The Correct Word is Desource, Not Outsource.
posted by Deven Desai
Everyone thinks jobs are being outsourced; they are, in fact, being desourced. When Mitt Romney claims he will create jobs, when Barak Obama claims the same, when Google, Apple, or Amazon assert they build out the economy, they all overstate. Worse, they ignore the reality that both manufacturing and service jobs are dying. Robots, artificial intelligence, and the new information-at-scale industries all but assure that outcome. The ability to build and sell without humans is already here. I am not saying that these shifts are inherently bad. They may even be inevitable. What we do next is the question. To answer that question, we need to understand the ways humans will be eliminated from manufacturing and service jobs. We need to understand what I call desourcing.
Focus on manufacturing is a distraction, a sideshow; so too is faith in service jobs. A recent New York Times article about Apple, noted that manufacturing accounts for only about eight percent of the U.S. labor force. And, The Atlantic’s Making It in America piece shows how manufacturing is being changed by robots and other automation. According to some, the real engine is service labor “and any recovery with real legs, labor experts say, will be powered and sustained by this segment of the economy.” That is where desourcing comes in. Many talk about the non-career path of service sector jobs. A future of jobs that have low pay and little room to rise is scary and a problem. Amazon explains why that world might be heaven.
The world of low wage, high stress service work is being replaced by automation. Amazon gave up its fight against state taxes, because it is moving to a model of local distribution centers so that it can deliver same-day delivery of goods. According to Slate, Amazon will spend more than $1 billion to build centers all over the U.S. and hire thousands of people for those centers. The real story is that like any company Amazon wants to reduce operation costs; it must automate or perish as Technology Review put it. It will do that, in part, by using robots to handle the goods. Self-driving cars and autonomous stocking clerks are the logical steps after ATMs and self-serve kiosks at movie theaters and grocery stores. I am always amazed at the folks who line up at movie theater ticket windows rather than use the kiosks. A friend said to me that we should walk up to the window to keep those jobs. It is a nice idea, but I think untenable. We all want to move faster and pay less. Welcome to desourcing.
Desourcing means reducing or eliminating humans from the production or service equation. Humans are friction points. More and more we can reduce those points of contact. We no longer need to send work to other humans.
There are many economic questions that are beyond what can be addressed in a short piece. But here are some ideas on which to chew. The returns from this approach are tremendous for the companies that desource. For example, by one account, Apple makes $473,000 per employee; yet “About 30,000 of the 43,000 Apple employees in this country work in Apple Stores, as members of the service economy, and many of them earn about $25,000 a year.” So we may satisfy our need for instant gratification as companies reduce their costs, but that money will go to corporate bottom lines. Whether it will really reach the rest of the economy is not so clear precisely because a smart company will invest in desourcing. I suppose at some point companies will have to realize that they need masses who can buy stuff. Yet I think some studies indicate that serving the upper end of the economy works better than serving the masses. In theory, a company may offer goods at lower prices but to do that, it will need lower production costs. And less workers means lower costs.
I am not saying I know what will solve this riddle. I offer desourcing, because I have not seen a satisfying answer to the issue. There may not be one; for we may be stil sorting what to do as the digital age takes full hold. As the computer science folks say in early training, “Hello world.”
September 22, 2012 at 4:28 pm
Posted in: Economic Analysis of Law, Employment Law, Innovation, Political Economy, Technology, Web 2.0
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Responses (6)
A.J. Sutter - September 23, 2012 at 10:56 am
“Self-driving cars and autonomous stocking clerks are the logical steps after ATMs and self-serve kiosks at movie theaters and grocery stores.” — By what “logic”? And why should that sort of “logic” be the criterion for policy?
“I suppose at some point companies will have to realize that they need masses who can buy stuff. Yet I think some studies indicate that serving the upper end of the economy works better than serving the masses. ” — Works better at what? This post doesn’t consider such a question. In the view expressed here, “the masses” seem to have a purely instrumental function of consuming stuff that keeps the economy rolling. The post doesn’t reflect at all on the importance of work to most people — not only for their material needs, but for their human ones as well, including as a source of meaning in their lives. What are people to do if they can’t have work? And what is it that assures anyone writing or reading this blog that he or she won’t be swept into “the masses” at any moment?
