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REPORT FROM DAVOS: further reflections and ruminations on our dehumanizing pace, the “new” work/employment order, and income inequality

January 26th, 2014 |  Published in World Economic Forum 2014

WEF logo for post

 

By: Gregory P. Bufithis, Esq.

26 January 2014 – As I said in my first weekend post about Davos (click here) whether you think the World Economic Forum is a worthy enterprise or a bunch of baloney, it’s an extraordinary creation. You get easily sidetracked walking across the lounge areas by conversations that all seem interesting but that you are not part of, between/among people that would be in a name-dropper’s paradise: central bankers, industrial chiefs, hedge-fund titans, astrophysicists, tech wizards, etc. Where else are you going to see and hear from such an eclectic group that includes Margaret Atwood, Marc Benioff, Ian Bremmer, Erik Brynjolfsson, Clayton Christensen, Bill Gates, Kris Gopalakrishnan, Jiang Jianqing, Christophe Margerie, Marissa Mayer, Kenneth Rogoff, Eric Schmidt, George Soros, Martin Wolf, etc.

And yes, often it seemed irony abounded. Playing at the local movie theatre on Davos Platz:

WEF movie

 

The educational part of Davos

The session agenda included presentations/panels on 3D printing, China’s future, data privacy, the digital context and landscape, employment and work, the global energy landscape, the global healthcare landscape, hyperconnectivity’s affect on our brains, the crisis of inequality, meditation, neuroscience and how the creative mind works, Syria and refugees … and on, and on, and on. There were 20 public sessions (most of them streamed), 70+ private/sign-up sessions, and 30+ “invitation only” sessions.

In my pre-Davos post I noted that Davos is primarily a huge, high-level business conference, in which senior executives from the world’s largest companies take advantage of their physical proximity to meet in person with partners and clients and would-be clients. But it also exposes these attendees to subjects and areas they have heard about and need to know … they aren’t going to attend normal conferences to learn because of their time constraints … so what better venue than Davos.

But at the event I had the opportunity to meet a few CEOs and one put that entire element in better context:

“New technologies, new ideas develop quickly. New approaches to science … and look, they affect everybody, in everything they do … and new approaches to business mean we need to be nimble to succeed. My problem, and I guess it is also a problem for my fellow CxOs, is that we settle into positions of expertise in our chosen fields. We might have a hankering to dismiss new ideas. Especially challenging ones. Or ones that seem irrelevant to our interests. We can’t. We need total acumen, not just business acumen. Everything is connected today. So here at Davos I get a Chinese menu of sessions. I’ll pick some things to see, some I might know, others never heard of. And take notes to direct my staffers to get more information for me”.

Note: he was alone at the event, not an aide in site. At least at the portion of it where we met. But that was typical. No trailing retinues. Even Marissa Mayer was buzzing around by herself:

World Economic Forum in Davos

 

“The Human Factor”

In my earlier post this weekend I tried to summarize one of the big themes at Davos: the disruptive technologies affecting every single sector of the economy, and the enormous affect of our social interactions being digitized via social networks and the assault on our physical world of sensors for pressure, temperature, force, stress, strain, location …. you name it. DAMN YOU, SMARTPHONE!

 

But the most interesting chats were about “the human”. Well, and how the modern world seems to have become a dehumanizing place. We’re more often “handled” than serviced, and calculated, rather than cared for. As one participant told me “it’s been a rapid, bizarre shift from our old industrial age. I was brought up with mass production and mass marketing. Rather than cater to the individual, we learned to create products that would suit most people. We tried to game the statistics. But now .. damn. Everything is personal and comes with a learning algorithm!”

Ah, yes. The education of an algorithm. Recognizing patterns, understanding meaning. At super human speeds. IBM’s Watson computer can analyze hundreds of millions of documents in seconds in scores of applications : call center operations, legal discovery, medical diagnoses, evaluating creative work such as music and screenplays, even food recipes. Researchers at IBM taught their algorithm to translate between French and English by exposing it to proceedings of the Canadian Parliament, which by law must be produced in both languages. This allowed them to connect not just words, but entire phrases and even slang. It would take a year for a human to sit through it all, but a computer can do it wihout breaking a sweat. The new algorithms can learn by merely observing human behavior (demonstrated by MIT Labs at the event).

