The world is going through a profound and comprehensive transformation. As an investor, entrepreneur or business owner, if you get it wrong, it can be disastrous. If, however, you get it right, the result can be more than lucrative. It can be personally transformative. Read below to get a thumbnail sketch of what lies ahead.
A Spectacular Income Explosion
Between 1875 and 2000 Real GDP per capita increased by 1,286% in the U.S. and by somewhat less, but still, significant percentages over the other developed nations. A similar increase in Real GDP per Capita will occur again. However, this time, because essentially everything happens faster, it will only take about 30 years, from 2010 to 2040. Additionally, nearly the whole world will participate this time, most notably the 'BRIC' nations.. In general, whereever you may live, your income potential over the next thirty years is extremely rosy. The more you know about The Transformation the sooner the rosiness can begin.
This explosive growth in household income will result from a rapid and comprehensive implementation of robotics, expert systems and other forms of artificial intelligence. The commonly cited technologies of nanotechnology, biotechnology, emerging energy sources, medical technologies and genetic engineering, while exciting and 'game changing' on many levels, will contribute, in a much smaller measure, to productivity gains. I will discuss them and their potential to enhance standards of living, in other articles.
Rather, people who remain in Industrial Age jobs will continue to receive Industrial Age income. In fact, as the supply of Industrial Age jobs continues to decrease, their real income may actually fall. This manifests itself in 'the rich getting richer' while the middle class income continues, at best, to stagnate.
However, the overall economic picture is still optimistic, because an increasing percentage of people will obtain Information Age careers and 'jump to the Knowledge Class'. Rather than their income growing at the rate of 8% per year plus inflation, their incomes will experience a quantum leap, often increasing over one to three years, into seven, even eight, figures. This will also be characterized by a shift from an employment status to entrepreneurial, partnership or consultative relationships. To clarify, this is not something that will happen. This is something that is happening. If you ask real estate agents who specialize in upper bracket homes where all the new money is coming from, usually, the answer is 'The Internet.'
Future historians will undoubtedly consider the Audi 'Race up Pikes Peak' and IBM's Watson's defeat of past Jeopardy champions as two seminal events in The Transformation. It is only a matter of time, and likely a short time at that, before these technologies as well as many others create an explosion in productivity gains.
By 2040, small management teams will direct the business while primarily automated offices run themselves. Trucks, taxis, buses, material handling vehicles (AT&T's forklifts that drive themselves), even farmers' tractors will drive themselves. Construction sites will be dominated by specialized fabrication robots with only a handful of human over-seers.
IBM's first use of the Watson technology will be to create a Physician's Assistant expert system called Dr. Watson, expected by 2013. This will be the beginning of a revolution in the delivery of medical care that will drive down costs as a percent of GDP from the current 18% to as little as 5%. From lab techs to physicians, productivity will be augmented with robots and expert systems. The back office of nearly all restaurants will flawlessly prepare the meals while the wait staff and maitre'd provide a human touch. Clerical positions will be replaced by Corporate A.I. software talking directly with their counterparts at their vendors, customers, bank and government agencies.
In each case, with the implementation of automation, first profits will increase. Then competition will cause prices will fall. Monetary policy, most likely, will see the deflation as bad and its cure, an increasing money supply, as a potential windfall. As the population redeploys to higher value-added productive activities, incomes will begin to skyrocket. By 2040, the process will be, more or less, complete. Humans will occupy only those productive activities that humans aren't willing to cede to robots and computers.
.A Temporary but Serious Bout of Technological Unemployment
ABSTRACT:The Income Explosion will radically transform the workplace requiring as much as 90% of the current workforce to be redeployed. In other words, whatever you are doing now, it is unlikely that you will do it for much longer. In fact, this process has already started. Since 2000, all unemployment is technological. In other words, if we produced current GDP by employing people at the GDP/worker of 2000, we would employ every unemployed worker, every discouraged worker, everyone who was thinking about getting a job and still be looking for more workers. This is one of several reasons that the beginning of the Transformation is likely to be set at about 2000.
As we see in the graph below, the rate of increase in GDP produced by non-farm employed person actually increased during the last recession. One might reasonably speculate that corporations use recessions as 'cover' for replacing employees with technology. As dramatic as the behavior of this metric has been over the past decade, the next decade will see, perhaps, annual increases at 8% or more as the technological breakthroughs of the past five years leave the lab and enter the offices, manufacturing floors and service providers.
Even if this period of our history is carefully managed, the technological unemployment that we are experiencing will continue. While a temporary phenomenon , it will likely become very serious before it gets better. This is because it takes longer to retrain and redeploy a worker than it takes to displace him with automation.
