Our children are screwed

As you trudge into work on Monday Tuesday, doing the same thing (but better?) than you were doing 10 years ago, ask yourself, honestly, whether you’re still adding value?

OK. I know you all answered, “Hell, yeah!” to that one.

But what if, overnight, your skill set became obsolete? What once worked, doesn’t. Those networks of old Etonians are now irrelevant. You go into work and the ground has shifted. You have no idea what you’re doing.

You blunder around, trying to hide your incompetence, but it’s no use. You get found out and now it’s not just your skill set that’s obsolete. It’s you.

Our economy is changing. Fast. What once worked (when we were kids, starting out) doesn’t work any more. Trends come and go and careers rise and fall in an instant.

Yet, this is the world of work that our children are heading into. And I for one, don’t think I’m able to help them.

You see, the rules of our economy have shifted.

Economics says value arises from four factors - land, labour, capital and enterprise.

As technology progresses, the mix of these four shifts wildly. And technology is moving very, very quickly.

Back in the Agricultural Age, your wealth was pretty much tied to the amount of land you had. Wealth therefore mostly stayed within families. There wasn’t much economic mobility and wealth was pretty uneven.

Then came a game changer - technology breakthroughs such as steam, steel, and the production line - and we moved into the Industrial Age.

Now, your wealth was mostly about how much capital (money to buy machinery and materials for a factory) you could get your hands on. The few who could set up and run factories made a fortune.

Now as a Business Owner, you needed labour to help you run your factories but skilled labour was hard to come by, so we created our schooling system to fill that gap. More capital led to more and more innovations, so more labour was needed, and just like that we’ve got ourselves a middle class full of skilled workers.

Capitalism reigned supreme.

Suddenly wealth was moving around much faster and people’s lives could change dramatically and quickly - wealth became more equal for a time.

Then along came digital technology - the ability to connect people and information at light speed no matter where they are.

Digital technology is highly efficient and requires only a small number of skilled people working with relatively little capital. A team of a dozen digital creators can build something that a hundred million people find valuable.

In today’s world, you don’t need land or capital to create something of significance. You need a brain and a ton of entrepreneurial drive. An idea, an opportunity, a gap in the market is all you need.

The OLD economy is breaking down. The value of skilled labour and capital is diminishing.

The end of Capitalism?

OK so I’m conscious that some of you are economists and I’m not. There is a very real chance that I get some of this wrong. Though to be clear, I don’t think capitalism is actually dead (yet).

But it is changing. Capital was so important in the Industrial Age because it was so expensive to create and distribute anything of value.

But now it’s not.

There's a lot of spare capital in the world looking for a home. Private Equity alone (my old career and a sector I know well) has $2.59 TRILLION of ‘dry powder’ as they call it, looking for investments. And then there are hedge funds, real estate funds, venture capital etc etc…

Get a degree, get a job?

It used to be that any university degree would get you a good job. Crikey, some of the charlatans I went to university with, who left with useless degrees in English or Geography or some such nonsense, still found work.

Now graduates are finding out that it’s hard to get a job, even in skilled specialist sectors with a relevant degree. You see the digital economy needs low skilled labour to do stuff only humans can physically do, but it doesn’t need that many people to be decision makers, networkers, etc.

The pendulum has swung towards enterprise. Entrepreneurship is the big game in town. Spot opportunities, launch products, find talent, make sales, scale and exit. This is the skill set that is most rewarded.

The Agricultural Age lorded the land owners. The industrial age lorded the industrialists, the bankers and the skilled workers but not the people owning or working on the land.

The current age lords the entrepreneurs. Especially the digital creators. Bezos, Musk, Zuckerberg, Gates, Ellison, Brin. They are the kings today.

So our kids are screwed, right?

The next generation, those in their early 20s or in university today are entering this changing landscape. And who is going to help them? Our school system is still designed to produce a skilled middle class - perfect for the Industrial Age. Whoops.

Their parents (you and me) grew up when hard work, a decent degree and our mates Ham, Stanners and Nellie were enough for a decent career. Not any more. So we aren’t going to be able to help them either.

I fear there is no quick, easy solution. We’re entering an age when wealth will be more and more unequal. But I don’t just mean the gap between the rich and the poor. I mean the gap between the rich and the middle class will get bigger too. You may argue we’re already there, but it does seem like our children will be worse off than us (unless they're entrepreneurial geniuses - in which case, drop me a line: I'd like to back them. Seriously.)

Jon Kaye

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