Blog: The Smart Home, Job transience and the Gig economy — Alvin Toffler predicted them all 50 years ago
Toffler could never have predicted Australia’s current political environment 50 years ago, but he has predicted the economic environment and the factors that underpin income polarisation, transience in jobs and wage growth stagnation.
I first came across Alvin Toffler’s 1970 best seller, Future Shock, on my father’s bookshelf in my late teens. Its distinctive orange cover, gigantic font and stark title made it hard to miss. Revisiting his books came out of a sense of curiosity, given all the challenges we now face in 2019. With the benefit of hindsight, how much did Toffler actually get right?
Future Shock and its sequel (The Third Wave released in 1980) attracted some high profile fans on release. These books influenced China’s Zhao Ziyang and business magnates from Ted Turner (CNN) to AOL founder Steve Case. The Chinese Government cited Alvin Toffler as being among the key Westerners who had most influenced their Country. This is interesting in hindsight, given China’s rise as an information technology powerhouse.
Future Shock deals with the impact of too much change in too short a period of time and a shift to a “super-industrial” society. This said society leaves many people feeling socially disconnected, causes professions to become quickly out-dated and creates more temporary and transient jobs. Whole branches of Industry die off, knowledge replaces labour as the key driver of wealth creation and people have many careers in a lifetime. People start losing the familiarity that the bed-rock institutions of family and religion once provided.
Toffler’s books went beyond pure technology trends to forecast an information age that also impacted future political and social trends — all these areas interacting with and influencing each other. From a geopolitical perspective, Toffler predicted the rise of nations following their own regional interests and economic separatist movements. And he was surprisingly prophetic in predicting what we are now witnessing as the Fourth Industrial Revolution.
“The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.”
― Alvin Toffler
Whilst Toffler popularised the term “information overload”, even he may have been overwhelmed to hear of a current global datasphere totalling 33 zettabytes that is fuelled, in part, by a new economy driver called the Internet of Things (iOT).
Future Shock accurately predicted the economic influence of information and the concept of ideas becoming as critical as physical things. However, Toffler perhaps under-estimated our abilities to cope with this change.
Technology represents an interesting paradox, simultaneously helping us to filter and navigate a world filled with greater amounts of products and information, whilst itself feeding the amount of change.
Netflix and Amazon use recommendation engines to tailor content to our interests. Google uses unsupervised machine learning to group information into news stories. General Artificial Intelligence has taken over a lot of the information-based and data processing heavy lifting for us. These conveniences also come with societal costs ranging from privacy intrusion to the job transience that Toffler also predicted.
This explosion in information has been accompanied by an explosion of products and services and a surfeit of choice.
The Throw Away Society and a surfeit of choice
“Freedom of choice — Is what you got. Freedom from choice — Is what you want”
In The Third wave, Toffler writes of rapidly superseded products with shorter lifecycles driven by increasingly efficient innovation. This, in turn, creates a throw away culture with consumers. The home becomes “a large processing machine through which objects flow, entering and leaving at a faster and faster rate of speed”.
In this “throw away” society, no-one repairs things anymore and manufacturers produce items that purposefully do not last. It’s cheaper to buy and replace than to undertake a customised repair job. Cost efficiency is driven by both automation (for standardized products manufactured at scale) and technology cost curve reduction (for more custom products and services).
Toffler sees this combination of mass-consumerism and disposability of products flowing into a variety of other impacts that are increasingly evident today. Among them being environmental waste issues and a form of “transience”, which extends to work and the end of the “job for life”. In Toffler’s predicted future, our interactions with service providers become more volatile and the turnover of entire industries becomes more frequent.
This throw away society is also aided and abetted by a rise in “individualism”.
The rise of Individualism
According to Toffler, a rise in individualism coincides with the increase in product choice made possible by lower costs of production and “de-massification” of the media. Perhaps nothing illustrates better the marrying of mass-market production with individualised customisation than the ability to design your own burger at McDonalds.
Of individualism in politics, Toffler stated that “our views are increasingly non-standard as consensus breaks down in nation after nation and thousands of “issue groups” spring up”. “The thrust of Third Wave change is toward increased diversity, not toward the further standardisation of life”.
Toffler argued that this individualism extended to the workplace in the form of the job specialisation that was necessary in order to keep pace with change. Nowadays, an increasing number of millennials are completely bypassing the traditional 9 to 5 role to become “solopreneurs”.
The ability to participate in what is known as the “side hustle” is aided by the ability to market your “individualism” to the world. The side hustle is also helped enormously by the ability to work remotely and at home.
