Saturday, June 22, 2013

From the Empirical Archives: Creative Disruption by John F. McMullen

Creative Disruption
John F. McMullen
Originally published in the December 2012 issue of Empirical

Whether you spend most of your waking hours on Facebook or try to stay as far away from computers as possible, technology has changed the world around you, often “under your radar,” and will continue to do so at a constantly accelerating pace. The way you do things will be affected; jobs will be lost; companies, even industries, will disappear; and new opportunities will open for people with the proper education and skill sets.

Consider a mall, if there was one near you, ten years ago. There might have been a B. Dalton, a Waldenbooks, or a local bookstore; there were probably a few stores that did film processing; there were probably two music stores that sold cassettes and CDs; a travel agent; and a movie rental store. Somewhere near the mall there might have been a stand-alone Border’s bookstore and/or a Tower Records. As you walked between the stores, if you passed someone alone speaking loudly, you would give her/ him a wide berth, thinking there might be some mental or emotional problem looming.

That was ten years ago–now, there are no more bookstores, travel agents, music stores, film-processing centers, or movie rental stores, and we just assume that the person speaking loudly is on a cellphone with a Bluetooth earpiece. How things changed!

These are the only changes that we see but there is much more going on. Technological advancement can threaten our economy and our way of life; at a minimum, it will disrupt businesses as we know them; shift more responsibilities to us, the consumers; and require much different tools from our workforce. It also will require greater understanding of the long-term impact of these advances that our elected officials have at the present or seemingly want to acquire.

I call this ongoing march of technological innovation creative disruption because it is always based on innovation, imagination, and disrupts the existing ways of doing things. Some prefer the term creative destruction because of the impact it has on some jobs and some companies. I choose disruption because it is a more optimistic term that sees opportunities in these changes.

Innovation has allowed businesses to make us “part of the process,” eliminating many jobs as it provides instant service to us. Every bill that we pay online to our utilities, credit card companies, or mortgages means that we no longer have to address an envelope, stamp it, and mail it. Further, it means that no one at the other end has to open the envelope, check the payment, enter the information into a computer system, and tabulate the checks for a bank deposit.

Every book that we choose to read on a Kindle or a Nook means we can carry it and hundreds of others with it at all times, takes no storage space in our home or office, and usually costs less than a hardcover or paperback version. It also means that the seller requires no inventory, no employees to package and ship to distribution centers or retail bookstores. These stores require fewer retail personnel as they are selling fewer printed books (it also means fewer bookstores).

iTunes is now the largest music store in the world. The downloading of music is the same model as that of books–no inventory and no retail processing. Even if we prefer the physical feel of merchandise, the ordering online from Amazon, Barnes & Noble, Best Buy, Apple, Dell, etc., once again eliminates the middleman. 

We call this cutting out of the middle man disintermediation.

We see this disintermediation also in the replacement of many travel agents and realty listings with computer services. Firms doing business with government agencies and large companies such as Wal-Mart are required to enter bids, invoices, and statements by electronic data interchange, once again moving the input process away from the large entity. Many supermarkets and box stores now have self-checkout facilities that both speed the shopping process and eliminate retail positions.

We also see more and more replacement of manufacturing jobs through the use of robotics–robots don’t get sick, break for lunch, or make demands and, properly maintained, perform the same task in exactly the same manner all day long. In a New York Times article, “Skilled Work, Without the Worker,” John Markoff wrote, “The use of ‘artificial intelligence’ is not limited to manufacturing but extends also to such areas as automatic security trading (a programming error in such a system recently caused Knight Capital to lose $440 million in a matter of minutes) and analysis of loan applications.”

The impact of technological changes often extends to entire geographical areas. Rochester, New York, for example, is home to Kodak and Xerox, two firms hit hard by changes in technology. It is particularly ironic that Kodak, which invented digital photography, chose to protect its film and chemical processing businesses and did not pursue the digital technology until it was destroyed by it. Similarly, Xerox, which developed many of the important computer technologies (graphic user interface, object-oriented programming, and Ethernet networking), chose to focus on its copier business only to see e-mail and interoffice networking make major dents in that business.

We have just scratched the surface of the technological revolution.

Our amount of available information grows exponentially, causing the disruption to also grow exponentially. (See the “Did You Know” videos, starting with the first–http://vimeo. com/2030361.) It is more than the tremendous explosion of information technology that has brought us to where we are now–it is the confluence of developments in many areas. Some students of the revolution use the acronym “GRAIN,” which I have modified slightly to mean:

G - Genetics
R - Robotics
A - Artificial Intelligence
I - Internet
N - Nanotechnology.
(Note that I inserted “Internet” as the “I”
to replace “Intelligence,” the second half of
“Artificial Intelligence.”)

Each of these areas are now linked together by our understanding of systems and the digital world–and we are attempting to solve problems and/or create “new things” through “programming,” be it the programming of DNA in genetics, atoms and molecules in nanotechnology, microprocessors in robotics and any type of computer system in relation to artificial intelligence and the internet.

