Oil prices are below $50 per barrel and are expected to stay around this level well into next year. With mass layoffs in the Alberta oil sector, the rest of the economy is sure to be impacted very soon.
With a downturn in the economy, it’s no surprise that there is less demand for new home purchases, but what is the effect on home improvement companies. Home hardware stores tend to do better in down economies because people spend more money fixing up their current homes rather than upgrading. Does the same logic hold true for other companies in the home improvement sector?
Calgary Roofing Companies
It is my guess that Calgary roofing companies are not going to feel much pressure. If you need a new roof, you need a new roof. Holding off on replacing your roof could lead to much higher costs in the long run. I suspect Calgary plumbers, electricians and other essential services will also not be affected too much.
Kitchen and Bathroom Renovations
At the other end of the spectrum are non-essential upgrades like landscaping, kitchen renovations and custom cabinet companies. These firms are likely to be the first to feel the impact of the slowing Calgary economy as consumers delay these types of purchases.
Calgary Window Companies
Calgary window companies and other industries straddle a middle ground where the purchase may be needed, however could also be delayed if there is some economic uncertainty in the household. New windows and doors can be delayed a little, but if they are old, they will need to be replaced sooner or later.
Retail and Restaurant Businesses
Consumer focused businesses like restaurants and retail don’t seem to be affected yet. While thousands have lost their jobs in Alberta, there still seems to be plenty of work opportunities available. We might cut our personal expenditures a little but we all still want to eat out.
How will Calgary Ride Out the Economic Slowdown?
There is no question that oil has a huge influence on the local economy. The real issue will be how much the economic slowdown starts to trickle down to the rest of the economy. There are already drastic cuts in the oil sector and this has lead to a big decrease in new housing construction and home sales. The next market to look for will be the home improvement sector. If we start to see weakness in renovation and home improvement businesses than I’d take that as a sign that the economy is in for much more hardship.
GORUCK shows how to cleverly differentiate itself in a crowded market.
Create inspirational events that showcase the key value of your product.
GORUCK Marketing Strategy
Imagine you are a Green Beret and you decide to manufacture and sell a military strength backpack. How do you get noticed in a crowded market?
There are dozens and dozens of large companies with big marketing budgets making high quality backpacks. A startup will never have the budget or manpower to compete head-to-head. More creative marketing tactics are required, guerilla marketing, if you will.
The GORUCK Challenge
Originally, devised at a way to test the durability of new products, the GORUCK challenge is turning into a movement of challenging urban adventures held around the world.
The Challenge is a 9-13 hour team event in which a Special Forces veteran — called a Cadre — leads you on a 15-20 mile “guided tour” of your city. It begins at night and runs until the morning. Along the way, you take part in military-inspired challenges and “missions,” which includes doing some basic training calisthenics, taking a little swim, carrying logs (and each other), and a lot of marching. Oh, and you do it all while wearing a backpack filled with 30 to 40 pounds of bricks and other equipment. They tell you to bring $20 for a taxi – if you can’t go on, you have to call one to pick you up. The GORUCK Challenge is designed to push the individual physically and mentally and build teamwork and camaraderie among those participating. It isn’t a race. You don’t get a medal for first prize. The goal of the Challenge is to finish it, and finish it as a team.
Here is the promotional video from the site:
This is brilliant. Customers sign up for gruelling adventures, proving the strength of the product, while at the same find, growing a community of engaged and connected customers.
What is the key benefit of your product or service?
What is the most extreme way of proving that key benefit?
Is it possible to create an event or movement around your product?
If your having difficulty finding that key benefit or identifying an inspiring aspect of your corporate vision, then perhaps that is your marketing problem. Maybe you need to improve your product or service to make it stand out in the market?
The US is shifting from a market economy to a market society, where everything is for sale.
Putting preferential access to public goods for a price only increases inequalities.
This PBS.org interview explores Harvard professor Michael Sandel’s new book, “What Money Can’t Buy.” We can pay for faster processing through airport security lines, access to the the fast lane on roads and there are even companies that will hire people to wait in line for you to get into congressional hearings in the US. Where do we draw the line?
It is a fascinating discussion. Please watch the video.
According to the logic of the market, the matter of whether these transactions are right or wrong is literally meaningless. They simply represent efficient arrangements, incentivising desirable behaviour and “improving social utility by making underpriced goods available to those most willing to pay for them”. To Sandel, however, the two important questions we should be asking in every instance are: Is it fair to buy and sell this activity or product? And does doing so degrade it? Almost invariably, his answers are no, and yes.
