Outsourced and Automated

During the last political campaign and particularly following the collapse of Wall Street, you heard echoes of “Americans just don’t make anything anymore.” Sure we export high-tech electronics, avionics, military gear, software, agricultural products and entertainment, but we don’t manufacture much else on a mass scale that creates a viable export business. And while there may be mega-tons of agricultural products, less than 2% of Americans are still involved in agriculture, the entertainment sector is relatively small, and we have lots of competition everywhere. The tough reality is that the labor required to make stuff that the world really wants is either the precise manufacturing we have come to expect from German carmakers or the cheap labor we see in China and India for most everything else.

So naturally, our service sector has grown much more rapidly than the manufacturing base, which production-based sector is almost a vestige of the “industrial revolution” that has long past the American economy. We’re in the information age. We are financiers to the world – and you can see the trouble that has created. We create social networks, creative content and software that controls everything to analytics to robotic manufacturing. Think robots are only for manufacturing? Think again. How about the new da Vinci surgical robot that has four remote control arms and a very elegant camera system? It allows surgeons to operate less invasively with much greater precision and much better visibility. The surgeon sets the robot and triggers the procedure, all the time under the doctor’s watchful eye, but it works incredibly well.

Computers are not only changing our business lives, they also provide ways to extend our very lives. Ian Ayres – author of a must-read Super Crunchers (Bantam 2007) – illustrates how “evidence based medicine” and software packages like the diagnostic program “Isabel” can increase patient illness evaluation from an average of 67% to 96% accuracy. Many doctors still believe that they can outguess the computer, but that is increasingly a myth that will die hard, especially as the press for more doctors that the new healthcare reform will mandate creates new demands for efficiency.

The kinds of detailed analysis that young MBA are required to do when they join financial institutions is becoming computer-routinized and/or outsourced to mathematically-trained experts in places like India. Simple legal documents are being offered by self-help sources like LegalZoom.com, clearly impacting the lower levels of legal practice, but India offers specialized companies that can write a U.S. patent or perform the most tedious legal research once reserved for young associates at the most prestigious firms in the United States. The world is definitely changing. And with the horrific economy teaching companies to resist hiring back for fear of recession part two, many of these convenient efficiencies will become a necessary part of corporate existence on a permanent basis. The need to be competitive will take us there and require use to remain in this lean, mean automated and outsourced world.

My friend Dennis Duitch (www.duitchconsulting.com ) notes in his weekly report what this trend holds for us in the future: “FAIRLY DISTRIBUTING SOCIETY’S WEALTH may be the most pressing unrecognized necessity now facing the U.S… As computers become more powerful, they can take over more jobs that now require human input and, within ten years, will be capable of carrying out almost any task… Manufacturing already is all but lost to human labor. Service, management, and even many research jobs are next… This trend is inevitable – the U.S. (and other developed lands) will become essentially jobless societies within the lifetimes of today’s younger adults… The only questions left are of timing… Within ten years, the U.S. will begin to follow Europe’s lead, reducing the workweek so that jobs and income can be divided among more people. Implications are a more severe decline in living standards than many people recognize, eventually making it necessary to scrap the current system (the ‘jobs for wages’ model adopted during the Industrial Revolution) in favor of some other means… so that the majority of people have at least the opportunity to provide a secure life for themselves and their families.” A distressing forecast. [THE FUTURIST – May-Jun 10]

It is easy to blame the economy for the changes we see, but even when the economic climate reaches a more positive plateau, clearly, almost every facet of the lives we took for granted in earlier times will have changed. The economic collapse didn’t cause these changes; it simply accelerated their implementation. Our new mission is learning to live within the new rules.

I’m Peter Dekom, and this isn’t going to be an easy transition.