Salaries will not grow in the next decades, and it is essential to understand the reasons and the impact on all of us. This week, CNN released an article entitled This is the biggest mystery in the U.S. economy. "Who killed inflation?", they asked. "It's the most puzzling problem in the U.S. economy today. Even Federal Reserve leaders are scratching their heads. Normally in a healthy economy, as unemployment goes down, workers earn more in their paychecks and prices for goods go up -- ideally more than 2% annually".
But that is not the case.
We might find a reasonable explanation on the dynamics of the job market impacted by the ongoing digital revolution. For most of us, it has been a while since last significant salary raise. Smart marketers are acutely aware of the trend, holding prices of services and goods down, and preserving a healthy demand growth while pushing inflation to lower levels. Despite many macroeconomic dynamics the FED and other organisms are looking up to solve the puzzle, we might have a plausible answer in the subtleties of the job market. Here is what we at Collective Brains think about this.
Many simultaneous micro-dynamics are ongoing, resulting in an unforeseen jobs creation polarization process on the two ends of the wages spectrum. The trend is an explosion of jobs in the gig economy and other low wage ones on one end, and a healthy demand for highly educated jobs, especially STEM ones on the other. In the middle, every position is at risk of displacement as most companies aim to increase profitability by deploying new technologies and flatting the organization. Technologies like automation, machine learning, AI, and robotics are progressively replacing human jobs at scale, and that is especially true for that middle management population, where computers are starting to understand context, process Natural Language and develop cognitive capabilities. The aim is to eliminate jobs with higher compensation by both reducing managerial levels and organization levels, with a positive impact on the bottom line. Top lines can be positively impacted too as the process also creates more agility and increase employee’s overall efficiency, freeing time to give customers more attention.
At a macroeconomy level, even though we might see low unemployment rates, the numerically subtle tradeoff of highly compensated jobs by the explosion of low wage ones will keep average labor earnings stagnated or declining. That trend shows the real threat the fourth industrial revolution is posing on the middle class in the next decades, and numbers are starting to show.
Let's look at some of them.
First, the most recent Bureau of Labor Statistics (BLS) study projecting job growth by major occupational groups to the year 2024 shows that out of the top 15 occupations with the most job growth since 2014, 12 or 80% of them present median annual wage below the national average of 35,540 dollars. It seems the job market is skewing lower by job profile and driving growth of occupations that make less money (table 6).
The same study shows that in the 2014-24 decade (table 4), those new jobs will have a weighted median annual wage average of 44,220 dollars what could be good news as it represents a growth of 24.4% over the overall 2014 market median. The problem is that the projection does not go deep to understand the impact of new technologies like automation, machine learning, AI, and robotics. The last predictions of the effects of those technologies in the labor market show that in average, 30% of all the activities performed has a potential to be replaced by a bot (depending on the profession). Just to have a rough estimate and get a grip on the impact of those technologies on wages, we can apply that percentage to the occupations highly exposed to information technology only. The weighted median projection will fall to 34,817 dollars, 2% below the 2014 national average. That means, no wages growth in the next seven years. If we consider those projections might be conservative as technology adoption and deployment tend to escalate faster than most forecasts, we might even since the median wage declining, what could also trigger prices deflation.
Undoubtedly that is not a comfortable conversation for big corporations or policymakers while clear solutions are not identified to create a counter cycle. Big businesses have already started to rationalize their payrolls and please note the group has a more prominent participation in middle management types of roles. Despite the stock market growth in the last three years, with S&P 500 adding 31% of value in average, payrolls are reduced steadily in many cases. Fewer industries are adding jobs. In most of the cases, those are the ones with salaries below the current national average as fast food chains and retailers. Most tech sector companies are also adding new high education jobs, but not necessarily increasing the annual median or being enough to offset losses. Here is a closer look at the biggest employers in the US.
As the fourth industrial revolution deploys its disruption in the job market, we urge tech companies developing new technologies and lawmakers to act fast, and think on real solutions. We are raising awareness and motivate people to be actively engaged and ready to embrace this future as the full impact of those technologies will hit in a decade or so. At collectivebrains.org we invest in startups connected with the future of work and the future of education and tech companies leading the AI agenda.