However, a true believer in the law of the market would surely argue that all this proves is that sometimes a particular marketisation device doesn’t work. For them it remains not a moral debate but simply one of efficacy. Sandel writes about the wrongness of a medical system in which the rich can pay for “concierge doctors” who will prioritise wealthy patients – but to anyone who believes in markets, Sandel’s objection would surely cut little ice. They would say it’s a question of whether or not the system is fulfilling its purpose. If the primary purpose of a particular hospital is to save lives, then if it treats a millionaire’s bruised toe while a poorer patient dies of a heart attack in the waiting room, the marketisation has clearly not worked. But if the function of the hospital is to maximise profits, then treating the millionaire’s sore toe first makes perfect sense, doesn’t it?
“I suspect that you have – we have – a certain idea of what a hospital is for, such that a purely profit-driven one misses the mark; it’s deficient in some way; it falls short of what hospitals are properly for. You would say, wouldn’t you, that that hospital – that market-driven one – is not a proper hospital. They’ve misidentified, really, what a hospital is for. Just as if they were a school that said: ‘Our purpose isn’t, really, primarily, to educate students, but to maximise revenue – and we maximise revenue by offering certain credentials, and so on,’ you’d say: ‘Well, that’s not a proper school; they’re deficient in some way.’”
Don’t buy make money online programs or get rich quick schemes.
It is not worth lying to make a quick sale. The life time value of the customer will likely be worth more than the short-term profits, unless you are a criminal.
1/5 of online information product sales are never downloaded by the purchasers. Is it because sellers are misleading customers?
Are you a Used Car Salesmen?
Why do used car salespeople get such a bad rap? Many of us have expectations of being sold a lemon, being over-charged or being pushed into something we don’t want to buy. Of course, those feelings are not only for used cars. We have this idea of ‘snake-oil salesmen’ in many industries, especially for online information products.
How Not to Make Money Online
Seth Godin had a great article on How to Make Money Online. It is a great list to read in it’s entirety but here are the first three items.
The first step is to stop Googling things like, “how to make money online.” Not because you shouldn’t want to make money online, but because the stuff you’re going to find by doing that is going to help you lose money online. Sort of like asking a casino owner how to make money in Vegas…
Don’t pay anyone for simple and proven instructions on how to achieve this goal. In particular, don’t pay anyone to teach you how to write or sell manuals or ebooks about how to make money online.
Get rich slow.
All Consumers are Suckers
I have read or heard a few times now, that about 20% of purchases of online products are never downloaded. People pay their money, but for some reason never actually get the product they gave up their money for.
On a popular marketing podcast, the two announcers joked about how so many of their customers were retirees in Florida and probably don’t even know how to turn a computer on. They seemed to be quite happy with the fact that their sales techniques were so effective in getting customers that many were buying even though they had little ability to benefit from the product.
While some responsibility has to be taken by consumers themselves to not purchase products or services they are not going to use, I can’t help but feel that many businesses, online and off, hint of snail oil salesmen. How many information products have you bought that didn’t pass the used car salesman test?
The Used Car Salesman Test
Have you ever purchased a product that failed one or more of the following three tests?
1. It was a lemon. It didn’t match it’s over-hyped sales pitch.
2. You were screwed over. It was over-priced for the quality you received.
3. You were squeezed. It was sold through pushy sales tactics like false-scarcity (limited time offer, only 10 more at this price), or emotional appeals (When are you going to stop beating your head against the wall? Doesn’t your family deserve this?).
Most information products I have purchased haven’t lived up to their claims. Why does a self-published ebook sell for $97 or more when a print book, that has been vetted by agents, editors and the marketing process go for typically less than $30? The ebook publishers will tell you that it is not the price you pay, but the value you get out of it. Bullshit.
A $97 price, has nothing to do with the value of the ebook. That price point is chosen solely because it maximizes profits for the writer. Sadly, that is the way most business is done. Prices are chosen to maximize profits, not value for customers.
We all need to make a living, so by all means create value for others. Companies that create the most value, deserve to make the most money. That is fair. Misleading customers is not.
If your customer can’t use or doesn’t need your product, don’t sell it to them. The life time value of trusted relationship is greater than the profits from a single one-off sale, unless you are a fraud or a criminal and don’t care about the future business.
