements that allowed other countries to steal the manufacturing sector out from under us, but he did so without ever mentioning two important aspects of this: cheaper products produced by cheaper labor, which benefit us all, and dramatically increased profits that didn’t have to be shared with the cheaper labor. Assuming all of that was somehow brought back to the U.S., consumer prices would skyrocket, which would not please anybody. I mean, what’s the point of a “good” job, if it means inflation and higher prices for everything from housing to a pair of jeans?

But the bigger story is what’s ahead for the working class regardless of the extent to which nationalism grows as a practical matter. Technology isn’t just disrupting hierarchies and those whose value to the economy is based on protected knowledge; technology is also stripping away working class jobs and will continue to do so at an accelerating pace. By 2019, the Labor Department projects that 40% of the labor force will be self-employed, which doesn’t bode well for those who whose parents went to the office, the plant, the mine, or whatever. No amount of “Yea, America” is going to make corporations care about the lives of their employees beyond what they can do for the bottom line.

And that means the digitalization of the kinds of jobs once thought untouchable will continue. Today, it means little that a truck can transport goods without a driver, but what about tomorrow? Anybody who drives for a living can be replaced. Robotics continue to advance in all directions, as does artificial intelligence, holograms, virtual reality, advanced military weaponry, and many, many other areas. This has brought about serious discussion about the concept of “uniform basic income” or “guaranteed basic income,” in which the government would give everybody money whether they worked or not. The election of Donald Trump, some within the basic income movement argue, may jumpstart the idea, while others, according to a Business Insider article, disagree.

“The election of Trump as president is probably not good news for the basic income movement,” Rutger Bregman, Dutch basic income expert and author of “Utopia for Realists,” tells Business Insider.

And with millions of jobs set to get displaced by robotic automation in the coming decades, Bregman could be right. As Business Insider’s Josh Barro argued, Trump doesn’t seem too concerned about the lack of manufacturing jobs in the future. That lack of clarity has experts like Bregman worried. The president-elect seems unwilling to acknowledge that humans could get booted from entire industries in a matter of decades.

That’s precisely why Trump has every incentive to cozy up to basic income, Pugh says. His fan base has serious fears about the future of the economy.

“Enacting basic income would help to revitalize parts of the country hit hardest by outsourcing and automation by spurring entrepreneurship in those areas.” Or as writer and basic income advocate Scott Santens put it, “Basic income is good for business.”

The working class faces a very difficult future, which is why it’s probably a safe bet that young people will continue to leave rural communities for opportunities in the big city. There are still innovative opportunities available to anyone within the Great Horizontal, but such opportunities demand a different mindset than one based on nostalgia and making American great (again) by going back to an era buried in the sands of human progress. The irony is that rural versus urban is an artificial barrier, for we have achieved a degree of omnipresence never even considered by the planners of old.

Personally, I’ll take small town living with a good internet connection any day of the year.

Another postmodern signpost – banks

Here we go again.

A new Citi Global Perspectives & Solutions (GPS) report on how financial technology is disrupting banks provides another look for us into our rapidly ascending postmodern future. According to the report, mobile distribution will be the main channel of interaction between customers and the bank, which will mean a dramatically reduced need for bank branches. This will lead to the loss of 1.8 million employees between now and 2015, down a whopping 40-50% from its peak in 2007.

banks

An article in Business Insider referencing the report compares it to earlier projections:

That’s in line with former Barclays CEO Antony Jenkins’ recent prediction that pressure from the tech industry “will compel banks to significantly automate their business” and “that the number of branches and people may decline by as much as 50% over the next years.”

The CITI report suggests that as more and more transactions move to mobile, there will be a “rebalancing of staff from transaction-based roles to advisory-based roles,” but I don’t believe such jobs will pay as much. As such, I’m not certain this “rebalancing” will make much difference for those out of work.

