Malcolm Berko Explains Disruption
by Miki Saxon
Have you heard of/read Malcolm Berko? He writes a twice-a-week column answering financial/investment questions — just one answer in each column.
In addition to being broadly educated and financially knowledgeable, he is a superb and truly witty writer, doesn’t suffer fools at all, and, after reading him for decades, has no sacred cows. (I highly recommend him.)
I thought this recent question and his response would explain the coverage, and downright scare hype, surrounding AI, robots and the tech upheaval of many industries, such as retail.
Here is the salient part of the question.
My professor believes that “its disruptive pricing power chokes employment, restrains wage growth and is bankrupting competitors.” He believes that Amazon is “too negatively impactive on our economy, especially wages, and must be restrained by government-decreed divestiture.”
Berko wasted few words on what he thought of the prof and went on to explain as follows:
Joseph Schumpeter, a brilliant economist and bald as an egg, who passed away in 1950, explained capitalism as a series 50- to 60-year waves of technological revolutions causing gales of creative destruction, or GCDs, in which old industries are swept away and replaced by new industries. These new industries generate new economic activity, employing more people, who buy more products, creating more demand and, resultantly, increased employment.
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First GCD, between the 1780s and 1840s, was fueled by steam power. During those years, the steam engine increased our gross domestic product fivefold, and employment grew fourfold.
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Second GCD, between the 1840s and 1890s, the railroads replaced wagon trains, stagecoaches and sailing ships. (…) Resultantly, our GDP exploded sixfold, and employment grew fivefold.
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Third GDC, between the 1890s and the 1940s, was charged by electricity. Inexpensive electrical power hugely improved industrial efficiency and labor productivity. This bred a sixfold growth in GDP and a fourfold rise in our working population.
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Fourth GDC between the 1940s and the 1990s was powered by oil and the automobile. People moved to the suburbs and families owned two cars as the GDP increased eightfold and the workforce grew fivefold.
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Fifth GDC is information technology and the microchip. It’s making other technologies obsolete and altering our social, cultural, political and economic futures in ways we never imagined possible. We’re on the cusp of that wave today.
Excellent for understanding what’s happening, but what neither Schumpeter nor Berko adress is the enormous upheaval, fear and human pain that comes with each wave.
It is terrifying to be told that skills you have worked to develop and hone for 5, 10 or 20 years, or longer, have no value.
But in today’s world, where what-you-do-is-who-you-are, that often means that you, the person, has no value.
While Berko is correct about the potential of an unimaginable future, which you may not even live to see, that future is of little solace and does nothing to mitigate the terror and economic woes facing you today or tomorrow.
Two parts of the solution is to put your energy into coping and immediately develop the most important skill/attitude they probably didn’t bother teaching you in school.
Learn to love learning.
PS I sincerely hope you take the time to read Berko’s full column. I guarantee it will be time well spent, as are all him writings.
Image credit: Creator’s.com