The Electronic Cottage
“When we suddenly make available technologies that can place a low-cost “work station” in any home, providing it with a “smart” typewriter, perhaps, along with a facsimile machine or computer console and teleconferencing equipment, the possibilities for home work are radically extended.”
– The Third Wave
The concept of home as a place of work and the philosophy that Corporations would allow their employees to work from home was no small matter between 1970 and 1980. Such luxuries were the domain of the privileged.
The ability to work from home today, required both a cultural shift (from corporates) and an availability of all the necessary technologies from the home. In Toffler’s words “an electronic cottage”.
Now, almost 1 in 3 Australians regularly work from home and this has, in turn, fed a growth in SOHOs (now the majority of Australia’s listed 2 million businesses), freelancing and the gig economy.
Toffler not only presaged the emergence of telecommuting and the home as a place of work but also the concepts of natural speech recognition, iOT and the smart home. Of home computers he wrote that they would “monitor and minimise the waste of energy in the home” and will “talk, listen and control appliances”. Machine intelligence will be embedded in everything from “air conditioners and autos to sewing machines and scales” allowing conversations “between humans and the intelligent environment around them”.
Work place flexibility is also assisted by a collaborative workspace industry growing at 16% year on year. Companies such as wework are doubling memberships year on year. If you want to get away from home for work, why rent an office when you can rent a desk instead? Environments set up for collaboration and networking are great for freelancing as well.
It’s all part of an increasing trend of “rent-a-person” (a rental economy) as Worker supply and Business demand each take advantage of flexibility, reach and efficiency.
Rent-a-person and Freelancing
“The rental of temporary employees for temporary needs is, like the rental of physical objects, spreading all over the industrialized world”
– Future Shock
Future Shock discusses a “rent” rather than “own” philosophy evolving from a life of constant change and uncertainty. Renting allows for freedom of movement within the chaos and fits snugly with a “throw away” mentality once a product quickly reaches its end of life.
We are seeing this now in the context of business use of assets (both IT and human resource related) as well as personal use of assets (increasing proportion of rented vs owned homes).
Companies are increasingly utilising software-as-a-service and out-sourcing all things IT-related to the cloud. Computing of an open-source, globalised and distributed nature furnishes powers to Companies (big and small) far beyond the scope of centralised or “owned” models. Why build out a messaging service when it can be more cheaply out-sourced to Twilio and charged on an “as needs” basis?
From a human resource perspective, only 1 in 100 workers offered temporary help services back in 1970. That figure has now drastically changed. A recent US study found that almost all net job growth between 2005 and 2015 occurred by way of contractors, temporary workers and freelancers. Outsourced unskilled workers in the US earn significantly less than their non-contracted and in-house peers and this sector is seen as one of the causes of stagnating wage growth. Outsourcing serves to externalise some of the employee costs usually reserved for the employer.
There is also a growing trend towards zero based contracts. These are contracts in which the employer does not guarantee the individual any hours of work.
The rental of one’s own skill as a freelancer is not just driven by the business sector. People are increasingly seeking work flexibility, work-life balance and work “insurance” using supplementing side activity on top of their regular job.
This is supported by research from McKinsey and Co (2016) which found that whereas 70% of free agents undertook this type of work due to lifestyle or regular income supporting activity, only 14% used free agent work as their primary source of income.
It’s also supported by the economic indicators. in America, the gig economy was once forecast to reach 15% of the economy (involving more than 50% of the workforce) but is now slowing as the US economy picks up. This provides further evidence that the gig economy is being used as either a form of supplemental income or “regular job” insurance.
In Australia, 32% of workers have dabbled in the gig economy with software developers leading the pack. Freelancing provides more flexibility to cater for a rapidly changing environment in which workers shift Companies more often and full-time jobs become less permanent and secure.
More generally, the gig economy allows an efficient allocation of supply resources against aggregated demand to provide a continuous flow of non-routine work. Supply is in the form of differentiated assets (Airbnb), commoditised services within a competitive supply environment (Ride-share) or highly specialised skills in the case of marketplaces for code and creative assets.
Individuals can also now more easily rent out their assets (for example, as ride-share platform workers) as well as their skills in the new ‘shared economy’.
Platform working may sound like a brand new economic model, but Toffler’s concept of “prosumption” showed that the shared economy has actually been around for millennia.
The Return of the Prosumer
“During the First Wave, most people consumed what they themselves produced. They were neither producers nor consumers in the usual sense. They were instead what might be called ‘Prosumers’.”
– The Third Wave
In The Third Wave, Toffler introduces the concept of the “prosumer” — someone who both produces and consumes their own assets.
