Finding Genius

by Kunal Mehta

  Throughout this book, I have hinted at the ethical dilemmas some investors face as they invest in businesses that are replacing the jobs of humans. Some investors believe that more jobs will be created as a result of the persistent progress made through technology, while others argue that investments need to be made to build this infrastructure for a future economy. Adriel addresses many of these points, asking questions such as: How will workers receive professional development, ongoing training, and worker classification and credentials? What is the software infrastructure needed to support the enterprises shifting to a contingent workforce? What other industries are ripe for the gig economy? His perspective will further explore what is driving the future of work and the investment categories that will look to answer these questions in the decades to come.

  Adriel approaches this topic with a sense of responsibility and optimism. While some may look at this topic with a grave outlook, Adriel adopts the perspective of a venture capitalist who genuinely believes that the world can be made better through technology. He provides a convincing case that venture capitalists are in search of the founders who are building the answers to problems that automation presents.

  THE FUTURE OF WORK

  Adriel Bercow, Flybridge Capital

  “Work” in the 21st Century

  “What do you do for a living?”

  While this opener has been the dominant conversation starter for North Americans for decades, it has also been a cultural norm that is viewed as contentious and divergent from the values in Europe and other regions. In their new book, The Bonjour Effect: The Secret Codes of French Conversation Revealed, authors Julie Barlow and Jean-Benoît Nadeau warn the reader not to initiate a conversation about work with a French person due to their beliefs in viewing each person from an egalitarian framework no matter what their job is. They also become indignant at being “put into a box,” not wanting to be judged for their work. However, for many of us in today’s labor force, our chosen employment has become the defining representation of who we are as individuals.

  Jessica Pryce-Jones identifies in her book Happiness at Work that the average American spends 90,000 hours at work over their lifetime. Tack on the more than 100 hours commuting every year (US Census Bureau) and for most Americans over one-third of their life and half their waking hours during any given working day are consumed by their job. Consequently, it has become more commonplace for individuals to define themselves by their occupation. As writer Annie Dillard once said, “How we spend our days is, of course, how we spend our lives.”

  We have reached an inflection point in society where work no longer has the same structural constraints it once had; the question of what one does is more tied to how one spends their day rather than their title or job. Today, the “lawyer-in-training” may also be participating in the gig economy driving an Uber as they strive to pay off their student debt. The “photographer” traveling the world is now an influencer with hundreds of thousands of followers making a six-digit income through brand sponsorships. Where the term “entrepreneur” used to imply struggling to find a job, now it signifies a business builder providing dozens of others employment. “Working in finance” today might refer to developing algorithms that are increasingly replacing the once-lucrative trading jobs on Wall Street.

  Although it is impossible to predict the future, we can ask questions that will help define the future of work. As globalization sets in and technology progresses and becomes democratized, enterprises and individuals are continuously reimagining what is entailed in a given job, who does them, where, when, why, and how they will get completed. This ultimately determines the very definition of “work.” Opportunities are effectively being created in new sectors due to the exponential evolution of technologies, an anachronistic education system, cultural shifts amongst the workforce, and growing income and access inequality. This chapter will further explore what is driving the future of work and the investment categories that will look to answer these questions for the coming decades.

  The Driving Factors

  To better understand what the future of work holds we need to explore the different “driving factors” that are shaping today’s global economy and its workforce. These are catalysts for change. Many are well-researched macro trends across the private, public, and non-profit sectors. When combined, their interconnectedness becomes apparent and may shed light on future possibilities.

  Advancements in technology

  Advancements in technologies including artificial intelligence, automation, the blockchain, and the democratization of access to mobile phones and the Internet are transforming the nature of work for enterprises and the labor force. Simultaneously, they have trillions of dollars’ worth of impact on the economy. Over the last 45 years, we have seen the transistor count follow Moore’s Law, increasing from less than 5,000 to more than 10 billion. We have progressed from the World Wide Web to major technology milestones such as Google search, Amazon Web Services, IBM’s Watson, Facebook’s DeepFace, Amazon’s Alexa voice technology, the blockchain, and Deepmind’s AlphaGo. There are now over four billion Internet users with access to nearly 600,000 Wi-Fi networks (WiGLE). Not only are individuals frequently online, but they are accessing it through handheld devices, evidenced by the nearly three billion owners of smartphones, according to a report by market researcher Newzoo.

  What does this all mean? The workplace is increasingly becoming digitalized in order for employees and enterprises to connect, communicate, collaborate, and compete. Enter artificial intelligence, machine learning, the blockchain, and automation and the outcome is that new and innovative methods are being developed to accomplish those four C’s. However, with advancement comes change, which can have a negative impact on those on the receiving end. There has been extensive conversation around the effects that automation and digitalization will have on the larger workforce — many of which are quite alarming. While these issues are important to be raised as credible concerns, it is equally critical to understand that these challenges will act as catalysts for opportunity (to be discussed later in the chapter.)