This is downside of the Great Horizontal, when it’s viewed from a strictly modernist, top-down perspective. These bank executives know that reduced expenses mean increased profits, so their concern about employees is disingenuous, at best. They will be surprised when faced with the granular investment opportunities that will occur along the bottom of their top-down paradigm, and then the real postmodern disruption of the banking institution will begin. A modernist culture requires banks, but I’m not convinced they will be at all relevant as the twenty-first century moves along.

One thing is absolutely certain: making a living will be completely redefined, and the time to start thinking about that is today.

Our addiction to formulas is killing us

pattersonFormulas are the greatest gift and yet the greatest curse of modernity. In a culture where the wheels of commerce are greased through mass marketing, there is no greater path to wealth than a successful formula. However, when formulas are used to stifle creativity, the whole culture stagnates and eventually is ripe for disruption. The United States of America is stagnating, because we’ve steadily embraced this obsession with road maps over the last century. Rather than elect leaders to take us forward, we choose managers who can show us bullet points, formulas, and a spread sheet. The result feels safe but is actually stagnating and deflating, because it has no imagination.

Formula addiction is especially useless for institutions during times when equilibrium is lost amid chaos. In the 21st Century, we are in one of those times.

But formulas can also become counterproductive value propositions when people manipulated by formulas gain their (formerly) secret knowledge. One, formulas then produce a boring and predictable sameness, and, two, anybody is free to take up the same formula, thereby destroying the value of its former uniqueness. Add to this the corporate greed of formula exploiters, and suddenly a formula that used to “work” becomes a net turn-off to its customers. This is where institutions fail the most, for modernist hierarchical groups can’t afford to talk with customers.

Star Wars, for example, is a very successful Hollywood formula. The rarity of its episodes (there have only been 7 in the last 40 years) doubtless contributed to that success, but we’re about to get one Christmastime movie a year (including spin-offs) from Disney, because they like the profits produced by the formula. This means other movies won’t be made, because why should a corporation that’s in it for profit take a chance when all they have to do is copy a known formula for success, right?

It’s the same way with publishing, which is why James Patterson is the only author you see in TV advertising. The man is one giant formula gone to seed. Formula addiction contributes to failures with media, with education, and every aspect of our society, even the arts.

Beancounters love to copy. It’s why nearly every client I’ve had in broadcasting – when offered my ideas – has responded with, “Who else is doing this?” The inference is a reticence to experiment rather than copy something that’s already been tried and proven a success elsewhere. The ability to show broadcasters what’s working elsewhere is the core competency of TV news consulting, so my iconoclastic approach didn’t win any business for my employer. My evidence didn’t matter. I could show clients the damaging pathway of their existing strategy, and it didn’t matter. I could appeal to reason and present clever images to spark their imaginations, but it didn’t matter. None of it mattered, because their profit was based on known formulas, and despite evidence that the formulas wouldn’t ever meet their digital expectations, they still cling to them today. It will be their downfall.

Christianity is another tired cultural formula that’s being picked apart today. The Emergent or “Emerging Church” movement exploded on the scene as a “postmodern” alternative to stagnating orthodoxy, but it has slowed down considerably in the wake of scandals and other mischief. As one who writes of postmodernism, I’ve always felt both kinship with and distance from the leaders of this group, for they were using the basics of postmodern thought and tools to create a new hierarchy (and sell books). This is quite absurd by default, for horizontal chaos is the authority in a postmodern culture, not hierarchies.

Keep this in mind as you go about your lives in this century, for it’s on display everywhere. The left brain thinking that has governed life in the West for so long is crumbling under the weight of its disrespect for imagination.

UPDATE: Independent Contractors for Media

I’ve been writing about the inevitability of media companies moving to independent contractors for over a decade, and the signs continue to point in that direction. As revenues slow, cost-cutting becomes the only way to maintain margins, and the one-to-many need to wrap employees into one super brand will become less important in the profit-driven minds of managers. Besides, the Net – which is where everything’s going – is more receptive to personal brands than those of industry. So-called “social” media is where you’ll find the people formerly known as the audience, and big brands don’t belong there.