Consequently, as the rate of technological unemployment increases, the displaced workers will begin to 'stack up.' If the situation is carefully managed unemployment could still reach 15%. However, because of a demogogic and ideologically driven political environment, it is unlikely that it will be carefully managed. Consequently we can expect dramatic, perhaps calamitous, increases in unemployment over the next ten years. It could go as high as 25% by 2020. Fortunately, as people do become retrained and redeployed, the crisis will subside by the mid to late 2020's.
A new term has entered the Economics lexicon - the jobless recovery. The term was first used to refer to the lack of employment rebound after the July 1990 to March 1991 recession. It was referred to again by Fed Chairman Ben Bernanke with regard to the March to November 2001 recession. Yet again, although we have been out of the December 2007 to June 2009 recession for quite some time, we are talking about the jobless recovery.
Even though this is the third time around, the pundits, professors and politicians are not getting the proper message from the phenomenon. When President Obama suggested that ATM's replacing bank tellers and check-in kiosks at airports replacing airline representative are responsible for persistent unemployment, it was immediately characterized as a 'gaffe.' The Economist published a rebuttal article. that was an uncharacteristically technically poor piece. However, despite the reluctance of our leaders to recognize the problem, the evidence is clear. In nearly all sectors, it is requiring fewer labor hours to produce a unit of product or service.
This growing unemployment, combined with the inequality of the Income Explosion will come to dominate the public discourse. Because of the inability or unwillingness to properly diagnose the causes of persistently high unemployment, it is very likely that the political fallout will push government to take action that will actually accelerate the Transformation and exacerbate the problem of technological unemployment. This is because of the current reality that, while economic growth stimulates job growth in the short term, in the long term it encourages more rapid automation and job loss.
The Rise of a Knowledge Class
ABSTRACT:
In the information Age, robots, artificial intelligence and expert systems will tend the trees, while we, humans, will manage the forest. So, if you are currently tending a tree, you should take immediate and dramatic action directed at entering the polymathic Knowledge Class as quickly as possible.The writing is on the wall. IBM's Watson proved itself to be superior to even the best humans in playing the game of Jeopardy. IBM, next, will apply the technology to the marketing of a Physician's Assistant. Dr. Watson, as it is being named, will, with time, undoubtedly diagnose and prescribe with greater speed and accuracy, and at a much lower cost, than even the best human Physicians. So, calling it an assistant is more of a 'softening of the blow' than an accurate description. It is only a matter of time, and not much time at that, before Watson's descendants will do accounting, financial analysis, legal research and legal brief writing, software coding, etc., as good or better than their human counterparts.
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This will not spell the end of employment as we know it. Rather, humans will move up the intellectual food chain to engage in more polymathic and distinctly human pursuits. They will synthesize. They will provide the volition for projects. They will inject the human touch into creative activities, services and social institutions. They will be the executives of primarily automated enterprises. They will participate in the engineering of various human organizations. They will retain the prerogative of injecting vision into society. They will do so, not because artificial intelligence cannot be made to do these functions but, rather, because we will not want them to.
As humans become progressively less involved in the 'nuts and bolts' of the economy, a profoundly affluent Knowledge Class will arise that will supplant most of the current elite professions at the apex of the socio-economic pyramid. These people will be characterized by exceptional intelligence, unrelenting drive and well tempered vision. They will comprise perhaps as much as 20% of the population, with characteristic income in excess of 1.0 million 2011USD and a mean income in excess of $3.0 million.
The remainder of the population will be engaged in semi-automated service and fabrication activities. In other words, the very affluent customers of the Information Age will decide that a bit of a human touch is worth the additional cost. For the most part, they will eschew the $4.00 hamburger from a completely automated restaurant in favor of the $5.00 hamburger where they are greeted by a human and served by a human. They will make this choice, not because the hamburger will be better, but because meals, in addition to providing sustenance, are a distinctly human, social activity. To elaborate, people like a little music with their meal. That can be machine music. However, with the very high level of affluence, real musicians will find plenty of work.
As humans become progressively less involved in the 'nuts and bolts' of the economy, a profoundly affluent Knowledge Class will arise that will supplant most of the current elite professions at the apex of the socio-economic pyramid. These people will be characterized by exceptional intelligence, unrelenting drive and well tempered vision. They will comprise perhaps as much as 20% of the population, with characteristic income in excess of 1.0 million 2011USD and a mean income in excess of $3.0 million.