NOTE: I’ll have more on this next month during the Mobile World Congress when Bernie Meyerson, IBM’s Vice President of Innovation (the chap behind IBM’s “5 in 5” technology trends for the next five years), and the IBM Cognitive Systems and Watson team make presentations.

And it’s easy. With technology getting cheaper and more efficient at exponential rates, firms are able to store and process an amazing array of information about us. And we help! How? By increasingly sending them a continuous stream of information through our ever expanding “Web of Things”.

Ah, but the devil lurks within. The worry in all this is that these systems are also learning many of the same things that people do, except they do not get tired or sick, never ask for a raise and when they get too old to function effectively, their hardware can be replaced. At the Bremmer and Rogoff sessions (and others) the focus was simple: over the longer term we can’t rely exclusively on economic growth alone to solve all of our employment problems. Yes, in the short term, economic growth is absolutely the best way to get the hiring engine kicked in again. All those robots, the androids, the artificial intelligence can’t do everyone’s job yet. But …  over the longer term you will have a situation where enterprises can grow and thrive and not need as much labor as before.

And then there was the ultimate Robin Hood present … Bill Gates. But you know what? He has probably done more for the poorest 50% of the world than 100 Oxfams. Gates took $62 billion of his wealth and has so far used $27 billion of it to accelerate the curing of Malaria, other diseases, and bringing clean water, sanitation and better agriculture to the poor. The Giving Pledge is a campaign Bill Gates created to encourage the wealthiest people in the world to make a commitment to give most of their wealth to philanthropic causes. He convinced Warren Buffet to give most of Buffets billions to his Bill and Melinda Gates foundation.

And that isn’t just Bill talking. If you look at the Credit Suisse analysis of his work and the studies by James Davies and Anthony Shorrocks, he has done loads of hard work that has really improved the lot of thousands of people.

Ok, Oxfam has railed against the wealthy. And certainly there is corruption and there are modern robber barrons. But Oxfam has generally not been promoting the solutions that will actually work to lift people out of poverty. I am reminded of the words of Steve Job when asked about the influence of the public sector and private sector:

“I’m one of those people that think Thomas Edison and the light bulb changed the world more than Karl Marx ever did”

Yes, Bill Gates created and ran Microsoft which was able to overcharge for its PC operating systems and Microsoft office products for decades because they held a virtual monopoly. This extra money was taken from purchasers of personal computers for 30 years. But it was mostly the middle and upper middle class and wealthy.

But in addition to the items noted above, he has helped accelerate the curing of AIDS. Some countries which had negative GDP growth and big drops in life expectancy because of Aids have had their public health and economies turned around.

So let’s talk about work, employment, education, economic growth … and inequality

 

The Internet has changed the functioning of everything. Your hearing aid. Your car. Your thermostat. Your toilet. Everything is being programmed, monitored and designed for what the quants call “process optimization”. Meaning a machine will run your life. Artificial intelligence is changing the job of everyone. Emerging intelligent software can handle unstructured commands and rely on what we humans call judgment. Hell, wait until Apple rolls out the new Siri later this year. She’s getting a PhD.

McKinsey & Company … which has put out a magnificent series that calculates how much the coming wave of disruptive technologies will change the global economy … figures a dozen of the innovations they looked at will, by 2025, create up to $33-trillion a year in new economic activity. Except none of it is labor intensive. Heady stuff for consumers and entrepreneurs. Goods and services will be cheaper, and easier to use. And anyone with a sound, scalable idea – plus some venture capital – will be able to “eat the lunch of vast industries” (quote at the conference).

But the new digital divide which used to be about access is now really about employment. And there were at least 10 jam-packed sessions with a lot of very intelligent folks on the panels. Big topic: education. What to do? You simply are not going to have people who have produced cars suddenly become software programers. So you will need to turn to develop new business models like Airbnb where people can then use assets that they have, like their houses or their flats.

But how do you learn to be fluent with these sorts of smart, digital tools? Well, as we all know, that other part of the software revolution: online education. Many people think that, because online education will be cheap and widely available, it will be a democratizing force. But the counter argument is that on-line access places a premium on conscientiousness. Ask anybody involved with any MOOC (Massive Open Online Course). There’s so much free material on the Internet you can learn from, and some people are pure self-starters: they pick up computers and teach themselves everything. Certainly there are millions of people like that. But at the same time, it’s a pretty small percentage of the population. Most of us are not pure self-starters; most people need role models, they need coaches, they need exemplars, they maybe need some discipline or some rewards. We need to be motivated. The smart-software world will reward the most conscientious and self-motivated people.