  Automation

  One of the more highly debated topics is the disruption or repositioning of work. According to a McKinsey Global Institute (MGI) study, up to one-third of work activities could be displaced by automation as soon as 2030. This would result in the need for 75 million to 375 million workers — which accounts for 3%-14% of the global workforce — to switch their occupations. Bain’s Macro Trends Group has shared a similarly daunting outlook, which they call “The Great Transformation.” An analysis they put together claims that automation could reposition labor two to three times more rapidly than past transformations in agriculture, manufacturing, and construction — ultimately displacing 20%-25% of the labor force over the next couple of decades. While MGI found that less than 5% of jobs have activities that can be fully automated with existing technologies, at least one-third of constituent activities could be automated in about 60% of occupations.

  Consequently, all workers will need to adapt as the technologies they work alongside are evolving to become increasingly capable replacements. We have already seen this transition for decades as machines have superseded physical labor resulting in productivity gains in industries such as manufacturing and construction. Technology has also altered or replaced routine service occupations including secretaries, switchboard operators, travel agents, and file clerks. Robots and computers can now recognize, translate, and respond to human speech, drive automobiles, identify a universe of images, and diagnose and support medical operations.

  In the coming era, many aspects of cognitive occupations that once required years of education and training such as law, medicine, and finance, will be augmented or replaced by computers. Advances in artificial intelligence will mean that technology will outperform humans in areas in which data is a key function of that job or industry. It is entirely possible that in the next few years a non-trivial percentage of the core
skill sets of most occupations will be skills that are not crucial to today’s workforce.

  On a global scale, MGI calculated that automation could affect 50% of the world economy and nearly $14.6 trillion in wages. In order to adapt, members of the workforce must attain a higher degree, specialized education, or refocus on activities that require soft skills such as creativity, emotional and social adeptness, and other cognitive capabilities that are inherently too human to automate.

  Student loan debt and the broken education system

  In Brookings Metropolitan Policy Program’s analysis covering 90%of the workforce in industries since 2000, it was found that two-thirds of today’s new jobs require either high- or medium-level digital skills. In order to meet the demands of the digitalized labor market, the Georgetown Center on Education and The Workforce believe 65% of jobs will require education beyond high school by 2020. The “catch 22” of higher educational attainment or advanced degrees is the high financial commitment involved.

  Over the last decade, the student loan debt totals in the US have skyrocketed to nearly $1.5 trillion (as of the end of 2018.) According to a report by the Federal Reserve Bank of New York, that accounts for one in five adult Americans or 45 million individuals carrying student loan debt. This report states that the total student loan debt is on average $37,000, a $20,000 increase from 13 years ago. This is a powerful driving factor for the future of work. Unlike previous generations, it is no longer financially viable to take the first accessible nine-to-five job out of college.

  How did we get to the point of a student loan crisis? The amalgamation of exponentially increasing tuitions (more than quadrupled in the last few decades), lower wages, globalization repositioning jobs internationally, and the need for additional education to succeed in the rapidly changing labor market have all exacerbated this issue. Yet the depth of the problem lies within the actual structure of our education system creating unprecedented income inequality and a drastically shrinking middle class.

  One of the key aspects that led to the United States becoming the leading global economy is education. In the early twentieth century, the US responded to technology advancements like electricity, air travel, the telephone, and the automobile by expanding public high school education and establishing the state university systems. In Claudia Goldin’s “America’s Graduation from High School: The Evolution and Spread of Secondary Schooling in the Twentieth Century,” she reports that through the first four decades of the 1900s high school attendance rose from 18% to 73% and completion went from a mere 9% to 51%. This greatly impacted US labor share (economic output that accrues to workers in the form of compensation) over the next couple of decades as workers averaged 65% of the national income. The labor share effectively helps explain the extent of the wage gap between growth in labor productivity and growth in real hourly compensation. Yet, after years of relative stability, the labor share fell to unprecedented lows and is now 10% less than what it once was. This is particularly important for workers because it both describes the degree to which they are compensated for their work and is a direct comparison of the output they helped produce with the compensation they received.

  Although there has been strong economic growth over the last five decades, according to the Brookings Institution, wage growth has been stagnant, averaging just 0.2% annually since 1973. This has accentuated income inequality and constricted the middle class. Those at the top of the income distribution have seen an increase in wages, while those at the bottom have had a substantial drop in real wages. That gap in compensation is largely being attributed to a steady rise in corporate/owner share of the national income. In most cases, employment and wage growth are concentrated in jobs that require high social and analytical skills. For common low- and middle-income jobs, such as cashiers and truck drivers who are at high risk of elimination due to automation, individuals will be forced to receive better or additional education and training or to find new fields of work.