INSEAD’s Knowledge blog uses the Dutch model to make the statement: The Future for Labour Is Self-Employment, validating the ideas expressed in an essay that I published five years ago.

nonemployerIn 2005, we crossed a milestone in this country when the number of people self-employed went over 20 million. Data from the Small Business Administration put that figure over 21 million in the latest year for which the information was reported, 2008. By now, we expect that number is approaching 23 million, as more and more people — especially older people — set up eBay stores or find other ways to support themselves and their families online. These people are well-educated in the ways of the Web and don’t spend their marketing money in traditional ways. This figure bears watching, for while they live and work in our communities and neighborhoods, the money they earn comes from everywhere. They are a part of a new subset of our economy, and…it’s actually growing.

The economy is better than it was in 2008, and much of that has been due to the continued rise of self-employment. A Business Week article in 2011 put the number at 40 million and offered the advice that “To boost the economy, help the self-employed.” As an optimist, I believe this is an issue that Congress will have to address sooner than later. The article notes “By 2019, the self-employed will account for 40 percent of all American workers, according to the U.S. Bureau of Labor Statistics.” How can such a staggering number not include reporters, photographers and other practitioners of “the news” downstream?

Another Bureau of Labor Statistics article  published last year offers the below graph. Note that writers and photographers are already two careers with high self-employment rates.

Screen Shot 2015-04-11 at 10.18.49 AM

The times they are a-changing have changed

Steve Denning's newest bookHere are a couple of great lines from a Forbes article by Steve Denning, “Resolving The Identity Crisis Of American Capitalism:”

Once making money becomes the goal of a firm, companies and their executives start to do things that not only lose money for the firm but cause problems for the economy…

…Customer capitalism involves a shift (of) the focus of companies to delighting the customer and away from shareholder value, which is the result of delighting the customer.

The shift to customer capitalism doesn’t involve sacrifices for the shareholders, the organizations or the economy. That’s because customer capitalism is not just profitable: it’s hugely profitable.

The shift to customer capitalism does however require fundamental changes in management. The command-and-control management of hierarchical bureaucracy is inherently unable to delight anyone—it was never intended to. To delight customers, a radically different kind of management needs to be in place, with a different role for the managers, a different way of coordinating work, a different set of values and a different way of communicating.

The shift to customer capitalism also involves a major power shift within the organization. Instead of the company being dominated by traders and salesmen who can pump up the numbers and the accountants who can come up with cuts needed to make the quarterly targets, those who add genuine value to the customer have to re-occupy their rightful place.

What I love most about Denning’s approach is the use of the word “customer,” when many others would use the term “consumer.”

Burn this into your mind and into the minds of those around you: We have entered a new era. Period. It’s not on the horizon; we’re already there. Those who take a leadership position and beat their competitors to the punch are GUARANTEED the top spot in this new era’s business infrastructure. It’s all about the customer today. Making money is the end, not the means anymore. It has to be that way. The beancounters and manipulators are lesser players in the new status quo, because, as Steven Covey wrote many years ago, “You can’t talk your way out of something you behaved your way into.”

Umair Haque wrote in 2004 that in a networked world, the emphasis must be on the product, not marketing. Jay Rosen says basically the same thing in his brilliant thoughts about “The Great Horizontal” and “Audience Atomization Overcome.”

Dylan’s classic song noted that “The Times They Are A-Changin’,” but I’m much more inclined today to say that they’ve already changed. When the brightest business minds of the day — and I certainly include Steve Denning in that group (John Hagel, too) — shift their thinking from hard core making money to hard core customer service, it’s time to give up on an agenda that only defends the past.

This bubble stuff feels eerily familiar

Celebrating after the AOL Time Warner mergerI was sitting in a conference room at the hi-tech incubator BizTech in Huntsville, Alabama with hopeful eyes fixed on the TV. It was January 10, 2000, and on the screen was the press conference during which the AOL and Time Warner merger was announced. I remember it like it was yesterday. Here I was trying to raise a million dollars for my own start-up, ANSIR (A New Style In Relating), and these guys were talking about a merger valued at $350 billion. AOL itself was valued for the deal at $165 billion. It was then and remains the biggest merger in business history.