So, some points from numerous sessions, in no particular order (borrowing from McKinsey notes, notes from Ruben Harris, and my own notes):

*Some governments see this as a call for an overhaul of their education systems, to be replaced by lifelong learning programs that assume much of the population will be back in class at age 40, 50 and 60, and probably for a good many hours in between. Globally, there are an estimated 200-million unemployed. A Davos forum on the issue was told that number could hit 250 million by 2018.

*In an age of economic upheaval, history indicates most employment will come from new enterprises, ones that don’t exist today, as the old ones – including government – batten down their hatches.

*Martin Wolf: the world may be unable to generate more growth and more jobs. We can’t seem to find a way to be more productive.

*Eric Schmidt: wrong. You are using the wrong numerator, that we’re all producing lots more than we know thanks to, well, Google, and a lot of other disruptive technologies. We’re producing more, consuming more, enjoying more.

*Ian Bremmer: once again, the argument is between creative destruction and state-funded stability. Yes, a new year of economic growth around the world. Not the dread but last year. But a dreaded sense that this global expansion will not bring nearly enough jobs and wage increases to satisfy any public.

*Soros: here is the problem. Another machine revolution is upon us. There is a new wave forming behind the past decade’s surge of mobile technology, with disruptive technologies like driverless cars and automated personal medical assistants. Not only will lifestyles change but our assumptions about work.

*Two scenarios are taking shape. There clearly is a divide. Call them warring tribes. The coming waves of innovation will show who’s right, and who is wrong. Whether government … having saved the financial system … should now get out of the way of a new industrial revolution. Or whether government needs to step it up, spending tax money on training, help pick winning technologies and pumping consumers with even more credit to buy what the innovators are creating.

*The old economy, built on factory work and mid-level office jobs, has stagnated. It’s that the nature of work itself is changing, largely because of the increasing power of intelligent machines. Smart software is transforming almost everything about work, and ushering in an era of “hyper-meritocracy.” It makes workers redundant, by doing their work for them. It makes work more unforgiving, by tracking our mistakes. And it creates an entirely new class of workers: people who know how to manage and interpret computer systems, and whose work, instead of competing with the software, augments and extends it. Over the next several decades, wages for that new class of workers will grow rapidly, while the rest will be left behind. Inequality will be here to stay, and that will affect not only how we work, but where and how we live.

*Inequality will grow in the U.S. for the next several decades. C’est la vie. Using the incredible advances made by artificial intelligence in the field of medicine, the thought process runs something like this: a future middle-class job will be reading medical scans, working alongside a computer. The computer does most of the judging, but there are some special or unusual scans where you say, “Hmm, that’s not quite right—I need a doctor to look at this again and study it more carefully.” You’ll need to know something about medicine, but it won’t be the same as being a doctor. You’ll need to know something about how these programs work, but it won’t be the same as being a programmer. You’ll need to be really good at judging, and being dispassionate, and you’ll have to have a sense of what computers can and cannot do. It’s about working with the machine: knowing when to hold back, when to intervene.

*The New York Times study and The Atlantic study on changing U.S. demographics. Fewer people are living in old-style, middle-class neighborhoods. Manhattan is far wealthier than before; Washington, D.C., is rapidly gentrifying. Meanwhile, places like Texas are absorbing more poor people, who are leaving places like California or New York. So we’re seeing much more geographic segregation by income class.

 

 

And lastly, a polemic about inequality 

 

The one report that seemed to get the most coverage (the Twitter board and Facebook board were both full with related posts for 3+ days) was the Oxfam report that stated the top 85 billionaires have as much wealth as the bottom 50% of the world. In other words, the top 0.00000001 percent are worth as much as the bottom 50 percent combined. The top 1 percent, meanwhile, control nearly half the world’s wealth, or 65 times as much as the world’s less-fortunate half.

They also added a spin with the phrase “working for the few”. They imply that the rich are making the poor work for them.

NOTE TO OXFAM: the vast majority of billionaires do not employ the poor. As an example, the Google guys employ about 80,000 well paid (in terms of upper middle class salaries and a thousand or more who have good stock options). Bill Gates had employed a few hundred thousand at Microsoft. The poor were there before either company existed. Go back a few hundred years and pretty much everyone is poor.