This model was dominant in early agrarian societies (where farmers ate their own produce and then sold or traded what remained), then disappeared during the industrial age as people traded almost exclusively by exchanging their commodities with others.
As at 2019, the most popular examples of the gig economy are Uber and Airbnb, but they are really forms of prosumption in disguise. They involve the use of assets (in the form of cars and accommodation) that are both consumed and commercialised by their owners.
Lego offers a slightly different mix of crowd-sourcing and prosumption with an eye to customisation and people’s desire for individualism. Recently, the company allowed users to submit designs for their own products which in turn tested demand by way of votes. What Lego got out of the process was more product ideas (for free) and increased consumer engagement.
Importantly, technology has also heavily enabled our ability to prosume energy as a commodity.
The solar panels that may be deployed on the asset that is your home’s roof can be used to generate the energy consumed by both your family and others by returning any excess to the grid. This is prosumption in every sense of the word. It also offers a consumer-driven response to cost-effectively utilise renewables — in so doing, overcoming some of the environmental impacts that Toffler predicted coming out of the throwaway society. The home, as an asset, can be used in many ways beyond the offer of shared accommodation.
“What combination of policies can possibly, within our lifetime, provide full-time jobs for all these (jobless) surging millions.” “Perhaps what is needed for most people is part-time employment for wages … plus imaginative new policies aimed at making their prosumption more productive.”
– The Third wave
These newly labelled versions of prosumption are now a key driver for many of the disruptive plays coming out of Silicon Valley. The other key drivers are Artificial Intelligence (AI) and automation.
Ai and Job Transience
Future Shock extensively covered the change that arises from automation. Toffler wrote that this change would heavily impact blue collar jobs and increase job transience as the average tenure of employees at Companies decreased and the number of “careers” a person held over a lifetime increased.
The average tenure at a Company in Australia is now sitting at 3.3 years. In 1970, this average tenure was more like a decade, but already starting to be impacted by the move away from manufacturing into information led jobs. It’s interesting to look at the prominent job roles that did not exist in 1970 or even 15 years ago — professions that cover data science, app development and social media communications.
Future Shock lays out an information era in which more and more roles are created to deal with ever increasing amounts of information. Toffler wrote of mundane and repetitive blue collar jobs being replaced by mundane and repetitive white collar jobs. Somewhat ironically, these white collar roles, created 4 decades ago to undertake repetitive data manipulation, are now amongst the most at threat from AI and machine learning.
The new Silicon Valley disruptors, as Toffler predicted, see a new and valuable economic currency in information. They deploy labour more efficiently using technology driven advancements. Digitally centric multinationals pay less foreign tax in a global economy in which data and information assets easily traverse borders. This is a hotbed issue in Australia at the moment.
Changes to the American S & P index over the past 10 years bear this out. Historically large employers such as General Electric (ranked #2 in 2008 and employing 283,000 workers) have been replaced by Internet giants such as Facebook (ranked #5 in 2018 and employing around 35,000 workers).
Toffler’s 50 year old predictions regarding job transience are also supported by recent McKinsey and Co research. McKinsey forecasts an estimated 400M to 800M individualsglobally will be displaced by automation and that 60% of occupations have 30% of work activity capable of being automated using current technology.
Importantly, McKinsey warns that if displaced workers are not reemployed quickly, a moderate period of rising unemployment/ underemployment and depressed wages will arise. In their view, between 3% and 14% of the global workforce will need to switch occupational categories and that “income polarisation” is a real threat. Occupational change will happen “on a scale not seen since the transition of the labour force out of agriculture in the early 1900s.”
For some, re-employment into a new skill or career trajectory is easier said than done. For older workers, it can be a very hard thing to do. One alternative is the commoditised form of platform work, but these have been criticised for lacking in security and employee benefits if it is the sole source of income. Skill transition will need to occur from unskilled to skilled occupations requiring more investment of time and capability from the individual worker supported by Government.
The macroeconomic indicators of 2019 in Australia follow this same script.
In 2000, employment in Australia hit a critical inflexion point as rates of underemployment rose for the first time above the unemployment rate. The underemployment rate in Australia has risen ever since to a current level of 8.8%.
Throw in all the workforce trends that are in play (gig economy, platform work, automation, increased contracting and outsourcing) and it comes as no surprise that although population growth is fuelling overall GDP, wage growth in Australia is now stalled at 2.2% annually.
However, the biggest economic impacts may come from a third type of economy (beyond the traditional and rental/ gig economies). This third economy is one we don’t even notice. It’s an economy largely ignored by economists after it disappeared during the Industrial Revolution. What Toffler referred to as a DIY or “invisible” economy.
