Beyond subsistence

February, 2017

In pre-modern times, the world didn't change. A man born 500 years ago could expect to live in the same town, working the same job with the same tools, his entire life. His world was static.

200 years ago, economic change started. It became possible for one person to produce and do more with each passing year. As people became richer, life expectancies increased. Change became noticeable over one's lifetime.

Today, almost nobody is a farmer. In Silicon Valley, changing jobs every 3-4 years is commonplace. It used to take decades for a company to reach billions/year in sales; now it takes five. [1] Today, I have video chats with friends around the world almost free of charge. Were a pre-modern man transported to today, he would surely think we've invented magic.

So, what about the world of work? We've moved beyond subsistence farming; what's next? The economy—our jobs, the companies we buy from, the technology we use—is changing faster than ever, but our beliefs about work haven't kept up. Take "seniority": what good is it when the company won't be around in 10 years? When someone takes a risk, working at a smaller company, or trying something new, and it doesn't work out, are they "damaged goods" for life?

We're going to need answers to these questions soon. If change brings chaos, and the rate of change is still accelerating, the only reasonable conclusion is that the world of work will get more turbulent. As Robert Reich [2] reminds us, consumers will get a better deal than ever, but careers, and the yardsticks by which we measure them, will shift.

It didn't used to be this way

Last year, reading Piketty's Capital, I came across the following chart:

Year World output World population Per capita output
0 - 1700 0.1% 0.1% 0.0%
1700 - 1820 0.5% 0.4% 0.1%
1820 - 1913 1.5% 0.6% 0.9%
1913 - 2012 3.0% 1.4% 1.6%

The chart shows per-year change.

Seeing this for the first time, I couldn't believe my eyes: for 90% of the first two millenia of our age, the economic output of a typical person didn't change? Over his entire life? The guy would start at $10k/year and earn this forever?

Indeed, my interpretation was correct: a man born in this time would take the same job as his parents (likely farming), which was what his family had done for generations. He would never change jobs, get a raise, move to a different city, or get better medical care.

In short, life was static. And it had been that way as far as anyone could remember.

What changed

So, what changed? How did we go from $10k/year for life, to a new iPhone every two years?

The question is one of the most interesting in economics; the rough answer is that "we started reinvesting our profits" [3]. As farmers, rather than eating every last kernel of grain we harvested, we set some aside to finance "experiments", things we tried, but weren't sure they would work. People call these experiments "investments" in polite company, "speculations" when they have a lot of risk, and "gambles" to make them sound nasty, but the distinction is artificial; it's all the same stuff: risk, uncertainty, and reward, just in degrees.

For a farmer, one such experiment might be planting the crops a bit deeper in the ground, or putting more water on them. Like any type of gamble, it's only prudent to do when a loss won't be catastrophic.

Combine enough of these little experiments, and get people discussing them, and what emerges is science—the accumulation of knowledge via empirical methods, reproducible results, and peer review.

Governments do it, too. If a little more tax is collected, governments can use tax revenue to finance speculative ventures. The most famous example: Columbus's voyage to the New World, financed by the Spanish government. NASA is another government-funded, speculative voyage of exploration.

As the world becomes richer–and it is, despite concerns over inequality–it is inevitable that an increasing proportion of economic activity will be less hand-to-mouth, and more speculative in character. The quantity of shirts, lunches, and housing humanity can consume has a physical limit. And we're heading toward an age where almost all mechanical labor can be done more accurately, and cheaply, by machines.

Work

If it's inevitable that more economic activity will become speculative as the world gets richer, what does this mean for the world of work? What's going to change for, say, a 21-year old college grauate entering the workforce?

I have four ideas I'd like to put forth.

One thing's certain: the arc of careers will change. A traditional business career consists of handling small tasks, and with the exercise of good judgment, handling progressively larger and more important ones. But speculative ventures aren't matters of discipline, like getting to work on time, or judgment, such as knowing not to lie on one's expense report. Success involves a lot of traditional stuff like skill and hard work, but with a lot more randomness mixed in.

This is a big problem in Silicon Valley today: it's socially acceptable to put successful entrepreneurs in positions of trust, but not "unsuccessful" ones. This is a classic case of "judging decisions by outcomes, rather than process" that writers like Nassim Taleb rail against. The problem is a common error of measurement: basing decisions on what's easily observed (outcome) vs. something harder, but more predictive (process). For all the lip service paid to "innovation", "failing fast", and the like, most of Silicon Valley's upper echelons (executives, venture capitalists) haven't "failed fast", despite otherwise outstanding work ethic, razor-sharp judgment, or whatever else might make a difference. Hiring is as conservative as ever, because most people still care about their reputations rather than outcomes. It's better where people are working for themselves, rather than trying to look good for a boss; they have more skin in the game. [4]

Second: more of work will look "silly", "trite", or "playful". The press loves to take cheap shots at Silicon Valley, deriding it as a place full of "facebook for cats" and other genuinely stupid ideas. The problem is, it's just too hard to tell what's going to work and what won't before you try it. I was recruited heavily by Uber a few years ago; looking back, that was a rocket ship I missed. I don't regret it; I had no idea they'd become as big as they did. Thomas Edison took a lot of flak for working on a newfangled toy of the rich called "electricity"; maybe someone should've told that slacker to get a job, already.

Third: inequality will increase a lot. For wage-earners, when the option is between two jobs, and one pays 10% more than the other, that's a relatively bounded set of outcomes. For investors, it's even worse: it's not the difference of one percentage point of return, like in real estate, it's total loss versus 100x gain. There are neighborhoods now, in Silicon Valley, where next-door neighbors can have 10x or even 100x income differences. "Keeping up with the Jonses" takes on a whole new meaning when one family is struggling to make mortgage payments, while another is buying a private island. Wealth and income differences like this are a fact of life in Silicon Valley, and it's not getting better.

Fourth, the pressure to make the right decisions, join the right company, and see into the future will increase. When comparing two jobs with 10% pay difference, the set of outcomes is relatively bounded. Not so when the choice is, "join the right company/work on the right idea, work is now optional for the rest of your life; wrong company, you're unemployed and broke". This dynamic is already a significant source of stress for anyone working in a high-uncertainty industry (finance, Hollywood) and it's not going away.

Wrapping up

We're living in amazing times. We're going to see more change in our lifetime than perhaps, the last 3-4 generations in aggregate. Autonomous vehicles are almost reality. We can watch almost any movie, read almost any book, or write to anyone on the planet, instantly. I wouldn't be surprised if fusion energy becomes reality in my lifetime.

Human attitudes and institutions are always slower to adjust, though. In time we'll adjust; just be sure not to be critical of someone working on something that seems "stupid". Who knows, they might be the next Marie Curie, or Thomas Edison.

Notes

[1] The Economist: From 0 to seventy (billion). I take no position on Uber's valuation, social impact, fairness to drivers, etc.; I am arguing only that its revenue growth is extremely rapid.

[2] Reich's Supercapitalism has some depth on this point: that as competition heats up, it's going to be better than ever to be a buyer, but tougher than ever to compete as a producer.

[3] This explains what, not why or how; check out Yuval Harari's Sapiens for a good outline of the why and how.

[4] As in so many other areas, Y Combinator is leading the way in this regard, making Adora Cheung a partner despite Homejoy's failure. I'm not surprised, since the partners invest a lot of their own money and don't care too much about impressing people.