It takes only looking at some recent examples to see the disruptive power of such innovation. A recent video (http://www. demonstrates the making of a working crescent wrench by “copying” an original wrench in a 3D copier. Imagine, as this process gets cheaper, the impact on manufacturing if we can simply copy existing tools, furniture, clothing, etc. to make new items. Consider “3D Printing A House” and think of the applications of that.

If these examples don’t either excite you or move you to trepidation, even a basic understanding of nanotechnology should. The manipulation of the world at the molecular level is so full of promise that it boggles the imagination. There are already applications in use by Dockers (the making of slacks that resist stains) and by the Defense Department (production of uniforms that seal on a wound to prevent infection; development of a wearable light skeleton that allows a soldier to carry an incredible amount of weight).

Nanotechnology has allowed the creation of carbon nanotubes, the strongest material made to date. This material has allowed the development of both the skeleton structure mentioned above and is the basis for the planned “Space Elevator,” a rope ladder type of device made with carbon nanotubes that will hang from the “Space Station” over the Pacific Ocean for the transport of material up to the Space Station ( If successful, there will no longer be a need for manned shuttles to deliver material, greatly reducing cost and danger.

If this seems too much like science fiction, it gets even weirder. Medical technologists envision the development of very tiny programmable machines that may be injected into the blood stream to travel through the human body to find infectors, tumors, and malfunctions and correct them.

Finally, there is the concept of the home assembler that may or may not arrive in our lifetime. Presently, Levi Strauss manufactures the majority, if not all, of its jeans offshore. The jeans are then shipped to the US, trucked to regional distribution centers or large stores, and sold through retail channels. Levi Strauss, IBM, and other firms are engaged in research, which has a goal of moving to the following process of jean delivery–the consumer goes online, chooses a style, color, measurements (all possible measurements), provides payment information and, very shortly, the jeans come out of the consumer’s own assembler. The “manufacturer” has collected the order information and developed the proper instructions to send to the consumer’s home assembler–and there are no longer people in Malaysia making the jeans, ships crossing the Pacific to ferry the jeans to the US, truckers delivering the jeans to retail outfits, or retail personnel handling inventory, bagging, and collection! The consumer can now decide to order a toaster or a pillow in the same manner.

So, between now and sometime in the future, we will have eliminated millions of jobs–from the unskilled person opening the payment envelopes at a utility to the very highly skilled Space Shuttle pilot–jobs at every level. Both political parties tell us “When the economy comes back, employment will return to high levels.” This is nonsense and they either lie or just don’t understand. Jobs that have been replaced by technology aren’t coming back. Unfortunately, the people replaced through the elimination of these jobs are often too old, too uneducated, or too unintelligent to be retrained for the higher skilled jobs required in the new workplaces. Even if they are not, we will require massive retraining projects to keep these people gainfully employed.

It should further be understood that as businesses thrive in a resurgent economy, they no longer will seek to add personnel to meet new demand as they did it the past. They will, rather, seek to automate further to reduce personnel. To compete in the worldwide global economy, it is necessary to reduce personnel costs. The US can only compete with foreign worker wages by eliminating workers.

The biggest problem facing us is that there is no long-range planning for these possible eventualities. Consultant William Hugh Murray, a long-time observer of the impact of technology on employment, suggested the following to this writer: “Computers and robots will produce everything but jobs. In the twentieth century, we dealt with the tractor by shortening the workweek from 72 to 42 hours. How about a 25-hour work week?”

Bill’s idea is not new. John Maynard Keynes, in a 1930 paper, “Economic Possibilities for Our Grandchildren,” laid out a case that increases in productivity would result in a work week of 15 hours a week in 2030 to maintain the standard of living that in 1930 required 40-50 hours a week–he estimated that the average workweek in 2010 would be 20 hours a week (In their recent book, How Much Is Enough?, Robert Skidelsky and Edward Skidelsky use Keynes’s prediction as a jumping off point in their analysis of “economics as a moral science.”)

It seems to me that we are a long way from shorter workweeks because of abundance. Competing in a global economy in which other players either have employees working 50-60 hours per week at low wages or have totally automated workplaces tends to weigh against greater leisure time in the US. What then do we do as individuals and as a society to deal wit these rapid disruptive changes? While there is no single silver bullet, there are some obvious first steps:
  • We must recognize that there is a long-term trend to deal with–no such public recognition is in evidence.
  • Political leaders of both parties must focus on long-range solutions rather than the short-term sound byte pap, which we are fed now. A “space race” type of national mentality is needed and that requires political leadership. We must demand this leadership.
  • Education must be strengthened with a focus not only on technical competence but on the realization that constant change is inevitable and, to meet this challenge, lifetime reeducation and constant adaptability is necessary.
  • We must also recognize that we will have a constant, if not growing, legion of unemployables and we must find a way to not only support them but to insure that they continue as productive members of society (perhaps through paid volunteerism, mentoring programs, etc.).

One of the great technology visionaries of the last 50 years, Alan Kay, is oft quoted as saying, “The best way to predict the future is to invent it.” If we do not take heed of Kay’s dictum and continue to reinvent all around us, what I call creative disruption will truly turn out to be creative destruction.

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