Scarcity tactics work. More people will buy when there is a time limit. However, if you are going to use scarcity tactics, be honest about it. If the sale is one-time only, make it one-time only. Act with integrity and keep your word.
The same goes for the long sales pages on websites. They work. That is why they are used. If you are a publisher and you know that 20% of purchases are never downloaded, you still have a responsibility to those customers. Make sure the purchaser knows exactly what they are buying in advance. Have a fair return policy that you honor.
Profits don’t have to trump ethics. Do the right thing.
As a consumer, don’t buy “How to make money online products,” “No money down real estate courses” or any of that instant millionaire nonsense. They are designed to make the authors rich, not you.
Dirty profits are extorted out of consumers at moments when they have little alternative.
While most business pay lip service quality and customer service, their actions say otherwise.
Try giving more than you promise. The marketing benefits will out way the increased costs in the long run.
For the most part, capitalism and free markets do a pretty good job of keeping corporations in check. Charge too much money, fail to innovate or offer lousy service and someone else will take away your market share. The problem is that markets are not quite that free. As the economic crisis has proven, greed, corruption, government bailouts and a whole host of barriers interfere with the free flow of most markets. Those are all huge problems in their own rights, but I want to focus on smaller problems with individual firms.
There are far too many companies that, once they have a captive consumer, will try to gouge as much as they possibly can. It is not about creating value for the consumer, maximizing profits at all costs is clearly the priority.
I have stayed in nicer hotels that charge $30 per day for internet access, exorbitant rates for long distance calls and have mini bar prices that would embarrass Wall Street fraudsters. While at the same time I have stayed in $25 per day hotels that offer free internet, free bottled water and complimentary buffet breakfasts. How much good will is a hotel building by charging $30 per day for Internet access that costs them almost nothing?
Most businesses do a pretty lousy job of serving customers. The Ristr8tto Cafe in Thailand is an example of company that clearly gets it.
Great businesses can’t be built on efficiency and administration alone, any longer. Success is dependent on delivering a great customer experience.
Business can be art if you really care.
Most Businesses Offer Mediocre Products with Even Worse Customer Service
I’ll be blunt. Most businesses suck. Owners only seem to care about profits. Employees often do as little as possible to keep their jobs and all stakeholders blame everyone else for the sad state of affairs. It happens in government, large corporations, chain stores and even small businesses. There are exceptions, but they are so rare that I am going to start a new series this blog to hi-light amazing businesses around the world. These are companies that care about delivering exceptional experiences above all else. Everything they do is art. Unsurprisingly, exceptional companies also seem to generate higher sales and income.
Ristr8tto – Chiang Mai, Thailand.
On my first visit to Thailand more than 15 years ago, good coffee was pretty hard to come by. Not any longer. There are decent cafes all over the country. You might guess from this post that I like good coffee.
Ristr8tto is a relatively unassuming cafe on the trendy Nimmanhaeman Street frequented more by locals than the backpacker scene. My wife and I walked by several times and noticed that it was always packed with customers, even though many neighboring cafes were quiet. One day we finally gave it a try.
Immediately upon entering, your eyes will be drawn to the large flowchart type menu explaining exactly how to order. Your first choice is hot or cold coffee. If you choose cold, you are once again directed with “Why not hot coffee?” The owner admonishes you to not ruin a great espresso drink with ice and syrup before you even order.
The next choice is what type of espresso drink you want, followed by the origin of beans. If you really want to get fancy you can also choose the type of latte art you would like to finish up with.
As a side note, I once asked a Starbucks Barista why they don’t do latte art. She said she could make butterflies and many other designs but it would take too long in this busy cafe. I was the only customer at the time.
Fortunately, Anon, the owner is never too busy for latte art. Every cappuccino and latte is finished to perfection every time without exception. You don’t take short cuts when you are an artist.
Ristr8tto doesn’t sell much else other than coffee either. There are a couple of desserts to compliment your beverage, but make no mistake, you are there to enjoy a damn good cup of coffee.
The young Thai owner of Ristr8tto, spent several years in Australia where he had an opportunity to study the art of coffee, opened and sold his own cafe, won the world latte art championship in the Netherlands and returned to Thailand to open another cafe. This is clearly a person that lives for coffee. I love the fact that several pages of the menu are dedicated to telling his story.
