The future economy

In the Summer of 1922, the Austrian philosopher, social thinker, architect, and esotericist gave a series of lectures laying the foundation for a new approach to the science of economics, which had only developed into a science towards the end of the 19th century, although its origins are much older. Steiner describes the interplay of nature and human labor as one essential pole of economic value, and the interplay of human labor and human intelligence (some translations use the word “spirit”) as the other.

In his 1993 publication, “Post-Capitalist Society”, legendary Austrian-born management guru posited that we are currently living through a great societal transformation–the kind that only occurs every 200 years or so resulting in a world that would be virtually unrecognizable to those who came before it. The current transformation will see, according to Drucker, “knowledge” replacing “land”, “labor”, and “capital” as the central driving force of the global economy; these latter 3 terms being identified by in his 1776 publication as the three factors of production (1776 being, coincidentally, the beginning of the last great societal transformation– the Industrial Age).

In the emerging post-capitalist society, we are seeing in the software industry the ever-decreasing cost interplay between human labor and intelligence in the purest sense. Compare the multi-million dollar annual lease for a typical mainframe computer in the 1960s to today. Whereas an entrepreneur would have needed significant up-front capital to finance a new software company in the mainframe era, today, all that’s needed is an inexpensive laptop! Support software, such as operating systems, databases, messaging infrastructure, and integrated development environment, coupled with pay-as-you go hosting models offered by competing vendors dramatically reduce capital requirements. For example, according to Jan Müehlfeit, Microsoft’s European chairman, speaking at a Microsoft conference in Brussels on 14 June, 2011, 1 GFlop of computing power would have cost $40 million, whereas today it would cost $0.25 (that’s 25 cents!). Indeed, you can see Drucker’s phenomenon behind the  work of Steve Blank, Eric Ries, Alex Osterwalder, and the entire “Lean Startup” movement, as well as the rise of Super Angel investors, such as Dave McClure. The angel business model–well, McClure’s anyway–is to invest small amounts (say, 5 figures) in a greater number of prospects; and then, generally doing so only after the prospect has gained traction in the marketplace (i.e.; after an initial product has been built and validated in the market)!

In industries that are more closely aligned with Steiner’s other essential pole, such as farming,  mining, or industrial manufacturing, the interplay of human intelligence and labor has resulted in tremendous productivity growth, requiring fewer workers to produce the same amount of value. In the US, the approximately 3% annual reduction in the number of workers performing what is traditionally referred to as blue-collar labor, has not resulted in a decrease in manufacturing output, but rather, since 2000, US manufacturing output is up 19%. The trend seems inexorable, and the percentage of developed countries labor forces devoted to traditional blue-collar labor will most likely continue to shrink. In other words, manufacturing jobs are not moving overseas, they are disappearing, even in China. Drucker asserted that, “The only long-term policy which promises success, is for developed countries to convert manufacturing from being labor based into being knowledge based.”

However, as computer systems continue to improve, they are taking over for humans in areas that would have been previously considered “knowledge work”. This makes sense, if intelligence, through technology, is applied to labor, then knowledge work is just another type of labor–eventually someone will try to automate it. Taken to an extreme, this process eventually results in the unemployment of all human beings, having been replaced by labor-saving devices throughout the economy. Human beings become parasites of a world dominated by machines of our own creation. Before despairing that “The Terminator” will become true, however, let’s look at this from another, more positive, perspective–reduced cost. These “labor-saving” applications of technology should, in theory, drive down costs. , the American engineer, systems theorist, designer, inventor and futurist, once proposed his principle of “ephemeralization”, the ability of technological advancement to do “more and more with less and less until eventually you can do everything with nothing”.

The two extremes outcomes are one in which humans don’t have to work and everything is free, while the other is that humans can’t find work and live miserable existences.


About jeffmershon

Director of Program Management at SiriusXM.
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