Chronic Unemployment

Structural unemployment is a form of unemployment that occurs because worker’s skills are outdated, or not desired by employers. Technological unemployment is in some ways a type of structural unemployment caused specifically by advances in technology – as technology automates jobs, workers become unemployed with no skills to gain other employment.

Both of these types of unemployment are traditionally fixed through supply-side policies such as training and educating workers so that they have skills desired by employers. This fix is costly to taxpayers as it is not cheap to provide education. However, in most cases, it is a fix – workers will be able to find employment after being trained and educated. Structural and technological unemployment are in most cases temporary because of the government’s supply-side efforts.

But what if technology advances so much that employers simply don’t need as many workers, no matter what their skills?

I’m not just talking about manual labour here. Obviously manual jobs are being replaced by robots and others forms of technology. But again, these people can be up-skilled and subsequently find re-employment. I’m talking about when technology becomes so advanced that people cannot up-skill to a point above the capacity of the technology so as to become desirable to an employer.

Technology is starting to cause people with university degrees to become unemployed. Law firms don’t need as many lawyers because much of the research can be done in one-hundredth the time it previously took. R&D departments need less engineers and managers because the processes have been automated. Teachers are becoming irrelevant as we learn online. I’m talking to friends of mine who have masters degrees and cannot find a job. It’s a global problem that most people are blaming on the economic downturn. I don’t fully believe that. It may be a part of it, yes – but I believe the main cause of this unemployment is simply advances in technology.

It’s only going to get worse because technology will never stop advancing. We’re going to see technology continue to progress at faster rates every single year than it ever has previously. And the technology is going to become (already is becoming) so advanced that it will render people with masters degrees “unskilled”. No company will hire an individual whose skills can be done by a form of technology at a tenth of the cost. Technology also doesn’t require healthcare and stock options.

Where is this going to lead? If people simply are not needed and therefore cannot gain a form of income, what happens? How do they live?

In the short-term, governments won’t realize that the problem is advances in technology. They’ll keep paying benefits to more and more people, while funding supply-side efforts to train workers. They will subsidize university. They’ll focus on education to begin with. They also might try demand-side policies – by increasing government spending, they can fund more jobs. So we’ll see governments employing more people. But none of these solutions are long-term. They’ll simply lead to a waste of resources in every country.

And when governments do realize that the problem is advances in technology? Well, stopping advances in technology to save jobs is ludicrous. I hope that no government ever considers that.

I think this is a massive problem that will start to show just how serious it is in a couple of decades. This will be one of the major problems facing economies (excluding, ironically, developing economies) in this century. And I don’t have an answer to the problem.

Personally, I want to be at the forefront of developing these technologies. I guess it’s a kind of “If you can’t beat ‘em, join ‘em” mentality. I also think that entrepreneurship is going to explode in societies as a result of this problem. People who can’t find jobs will simply create one for themselves. In this sense, this may be a blessing to modern societies.

After I began thinking about this issue, I tried to find more writing on the topic. I couldn’t find much, other than a book by one Martin Ford, called The Lights in the Tunnel. I’m reading it now, and will likely write another post once I’ve finished it. If you know of any other writing done on this topic, please share it with me – I want to find out as much as I can.

Don’t change the world. Improve it.

“How are you going to change the world”? This big question gets thrown around a lot. It seems as though everyone who wants to achieve something in their life is obsessed with trying to “change the world”. From Steve Jobs quotes to discussions about what you want to do in life, we hear a lot of talk about how we are going to, or should, change the world.

I don’t think anyone should ever grow up being focussed on changing the world.

If the system isn’t broken, don’t try to fix it. Not all change is good change. Indeed, some change is very harmful.

We see executives being brought into new companies and government departments who are focussed on “changing the company/department”. They subsequently screw it up. It happens all too often in too many industries and areas of life.

We should never focus on changing the world, or anything for that matter.

We should focus on improving it.

This distinction is critical.

If people believe that changing the world is the most virtuous thing they can do, they will likely achieve this quite easily. And they’ll stop at that, being satisfied that they’ve “changed the world”, regardless of the nature or consequences of the change they’ve made.

If people believe that improving the world is the highest goal they can aspire to, they’ll likely spend their whole life working towards achieving it. It’s harder to improve something than it is to merely change it. Anyone can change something. It takes a great mind to improve it. But the results of improvement are, by nature, positive. It’s not just a change for change’s sake.