Join us on creating a better future with equal opportunity to everyone. Help us find solutions for the future of work.
A constellation is a group of stars that are considered to form imaginary outlines or meaningful patterns on the celestial sphere. Similarly, we could call a business constellation a group of businesses that temporarily align around a significant purpose. Companies that get together to complement each other and cooperate towards a broad and impactful objective. That notion differs from traditional business partnerships by its impact and number of collaborators.
"Knowledge is a function of being. When there is a change in the being of the knower, there is a corresponding change in the nature and amount of knowing", writes Aldous Huxley in his book. We are living the fourth industrial revolution, and we need to recollect and reassess our knowledge about how businesses interact, compete and collaborate. Digital and new technologies are disrupting companies, business channels, business models, jobs and entire industries. Simultaneously, new generations are coming to the workplace with different mentality and understanding of relationship models. Generations born with broader social reach, real-time virtual collaboration and need to make the difference. The result is a significant shake on before understood permanent business structures, demolishing old patterns of supply-demand dominance and creating entire new ecosystems motivated to collaborate, deliver quantic leaps in human progress, and to launch reinvigorated business concepts.
NEW BUSINESS MODELS
New business models have surged in recent years and new terms coined to define them.
"Frenemies" are companies that compete in one area and are business partners in another. Samsung manufactures most of the I-phone screens and yet is the largest manufacturer of Android phones, making Apple its archrival on Smartphones and the most prominent customer at the same time. Amazon and Microsoft just announced Gluon, a partnership to deliver a new software tool for developers that makes it easier for developers to build AI/machine learning systems. Both are the most significant contenders on Cloud computing solutions, but they need help to fight Google in that space.
"Customer-Partner" is another model that boomed along with the Cloud tech growth. On these networks, a company can be simultaneously a user of one product, a reseller of your solutions and partner on your technology. Let's get a seller of Microsoft Azure as one example - typically a partner. The partner will develop solutions based on Azure and sell to its customer base. Those solutions might live in their websites or transact in Microsoft’s marketplace. That same partner might also resell Office365, and use it as their productivity solution. In that case, the partner will be at the same time a customer of Microsoft SaaS and IaaS and a partner on PaaS, increasing mutual dependency.
"Business ecosystems" are created around big companies that offer market wide strategic solutions. Amazon is a good example of a big business ecosystem anchor, and one of high growth. "Amazon ecosystem, made up of merchants, writers, reviewers, publishers, apps developers, and the information market of commentators, analysts, journalists and feature writers who get the word out about opportunity on the Amazon platform", says the Forbes article. The critical fundamental on those business relationships is that every entity works to the success of the ecosystem and depend on it at the same time. So, a retailer using Amazon virtual distribution system will profit more if the ecosystem grows and vice versa.
New ideas, new models, but we can do better.
BRAVE NEW WORLD
The world has experienced unparalleled growth in the last seven decades and wealth has multiplied and spread. That big new economy we have inherited from the "baby boomers" came with its challenges too. The way we explore resources, fuel growth and expand demand became not sustainable. Time to pass the baton to new thinkers. Especially "millennials", came to the workplace to challenge those notions. Growth can be sustainable, society can be more equitable, and the workplace can be more motivating and fun. Businesses around the globe recognized a new expanding market and started to adapt to this new consumer-user-entrepreneur-employee demands. Those same companies embraced new causes and purposes - recycling, no-GMO, organic, sustainable, ethical, socially responsible, equal opportunity, diversity and more - as never.
A new class of attraction and collaboration has surged. The one motivated by genuine purpose. People want to express their point of view, voice their passions and meaning, and create change by adopting a product or brand and choosing where to work. Businesses recognized the power of purpose and brought it to the cover of their strategies.
At the same time, the new generations can leverage the digital economy to disrupt businesses they are not happy about, and create their clusters when necessary. Or collaborate with bigger ones where there is opportunity.