  Unfortunately, the performance of the public education system is measured by college enrollment, not career identification and placement in high-paying, sustainable jobs. Schools have focused primarily on developing knowledge within more traditional subjects rather than fostering collaboration, problem solving, critical thinking, and cognitive skills. The challenge is that today’s technological breakthroughs have exponentially surpassed the necessary innovations within the education system in order to adjust to the modern labor market. In many industries that have been digitalized, employees need to have specific applicable job experience. This leads to increased competition and demand for the top academic programs and a stronger need for advanced degrees.

  Interestingly, there is an extreme dissonance between employers and the higher education system. According to a study by Gallup and the Lumina Foundation, 96% of college administrators believe their graduates are workforce ready, whereas only one-third of business leaders agree. Due to the lack of collaboration between employers and educators, we are left with an antiquated education and skills training system. With success not being tied to employment outcomes, both workers and employers are forced to adapt rapidly. This drives the future of learning, hiring, and ultimately, work.

  Millennial workforce

  An interesting paradigm shift being observed in today’s economy is the changeover from the employer to the employee determining how and where work is occurring. A major reason behind this is the rise of Millennials in the workforce. Already emerging as leaders in industries such as technology, by 2025 they will make up 75% of the global workforce.

  Millennials are a driving factor for the future of work because they have unique demands and expectations compared to previous generations. In order for employers to attract and retain high-performing talent, they are compelled to adapt. As we shift from industrial globalization to knowledge globalization, digitalization is decoupling people, information, and systems. This enables the worker to obtain employment that more accurately aligns with their needs and values. In order for employers to achieve success at a global level, they can no longer compete by simply procuring any available talent. They are moving to a model centered around acquiring superior (defined by experience and/or skill) talent.

  This shift in the labor pool empowers Millennials to dictate workplaces and corporate culture. As consumers, they are socially and environmentally responsible and expect the same from their employers. In addition to caring for the environment, they choose to acquire experiences over material objects and are attracted to communities with shared interests and values. Millennials spend more on wellness than any other generation and that is reflected in demands they have of their workplace. While they have a strong work ethic beyond traditional hours at an office, they also desire environments that support work-life integration.

  Due to growing up digitally connected, Millennials have an expectation of instant feedback and are willing to seek new opportunities if their job does not allow them to learn and grow both personally and professionally. This leads to a desire for flexibility in the workplace in order to acquire the life experiences and skills Millennials believe are associated with growth. As such, many Millennials would rather make less money at a job they love than remain in one that does not align with their needs and values. Unfortunately for employers, today’s unprecedented access to employment through online job boards, marketplaces, and digital platforms leads to a transient workforce if they are unable to meet the demands of their employees.

  Without strong ties to any particular organization, Millennials have gained a reputation for “job-hopping.” A Gallup report found that only 29% of Millennials are engaged in their jobs. With 60% open to different job opportunities, a high turnover ensues, costing the US over $30 billion dollars annually. The challenge for organizations is to understand that Millennials are consumers of the workplace and employers will need to identify how to attract, acquire, and retain their employees.

  The Investment Categories

  A
s Carl Sagan once famously said, “You have to know the past to understand the present.” Historians, policymakers, academics, and the like seek to make sense of today’s world through studying and reflecting on the past. Not only do we examine and learn from history in order to apply it at a macro or societal level, but as individuals, we reflect upon how we shape the future from the past.

  Perhaps the past and future are more alike than we realize. The idiomatic expression ‘hindsight is 20/20’ means that it is easy to be knowledgeable about an event only after it has occurred. Every past event or idea has a cause or multiple causes that may be retrospectively obvious yet were not so from the outset. While we may not be able to predict the future, we can examine the present as well as the past to understand what will shape the future.

  Making sense of how previous economy transformations have altered the way we work demonstrates how our current society might evolve to meet the challenges of the future of work. By examining the human motivations that drive today’s digital economy, we now see how we are encountering a paradigm shift around work. As the interactions between human and machine become more intertwined, our motivations have started to move from extrinsic to intrinsic. Where we were once motivated by extrinsic values such as income, prestige, and external validation, they are now being supplanted by intrinsic desires such as autonomy, creatively applying one’s skills, a bias towards community, and the urge to develop one’s knowledge and ability. This shift of how we are motivated continues to demonstrate itself in how humans participate in both the open development of technology and how work is being performed

  Being cognizant of the driving factors in today’s digital globalized labor economy enables us to identify the investment categories that will create financial and societal value for investors, employees, industries, and communities.

  The Gig Economy