He is perfectly happy to explain the nuances of each bean, talk about exactly what makes the perfect espresso and personally decorates your drink with virtually any latte art design you want. The owner is an artist. Coffee aficionados definitely appreciate his talent and knowledge of his craft.
There is no shortage of chain cafes in Chiang Mai, including Doi Chiang and the ubiquitous Starbucks, however, for any respectable Ristr8tto customer, it would be blasphemous to go to any other establishment. How can you not patronage a business that clearly loves their work so much? There is no competition when you operate at this level.
My wife and I went out of our way to visit this small little cafe because it was good and the owner cared. Do you care that much about the service and quality you offer the customers you serve?
Could Ristr8tto Improve?
Overall the cafe is doing a fantastic job, but I would offer a couple of suggestions to be even better. First, a second espresso machine would shorten wait times and increase throughput during busier times. Space is limited and this is a large capital expense, so perhaps this might have to wait for a new location, but it would definitely increase sales if it were possible.
The second suggestion would be to install a small oven in the back to offer fresh baked pastries. The smell of freshly baked croissants would be too hard to resist for any customer. While coffee purists, like the owner Anon, would argue that they don’t want to mask the aroma of the coffee, a good croissant and a latte are just too good of a combination to pass up. I suspect sales could be increased by 50% or more, if they have the capital for the equipment and can make better use of the back space of the cafe.
What experience do you offer your customers? What can be improved? I am constantly astonished at how little business owners care about their craft. Don’t be one of those people.
Go into an Apple store and closely examine every part of the customer experience. (Lots of knowledgable staff. All staff have devices to sell you right on the spot without lining up at a cash register. All products are simply displayed with ample space for you to test them out. iPads are used for sales information. The packaging is beautiful.) Everything is perfect from beginning to end.
Search out other companies that offer exemplary service and learn from them. Great companies are hard to find but they do exist.
Do you care so much about your job or your business that you treat it as art? If not, maybe it is time to change careers?
What is your art? Make that your business and do it so well that people rave about your work.
Do you know of an amazing company? Let me know in the comments below.
Effectively dealing with complaints can be a great marketing opportunity.
Negative experiences spread much more than positive ones.
Create an effective procedure to make customers happy, it costs much less than what you have to potentially lose.
Vegie Bar, Melbourne
Note from John: This is not a restaurant review. I am providing the background information to offer some lessons in customer service. I generally don’t waste time dwelling on low quality service, I prefer to write about positive experiences. I am starting a new series called The Art of Business, where I will celebrate great businesses around the world. Until then, I think there are some good lessons to learn from my visit to Vegie Bar.
Vegie Bar looks like a great restaurant from the outside. It is a very busy place in the trendy Fitzroy district of Melbourne, Australia.
Unfortunately, the food and service didn’t match our expectations. The first warning sign should have been the inability of our server to recommend anything from the menu. When going to a new restaurant, I generally ask the staff to recommend something that is a “must try” item. Our server, said she didn’t know but could recommend something “popular.” Two dishes she suggested were the lentil burger and the grilled mushroom with quinoa. I asked her if these are “amazing dishes with great flavour.” She again said she didn’t know but said they were popular. Not exactly an inspiring introduction to the restaurant.
I thought the idea of beet root on a lentil burger was good, unfortunately the curry sauce drowned out the flavour of everything. I wish I could have tasted the burger, because it’s probably good on it’s own. The worst part was the bun which was definitely stale. It was inedible and certainly was more than a couple of days old.
My wife’s dish was okay, but again the key ingredient of the dish, grilled mushrooms, was drowned out by the pickled olives in the sauce. The food seems to be a big mishmash of trendy ingredients without much thought to how they combine.
I would have ignored the whole experience, but on the way out of the restaurant, our waitress asked us how our meal was. I told her it wasn’t so good, so she suggested we tell the manager because he would help us.
As I was paying the bill, the manager (at least I think he was the manager) didn’t ask, but I mentioned that the food was disappointing.
He inquired why, and I told him that the old bread of the lentil burger crumbled in my hand. His response was, “Yeah, that is a difficult burger to eat.” I clarified that the bread was stale. His response was that I should have mentioned it earlier, he could have done something if I complained in time.
I then told him that none of the servers, bothered to check how our food was. His excuse was that it was a really busy restaurant. I said that I can see how busy it is, while gesturing to show that the restaurant was 80% empty because it was late in the afternoon. The manager, didn’t have a response for that.
He then suggested that the next time we come to the restaurant, we should complain about the food earlier.