As several bloggers have pointed out, there are some problems with the Oxfam numbers and frankly in such a hot button issue you cannot avoid campaigns of statistical obfuscation.

But the key point Oxfam is making is this: this staggering disparity creates a vicious cycle. From the report:

Oxfam is concerned that, left unchecked, the effects are potentially immutable, and will lead to “opportunity capture”—in which the lowest tax rates, the best education, and the best healthcare are claimed by the children of the rich. This creates dynamic and mutually reinforcing cycles of advantage that are transmitted across generations.

This is not a new story. Aristotle, Niccolò Machiavelli, Alexis de Tocqueville, Adam Smith and Karl Marx all began from the premise there is a natural antagonism between the rich and the masses. “Those who have too much of the goods of fortune, strength, wealth, friends, and the like, are neither willing nor able to submit to authority,” Aristotle wrote in Politics. “The evil begins at home; for when they are boys, by reason of the luxury in which they are brought up, they never learn, even at school, the habit of obedience.”

Oligarchs, we learned at school, are schooled in the mechanisms of manipulation, subtle and overt repression and exploitation to protect their wealth and power at our expense. Foremost among their mechanisms of control is the control of ideas. The blanket dissemination of the ideology of free market capitalism through the media and the purging (some not successful) of critical voices have permitted U.S. oligarchs to orchestrate the largest income inequality gap in the industrialized world. “WE ARE THE 99%!” rang throughout the Occupy Wall Street protests, taking it’s cue from the now-famous Joseph Stiglitz article The Price of Inequality wherein he stated “The top 1 percent in the United States own 40 percent of the nation’s wealth while the bottom 80 percent own only 7 percent”.

Americans are a submissive people. Only in America can a bank … JP Morgan Chase … pay $20+ billion in fines for securities fraud and trading fraud while it’s Chairman and CEO … Jamie Dimon … can declare “I am damn proud of this company!” And he gets a raise. And a bonus. Because, as the Board stated, “he should be rewarded for his stewardship of the bank during such a difficult period” (read: he kept the stock price up). And nobody went to jail.

So what, as a nation, as a people, are the choices? If you read Aristotle, you have two choices. The impoverished masses either revolt to rectify the imbalance of wealth and power, or the oligarchs establish a brutal tyranny to keep the masses forcibly enslaved. America has chosen the second of Aristotle’s options. The slow advances we made in the early 20th century through unions, government regulation, the New Deal, the courts, an alternative press and mass movements have been reversed. And they are building the most pervasive security and surveillance apparatus in human history to keep us submissive.

As Chris Hedges of Truthdig puts it:

This imbalance would not have disturbed most of our Founding Fathers. The Founding Fathers, largely wealthy slaveholders, feared direct democracy. They rigged our political process to thwart popular rule and protect the property rights of the native aristocracy. The masses were to be kept at bay. The Electoral College, the original power of the states to appoint senators, the disenfranchisement of women, Native Americans, African-Americans and men without property locked most people out of the democratic process at the beginning of the republic. We had to fight for our voice.

Hundreds of workers were killed and thousands were wounded in our labor wars. The violence dwarfed the labor battles in any other industrialized nation. The democratic openings we achieved were fought for and paid for with the blood of abolitionists, African-Americans, suffragists, workers and those in the anti-war and civil rights movements. Our radical movements, repressed and ruthlessly dismantled in the name of anti-communism, were the real engines of equality and social justice. The squalor and suffering inflicted on workers by the oligarchic class in the 19th century is mirrored in the present, now that we have been stripped of protection. Dissent is once again a criminal act. The Mellons, Rockefellers and Carnegies at the turn of the last century sought to create a nation of masters and serfs. The modern corporate incarnation of this 19th century oligarchic elite has created a worldwide neofeudalism, where workers across the planet toil in misery while corporate oligarchs amass hundreds of millions in personal wealth.

The rich, throughout history, have found ways to subjugate and re-subjugate the masses. And the masses, throughout history, have cyclically awoken to throw off their chains. But I doubt this will happen again. We all are just a spent force, focused on our iPhones. We have been placated with technology in the hopes that we would gaze away from the inherent sacrifices of such baubles.

 

 

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"The mind that lies fallow but a single day sprouts up follies that are only to be killed by a constant and assiduous culture."
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