I remember the excitement and the wonder of it all. Little did we know it was all just part of a big market bubble, and I remember especially this provocative line from Time Warner CEO Gerald Levin, a very sane, important and knowledgeable businessman at the time.

“I accept that something profound is happening in the Internet space; I believe that. The new media stock-market valuations are real – not in every case, of course. But what AOL has done is get first position in this new world. Its valuation is real, and I am attesting to that.”

Levin’s attestation would later be proven wrong, and he would be forced out as the merged company shriveled under the blended brand. It is now a case study in why what Levin said is a bad reason to take such an enormous gamble. Walt Disney built his empire with what he called “the plausible impossible,” and I suspect that was at work here. Logic is great, the old saying goes, unless you begin at the wrong spot. Believing the valuations was what grew the bubble. Turns out that if it seems unbelievable, it probably is.

I’m recalling this today, because I’m feeling the same vibe as Facebook is about to approach Wall Street with an IPO valued at $100 billion, a valuation that’s roughly 100 times its earnings from last year. It sounds and feels oh so familiar.

So are we in a bubble? The always astute Mathew Ingram has a nice overview of the subject today that’s worth a read, although his conclusion tends to support those who feel we’re not.

So while some venture funds may be doing their best to inflate expectations and cash in on high valuations, that appears to be causing problems only at the small end of the startup pool — for now. Without any obvious signs of a public-stock mania that puts individual shareholders at risk, it’s hard to argue that we are in a 1990s-style bubble yet (although some critics fear that the new crowdfunding bill could accelerate the problem). Whether Facebook’s IPO triggers a broader inflationary atmosphere remains to be seen.

Dave Winer says we’re “definitely” in a bubble, and I believe him. I mean, look at the evidence. AOL’s model was based on a pre-Internet business model, one we know of as mass marketing. They could make tons of money, if they could just keep people inside their walls, a “walled garden” as many would later call it. When the fickle public disagreed, a new garden called MySpace sprang up. This social network could make money the same way, and for awhile, things looked good, until a young guy named Mark Zuckerberg took over with his Facebook. So here we are again, and the whole thing still hinges on the same value proposition, that Facebook can somehow keep those people within its walls. Old school media value, after all, is about controlling the infrastructure for content, whether its made by the New York Times, Zuckerberg or Joe Blow.

And for the last few weeks, we’ve been treated to justification and rationalization that Facebook is somehow different than its predecessors. The company paid a billion dollars for Instagram in what most (myself included) feel was an overpriced grab at real estate Facebook needed to be inside its wall instead of outside. But is Facebook substantially different that previous walled-garden approaches? Get real. It may have a few more bells and whistles and connections, but the core competency is the same. Web research and consulting firm BIA/Kelsey is hosting a webinar on the topic this week to probe this specific issue:

…questions continue to swirl about its (Facebook’s) actual worth and whether any company can justify becoming public at such a high value. The prevailing question: How will Facebook support this valuation…?

I don’t believe it can be justified, although lots of smart people who’ve doubtless done their homework will try to explain that it is entirely justified.

I’m sure Mr. Levin had done his homework when he made that infamous statement back in January of 2000, but at some point in a gamble, you must consider that you could be wrong, partly or as the AOL Time Warner deal proved, utterly and completely. So in addition to homework, what say we also consider common sense. We could also ask a few teenagers.

“Everybody’s switching to Twitter,” a 17-year old family member told me. She used to be a pretty regular user of social media, but her activity has been shrinking for the last year or so. She doesn’t need Facebook anymore, and besides, “it’s pretty lame.” Think about that for a minute. It’s AOL all over again.

“To everything is a season,” we’re taught. I wouldn’t bet on Facebook’s future if you gave me the money with which to do it.