To clarify, I had a bad experience that he was not willing to do anything about, and he was asking me to come back again so that I could get another opportunity to complain.
I assured him there wouldn’t be a next time and thanked him for being so helpful.
Again, if the waitress hadn’t asked us to complain to the manager, I wouldn’t have. I would have left and completely ignored the experience. However, after talking to the manager I was incensed. He made me feel stupid and cheated.
What could the restaurant have done better?
Food costs in a restaurant are typically 30% of sales. If Vegie Bar had comped my $10 lentil burger, it would have only been a $3 cost. Alternatively, they could have offered us a free dessert or coffee at an even lower food cost. Basically, for a dollar or two they could have made a dissatisfied customer into a loyal fan. We would have probably returned the next night as well if the manager made any gesture to rectify the situation.
How do you deal with complaints?
Is the customer always wrong in your view? Do you care what customers think?
People with bad experiences are much more likely to share them that those with positive ones. Finding a way to satisfy unhappy customers is generally not that difficult and rarely costs as much as you can potentially lose. Consider how much money the United Breaks Guitars video has cost United Airlines. The video now has almost 12 million views.
The best defense against bad reviews is a good offense; don’t give mediocre service in the first place. However, there are people that will always complain regardless of what you do. Often, all you need to do is sympathize and acknowledge the problem.
If the manager of Vegie Bar had said, “I’m sorry you had a bad experience, can I get you another entree?”, I probably would have declined because we were finished eating and on the way out of the restaurant anyway. However, that gesture would have meant a lot and would have definitely encouraged me to come back again. Giving us a couple of free coffees, would have definitely cost the restaurant less than a dollar and would probably have encouraged me to leave some positive reviews. Instead, I am writing this post.
The problem with United, is much deeper. I have personally witnessed the disrespect and utter callousness of United Airline’s employees several times. That ingrained attitude comes from a culture of mistrust and abuse right from the top levels of the organization. However, I am sure that a couple of free air tickets to anywhere United flies would have done a lot to appease musician Dave Carroll, at very little cost to the company. Unfortunately, the airline would never trust it’s employees that much to allow them to solve customer problems of that nature.
Does your business have a service or efficiency focus?
Every business talks about how important quality and service are, yet most only really care about the bottom line. The manager at Vegie Bar likely has food and labour cost percentages that dominate his thinking. Sadly, the focus of most businesses is on how to cut back staffing or costs a little more, hoping the customer won’t notice. That is the type of thinking that created offshore call centers, complicated voice mail answering systems and large box stores where you can never seem to find any staff.
What if businesses reversed that idea? Instead saving 10 cents on a business class passenger by cutting an olive from martinis, how about giving a little more to every customer. For example, the cost to give every passenger an ice cream on a discount airline, might be $1. In the aggregate this will be a huge expense, hundreds of dollars on each flight and potentially hundreds of thousands of dollars every year. However, that is an accountant’s mindset. Accountants don’t grow businesses, they manage businesses. You can’t shrink your way to greatness.
What would the marketing benefit and overall customer good will that could be created from just a $1 per person ice cream? I suspect the costs to acquire a new customer for a discount airline would be in the tens of dollars. Instead of having a large marketing budget to acquire new customers, why not spend a little more to make your current customers happy. That word of mouth might just prove to be invaluable. Unexpected positive surprises leave a lasting impression. Give your customers a little more than they expected and you will have all the business you can handle.
It doesn’t have to cost much either.
Why not make a sales call a month after the initial purchase to see if everything is okay?
How about making a sales call just before the warranty expires to see if the product needs to be repaired?
Mail a hand written thank you note after the sale of a major product. Few companies give that personal service anymore.
For bloggers, why not email every one who comments on a post to personally thank them?
Bulk purchases can make a valuable gift very inexpensive. The value to the customer can be much greater than the cost to the company.
Create an effective policy to deal with customer complaints. It doesn’t have to be complex, just make sure that everyone in your organization knows that quality customer service is more than bullshit marketing speak.
Set a reasonable budget and let front line employees solve customer problems immediately, without management intervention. In a restaurant, it might be $20. Any server has the ability to give out $20 of product to a dissatisfied customer, without retribution. Management can ask about why there was a complaint and discuss ways to avoid charges like that in the future, but why not give your staff the power to make customers happy? Empowered staff are happier staff.
