Wednesday, July 4, 2012

Job-Killing Machines in the Modern Information Age

by Luke Ho-Hyung Lee
We have developed numerous “job-killing machines” in the real market (or supply chain process) through the use of IT and networking technology over the last 20 to 30 years of the Modern Information Age.  These machines have significantly contributed to the shift to a more efficiency-oriented supply side environment by killing jobs and have altered the whole economic environment.  Strangely, it seems nobody has recognized this yet, and no expert has considered this at all in his or her public ruminations about the economy.
What are the job-killing machines in the real market process?
As you may have recognized, every company on the supply side has aggressively adopted IT and electronic networking mainly to increase its own productivity and efficiency in the functional real market process.
By developing many kinds of market (transaction or supply chain) systems and applications through the use of IT and networking technology in this way, two major effects are to be observed: (1) the number of transactions and functions in the supply chain process has shrunk remarkably—as with Wal-Mart, e-buyer, e-seller, and e-auctioneer systems, and existing e-marketplace systems in the real market process—and (2) numerous collaborative activities to increase efficiency of function have arisen in all sectors of the real market.   
Finally, by integrating those two major activities, numerous private information-based supply chain networks (mostly in big companies) have developed in all industries, and virtually only the big companies benefit.
Due to the superior position of big companies with their own efficient supply chain networks, the businesses of small- and medium-size companies have weakened and eventually been destroyed, and accordingly, many jobs in those companies also have been killed.  Moreover, these private information-based supply chain networks have contributed to the shift to a more efficiency-oriented supply side environment and changed the whole economic environment in the Modern Information Age.  That is, a mutually complementary relationship between the supply side and the existing market process has been firmly established, and this has completely altered the economic environment.  Thereafter, the following activities have been significantly facilitated in almost all industries on the supply side by killing numerous jobs in the domestic market: (1) aggressive adoption of IT progress, (2) off-shoring and outsourcing activities toward lower-labor cost countries, and (3) broad adoption of robotic machines and automation processes equipped with information (software) devices.
In this situation with the private information-based supply chain networks in the real market process, employment has continually and inevitably declined, and policies aimed at improving it have been unsuccessful.  Therefore, it could be said that private information-based supply chain networks have been the major job-killing machines in the Modern Information Age.
What is the private information based supply chain network?
Let me explain more details about the private information-based supply chain network with an example, the Zara case:
Zara, the largest clothing company in the world, developed a private information-based supply chain network by vertically integrating its logistics and collaborative functions through the use of IT and networking technology and now needs just two weeks to develop a new product and get it to its own stores, compared with a six-month industry average, enabling Zara to launch around 10,000 new designs each year, far more than its competition.
Zara has been remarkably successful over the last 20 to 30 years, and as a result, Amancio Ortega, Chairman of Zara, was named the fifth richest person in the world by Forbes in 2012.
But what happened to others in the industry?  Most small individual designers, manufacturers and stores were much less competitive than Zara, and most of them in their supply chain lost their businesses. That is, the whole supply chain in this industry became seriously unstable. Only some of them could be subordinated to Zara for survival.  As a result, the employment situation for middle- and lower-income workers in this industry has seriously and relentlessly deteriorated.  Unfortunately, Zara is no longer an isolated case.
Large companies in every industry have developed similar private information-based supply chain networks for their own distribution, and those big companies have used their supply chain networks only for their own benefit.  Thereafter, sadly, the employment situation for middle- and lower-income workers has seriously worsened in almost all industries, worldwide. 
Let me ask you directly:  “Without first replacing those job-killing machines, can you change this worsening course of the employment situation and revitalize the economy?  That is, can you solve the current economic crisis only with the old economic policies or stimulus plans?”  I believe it to be impossible in most existing market or supply chain processes.  That’s the real problem.
What should we do then?
Remember, we had also developed numerous private information networks in information until the Internet as a meta-platform was introduced and popularized in 1996.  What has happened in employment since then?
On the basis of the Internet, we could have developed numerous web-based software applications, software platforms such as Facebook and platform devices such as smart phones. Further, we could also have developed numerous platform-based software applications on the basis of those software platforms and platform devices. That is, we could have created numerous new businesses and jobs in the IT and Internet sectors of the market. Those meta-platform, software platforms, and platform devices were major job-creating machines in the information process, or so we were told at the time.
A question is raised: “Why haven’t we developed such a meta-platform or platforms also in the real market process?”
Unfortunately, without being aware of it, we have made a simple but serious mistake in developing many kinds of market, transaction, or supply chain systems and applications based on information technology.  As a result, information technology has been used in the wrong way in developing those systems and applications.  Thereafter, no competing public information-based supply chain infrastructure as a meta-platform in the real supply chain process has been developed.  (Please see more details about the mistake in “The Real Cause of the Current Economic Crisis and a Suggested Solution”.)
Another question is raised: “Is it possible to develop such a meta-platform as a job-creating machine also in the real market or supply chain process?”
To answer this question, we must be clear about what the Internet is.  It is a meta-platform for efficiently transferring information (digital codes) between multiple information sources and recipients.  Is it also possible to develop such a meta-platform for efficiently transferring physical objects and services between multiple suppliers and customers?  Yes, it is possible.  The concepts are the same, even if one is for transacting information and the other one is for transacting the sale and purchase of physical objects and services.
I believe the conditions and circumstances for the development of such a meta-platform, that is, a new public information-based supply chain infrastructure, are already in place.  That is, information technologies, facilities, devices, and people are already in place to develop it.  The only issue that remains is the will to develop it.  Moreover, the solution is already in sight.  It only needs to be implemented.  Once decision-makers are willing to make the necessary choices, it will be relatively easy to implement, and it will not take long to see positive results.
I believe there will be no sustainable solutions for the current economic crisis until the existing job-killing machines, that is, the private information-based supply chain networks, are replaced by a new job-creating machine, that is, a new public information-based supply chain infrastructure (or platform) that helps rather than disrupts and destroys existing businesses.
I would strongly recommend that governments and leaders of the Western countries, especially the United States and the Euro-zone countries, initiate the development of this new job- creating machine, and provide the active assistance and support necessary to revitalize their own economies and also the world economy, and that we do so immediately.
Time is running out.  The old private supply chain networks continue to shed jobs and wreck businesses.  This new public information-based supply chain infrastructure can and will reverse these effects in time to avert collapse.

