Posted: March 08, 2013

The futurist: The fastest way to create new jobs: Part 1

This will surprise you

Thomas Frey

I recently spoke at the MD&M West Expo in Anaheim, Calif., on the “future of manufacturing.” With more than 2,000 manufacturing exhibitors filling the convention center, there was no small amount of interest in this topic.

With China and the rest of Asia making massive inroads in manufacturing over the past couple decades and automation threatening many of the remaining industries, a huge underlying theme of this event was jobs. Where will our jobs in the future come from?

Job loss is not an idle threat. As everyone attending this conference knows, businesses have an obligation to hire the fewest number of people they can get away with, and when automation eliminates the need for an employee, the employee has to go.

However, while job loss is very real and happening all around us, job creation is also happening, in a way that many didn't see coming.

To be sure, the transition period we are in will cause considerable collateral damage, but we will also experience a period of unprecedented opportunity provided we create the right systems for capitalizing on them. 

As I mentioned at the conference, the fastest way to create new jobs is to automate them out of existence. Here’s why!

All industries form a bell curve 

As with everything in life, all industries have a starting point and an ending point. Usually the starting point can be traced to an invention or discovery such as Alexander Graham Bell’s invention of the telephone or Henry Bessemer’s discovery of a process for making steel cheaply in large volumes. The end comes when new industry replaces the old, like calculators replacing the slide rule.

In addition, all industries form a bell curve. At some point along the way, every industry will experience a period of peak demand for their goods or service.

Many industry are entering the downside of the curve

Many of our largest industries today are entering the second half of the bell curve.

To understand this, ask the simple question, “What goods and services that we buy today will we be spending less money on in the future?” The list you come up should include energy, transportation, healthcare, publishing, insurance, telecom, education, construction, mining, and many more.

Leading indicators that industries are entering their top-of-the-curve midlife crisis are a growing number of startups attacking key profit centers.

Prior to reaching peak demand for their goods or service, industries experience a period of peak employment.

Peak Steel 

Using “Peak Steel” as an example, the peak employment for the steel industry was reached in the 1980s. The peak demand for steel itself is projected to happen in 2024. This is when composite materials will gain enough of a foothold and the overall demand for steal will begin to decline.

Many industries have already begun reducing headcount, partly because of automation, but primarily because they are about to enter their waning years.

The True Engines of Job Creation

Startup companies are necessarily sloppy in how they grow, requiring additional headcount to manage their still-to-be-defined business operations. Mature industries have well-defined processes and are better able to find efficiencies along the way.

A recent Wall Street Journal article tried to correct the perception that this is a small business vs. large business debate. Instead, it’s a young business vs. old business issue.

Economists John Haltiwanger, Ron Jarmin and Javier Miranda showed in a 2010 paper, what really drives job growth is fast-growing start ups.

Their study showed that even before the recession, starting in 2006, government policy shifts caused a key turning point.

Young businesses created an average of 5.5 million jobs per month from 1992 through the end of 2006. Since then, they only created 4.7 million per month. This is appearing to be a long-term trend.

Since stable old businesses tend to be major campaign contributors, policymakers tend to favor them over young startups. While the writers suggest the key to more jobs is a good start-up lobby, the real path to job creation is more automation.

Read Part 2 on Monday.

Thomas Frey is the executive director and senior futurist at the DaVinci Institute and currently Google’s top-rated futurist speaker.  At the Institute, he has developed original research studies, enabling him to speak on unusual topics, translating trends into unique opportunities. Tom continually pushes the envelope of understanding, creating fascinating images of the world to come.  His talks on futurist topics have captivated people ranging from high level of government officials to executives in Fortune 500 companies including NASA, IBM, AT&T, Hewlett-Packard, Unilever, GE, Blackmont Capital, Lucent Technologies, First Data, Boeing, Ford Motor Company, Qwest, Allied Signal, Hunter Douglas, Direct TV, Capital One, National Association of Federal Credit Unions, STAMATS, Bell Canada, American Chemical Society, Times of India, Leaders in Dubai, and many more. Before launching the DaVinci Institute, Tom spent 15 years at IBM as an engineer and designer where he received over 270 awards, more than any other IBM engineer.

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Readers Respond

Tom, I am curious as to the definition of a "young" or "old" business. How old is old? How young is young? How would you define them according to your article? By Fred Wellers on 2013 03 11
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