The Digital Revolution and America’s Economic Future

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  • David Kirkpatrick, Techonomy Media

  • Philip Zelikow, Markle Foundation & University of Virginia

Speaker

Philip Zelikow
Visiting Managing Director, Markle Foundation


Session Description:
As the US goes through the biggest economic transformation in a hundred years, millions of Americans are losing faith in the American dream. How did we get to this moment? What are its unique opportunities? Can Americans thrive again? We must rethink how people learn and train for the jobs of the future, and create paths to expand business opportunities. We need a bold vision for a new way forward. Now is America’s Moment.

Kirkpatrick: Next we’re going to go to one of the issues that I mentioned at the beginning, which is the future of work and America’s economy as technology’s transforming it. Philip Zelikow, who’s a very eminent Washingtonian and a professor of history at the University of Virginia, and for the last couple of years a very senior executive at the Markle Foundation.

Zelikow: Thanks, David. Americans have never been more pessimistic about their economic future. Yet my colleagues and I involved in this project, which we call Rework America, actually think this is America’s moment and the economic future could be brighter than it’s ever been in American history. So there’s a paradox. To start understanding that paradox, consider the iPhone. We’re right now having a big debate in Washington about trade. How many of you would classify this iPhone as an import? How many of you would classify this iPhone from Cupertino, in the product insert, as an export?

Let me offer you a choice C, none of the above. All right. None of the above is what I would choose. Think about it. All right, it’s classified as an import under US law because the final assembly occurred in Shenzhen. The actual value of the Shenzhen final assembly is about 3% of the value of this phone. Almost all the value in this phone is made by a huge number of suppliers, South Korea, France, Germany. The Gorilla Glass on the iPhone, made my Corning, headquartered in upstate New York. The fabricators for Corning are in Kentucky, as well as in Taiwan and other parts of Asia. So classifying the iPhone as in import and an export—in a way the iPhone is none of the above.

Every sale in our economy tends to be classified as the sale of a good or the sale of a service. So here’s the next question: Is this iPhone—should this be classified, the sale of this iPhone, as the sale of a good? Raise your hand if you think it’s a good. Raise your hand if you think it’s a service. Again, probably I’d have to give you a choice C, none of the above. Think about this as a good; the good part of this is a polished brick. Everything on top of the polished brick is the service that gives it so much of its value. We barely even know how to classify software or software developers.

It’s this conundrum, how do we think about a none of the above economy, that has Americans both worried yet some of us here so hopeful. This challenge, this paradox is what drew two years ago 56 American leaders together to puzzle over how to talk about America’s economic future. That’s this group Rework America. It includes corporate CEOs, Howard Schultz of Starbucks, Walter Robb of Whole Foods, the CEOs of Salesforce, of eBay, the HR head of Google and more. It included community leaders like Dorothy Stoneman of YouthBuild. It included politicians from both sides of the aisle. It included the head of the business roundtable and a leader of the AFL-CIO. This 56 people from all over the spectrum, tech gurus like Craig Mundie, whom you just heard from, and others all got together to puzzle over these problems. We formed working groups on personal development and on business development and the result then is this book, “America’s Moment,” which we brought a lot of copies too, and which will be publicly released on Monday, published by Norton—available at a bookstore near you.

So what did these folks come up with? First, this is not another problem book. This is a solution book. It’s grounded in a sense of America’s economic history but it is full of ideas about what to do. But I’d give you a few of the big takeaways right now about revolution, about mismatches, and about emerging American leaders. First big takeaway: We are in an economic revolution of a new kind. Yes, it is a revolution. It’s a revolution as big as the Industrial Revolution of the late nineteenth century and early twentieth century. But it is the first economic revolution in history that is fundamentally user friendly and that makes all the difference. The last economic revolution, the Industrial Revolution was all about centrality and big enterprises: the huge factory, the huge government, the huge corporations organized around the large firms—Alfred Chandler’s “Scale and Scope.” That was the essence of that revolution, the global supply chains they could create, the organization around the giant hubs and all the spokes. Except now the essence of this revolution is decentralized. It’s distributed. It pushes things out to the user. You had a first revolution in which the great argument of the mid-twentieth century was how will the institution swallow up individuality, because everybody had to fit in. Instead, this is a revolution in which all the institutions are trying to fit you in a seemingly infinite number of products and choices.

Alison Hills was a young woman growing up in a suburb of Tacoma, Washington. She went to Arizona State University. She had to drop out of Arizona State. Like the majority of Americans who try to go to college, she didn’t end up with a four-year degree. Ali, as is her nickname, had to drop out because, you know, her mom had financial problems, there were things going on at home. It’s a very common story. Most Americans lead very complicated lives. So her dream seemingly shattered, she goes to work at a Starbucks as a barista. She found out last year about a program that was actually hatched at one of our meetings, a deal between Howard Schultz and the president of Arizona State, Michael Crow, in which Starbucks said to Ali and thousands of other Starbucks employees, “You go back to college, we’ll pay the bills.” “Well, how can I go back to Arizona State? I’m in Tacoma, Washington?” “Arizona State’s going to come to you. It’s going to have a global online program and you can enroll and it’s full college credit.” And she’s in that program now. Starbucks didn’t care what she took. She’s majoring in art history.

Now, notice—you hear so much about this revolution and ordinary Americans may feel put off: “Yeah, I can see everything’s changing but what does this mean, like all of us have to learn how to code?” No. This is a revolution that’s going to come to you where you are and where you live and give you opportunities in the life you have, and that’s what makes it different.