One possibility you don’t consider is that the problem is, simply put, capitalism. These developments need not be “inevitable,” nor, as you seem to suggest in your final sentence, do they necessarily represent the way the world works, if capitalism is put into question — because in that case, the reduction of costs and the increase of “returns” need not be as prioritized as they are now. I’m not saying that any alternative to capitalism, e.g. a productivist doctrine such as communism, is sufficient. Rather, my point is that we need to break out of capitalist thinking in order to consider more humane alternatives.
“Humans are friction points.” What a vision. A profound one, in fact: like the rest of this post, it reflects both a profound lack of empathy and a profound failure of imagination.
Deven - September 23, 2012 at 1:14 pm
No one said that was the criterion for policy. I am making observations about how people think about this issue. I am not saying they are correct or the way things ought to be. I call out where things may head and call out desourcing to highlight the problem it poses. My empathy is clear. It is for those who may be cut out of a future where they may matter and have lives they like.
-Deven
amused@anon.com - September 23, 2012 at 6:37 pm
Deven, if you substitute “computers” for “steam engines”, your post will turn into a classic mournful outcry that navel-gazing humanities-trained Luddites were putting out back in 19th century. None of this is new. Since then, we’ve learned not to take this talk too seriously We DO want to increase productivity by using machines. This DOES lead to fundamental gains in social wealth. Regimes other than capitalism HAVE been tried and failed miserably everywhere. Optimism, brother! You haven’t listed anything new. None of this is a disaster.
Deven Desai - September 23, 2012 at 7:24 pm
Yet again, I am not saying turn back the clock. But productivity does not equal jobs. Social wealth increase does not mean spread broadly. Whether something other than capitalism can or will work is a good question. So far the other options seem to gave failed. Then again, pure capitalism is a mythology. My point is this is not, repeat not, steam. I might be wrong (and I’d be happy to find that things turned out better than it seems). But just as we have seen many folks claim ah this not new or this model works, we have also seen that sometimes models are broken or “flawed” as someone once said. Now I think it my job to put more into what I mean by different. And believe me I am a fan of technology and the way it can improve things. But pure faith does not happen to be my mode.
If you have specifics as to where the supposed new work will be, please list. I think that the labor numbers are more about less hands, possible union power (now gone), and so whether the service industry will also go away for more automation is a question. And should we (or could we) take advantage for higher productivity to let folks be with family, engage in civics, etc.? That would be great. Hmm blog post may not a good place to get into all that.
Anyway to be clear I am not saying “preserve the jobs, ditch the machines.” I am saying things will shift and so I’d like to think about what that looks like.
Eric Hodgdon - September 24, 2012 at 1:17 am
Post-Capitalism is now. Capitalism ( as practiced in the USA ) has failed by not providing for all the required equal access to opportunity for each generation.
If a family is poor, the parents are said to be at responsible. Why do we then condemn the children? This is along the lines of “corruption of blood” in the Constitution, because it condemns the children for the father’s mistakes.
Where is the level playing field I’ve heard so often as to sicken me? Nowhere! because we’re not playing a game! Real life demands demand the purpose of government be held – to protect its citizens from harm. Today’s people didn’t choose this form of government which protects the predators inherent in the economic anarchy of capitalism.
No one truly desires a handout, and an acceptable standard of living is never defined, so, as we have been born into this system, which has no free space were one can make a living on their own, as money and taxes are always required to buy and feed respectively the means to exist within this arbitrary system imposed on all of us.
Capitalism has failed as the usurpation of lawful government has succeeded.
Brett Bellmore - September 26, 2012 at 7:17 am
This is not steam. Steam replaced draft animals, primarily, not humans. There’s no reason automation has to stop short of systems which can entirely replace humans, from digging up the ore to delivering the product to your front door. A lights out factory over an automated mine, loading self-driving delivery trucks.
There’s a line creeping rightward across the bell curve, and everyone to the left of that line is essentially unemployable except as charity. It’s not stopping, we’re not getting smarter, eventually it’s going to reach that right tail of the curve, and everyone will be unemployable.
It’s not the failure of capitalism, in the sense of a system which can’t go on. It CAN go on. It’s only a failure in the sense that we’re not presently organized to cope well with it.
Everyone needs to become a capitalist, in a world where all the production is due to capital, not labor. That’s all.
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