Instead of trying to minimize costs at any cost, spend some time thinking about the effects of your efficiency efforts on staff morale and customer satisfaction. Allowing some slack in your budget by not look good on today’s income statement, but you will see the results over the longer run.
Remember that the product is the marketing. Create amazing products with a great user experience and you don’t need to sell so hard. Apple doesn’t just sell electronics. It has created fantastic experiences from it’s amazing stores with helpful staff, to the beautiful packaging, to the design and ease of use of all it’s products. There is no other electronics company that comes close.
Everyone wants to be more creative and innovative, however, they are too afraid of doing something different because it might lead to failure.
Try the Question Framework Exercise to help you discover new business models.
The Creativity Lie
Everyone wants to be innovative, creative and forward thinking. Of course, we all do. It is obvious that the the opposite is boring, safe and easier. Why would we choose a path that we know is inferior? The reason is that we don’t really want to change. Change is hard. It is much easier to lie. We tell everyone how creative and special we are. Perhaps if we say it often enough we might actually believe it.
That is a problem with all this positive psychology and motivational garbage we consume. There is this prevailing belief that if tell ourselves how smart, happy, rich and creative we are, then it will come true. That is like never practicing a musical instrument, yet calling yourself a talented musician while expecting to be a rock star one day.
In my experiences, people who are searching for innovative ideas to help propel their art or business, almost always reject new ideas as being too crazy. I hear things like, “our industry is different,” “our clients are not like that,” “that won’t work” or “that is not the way others do it.”If you say anything to that effect, you don’t really want to be creative. You want to play it safe, avoid risks and any chance of failure.
When you are looking to do something unique and special, it is hypocritical to outright reject an idea because it is extreme or different from your way of thinking.
Not all ideas are good, but how will you know which are good, unless you try something new and substantially different from what you have ever done before?
Connecting and collaborating are essential to most businesses. The best physical location for collaboration may very well be coffee shops.
Universities, bookstores, retail stores and offices will become more like coffee shops in the future.
Digital Nomad Unconference – Thailand
In the idea economy, our social connections (social capital), and effectiveness in collaboration are critical success factors. Historically, there has been no better location for the creative classes to work, connect and share ideas than coffee shops.
Starting with intellectuals gathering in European cafes of the 18th century, modern day cafes have become extended offices for sales people, freelancers, artists, and virtually anyone looking for a dynamic, socially rich place to work, talk and relax. Forward thinking businesses and co-working spaces are expanding on the water cooler gathering place to create full fledged cafes to foster serendipitous encounters, networking and collaboration. This is only the beginning.
With rising tuition costs and the birth of free online programs like MITx, it is likely that students will seek to reclaim some of the university experience in cafe like settings to socialize, study and network.
Book Stores Will Shrink to Coffee Shops
“Between ebooks and print-on-demand, Barnes and Nobel sized stores shrink down to just their coffee shops – or maybe Starbucks takes over their business. Either way, customers keep the experience of reading with coffee and those big comfortable chairs.”
The Coffee Shop Will Displace Most Retail Shops
“Which is more enjoyable: Starbucks or Walmart? For the sane: Starbucks. So if you can accomplish your Walmart shopping at Starbucks, why do it any other way?”
Offices Become Coffee Shops… Again
The need for offices grew as the equipment for mental work was developed starting in the late 19th centuries. That need appears to have peaked about 1980. It was a rare person who could afford the computers, printers, fax machines, and mailing/shipping equipment of that time.
Now a single person with $500 can duplicate most of those functions with a single laptop computer. So the remaining function of the office is to be that place that clients know to find you… and that kids and the other distractions of home can’t.
Here are some questions to think about?
Can your business become more like a coffee shop?
What would your company look like, if it were more of a meeting place for like minded people?
Can you benefit from working in a co-working space to share resources, network, and collaborate?
Do you need university with free online tutorials and academic programs?
Do you use coffee shops as creative places to meet and discuss ideas? If not, why not?
Technology is leading to more automation and outsourcing of work, increasing rates of unemployment are the inevitable result.
The middle class is bearing the brunt of these job losses.
Developed societies must change their fundamental social pact to cope with massively higher rates of structural unemployment.
We are automating, outsourcing, crowdsourcing and off-shoring more work than ever. It is not going to stop. After World War II, middle class families enjoyed fantastic improvements in their living standards. Great jobs in manufacturing, service and later technology industries brought comfortable incomes and low cost products to purchase. Life was good. Those times are over.
