The Second Industrial Revolution (Part 1 of 2)

Much like machinery replaced people’s jobs in factories, or at the very least, changed their job, computers and software will do the same for the services industry (think of desk jobs, or anything not in farming or manufacturing) . Companies are constantly testing/experimenting with new technologies and how they integrate into current production processes. Over time, best practices are broken down into smaller steps which technology can handle. Then it becomes easier to automate each of those components, much like machinery altered how manufacturing plants produced products. Think about it, in the industrial revolution, machines were bought and people’s jobs were changed to accommodate the new machinery, then as time goes by, you start to productionize tasks around the machines, to scale and make the machines as efficient as possible.

It’s interesting to note that the share of American employment in manufacturing has declined sharply since the 1950s, from almost 30% to less than 10%. At the same time, jobs in the Services industry soared, from less than 50% of employment to almost 70%. It’s inevitable, therefore, that firms would start to apply the same experimentation and reorganization to service industries.

The “machines” (computers and software), are not only becoming smarter, but they also have access to far more data than any human could sift through. The combination of big data and smart machines will take over some occupations wholesale; in others it will allow firms to do more with fewer workers. Some examples of jobs that could be replaced. Accountants may follow travel agents and tellers into the unemployment line as tax software improves. Machines are already turning basic sports results and financial data into good-enough news stories. And legal services is slowly being codified and productionized.  A taxi driver will be a rarity in many places by the 2030s or 2040s.

The productivity gains from future automation will be real, even if they mostly accrue to the owners of the machines…. On my next post I’ll post my thoughts on what these effects will have on the economy going forward.


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