Economic Change & "Creative Destruction"
Here's the rough text of a speech I gave to UC San Diego's Undergraduate Economics Society (UES) on April 16th. I hope you don't mind the colloquial tone.
Hi everyone…
Thank you so much for inviting me to speak to the ECONference. It’s been a long time since I attended John Muir College and UCSD but I still think of my time as an undergraduate here very fondly, and it’s an incredible honor to be back.
The roots of my career as an economist start with the very first freshman microecon class, with Don Bear who I believe is now a Prof Emeritus here. I became obsessed with the subject matter almost immediately, and shortly thereafter concluded with extreme certainty that I wanted to get an econ PhD. (I’d barely started on my bachelor’s degree!) I’d encourage anybody pondering a similar life move to be a little less passionate and a little more rational than I was, but I’m happy with how things turned out.
LinkedIn is my dream job, because I get to work with an amazing and unique data source and drive a labor economics and macroeconomics research agenda based on it. Day to day, I collaborate with about 20 other economists and data scientists to generate what I call “real world knowledge”... i.e. not just an understanding of what is happening on our platform, which is a separate and interesting problem, but use our platform as a prism with which to understand the global economy and labor market. We collaborate on sharing this knowledge with the public in tandem with our partners in LinkedIn's policy and communications teams.
You can see some of these insights in our monthly Workforce Report. We track gross hiring trends; skills gaps at a metro level; and geographic migration. We also do some really cool tracking the propagation of AI skills across the economy, and looking at how automation may be affecting different types of jobs. And I don’t have a visual for it in the deck, but a brand new initiative we have in conjunction with the World Bank is a dashboard sharing data sets with the public. The common theme across all of these is what I outlined before: can we use LinkedIn’s data to understand what is going on in the economy and labor market?
That brings me to a prompt I got from the ECONference, to talk about the Gig Economy and Digital Transformation and how they reflect Schumpeter’s “creative destruction” thesis.
To be fully transparent my perspective on these questions has changed a lot over the past few years. If you’d asked me 5 years ago, 10 years ago, 20 years ago… I would have said “creative destruction” for sure. Now I’m less sure, for several reasons.
The first of these is the slowdown in pace of economic change worldwide, to a degree we haven’t seen in 3-4 decades. Looking at a lot of metrics - business creation and destruction, productivity growth, low long term interest rates… these should make us at least a little skeptical about how much genuine creative destruction is really taking place. We're in a "lack of change" slump!
The second of these is that we shouldn’t overlook the impact of business cycle in creating an illusion of secular change. The depth of the Great Recession and the slowness of the recovery - and lengthy periods of elevated unemployment stretching out over the past 4 decades - led us to conclude that a lot of phenomena like high unemployment, low wage growth, and the emergence of jobs with lower bargaining power for workers were “structural” or “secular”, reflective of deep changes in the economy. The tightening labor market in the US should lead us to re-evaluate. Maybe some of these business models are simply reliant on lots of cheap abundant labor and will dry up when that abundant labor supply shrinks. I’m not sure you can call that creative destruction.
The third is we tend to think of the exogenous forces of technological progress as driving creative destruction. New technologies create new forms of work, right? Well... there are lots of other things that can do it too… policy is an obvious one Maybe the regulatory landscape or taxation have changed in ways that favor or hinder certain types of structuring economic activity. I’m not sure we should call that creative destruction either.
So to wrap up… there’ve been all sorts of interesting changes taking place in the economy over the last decade. But how many of them reflect creative destruction vs changes in public policy, or the business cycle, I’m not sure. I’m looking forward to finding out!
Questions?
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4yGreat article! Hearing of creative destruction after so long. Reminds me of clay christensen's lecture on this, disruptive innovation and jobs to be done!
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4ythank you for sharing this article. It would be interesting to know how far the current monetary policy is slowing down the creative destruction that is essentially being diagnosed for a digital market economy. To what extent expansionary monetary policy reduces potential for growth and to what extent technologies are artificially kept alive.
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5yInteresting outlook but I don't completely agree. I don't agree because it's not a laziness or an apathy problem but rather being pushed out of the market completely that will become a future concern for many. We can ignore it. And most do but it's already becoming an issue. Working your way up was a boomer paradigm that is virtually extinct. To move up you have to company-hop or change careers and start over. The problem as I see it is that many of those who have to start over again on the bottom rung will see most of those bottom jobs disappear to computers in the coming decades. Why pay for an assistant when you can get a digital one? Why hire a cherry picker when there are machines that do it better and faster? Why drive a taxi when there are self-driving cars for less? It's not a question of right or wrong it's an eventuality. It's a human problem because we all need each other to work together and succeed and thus discuss the impact on our society and with each other. I don't have a solution but I think it wise to discuss them.
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5yTheir plight is their choice. Guarantee the percentage of active plight-ers would decrease by 50%+ if US backed aid and benefits ceased, immediately.
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5yThen the responsibility lies squarely On those who are unable to/unwilling to improve their skills, their experience, “their value” to employers. Should society as a whole resist advancement because our current work force is too lazy and entitled and concerned about their next lunch break, to focus on their own professional growth/trajectory? Music to China’s ears. If people are less interested/ aka LESS MOTIVATED, there must be a reason. Is it govt aide perhaps? Welfare? Living w their parents until they’re 38 years old?? This shift is exactly the kind of kick in the entitled, lazy ass that our current (useless, unemployable) generation needs. As it is, the motivation for those boomers, who have been too “scared” to expand their professional skill set. Employers have no incentive to train people - if you owned a company, you’re telling me you’d invest time and money into people who will without question bail on you the minute the receive a bigger better deal? Of course you wouldn’t. It’s called smart business. If people aren’t willing to MAKE themselves assets, to make themselves invaluable employees regardless of whatever revolution is top of the news in said decade, then best of luck to them. Their plight isn’t my problem.