The Invisible Economy
“A more revealing way of thinking about the economy, therefore, is to think of it as having two sectors. Sector A comprises all that unpaid work done directly by people for themselves, their families, or their communities. Sector B comprises all the production of goods or services for sale through the exchange network or market”
– The Third Wave
Toffler refers to a new economy of two sectors in the Third Wave, one of which is increasingly invisible. A form of prosumption that is carried out for no monetary or salaried benefit. Different to Wikipedia which was not built to defray existing costs, but built as a non-transactional crowd-sourcing model with non-monetary based benefits from the ground up.
In this invisible economy, Corporates use a form of prosumption that shifts production from the costly Sector B in the quote above, to the free Sector A.
Every time you use an ATM, you “prosume” as a temporary version of a bank teller. Every time you self-check-in at the airport, self-order at McDonalds and self-check-out in the supermarket, you are adopting part of the role of a counter operator.
This DIY extends from assembling IKEA furniture to being routed to chatbots before being offered a conversation with a human. The example of self-service at the petrol station illustrates how rapidly this new economy can evolve. Between 1974 and 1977 the number of self-service petrol stations in the US increased from 8% to 50%.
We consumers are increasingly replacing Producers in the role of Prosumers and doing so for benefits in the form of time savings or queue jumping. There is a bit of carrot and stick involved as well. Self-service is made faster and customised attention is harder to find.
The Rise of a new economics
Some economists are now saying that a new economics is emerging based on the growth of the gig, rental and invisible economies, themselves driven by technology-led process automation.
Technology that is increasingly accessible, diminishing in cost and open-source, ceases to be a scarce commodity. It becomes a democratised commodity available to Companies large and small which also makes market disruption easier.
The old paradigm of standardised, mass-production based scale economies for product manufacturing — in turn, creating large barriers to market entry — starts to reduce in relevance. Technology companies don’t have the constraints of physical products and can accommodate “individualism” easier. They can take advantage of network effects, economies of scope and the leverage of information at scale instead.
Economists used to subscribe to the theory of technology as a rising tide floating all boats. Technology bought new skills with higher wages and lower prices to feed consumer demand which, in turn, fed into more jobs. The new reality may be quite different. One of increasing wage polarisation.
Wage growth stagnation is a politically charged area in Australia at the moment with a Federal election looming. But it’s an issue that (in my opinion) is not the fault of (or easily resolvable by) any of Australia’s political parties.
Blame is laid at the door of weakened unions, foreign workers and casualisation of the workforce. Solid unemployment trends are used to mask the rising state of underemployment. Some fault is laid at the door of platform work and the Gig economy. These indicators are red herrings as either symptoms of wage growth stagnation or minor causes. Wealth redistribution policies will also not address root cause.
We know these are not local issues because wage growth stagnation, underemployment and income polarisation are global trends. Toffler could never have predicted Australia’s current political environment 50 years ago, but he has predicted the economic environment. The real culprits are numerous and ubiquitous — automation, pace of change, the invisible economy, a rental based philosophy and a throw-away society. These are all areas covered by Toffler and are possibly the most astute of his predictions.
People tend to forget that technology (and hence change) advances in a non-linear fashion. Toffler said that “Technology feeds on itself. Technology makes more technology possible”. We are devolving the responsibility (and associated jobs) to cope with change to Technology that is also accelerating this change.
Its caused economic forums attended by concerned billionaires to address how society enjoys the fruits of wealth creation from technology advancement without impacting the fundamental tenets of reward for risk taking, hard work, endeavour and aspiration.
Blame should not be laid at the door of public Companies who, quite rightly, seek efficiency and value creation and who redistribute their profits to shareholders. Capitalism is not broken. Toffler instead describes this new economy as follows:
“prosuming involves the “de-marketization” of at least certain activities and therefore a sharply altered role for the market in society. It suggests an economy of the future unlike any we have known — an economy that is no longer lop-sidedly weighted in favour of either Sector A or Sector B. It points to the emergence of an economy that will resemble neither First wave nor Second Wave economies, but will, instead, fuse the characteristics of both into a new historic thesis.”
How does society deal with such a new economy? Unfortunately, Alvin Toffler is no longer around to help us predict how. In my opinion, we are yet to replace him with a futurist of similar extraordinary vision and scope. However, his 50 year old books provide guidance. A focus on assisting mid-career professional development and mid-life career change. A move towards equitable prosumption and rewarding activities that add societal value in the absence of monetary reward. These would be good areas to start.