The remainder of the population will be engaged in semi-automated service and fabrication activities. In other words, the very affluent customers of the Information Age will decide that a bit of a human touch is worth the additional cost. For the most part, they will eschew the $4.00 hamburger from a completely automated restaurant in favor of the $5.00 hamburger where they are greeted by a human and served by a human. They will make this choice, not because the hamburger will be better, but because meals, in addition to providing sustenance, are a distinctly human, social activity. To elaborate, people like a little music with their meal. That can be machine music. However, with the very high level of affluence, real musicians will find plenty of work.
The key word to describe the Transformation is 'imminent.' Consequently, with regard to entering the Knowledge Class, it is a 'sooner, the better' proposition. You defer action at your own peril. The coming wave of technological unemployment will create a dramatic, albeit temporary, upper middle class implosion that is catching some now and will catch nearly everyone very soon.
The Emergence of Cultures of Affluence
If one considers the public discourse, the dominance of physiological and safety needs as the underlying topic, becomes obvious. The news is full of stories about people losing their house, not having enough to eat, being unemployed or beset by environments of violence and crime. Our political discourse is about income disparities, taxation and the dangers of terrorism. How different will the world be when these are no longer the primary concerns, but rather the concerns revolve around people achieving their potential by expressing their unique selves through their life choices and activities?
The very texture of the cultural landscape will change in fundamental ways. There will be changing spending patterns, different educational and organizational goals, different interpretations of the meaning of community. Simply put, customers will behave differently; employees will behave differently; neighbors will behave differently; voters will behave differently; leaders of business and government will behave differently. The emergence of the new Information Age Cultures of Affluence will leave almost nothing untouched.
As the values emphasis of culture evolves, the definition of affluence will evolve as well. Rather than being a term that describes only purchasing power, reflecting the growing emphasis on actualization and esteem, it will embrace career, educational, social and lifestyle aspects. There will emerge the concept of 'a finely crafted life' structured specifically to actualize one's unique expression of human potential.
As the Income Explosion drives us up Maslow's Hierarchy, the Internet will simultaneously accelerate a fragmentation of cultures. Most members of Western civilization are building "cultural cocoons". Triggered by the emergence of Internet television, this will culminate in the emergence of Boutique Homepages. They will be portals to culturally relevant news, entertainment, social media, search engines, etc. It is true that some people will engage in cultural eclecticism and exploration. However, the vast majority of people will surround themselves with these cocoons of culturally and ideologically comfortable people, news, entertainment, products and services.
We see that populations are becoming more culturally distinct, cohesive and isolated. The degree of tolerance and mutual respect between these nascent cultures is decreasing and will continue to decrease. The level of rancor, invective and intolerance with one another becomes greater every year. In this sense, we can think of nations, especially those of Western civilization, as hurtling toward a kind of cultural divorce. Through the concept of a cultural calculus we can observe this fragmentation of old cultural descriptions and the coalescence of new ones.
While the future is not completely clear on the matter, it is likely that Information Age cultures will approximate a pareto distribution. In other words, one would expect the largest culture in Western civilization to have a population of about 340 million, the second about 270 million, the third about 215 million, the fourth about 174 million, etc. There will undoubtedly be a long tail of small, idiosyncratic and largely independent communities.
While some Information Age cultures will undoubtedly evolve directly from existing EuroAmerican subcultures, because of the forces of the Information Age and the migration up Maslow's hierarchy, despite a clear Western heritage, they will not closely resemble current cultural perspectives. Many, perhaps most, cultures will be entirely new Information age interpretations of the Western cultural heritage.
The Age of Boutique Everything
ABSTRACT:The industrial Age was the age of mass production. The productivity gains of the age were primarily the result of the use of 'dumb machines' that could fabricate products quickly and accurately as long as they were substantially identical. Robotics and artificial intelligence, however, allow for substantial variability of productive output within established parameters. In the lab, they can even mimic rudimentary aesthetics. Additionally, the Income Explosion will result in a decreasing interest in 'lowest price' products.
These two forces will create a situation where very little mass production can be supported. Rather, terms such as boutique, haute (couture and otherwise) and bespoke will enter the common lexicon as people can afford and will want products that express their individuality. This trend will be reinforced by The Cultures of Affluence and the increased emphasis upon esteem and self-actualization.
As Incomes explode and robots gain more capability in scene analysis, hand to eye coordination and artificial intelligence, we can expect that, very soon, many products that are currently mass produced will become, with increasing frequency, custom made.