That movement started to bring closer businesses aligned by meaningful purpose and boost collaboration to an entirely new level. Companies are partnering in leveraging services, aggregating solutions, changing regulations and helping each other to achieve bigger results and transformation. Those are Business Constellations, conceptual networks of individuals and businesses that get together to solve a problem or innovate with no or low formality. Businesses that come together and go at same speed, and make significant progress in critical areas of social, moral, economic and technological development. Companies may be part of many constellations at same time and collaborate on different projects in multiple purposes. A company can offer equal opportunity, partner with the local mayor on developing education and create new technology to support an efficient classroom all at the same time. What constellations is your company taking an active role? We at collectivebrains would love to hear your feedback and ideas on the future of work. Please join our constellation.
Technology changes everything. Can you imagine life without iPhone, WhatsApp, Uber or GPS? We are so much more productive than ten years ago due to those and other relevant technologies. Since the first industrial revolution, we have been harvesting significant productivity gains, improving quality of life and dedicating way less time on the traditional concept of work. Between 1880 and 1995 the amount of work per day fell nearly in half, allowing leisure time to more than triple, and as per the projection, it will continue growing in the next decades. And what do we do with all that free time?
LAY BACK AND RELAX
The leisure industry is showing unprecedented growth to help us occupy all that free time. Have a look at the content production revolution for movie theaters and cable, the exponential growth of tourism, and the proliferation of events, gourmet restaurants, and wine tastings. All are results of productivity gains and more free time to spend the wealth we have been accumulating. To add to the picture social trends are bringing new forces into the workplace. Highly demanded by the new talent the work contract is becoming every time more flexible. Mobility options, virtual offices, part-time jobs and engagement by the project are helping to create more flexible hours too. The result is a better quality of life and more discretionary time. All that is uncontested progress, however, we can do more with all that time.
Another industry anchored in productivity gains and showing steady growth is the online education. People tuned in the future of work are using their free time to learn and acquire new skills too. The report by Docebo shows the total marketing for e-learning in 2016 was $51.8B growing in average 7.9% per year in the 2012-16 period. But online courses are not the only solutions out there.
SOLUTIONS FOR THE FUTURE OF WORK
As we look for new investment opportunities at collectivebrains.org, one new company called my attention in Brazil. TOP2YOU has created a very friendly tool to connect top executives with anyone in need of business or career advice, or even talking about new aspirations and innovation ideas. HR professionals are jumping in the tool to provide external mentoring to their employees either developing further high potentials or helping performance laggards to grow. Top-ranked executives are also using the tool to discuss business strategy and innovation paths with other experienced professionals of the market. It is very simple to schedule sessions with the leaders they want to talk. The tool removes all the bureaucracy and communication barriers one would usually encounter to reach and talk to such renown professionals.
TOP2YOU is not only for large enterprises but to all professionals willing to rethink their careers, solve a business problem or find inspiration. A great resource for small businesses, entrepreneurs and independent workers too. Connecting with people that inspires you just became as simple as choose, click, and talk. As the job market changes and the workplace landscape reinvents itself, we need to be on top of our game. The tool can make the difference to rethink one's professional future.
That was what happened to Simone Madrid, an executive search pro who has seen the risk of disintermediation in the headhunting industry as a significant threat. Technology is changing the landscape, and the growth of online recruiting is undermining many of the companies in the sector. Simone decided not just to wait and see. She saw an enormous potential for people development beyond recruitment. In no time, she joined efforts with Thiago Correia and Marcio Minuzzi and created TOP2YOU. Thiago path is rooted in the investment market. He is an Associated investor at Gavea Angels, and immediately recognized the business potential of the idea in a country that is the 7th largest economy on the planet, and yet not well served by new tech solutions. Marcio is the third partner. He is still employed at a big multinational company but decided to try the entrepreneurship with the blessing of his employer. He brings digital marketing expertise to the team. The three are great examples of the entrepreneur spirit required to thrive under the digital revolution. The future of work is closer than we think. It is time to reinvent ourselves.
What is the future of decision making in business?
Large and small businesses live under the threat of being disrupted due to unwise decision making. Key projects are delayed, innovation postponed or killed before maturing, and new sales channels starve to death due to unappropriated funding, and more. Committees are equivocally used for decision making slowing outcomes; shadowy leaders are ambiguously hired and promoted, brands become fuzzy patchworks, and this list goes on and on. If you have worked for corporations, I am sure you are already mentally adding to the list.