About the Author
Ho-Hyung (Luke) Lee (luke.h.lee@ubims.com) is by training a lawyer, an international businessman and entrepreneur – and an inventor. He is currently the CEO of UBIMS, Inc. ("Ubiquitous Market System"). UBIMS, Inc. is a patent-pending startup with a new business method and system for the information-based public supply chain infrastructure.

8 comments:

  1. Doesn't it somehow resemble of Luddites?

    ReplyDelete
    Replies
    1. I think there is a little bit of confusion: The Luddites objected to the machinery that could replace them with less-skilled, low-wage laborers, leaving them without work. What I am insisting on is that we should replace the job-killing machines, which have developed in the wrong direction by mistake and are not really suited to the Modern Information Age, with a new job-creating machine better suited to the Modern Information Age. This is not destruction but innovation. Please try to figure out what that mistake was from my articles. Even if it was a simple mistake, I believe it could be one of the most expensive that human beings have ever made in modern commercial history.

      Delete
  2. So an internet for physical goods...kinda like the post office?

    Look, the reason these new technologies kill jobs is because they increase efficiency. That's good. We're nearing a post-scarcity economy. It will be a radically different economy, (if the word 'economy' is still even appropriate) and it will probably be painful getting there...but it will be the world human beings have dreamed of since before we were human.