Every automobile will likely be 'hand crafted' by robots to a designer's plan and the purchaser's specifications. As was the case in the early days of automobiles, custom designed coaches will be built on a more standardized chassis and drive train. A designer nameplate will define the automobile more than a manufacturer. For clarification, imagine a 'Ralph Lauren Cabriolet', for example. Because demographic trends will be toward smaller communities and more telepresence, annual mileage will fall. Combined with superior construction and its more direct emphasis upon personal expression, the automobile purchase will become more long-term in its scope.
Prêt-à-porter fashion will, for the most part, become a thing of the past, replaced by CAD assisted, robotically fabricated haute couture and bespoke articles of clothing. This may be done in one of two ways. A person may try on an article of clothing in a boutique. S(he) will then select fabrics and details using an in-store CAD program equipped with an artificial intelligence adviser and the suggestions of the in-store fashion consultant. Every person will keep their exact measurements on their flash drive or smart phone from which the CAD program will create the specific design. Then, a robot will produce the article on a dress form modified to exactly match the purchaser's measurements. In the second method, a person works directly with a designer who utilizes a CAD program to create specific designs. Again, once the design of the article of clothing is agreed upon, a robot will fabricate it on a dress form.
These two alternatives will spread across virtually all consumer products. For example, Interior designers will work with customers and create designs for spaces using CAD programs and artifical intelligence programs. The designer will not need to consider catalogs of available furniture but rather will create the furniture to fit the room. The artificial intelligence program, after customer approval, will create specifications that will be used by fabrication robots to custom create precisely the items required by the designer.
Of course, it is the Information Age and content will ascend to the new standard in products. The Income Explosion will allow people to afford the specific content they desire. Consequently, music, television, even books, can be successful with sales in the tens or hundreds of thousands and rarely in the millions. Distribution channels will flatten and become more efficient. For example, a $10 e-book sold on Amazon.com returns $7.00 to the author rather than the $1.00 to $1.50 that was typical of the Industrial Age.
The preceding is a short list of significant items. It is hardly comprehensive. Virtually any product you can think of is likely to cease being mass produced and become custom made, often with CAD and A.I., either Internet based or in-store, that will advise the potential customer, then specify and custom make the product for delivery. The concept of the long tail and 1,000 true fans will become generally known.
The Live Anywhere Option
ABSTRACT:
As the Industrial Age emerged, people left the farms and farming villages for the big city. In the Information age, these cities will first stop growing and then begin to shrink as households that enter the Knowledge Class move to Information Age communities. This will be the result of the interplay of the Income Explosion, the Cultures of Affluence and the Live Anywhere Option' created by the emergence of enterprise networks and telepresence work opportunities.
The NAR found that only about 19% of people surveyed want to live in the city. According to an NDN Survey, only 17% of Millennials (those born between 1982 and 2003) want to live in 'the big city.' In other words, the Industrial Age megacities are losing their appeal. Over the next 30 years, they will shrink to less than 50% of their current size while boutique villages designed and constructed to facilitate targeted lifestyle, cultural and values preferences will explode onto the scene. These boutique villages will often be culturally congruent with boutique homepages which will facilitate their marketing to a targeted, culturally homogenous market.
As the population migrates quickly away from megacities and the income explosion raises median house prices above 1,000,000 2011USD, low and moderately priced homes in large metropolitan areas will become essentially unsellable 'teardowns'. In other words, for most homeowners, the housing market will never recover. They may live there until they have paid the home off, sell the home for a substantial loss or give the home back to the bank and start over. These 'teardowns' will be replaced, over time, by Information Age scaled homes at lower Information Age population densities. Information Age homes will be highly automated, robotically constructed, with typical size in the 500 to 1,500 square meter range (.≈ 5,400 to 16,000 square feet)
During the Transformation, boutique villages will necessarily consider the ambient governments. However, Knowledge Workers will consider their 'office' to be anywhere there is a high speed Internet connection. Consequently, their considerations will favor, not the high GDP per capita nations, but rather the governments that will allow local lifestyle, design, values and cultures to dictate the nature of the village. Low taxes, minimal large scale control mechanisms, social and economic stability, ease of entry and residence, etc. will become important determinants of location. However, location will primarily consider climate, topography, major land features, etc.
Despite economic impediments, the population has been moving toward the equator and toward the coasts. With a live anywhere option, this trend will accelerate. Furthermore, with the emergence of EGS energy supplies and cost competitive desalination technologies, many locations that previously could not support large populations will become very attractive. Around the middle of teh 2020's the world will begin to defarm, as manufacturing style food production begins to emerge. This will allow populations to produce most of their own food without needing substantial land under tillage.