Why now? It starts with the fact that globalization and the information technology revolution have gone to a whole new level. Thanks to cloud computing, robotics, 3G wireless connectivity, Skype, Facebook, Google, LinkedIn, Twitter, the iPad, and cheap Internet-enabled smartphones, the world has gone from connected to hyper-connected.
This is the single most important trend in the world today. And it is a critical reason why, to get into the middle class now, you have to study harder, work smarter and adapt quicker than ever before. All this technology and globalization are eliminating more and more “routine” work — the sort of work that once sustained a lot of middle-class lifestyles.
The merger of globalization and I.T. is driving huge productivity gains, especially in recessionary times, where employers are finding it easier, cheaper and more necessary than ever to replace labor with machines, computers, robots and talented foreign workers. It used to be that only cheap foreign manual labor was easily available; now cheap foreign genius is easily available. This explains why corporations are getting richer and middle-skilled workers poorer. Good jobs do exist, but they require more education or technical skills. Unemployment today still remains relatively low for people with college degrees. But to get one of those degrees and to leverage it for a good job requires everyone to raise their game. It’s hard.
Jeremy Rifkin predicted the End of Work back in 1995 with his book of the same name. The Wikipedia page offers this summary:
Worldwide unemployment would increase as information technology eliminates tens of millions of jobs in the manufacturing, agricultural and service sectors. He traced the devastating impact of automation on blue-collar, retail and wholesale employees. While a small elite of corporate managers and knowledge workers reap the benefits of the high-tech world economy, the American middle class continues to shrink and the workplace becomes ever more stressful.
Economies are thought to be in devastating depressions when unemployment approaches ten percent, what will happen once we reach structural unemployment of 15 or even 25%? Rifkin showed that it happened to farm workers with the productivity improvements of the agricultural revolution. It happened in Detroit, with the decimation of the automobile industry. Where are jobs going to come from in the future?
Economists and politicians will naturally focus on job growth. After all, that is the problem, unemployment getting higher so we must need more jobs. What if the Friedmans and Rifkins are right and high unemployment is here to stay? Perhaps it is time to start asking ourselves different questions.
Some of those questions might be:
Is unimpeded economic growth good for civilization?
Why do we need to keep growing GDP at 2 or 3% per year to be successful. We are polluting our air, contaminating our water supply, killing wildlife, and countless other problems. Maybe growth at all costs, is no longer the ultimate goal?
Why do we need to work 40 plus hours a week?
With less consumption, individuals can start cutting back on work hours. Perhaps we all shift to a 25 or 30 hour work week? France has led the way with a 35 hour work week.
How do we limit social unrest when potential a quarter of the population will be unemployed?
Are access to adequate food, clothing, shelter, education and medical care only for the privileged classes, or are these basic human rights that government must provide to all. Northern European countries have been doing a pretty decent job of taking care of all of their citizens, maybe it is time the US followed suit.
How do we pay for social services?
Jeremy Rifkin says that non-profits and volunteers will start filling the gap where government fails. Perhaps the time is coming for a mass renaissance of civic and community engagement?
What do we do with the freed up time from lower hour work weeks and higher employment?
We could watch TV, we can commit crimes, or we can get involved in our communities and government. What does it mean to be a citizen anyway? Is it about working 40 hours a week and spending as much money as we can to keep the economy growing? Could it be possible that a good citizen volunteers in their community and connects with their neighbors?
It is not all bad news
The smartest and highest skilled in society will always be in demand. We will need more doctors, computer programmers, engineers and countless other professionals for whom jobs are not even invented yet. However, the real winners will be the rising middle class of the developing world.
Those lost automobile jobs in the U.S. and Japan are being done by $500 per month Indians who are ecstatic about their rise in living standards. While factories like Apple’s FoxConn in China are suffering from worker suicides, there is no denying that conditions in the developing world are improving. $2 per hour might sound like slave wages to a westerner, but for many in the third world, it means food, shelter and an opportunity for a better life.
Financial rewards will flow to the highest skilled and most connected. What are you doing to increase your value in the Idea Economy of the future?
Could you survive on a 20 hour work week at your current salary? What would you have to give up?
Why not start making those consumption sacrifices now and save your salary surplus for the future? Not only will you have much more savings, but you will also have the time to enjoy it.
Work can be more than making a salary. Start volunteering in your community and giving back. You might find that giving provides a greater reward than consuming.