The truth is most of the businesses are populated by smart and well-prepared resources, graduated in the best schools and continuously educated to make wise choices. And most of the wrong decisions are surrounded by managers not supporting them, and yet their voices are rarely heard.
Companies are not prepared to change this reality, and HR professionals in most of the cases have no support to change it either. Here are the primary sources of wrong decision making.
VOICE OF GOD
Egocentric charismatic leaders are a significant source of faulty decision making in larger companies. They can be extremely convincing even if the facts do not support their point of view. Usually, they are surrounded by tens of the "yes man" type, what does not help the process either. In this case, the voice of few is muffled by the "yes man" bunch. In small companies, the owner or founder is usually the top expert and the only one with skin in the game. Therefore, there is a limit to where employees can push back on decisions. For small companies, an impactful wrong decision might be just fatal.
SMALL GROUPS POLITICAL ALIGNMENT
It is not hard to find small groups of professionals aligned around some particular interest. Marketing vs. sales, followers of a charismatic leader vs. another, protectors of an investment line, one department vs. another. Politically aligned groups can create arguments and raise the volume when is the time to debate. They may also cover for each other when is time to explain. In all those cases, decisions are made in favor of a group and not necessarily the best for the company.
TOP DOWN DECISIONS
Wrong decision making does not belong to the middle manager only. Chief Officers also have a limit how much they can push their own beliefs and agenda. The actual impactful decision making in larger companies is done on the board of director’s level. CEOs have a limit to influence those decisions as the board of directors' members represents groups of investors with high authority.
LONG TERM vs. SHORT TERM
Data, analysis and common sense are not the only currency on making decisions. In many cases, decisions are negotiated, and middle ground has to be reached - and that is a significant source of mistakes especially when investment trade-offs have to be made in favor of a short-term P&L or a long-term benefit for the company. Every time there is less room to support long term decisions if that is going to hurt the quarterly P&L. The bottom line pressure is big and potential new businesses are killed just because funds are not allocated at the right time to nurture innovation.
IN A NUT SHELL
Short term favored decisions, political groups aligned with the wrong idea, big ego managers, and board room disputes might lead companies to off target decision making. Thus, it is important to have a look what the future of work looks like and the impact on decision making.
ROBOTS MAY DECIDE BETTER THAN HUMANS
The very first impact is about low-level decision making. I mean every decision making based on data without broad strategic or economic impact. Robots will potentially take over most of them. As soon as we explain AI powered robots how to make those decisions, human decisions will be obsolete. Even areas we thought as private human realms before. A good example is IBM's Watson law. Watson is heading to replace junior associates at scale on a key role, e-discovery, simultaneously adding precision and reducing costs. The rest is simple math. Marketing, sales, legal, planning, finance, HR among other personnel will be no longer demanded at the same pace as today for a company to develop and perform their core business. Big offices, hundreds of employees, and supporting areas are no longer necessary. A significant downsizing, with no help of consultants, will happen in the next decade. As a consequence, we will watch fewer employees involved in those processes, but amazingly productive. No long meetings, no political capital required, no "yes man" groups to perform simple tasks and so the potential for better decision making is higher either by robots or humans.
NEW JOB PROFILE
Most of the tasks in the post 4th industrial revolution "higher educated quadrant" of the jobs spectrum requiring human participation, will be both cross-functional and multidisciplinary. The way people will interact will be collectively based on genuine respect and regard of expertise. New degrees of analysis will be required, and strategic thinking and creativity will rule decision making. The best leaders will be the ones who can get the best out of a team and garnish decisions beautifully for fully informed board rooms and government agents to approve. CEOs will be pushed to be less egocentric and genuinely better leaders, as the impact of their work will be able to be measured in days and not quarters due to big data availability and power analytics tools. Robots will defy our logic, prototype ideas real time, create sales projections, make real time research to help us in our decision process. People will be compensated and promoted by their competence and business impact, and no one will have to fill in HR excel files of little value to the business. When we look back in the future, we will see intelligent robots to business leaders as we see tractors to farmers today. Just progress.