Let’s stop talking about changing the world. Let’s demand that people improve it.

Selling Lifestyles

To use Jim Collins’ phrase, I believe that these days the difference between “good and great” companies is how they manage to sell the idea of a lifestyle. I’ll explain why I think this using two companies in two different industries.

Firstly, Abercrombie & Fitch. They died as a company two times before becoming the phenomenon that they are now. They’ve always been known to sell incredibly high-quality products made from good materials. But that didn’t stop them from filing for bankruptcy once and then being bought out. Abercrombie then brought in a new CEO, Mike Jeffries, who created the new concept for A&F. He wanted this new concept to allow people to think that they’re in a movie. He also wanted the brand to “sizzle with sex”. Abercrombie sells the lifestyle of sexy college students.

Look at the difference in approach. When the brand failed, it focussed on product first and foremost. It made a great product, but with no image or lifestyle, people didn’t buy it. After Jeffries came in, A&F put their lifestyle image first, backed up by a super high quality product. And now they’re smiling all the way to the bank (they’re a multi-billion dollar company).

Look at Apple, too. Apple has always made high-quality products. But it almost failed years ago, because it didn’t have a lifestyle with which people could buy into. Then Jobs came back, and created the “think different” lifestyle that creative people could buy their products to become a part of. I don’t need to explain their success since then.

The point is, you can’t be a great company with just a great product. There are thousands of companies with high-quality, functional products, that are on the verge of failing because no one will buy the product. To be a great company, you need to have a lifestyle that people want to buy into by buying your product. The more compelling the lifestyle that you sell, the more you can charge for your product and the more people will want it. Abercrombie raises its prices every single year, and yet demand for their products rises faster every single year – the Abercrombie lifestyle is so strong that it even makes the law of demand invalid (in economics, it’s called a Veblen Good). This is the situation you want to be in as a company. Think about it – you raise your prices and even more people want to buy your products!

I don’t think that selling a lifestyle is something that only physical-good companies can do. I believe that web apps can do it as well, and indeed many should think about it more seriously. One app that I believe should really focus on creating a lifestyle to sell is Path. The new version of their app is fantastic, and they’re seeing huge numbers of people begin to use it. But Path, to me, is about sharing my life with the people who are close to me. Path’s job, then, is to make me want to share more of my life. And I think the best way for them to do that is to create a broad lifestyle image for people to want to buy into. They should create an image that means when someone sees me using Path, it says something about me and my lifestyle – “I’m tech savvy, value my close friends and family, and want to share my life with them as well as see their lives”.

Every web app can sell a lifestyle of some sort. It might not be as elaborate as Abercrombie’s, as you don’t have a physical store for people to walk around in, but you can create it through your app and website.

I’ll repeat the key point I’m trying to make in this post – that it’s not enough to make a fantastic product. To make your company great, I believe you need to sell a lifestyle through a high-quality product.

How To Bring Handwriting Into The 21st Century

I think better when I’m physically writing with pen and paper. There’s something about it that lets me map out my thoughts more effectively, and think in broader terms. When I’m writing on a computer, or an iPhone as I am now, I feel more confined and stuck within a specific format.

I can’t explain why this is, beyond saying that it’s either personal preference or a result of the fact that I wrote on paper before I typed. But because of it, I usually map out my thoughts on paper before I take to a computer to type. By doing this, I find that the end result of my writing is usually always better.

If you read my blog often, you’ll know that I have a love-hate relationship with paper. I try desperately to eliminate it from my life (and do pretty well) but love writing on it. I want all of my writing to be stored digitally (in Evernote), even things that I’ve handwritten.

There are ways for me to do this, and I’ve tried them. Livescribe is one solution, but it’s too much of a hassle to make it worthwhile.

For those of you who don’t know, Livescribe is a specific pen (a very chunky, uncomfortable to hold one), that allows you to write on a specific type of paper and have your notes converted into a digital format when you plug the pen into your computer. You cannot write on your own paper  - it has to be Livescribe’s paper, which is covered in tiny dots that the pen can read.