    You can either look at a trend of increasing unemployment and say 'this is terrible; people need jobs!' or you can look at it and say 'this is great! we don't need as much labor!' Personally, I think it's time to do two things: First, redistribute the wealth so people aren't dying in the streets so that CEO can get his 12th car; Second, shorten the work day. Once it was 12 hours; now it is 8 hours; soon it will be 6 hours.

    ReplyDelete
  3. The premise of this philosophy would be that the world economy is zero-sum: if automation eliminates a job, there is no other job for that individual and individual unemployment ensues. Further reading between the lines, this proposition of an "public information-based supply chain infrastructure", would seem to indicate that our beloved governments somehow can fix these problems by controlling the infrastructure. There are very few things governments do well, and being inserted into the economic supply chain has never been one of them. This article reflects what my father used to call, "Falling in love with an idea to the exclusion of reason or fact." I applaud the author for having a point of view and attempting to address the problems that affect the world economy, but that's all it is, because I don't think it is very well thought out. Just my humble opinion.

    ReplyDelete
  4. This comment has been removed by the author.

    ReplyDelete
  5. I love this idea, and completely defer to the author's erudition. I need to see one factor brawt in to the discussion: population. It is, so to speak, the elephant in the room. Picture Detroit in the 50s, growing, providing thousands of jobs, and as a result a population expansion, at least there (tho this scenario existed in many places in many industries--mining, farming, textiles, and even today around shale oil, pipelines, etc). Then the industry goes bust, at least where it had sprung up, leaving thousands of families, maybe brand-new familes, spawned by the original and now defunct bounty, milling around a brand-new ghost town with no jobs, no hope.

    ReplyDelete
  6. I applaud those thinking outside the box, oh how I wish that you are right. Never-the-less, I believe the problems outlined below have boxed us in and keep us on the hamster wheel.
    My two thoughts are that the internet kills profitability for many (and local) businesses. For example; I just bought a dash-cam, I shopped and found many on the internet. I never went to Best Buy or Radio Shack to shop. ONE item was $70.00, also for $40.00, I bought the same one for $20.00 (from China) after searching for the title of that product I liked and will buy the memory separately. My point being that I was able in 1-2 hours’ time to squeeze everybody in the business of selling dash-cams to the max. This is how the internet has hurt the economy. We cannot squeeze each other so hard and stay prosperous. Neither will we stop doing this while we still can. We are all guilty to some extent here if you are at all like me.
    The second thought is that super big business has gone to a "screw the consumer" business model. Read "From Good Hands to Boxing Gloves" (you can buy it used and cheap on Amazon and squeeze your local book seller who would love to order it for you if he is still in business) as a primer on what the insurance industry has done, taking billions out of people’s pockets by cheating on their prime function of trust worthiness. Take a look at the nutrient-free food sold to us by huge agra-businesses. It keeps the medical model of health care prospering as we get sicker. The truth is out that all chronic and degenerative diseases can be attributed to long term mineral deficiencies in the body. We are getting "killed" at both ends. Take the poison then pay big bucks for the antidote. That is the "new prosperity".
    So in summation we have “the squeeze” that we do in internet shopping and the squeeze that is done to us by immoral, super large profit-oriented big businesses. This includes foods, insurance and medical, which has its own insurmountable problems but is also getting super squeezed by the insurance industry along with the consumer (and generating huge profits for itself). Buy the slow poison (non-organic food) to stay alive, buy insurance because you can’t afford the antidote (merry-go-round medical care) for when the poison takes effect. The other squeeze is of course the manipulated price of gasoline which (by design) keeps the greater economy teetering on the edge of collapse.
    Unfortunately, and I am sorry to say, those with some preparation will be better off in the short term when this house of cards crumbles of its own weight. This has been called "the reset". Wealthy and agrarian societies will survive the world wide famine that is coming. The short term will be very painful and many will “not do well”. Long term is a different discussion entirely.

    ReplyDelete