HELP TO BUILD THE FUTURE
Rest no doubt we will go through a phase where the transition to this new scenario will impact us all and how we work. That has been called the 4th industrial revolution. We invest in solutions that will help make people productive in the future. Please join our discussions at collectivebrains.org.
DILBERT © 2015 Scott Adams. Used By permission of ANDREWS MCMEEL
SYNDICATION. All rights reserved.
As jobs massively disappear in the next years, we have been looking for solutions that will create new opportunities for people to engage with work, be productive and sustain a happier life.
The problem is clear and high impacting - soon the rate of workers displaced by the new tech wave will be bigger than the jobs created by the same technologies. Automation, machine learning, AI, and robotics will eliminate entire classes of jobs that exist today leaving millions of workers unprepared to the new workplace. The World Economic Forum forecasts that 5 million office jobs will be eliminated by 2020, just three years away, and that is just the beginning.
Concomitantly, a new social trend is hitting big companies where it hurts the most. New talent does not want to work for them anymore. Millennials and Gen Zers are turning their backs to toxic work environments, stalled paychecks bullying managers and low innovation environments. Only 15% of the class of 2015 said they would "prefer" to work for large corporations, according to a survey by Accenture. Large companies will have to adapt and be creative to attract and retain talent as there are new ways of engaging with work, create value and find self-fulfillment.
WE SEE NEW SOLUTIONS
A new broader-better-balanced workplace is in formation as we speak. Digital disruption is the norm, and new talents are deeply involved in creating the new deal as entrepreneurs or collaborators. New ways of digitally engaging with work are multiplying, and networks, platforms, and job opportunities are set up by the minute. More than never hybrid teams formed with internal and external experts are being created to supply talent to areas companies are short. All it requires is the hunger for continuous self-education and stamina. Money is available to venture, and there is demand for market knowledge and experience in many collective-thinking platforms. All you need is the leap of faith, as your job is probably not the safe harbor it was before. The sooner you get prepared, the better. Change is irreversible.
On our search to invest in new solutions aiming to build the new future, we found Nitesh and Indiez. Check it out. Nitesh, a 25yo super talented engineer, graduated from IIT, Bombay is the founder of indiez.io - a community of independent designers, developers and product managers who have come together with a shared purpose to build the Future of Work.
After trying the traditional big tech company environment and few start-ups, Nitesh decided to break with the model and create a better environment for software talent. A collaborative network that leverage talents 24h a day across multiple countries and get the job you need to be done faster and more affordable, and where every talent gets a bigger cut of the revenue generated.
An excellent example of what Indiez can do is help a large enterprise launch a product for masses in a matter of months. Tikkle (Tikkle.io) is a flagship case. On Nitesh's own words - " It was one of our complex assignments. We collaborated with the Tikkle’s team remotely to get to a right feature set. From a concept in their board member’s heads to a real product feature set. We have brainstormed online and remotely. After, we engaged a team of 15 members from 4 different time zones collaborating to build Tikkle. We managed the project through processes like daily check-ins, weekly reviews, regular demos and closed feedback loops. We developed mobile apps, web apps, backend and admin panels. The product was very elaborated as we were building impressive designed features with high performance on low-end smartphones, integrating the best-fit third-party solutions for a chat and live streaming, and serving enterprise customers with 100,000+ users all at the same time. Indiez has delivered Tikkle on time and enable them to do sales demo. Now Tikkle.io is used by multiple global organizations to engage their employees. We continue to provide them development support as needed. "
Indiez uses new technologies to stimulate collaboration, nurture collective thinking and to guarantee high-quality deliverables. They have embraced Slack as the key communication platform clubbed with tools like Trello, Jira, Asana, GitHub, Drive, Dropbox. They have connected these tools and have built an intelligence layer to manage projects using tech.
A real solution of a new talent that understand the future of work.
MONEY IS NOT THE CURRENCY
So, I offer to invest in his business. His answer was a very polite refusal. "Instead of your money, I need your network. That is way worthier than money. "
And so is, now we are collaborating on new projects and creating the basis for a long-term collaborative relationship.
At Collectivebrains.org we are helping to build the future of work. Please share your thoughts, cases and investment needs with us and our community.