North Africa, the Middle East, Bahamas and Baja California are among potential candidates. They all currently are near the coast, important both for lifestyle preference and for desalination and defarming. They are subtropical or tropical and currently have low population densities.
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| Mayaguana, a 105 square mile island in the Southern Bahamas has a current population of just 312 (2010). A Boston group in collaboration with the Bahamian government has already made plans to develop a significant portion of the island. Whether these plans are ever implemented, Mayaguana ultimately will likely have a population of over 800K equating to a population density similar to Miami Beach. It is just one of currently low population density locations that will become home to Information Age boutique villages. |
Already, the small, but exploding Knowledge Class is demonstrating a penchant for multiple residences. They may Winter in the Caribbean and summer in the Mediterranean. They may have a ski lodge in the Alps and a equestrian property in England. They are native to a single nation, but, now, often they have dual citizenship. They speak one language natively, but often speak two or three other languages, often those spoken where they have their various residences.
Their sense of national identity is waning. This is the face of tomorrow's Knowledge Class. Nations such as the U.S. that makes residency, and even temporary visas, a complex and expensive process for the holders of some passports will lose attractiveness for this very reason. The person may think of themselves as American despite spending little, if any, time there.
The Death of the Nation State
ABSTRACT:For the last couple of decades there has been an ongoing discussion of 'The Death of the Nation State.' This discussion has taken place primarily in the Liberal intellectual elites and has envisioned a global hegemony of liberal democracy.. A few prescient observers have alternatively recognized the power of the Knowledge Class and the Live Anywhere Option. They have not, however, properly integrated it with the Cultures of Affluence and the Death of Capitalism. Essentially, the Death of the Nation State will result from a convergence of several cultural, economic and political forces.
- Politics is the art of compromise
- It is wrong to compromise one's principles
- We no longer share common principles
- Therefore politics is wrong
These factors will reinforce and strengthen the sense that one should not compromise one's principles. Over time an important Information Age 'first principle' will emerge. It can be summarized by the statement, 'No person should be required to live under a body of laws, policies and programs that they consider to be unjust.' While most people who are not active combatants in 'The Culture War' would tend to agree with this first principle, they would not consider it practical.
The emergence of boutique villages and the multiple residences in multiple governmental units that will come to typify the Knowledge Class will also weaken national identity. Dual citizenship will become common. People will begin to ask the question, 'What benefit do I derive from sharing a body of laws, programs and policies with people that fundamentally disagree with my world view, cultural outlook and value system?"
Progressively more often the answer will be 'none.' The creation of physical cocoons to go along with the informational ones in the form of boutique villages will exacerbate the situation. In combination, these factors will lead inexorably to the death of nation states and representative democracies and the emergence of virtual nations and market based governance.
Boutique villages will begin to aggregate in global networks of cultural homogeneity that will engage in larger scale social projects and programs. Their residents will then see a route to the practical application of the Information Age Political First Principle. These global networks will become virtual nations and will, with greater frequency, demand political autonomy from the the nation states and provinces within which they are geographically imbedded.
This will not be a Utopia by any stretch. The various global networks will find new serious points of contention between themselves that will, for the most part, replace the contentions that characterized the Industrial Age community of nations. Examples are 'gaian global management' vs. 'regional engineered biodiversity', 'regional or global resource ownership' vs. 'cultural resource ownership' and freedom of migration issues.
The process of governance will bifurcate. Boutique villages will demand 'cultural sovereignty' while regions will retain and exercise an 'administrative sovereignty.' The principle of the Social Contract will become meaningful and practical. If one does not think that the laws, programs and policies of their boutique village and its network are just, they can vote with their feet. Governance becomes market based.
The institutions of geographic governance will likely become bicameral, with one house representing each culture in more or less equal measure and the other representing on the basis of population. What powers reside to what degree in the administrative government will be a matter of great contention. The line of demarcation between culture and practical administration is not always clear.
People retain institutions long past their practicality. Those people in the middle portion of the North American continent, for generations to come, may frequently refer to themselves as Americans and have picnics and fireworks on July 4. However, it will become a progressively less meaningful tradition, akin to sharing a sports team. The real significance will reside in the laws, programs and policies of the various networks of boutique villages.
Everywhere you turn, people are hawking the latest technological gizmo. These, in many cases are important. However, in the final analysis, it was the political, economic, cultural, demographic and social events of the Industrial Revolution that are best remembered.
Of course, you should pay attention to the march of technological advancement. It is, after all, the source of change. However, when it comes to your pocket book and your Financial Statement, these human events will be most important in the end.
