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PARADIGM SHIFT (Part 2)There was a time when shoes were made by hand. In the money or barter system of the day, they were expensive because they took a very long time to make. Then some innovative entrepreneur decided he would start a factory to make shoes and by creating permanent jobs, could make them cheaper. Now a farmer could afford more than one pair. But the farmer of the day might easily have said: "Why would I want more than one pair of shoes - I only have one pair of feet!" Then another innovative entrepreneur (or many, over the course of time) invented the fashion industry, so that people had to have many more pairs, in different styles and different colours. They became cheaper and people could afford many more pairs and employment making all those shoes went up. Such is the way progress provides employment where none existed before. True, the wheelwright, if he failed to progress from wooden wheels to steel and rubber, would languish. Is that fair? Is it fair to hold back the benefits of progress from the people to protect the antiquated jobs of those who refuse to keep up with the times? An entrepreneur might hire employees, or he might put every task that needed doing out to bid amongst independent workers. What determines when you would create a 'permanent job' rather than outsource to an independent contractor? The more efficient conditions of the Information Age that the world is now entering, alter the logic of business organisation. This becomes obvious if you think about it. If information technology does nothing else, it dramatically lowers the cost of processing and calculating and analysing information. And as we tried to show earlier, lower transaction costs lead to more outsourcing. Another effect of technological improvement is to reduce the need for a large number of middle managers to monitor production processes. Automated machine tools are replacing hourly workers, in many cases, and where there are fewer manual workers, fewer supervisors are needed. Even where the production process continues to be a manual operation, the control and coordination process has been computerised to a great extent. Without a doubt, microprocessor-controlled equipment can monitor production processes much more effectively than a manger ever could. Not only can modern equipment measure the speed and accuracy with which people work, it can also automatically compile accounts and re-order components the moment they are taken out of stock. Even the smallest business today has access to sophisticated financial control programmes that monitor their finances and do their accounts for them. And do them better than even the largest corporation could have hoped for even a few decades ago. So, am I predicting that we shall all be unemployed and that the business world will be run by machines? Not at all. Machines are sophisticated tools, but they are no more than tools. The world will look and feel very different in the future, although it will not be altogether strange. It is generally accepted by now that, with the pace of technological change and global competition, businesses can no longer guarantee anyone a lifetime job. We have all probably figured that out. Companies and employees will have a new kind of relationship, based on work to be done, not jobs to be held. If that is the case, what will the workplace look like in a world without job security? The typical business organisation of the new information economy is likely to be quite recognisable. The great lumbering corporate office is already being trimmed. Tomorrow's company will resemble a Hollywood movie production company. Such an enterprise may be very sophisticated, with a budget of hundreds of millions of dollars, employing thousands of people. Although a large organisation, it is temporary. A film production company making a film for $100 million comes into being for a year and then dissolves. While the people who work on the production are specialists, they have no expectation that finding work on the project is equivalent to having a 'permanent job'. When the project is over, the technicians, cameramen, costume and set people, go their separate ways. They may find themselves together again on another project, or they may not. It's very like the present day construction site, although in today's world the construction project is done by a permanent company. That may have to change, too. "The Company" is breaking down into smaller units. Instead of a permanent bureaucracy, activities will be organised around projects. In at least one advertising agency, operating today, the staff do not have offices. The entire physical aspect of their building is divided into 'project areas', and people move from area to area depending upon which project they are working on. They leave their stuff there, where it may be needed by the next co-worker. Most of the formerly internal functions of the firm are outsourced to independent contractors, and the firm consists of specialists hired as needed. And these specialists or contractors come together to work on a specific project, just like the film production company. Employees who previously held 'good jobs' but who contributed little to the enterprise will increasingly find themselves bidding for work on a piece-work or contract basis. In the post-industrial age, a job will be something you do, not something you 'have.' Before the industrial era, permanent employment was almost unknown. We shall revert to that philosophy, so that, in the information age, you will no longer have a job, instead you will do a job. Tasks that were formerly done within the confines of a company, as a way to reduce information and transaction costs, will now be done outside the firm. That will seem odd, at first, and I can hear readers muttering to themselves, that such and such cannot be done outside. But when you really get down and analyse it, and think about it rationally, there are very few, if any, corporate functions that cannot be outsourced. "Just in time" inventory control and manpower outsourcing are practical because of improved information technology. These are sure steps towards the death of permanent jobs. Some major corporations have already eliminated permanent job categories, in total. Employment is becoming temporary once again and work categories are becoming meaningless. With international interconnectivity upon us, independent contractors will telecommute across continents to work together on the Information Highway equivalent of Henry Ford's assembly line. The microprossessing revolution is sharply increasing the availability of information as well as significantly reducing its cost. Special skills and talents will still be important, of course, but the artificial boundaries between professions have already begun to dissolve. Readily accessible information, plus efficient storage and retrieval systems, will take the mystique out of the specialised knowledge of professions such as law and medicine. This knowledge will be available to anyone willing to undertake a sophisticated data search. It follows, therefore, that remembering the facts of one's profession - ie the very basis of being an engineer, for example - will be of less economic value. A premium will be paid to the engineer, or other professional, who can use his knowledge in a creative fashion, while the 'processor' or 'mechanic' within the professions earns correspondingly less. The importance and value of synthesis and creative application of information will increase. But, what about security? If work becomes temporary all the time, doesn't that mean intermittent? And, if that is so, how will we be able to accumulate sufficient funds for a reasonable retirement, let alone provide sufficiently for our day-to-day living? Economic security can be achieved with successful investment. That has always been the case, but it has been hidden for most people by the illusion of job security. We have lived in an insecure state believing ourselves economically secure as long as we had a job. In its simplest form, if machines replace people, more capital will be needed to buy the machines. Those with capital will be more secure than those without. This is nothing new. If you owned the piece of land you farmed, you were better off than if you rented. If you owned the ox you used to plough the fields, you were more secure than if you borrowed your neighbour's. In the coming years, there will be a greater need for capital, and therefore, more opportunity for owners of capital to benefit. A new need arises for savings. Real security can only come from investment success, not from salary increases or fringe benefits, such as a pension plan. It is going to be far more important in future years for one to have invested during one's lifetime to provide a retirement nest-egg for the long, hopefully happy, post-work years that face most people alive today. We are living longer and are more healthy in our old age than we have ever been. Two-thirds of all the human beings since time immemorial that lived beyond age 65 are alive today! We will need far more in our retirement fund than our parents, or their parents, because we will need to support ourselves for a longer time. Plus, we will be less able to rely on government to keep us in the manner to which we might have become accustomed. Fortunately, investing for the future is a well researched, well practised, and well documented process open to anybody with the interest to undertake it. The forces at work right now are developing into the most exciting change the world has ever seen. Society is being remade in a way that is beyond anything for which recent history might have prepared us. Until now, the biggest transition in the history of the human species has been the transition from hunting and gathering to farming. That took a lot longer than the other big change - the transition from farm to factory. The Information Age is going to change everything about the way we live in an equally profound way. It will be the Paradigm Shift of All Time! Contributed by Frederick Pearce, head of the Pearman Cooperation Alliance and webmaster of THE BUSINESS START PAGE at http://www.wp.com/fredfish/. E-mail him at: Frederick Pearce. | ||||||||
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