But it’s also an era full of mismatches, as you’d expect actually in a period of revolution. Let’s talk about just some of these mismatches. Say, global commerce. We’re stuck in old arguments about trade like the ones you’re reading about in the paper now, the rhetoric of which is exactly the same as the rhetoric I heard in the debates I was in over NAFTA more than 20 years ago. Yet you can see how much of the economy is changing. You can see that we’re actually in a none-of-the-above economy.

You can think about digital commerce. You can think about doctors performing operations in Beijing assisted in real time in the operating theater by an anesthesiologist or a surgeon in Richmond, Virginia. Or an electrician using telepresence to guide the emplacement of circuits in a building project in New Delhi from South Carolina. Commerce that we might not even know about, it’s not even coming into ports and harbors. This is a new world. We think of services as a non-tradable and in digital commerce services may become immensely tradable. We have a mismatch in which the best services economy in the whole world is actually not yet quite figuring out the fact that it can deliver services to the greatest burgeoning demand in services around the whole world in the coming 20 years that we will have ever seen as billions of people enter the global middle-class.

Think about capital, private capital. America is awash in private capital. Corporations are sitting on some of the largest cash balances they have ever seen, trillions of dollars sitting, waiting to be deployed. Yet investment in American business as a proportion of our national income is down. Investment in small business is down. We’re taking less risks, we’re being more cautious, we’re being more short term. It’s not a shortage of money, it’s a shortage of vision. It’s a failure to appreciate revolutionary possibilities.

Think about good jobs for Americans. You have a standard argument, the caricature argument, the robots will take our jobs. The mismatch of course is it’s not about the robots taking your jobs, it’s about how new jobs will be invented that use the robots. You have to reimagine the jobs, which we did during the Industrial Age when converted armies of illiterate laborers into electricians and machinists and then demanded that we build high schools in every American community to teach them. How about now? How about imagining home healthcare aids and medical assistants and paramedics now armed with iPads connected to the entire medical team behind them who are in real time able to assess vital signs and be the frontline operatives of an entire knowledgeable medical system, instead of thinking of a home healthcare aid as the bottom tier of the system and a minimum wage employee who can barely read. Of course that’s just the way we thought of laborers a hundred years ago. Reimagine the job. Revalue that person. That person’s more valuable. You invest in your workforce, you reimagine your workforce, everybody wins.

How about a world of making an innovation where we overcome another mismatch, the cultural legacy of the twentieth century, which left us a paradigm of blue collar and white collar. So in Colorado our colleagues working in the Markle Foundation go out and say, “We’d really like to help modernize this labor market because we know that employers are seeing and worrying about tens of thousands of their most experienced manufacturing workers retiring.” There are going to be all these jobs opening up. Yet they go out and people don’t want those jobs. Why? Because they think of them as blue collar. They tell them though, “Hey, how would you like to work in aerospace?” “Oh, I’d love to do that.” Well, that’s what those jobs are. We have these cultural images of blue collar and white collar, of people in overalls, of the mindless assembly workers guided by smart knowledge workers that is completely belied by the reality of today’s makers and builders and producers who mix software developers in an automobile manufacturing facility right alongside of people who are doing computer numerically controlled engineering. This is a no-collar world we are entering and the cultural paradigm of the past is a mismatch for it.

How do we fix also a broken labor market? We have lots of jobs going begging and we have lots of college graduates who feel underemployed. How can that happen? Well, partly it’s because we have a credential system in which the employers don’t know what people can do because we only have basically the menu of credentials that we designed and standardized in the 1890s that isn’t nearly transparent enough in showing what people can do and showing the skills they have, in which we measure credit units by the Carnegie Unit, which we developed in the 1890s based on seat time rather than competency. Yet we’ve never had more ways of measuring competency. We’ve never had more ways of matching people to opportunities. We can use network and platform power in the labor market in ways we’re only beginning to scratch the surface of. LinkedIn doesn’t just have to be a service for the elite. It can be a service for actually the entire labor market and it can plug educational portals right into it alongside of it.

Think of governance and where governance can evolve and what a mismatch we have there. We’ve never had more ways for citizens to participate, yet we hear about all the ways in which they feel distant and alienated.

So the final finding from our work was this: A lot of Americans get it and are ready to lead. Our book has more than 150 examples of Americans who are grabbing America’s moment and who are taking action. They just don’t know that there are thousands of Americans like them all over the country. And part of the reason we wrote our book is to share their stories and get them to sense, yes, you are really part of a movement that’s going to remake America.

A presidential candidate uttered these words. The candidate said, “There is one great basic fact which underlies all the questions. That singular fact is that nothing is done in this country as it was done 20 years ago. We are in the presence of a new organization of society. Our life has broken away from the past. We have changed our economic conditions absolutely from top to bottom, and with our economic society, the organization of our life. The old political formulas do not fit the present problems.” That presidential candidate, unfortunately, was Woodrow Wilson in 1912. Those words were on page one of his collected campaign speeches—page one. They were the premise for everything. They were the premise for everything Americans said in that race. They should be the premise for everything Americans say in this race. They should be on page one of the speeches this time. Because this is not just a problem that’s going to be solved by the federal government or local governments. It’s a problem for the private sector, for the nonprofit sector. In other words, it’s a problem for this generation, because this generation is at the crossroads that that generation faced 100 years ago. And that generation fashioned an enormous broad agenda touching every facet of American life and it’s the challenge of this generation to do it again and once again make this America’s moment. Thanks.

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