– Every era, every century, every generation has its massive technological disruption
– Taxi drivers being “disrupted” by technology of Uber
– History shows how “middle men” frequently made redundant
– Skill set of many professionals today can be replicated by machines and technology
– Technology may make lawyers, accountants, architects and doctors redundant
– We risk “cannabalising ourselves” with internet and emerging technologies
Once the Portuguese had opened up the passage to India via the Atlantic, the old Silk Roads, the commercial superhighways of the medieval ages from China to Istanbul, were gradually downgraded in global commerce. Economically, the Earth shifted on its axis from Asia to the Atlantic. This was the great disruption.
It took a while, but the commercial earthquake triggered by the Portuguese heading around Africa in 1497 and sailing triumphantly into the port of Calcutta in India is impossible to understate. So much changed, from slavery to mass manufacturing, from the conversion of England’s peasants to proletarian workers and, more traumatically, the mass expropriation of native lands, stemmed from the commercial imperative to trade as much stuff as possible in as many countries as possible.
It was the beginning of European domination of the world.
These guys were yesterday’s middlemen.
The fees that cotton generated for these middlemen kept generations of Ottoman, Arab and Indian merchants in clover for centuries. The fees were paid in the high price of cotton forked out by the final consumer in Europe. Then overnight the Portuguese transported cotton directly from India around the Cape, cutting out the various Silk Road middlemen.
All these massive shifts in economics had one thing in common: they were driven to cut out the middleman.
Cutting out the middleman is, and has always been, one of the major drivers of economic innovation. Whatever the product, profit margins tend to be driven by forcing down costs, making production more efficient and, if possible, maintaining your selling price. This is what capitalism and trade are all about.
The relentless pursuit of profit always identifies the middleman and tries to force him out or lower his take. For the producer, the quickest way from production to sale is the most profitable route. The fewer mouths to feed, the higher the margin — this means eliminating the middleman.
In the old days the technology that eliminated the Asian, Arab and Ottoman middleman was Portuguese, Dutch and later British naval prowess. Every generation has their technology. Today that technology is the Internet.
The only problem is that today we risk cannibalising ourselves.
As was pointed out in this column last week, we are all “middlemen” and if today’s technology is about eliminating the middleman, very soon we end up eliminating ourselves. In a mature service economy with easy credit and rampant consumerism, the middleman is what is normally called the white-collar economy. So everyone who doesn’t actually make something is threatened by new technology that cuts out the middleman.
In a time of the smartphone and companies like Netflix, Airbnb, Amazon and Uber, these might not so much be regarded as fantastic innovations, but could be seen as the enemy for many who could lose their jobs.
Consider London’s famous black taxis. In the old days the London cabbie had to learn “The Knowledge”.
This meant that the cabbie had to train for two years to memorise every nook and cranny of London, every backstreet in every area of that vast city. This effort demanded cabbies renting scooters to head out for months on end, committing the city’s streets to memory. Once he had the knowledge in his head, the cabbie did a rigorous exam and got his taxi license. He also had to buy a special black cab, an expensive vehicle, for which London is famous.
The knowledge was his pricing power; his cab was his unique asset. Because he had the knowledge, he could demand a fare. This was his value added and his price was his margin.
Uber is doing to the cabbie what the Portuguese did to other middlemen: eliminating them.
Just wait until technology does this to lawyers, accountants, architects and doctors. Whether they like it or not, the skill set of many of these professionals can be replicated accurately by machines. All the above are functional positions and with the exceptions of possibly doctors, few would lose sleep at their passing.
The point is every era, every century, every generation has its massive technological disruption. In the 1980s and 1990s when technology, outsourcing and the relentless drive for profits destroyed working-class manufacturing, the middle classes called it “economic reform”. Now when technology comes after those with white collars and pristine fingernails, what will they call it?
Full article: Great Disaster Looms as Technology Disrupts White Collar Workers (GoldCore)