I’ve tried Livescribe a few times and have never been taken with it. I want to use my own paper, and write with a normal-sized pen, and have all my notes automatically converted into a digital format and sent to my Evernote account. I’ve even thought up a concept that I believe could work, which I’ll explain here in case a brilliant engineer or inventor happens to read this. Please bear in mind that I do not have an engineer’s brain, and I don’t have a proper idea of how this would be built or the exact technology involved in it.

I envisage a normal-sized pen, that is comfortable to hold. It has a small screen on the side (similar to Livescribe) and is connected to the Internet via 3G (like Amazon Kindles). Inside the pen is an accelerometer and a gyroscope. You simply write on any paper you want, and the accelerometer and gyroscope pick up the movements that your hand is making and convert those movements into letters, which are then sent wirelessly to Evernote’s servers. This, in my opinion, is the best solution. It means you don’t have to be locked into using Livescribe’s paper, plus it removes most of the hassle from the process.

To be honest, I’m only guessing as to whether an accelerometer and gyroscope can pick up the movements that our hands make. But it’s an educated guess – from seeing what an iPhone can do, which has the same technology inside it, it seems likely that this could work.

If this was built, I’d be a bloody happy guy. I could write with pen and paper, which I love, but never have to worry about keeping the paper or having it with me, as I’d have all my notes accessible on my iPhone in Evernote, wherever I am. I believe this is a way that handwriting can be brought up to date with modern technology.

If you’re an engineer and read this – would you mind letting me know your view on the feasibility of producing a pen like this? And if any of you have heard of an existing technology like this, or another alternative, please let me know!

Making Things Interesting

One of my least favourite subjects is biology. It just has no relevance to my interests, and I find all the explanations just painful to remember. In saying that, I’ve done quite well in biology exams. This week I have a biology internal over two full days, which you’d expect to be two horrible days for me. But I’m actually quite enjoying them.

How am I enjoying biology even when it bores me to death? By making it relevant to my interests. And this method applies to any subject and almost everything in life.

For example, this biology internal. We were tasked with coming up with a project to carry out experiments on and then do a report on. There were lots of things that could have bored me to death. But I thought about what I was interested in and wanted to find out, and came up with something that I’d enjoy doing experiments on.

What I came up with was a series of tests to determine the effectiveness of different materials on keeping temperature and heart rate stable over a short run. Those of you who read my blog often will know I absolutely love Icebreaker merino – and so through this experiment, I wanted to see whether Icebreaker really is the best, or if I should be wearing different materials.

We carried out the experiment yesterday, and I’ll be reporting on results on Twitter later today. I’m sure hoping Icebreaker comes out on top, or near it, so I can stay faithful!

My point is that by thinking about all of my interests, and something that I want to discover or prove, I made a boring project very interesting. And you can do this with almost everything in life.

I think there are two types of people who succeed the most in exams. Firstly, there are people who are so insanely motivated to get good grades that they will study huge amounts and remember everything they need to, no matter how much it bores them. Secondly, there are people who are also insanely motivated to get good grades, but not as able to study for huge lengths of time. These people succeed through making boring topics interesting to them.

Just some food for thought. This strategy has worked for me over the past few years, and I’m confident it can work for you too, provided you have clear interests and things that excite you.

The Time Value of Experience

You’ve no doubt heard of the Time Value of Money, a theory that explains how the value of a dollar in your pocket today is more than the value of that dollar if you receive it tomorrow. If you own that dollar right now, you have the opportunity to receive interest on it before tomorrow, which means that the dollar is more valuable to you by the amount of the interest that you receive before tomorrow (and tomorrow can represent any date in the future).

The Time Value of Money theory is the basis of fundamental finance and economics. It explains the core reasoning behind why people act rationally with regard to money and how people make investment decisions. There is no arguing with the importance of this theory in our society.

I propose that there is another theory which is arguably more important than the Time Value of Money. It’s a theory that is relatively obvious, but often forgotten. The theory explains the core reasoning behind how we act, and how we make decisions in life. And because it encompasses much more than money, it’s something that people should be made aware of, so that they don’t forget it.

Let’s call it the Time Value of Experience. It describes how experiences we have are more valuable the earlier that we have them, because those experiences can then be applied to all other parts of our lives in the future. It’s about knowledge and lessons that we’ve learned – so perhaps those terms are interchangeable.

