Labor-positive innovation

It’s Labor Day 2013, and the people-work we celebrate today is under siege. In Marc Andreessen’s famous words, software is “eating the world,” and every redundant, repetitive job that previously required the skills of a person is a target.

Take for example the driverless car that’s been making news lately. In ten years, this technology alone promises to rescue billions of dollars in lost productivity from people sitting in traffic, replace every 1,000 cabbies with 250 new GUbers, and increase utilization of each car (converting ownership to temporary use) so we need fewer on the road.

Sounds great, until you realize that in one fell swoop, we’ve eliminated thousands of jobs in transportation, auto manufacturing, and even $121 bn in services jobs due to productivity gains from sitting in the car but not driving. That’s a lot of work displaced by just one technology, and the rate of these disruptions is only accelerating.

Responsible tech investing

I’m embarrassed to admit that, as an investor in startups and a member of the tech community, I’ve added fuel to this fire. I’ve rationalized the rapid job destruction by our industry as only temporary, wanting to believe that today’s disruptive technology will just create new kinds of jobs that we couldn’t have imagined before.

But the truth is, all this progress doesn’t benefit everyone equally. When investors back efficiency innovations that replace jobs, we make money at the expense of job holders. We then use that money to invest in even more technology, a vicious cycle akin to “standing on a beach holding our fire hoses full open, pouring more capital into an ocean of capital“.

In that way, tech investors have been acting no differently from the corporations that polluted the air and leveled the forests before us. I’m no Luddite but I know it’s not inevitable that software eats the world tomorrow. We’re just getting greedy and overfishing the lake.

So it’s time to prioritize labor sustainability.Tech entrepreneurs and investors are stewards of the capital that used to belong to workers, and we owe it to them to invest in technologies that create more jobs than taken away. I call these labor-positive innovations.

Here are the top three ways I’ve seen for us to invest responsibly.

1) Transition education

Millions of people who are getting displaced don’t have the luxury of learning their way into the services economy. The high cost of college or even online degrees, and the slow rate of skill acquisition in MOOCs makes those solutions intractable for people who need a job ASAP to support their families.

But thankfully, there are a few segments of the “middle-skilled” economy that are still growing. So new tech companies will be created that help people, through vocational education, to transition into the repetitive yet non-redundant skill work (eg in construction, hospitals, and new manufacturing) that humans are great at.

Often these middle-skilled jobs involve interacting with other people and complex coordination tasks, so we’ll need to modify traditional adaptive learning techniques to deal with this unique cross between online and real-world training. We’ll need new credentials such as tests and reputation systems to get these trainees into the workforce, and new cultural norms around vocational education. Germany provides a great example as Smil notes here.

2) Freelance and Entrepreneurship

Aside from educating people into today’s remaining growth sectors, we can also create new sectors that allow middle-class workers to make money on their own. In the physical goods and services worlds, this comes in the form of micro-entrepreneurship and freelance marketplaces such as Etsy, Kickstarter, Odesk, Elance, and 99designs.

These marketplaces are all labor-positive in and of themselves, helping people find work by aggregating supply and demand, providing access to capital, and reducing transaction, distribution, and coordination costs. There are hundreds of niche marketplaces still yet to be created, particularly those that are natively mobile (eg WorkMarket for hourly workers and Lyft for drivers).

But marketplaces that support micro-businesses and freelance are also enabled by a kind of labor-positive software. Tools for everything from payments processing to shipping to fraud detection to storefront building and optimization all serve to take the specialized knowledge out of building a small business. These often start as APIs for developers, and then evolve into full-service tools that make novice users look good without even trying (eg Shopify or Squarespace).

It’s critical that labor-positive marketplaces and software help individuals show off their uniqueness and creativity. This fosters clear differentiation of their goods and services on quality and perceptual value rather than destructive price competition. And facilitating one-to-one interactions engenders the kind of hyper-personalization that software can never replicate.

3) Entertainment and Leisure

Though education and micro-businesses can do a lot in the near term to stave off unemployment, in the long run the very notion of a job and the benefits it provides may have to change. What will it mean to live in a post-work world?

With technology and middle-skilled services taking over both full time jobs and mundane tasks at home, that frees up a whole lot of time for people to be bored out of their minds. So the entertainment, travel, and leisure industries will likely explode. Again, platforms and tools that make it easier for people to produce creative works will grow rapidly. We’re already seeing this happen with “long tail content” in TV / video, music, games and apps. Publishing tools and distribution platforms for the sale of digital goods will grow rapidly.

But digital goods have one extra benefit — the ability to create perceptual value out of thin air. Gaming worlds such as MMORPGs and casual games can have entire economies built around them, and “gold farming” in those worlds can be a full time job. I expect to see tons of innovation at the intersection of virtual goods markets, gaming, and entertainment of all forms — once again unleashing creativity and imagination to help people make money from what makes them human.

What else?

On Labor Day 2023, I hope we can say that we avoided massive unemployment, wealth inequality, and social unrest because our industry banded together for what’s right. When we cut down a tree, we need to plant five more.

Here are a few great thinkers on this issue for further reading. I don’t agree with all of them but think they provide a valuable diversity of perspective:
Albert Wenger’s series on Labor and Innovation
Vaclav Smil on The Manufacturing of Decline
Andrew McAfee on The Great Decoupling of the US Economy
David Autor on How Technology Wrecks the Middle Class
Clay Christensen on A Capitalist’s Dilemma
Tyler Cowan on Who will prosper in the new world and 10% Unemployment Forever
Sam Altman on Growth and Government
Paul Krugman’s various posts on Technology and Wages
Ashwin Parameswaran on Technological Unemployment Amidst Stagnation

If you’re a labor-positive builder, have read anything else I should check out, or think of any opportunities I’ve missed, I look forward to learning from you.