If I make a mistake today – let’s say I screw up a negotiation with someone, or make a bad decision – then the lessons that I’ve learned through this experience are valuable, as they help me to avoid making similar mistakes in the future when perhaps the stakes are higher. By making these mistakes today, that experience is more valuable than if I made the mistake tomorrow because I’ve had a day with which to apply that experience to my life. Later that day, I may have avoided making a similar mistake because I already made the mistake earlier that day.

Therefore, experiences that I have today are more valuable than that same experience tomorrow by the difference of mistakes that I would’ve made before tomorrow if I hadn’t gained that experience today.

Obviously, the Time Value of Experience is not as easy to measure as the Time Value of Money. It’s intangible, and non-numerical. But by being aware of this theory, we can attempt to gain as many experiences as we can, as soon as possible.

This theory explains why many entrepreneurs love making mistakes, and look upon mistakes as a huge achievement. By screwing up, you’ve successfully gained experience and knowledge which you can apply to everything you try in the future.

The Time Value of Experience also helps me to explain the importance and value of my project They Don’t Teach You This In School. If people can pass on their knowledge and experiences through TDTYTIS, then young people can learn from that right now and benefit from it into the future. On the other hand, if the only way for someone to learn something is through personal experience, then society is slowed down because everyone is making mistakes that could be avoided.

I believe everyone should bear in mind the Time Value of Experience. You should try to gain as much experience as you can in whatever it is you do every single day, because that experience is more valuable the sooner you gain it.

The Branded World

Apparently Italian towns used to be famous for small family-owned shops that specialised in creating and selling individual types of goods – shoes, bags, wallets, shirts etc. But on each of my trips to Italy, I’ve had a hard time finding a single one of them. No matter where you go in Italy, whether it’s a big city like Rome or Milan, or a small town like Padua or Siena, you’ll see the same shops. You’ll see Gucci, Prada, Dolce & Gabbana, Louis Vuitton, Burberry, Mont Blanc, Hermes… – you know the rest. No matter whether you’re looking for shoes or a wallet, you’ll be able to find it – but you’re going to find it at a shop you can find in almost every other city in the world.

Think about that. These big brands have killed off the individual sellers that used to make Italian towns so special and unique. The main streets of each town or city you visit are lined with exactly the same shops. Before you even get to a town, you know what you’re going to see there. And it’s the same all over the world. Literally almost every single city and town I’ve been in in the past few months, in Europe and Asia, have had all of the same shops.

But that fact makes you wonder how the big brands survive. No, not just survive, they flourish – they’re each doing hundreds of millions, if not billions, in sales. If you can buy exactly the same product in your home town, why bother buying it somewhere else? Or at the very least, why bother buying it in one town in Europe over the next?

By no means am I suggesting that the power of these big brands be curbed. I’d be the last person to suggest that. They’re all over the world because they’re playing the game right and their products are desired. It’s sad for the small sellers and the people who used to buy their goods, but you can’t be sorry for them.

I just find it an interesting phenomenon, that we can travel half the way across the world to remote towns in foreign countries, and find exactly the same shops as we can in our home country. It’s removed a lot of what made traveling fun, by discovering shops and products that you could never purchase at home. And it’s all gone now.

This demonstrates the shift that the world has undertaken in perhaps the last fifteen years. We’ve moved to become the Branded World. Brands rule almost every industry. We’ve lost the subtleties that used to make purchasing fun, in favor of brands as a symbol of status and affluence.

In New Zealand, each suburb used to have a local butcher, fruit and vege shop, and a bread shop. But the big-brand supermarkets killed that. We chose convenience and price-cutting in favor of relationships with our locals and perhaps higher quality. There’s nothing wrong with that, except for the fact that many people say they wish they still had local shops. In the Branded World, you can’t have both – there isn’t enough room in the markets.

The Branded World is one in which millions of people worldwide walk around with bags that look exactly the same. Apparently it’s meant to symbolize people’s wealth, only there’s no way of telling whose bag is a $2 knock-off. The Branded World is one in which you’ll find a Disney flagship store on a beautiful Venetian street. It’s a world where you’ll find two or more shops which are exactly the same within 50 metres of each other.

The Branded World is one in which we all willingly buy things that make us look the same.

It’s a world we’ve chosen and love. Only sometimes you have to wonder why.