Sunday, September 27, 2009

Unemployment Or Unemployability? A Story.

So the recession is over but unemployment is not falling, at least not yet. How on earth can a recovery be "jobless"? And how might this fit with the fact that, in the 1960s, about 60,000 new businesses a year got started in the US, while over a million a year were getting started in the years before the collapse? Here's a little story; bear with me:

In the summer of 2003, I drove my aging BMW over to Dave Marshall's garage, a converted two-bay service station on Pleasant Lake near my summer home in Wilmot, New Hampshire, hoping to find out from Dave—the solid son of the former Chief of Police—where in Concord or Manchester the nearest BMW dealership was. The “climate control” system was gone, a system governed (I correctly surmised) by a complex little computer module—not your change-your-oil-by-the-beach kind of problem. Dave got behind the wheel, confirmed the symptoms, shrugged, and told me he could handle it. I told him I doubted it. He smiled, not quite condescendingly. I followed him inside.

Sitting down at a terminal, Dave tapped a few soiled keys, and logged on—so he took pains to explain—to a network he paid a nominal price to access—a network of tens of thousands of independent, certified mechanics just like him, nationwide. He took a history of my problem—year, make, type of failure, etc.—and transmitted my description in some detail; then he gave me a coffee, told me he'd be back to me when he could “work up a report” and sent me home.

Later on I learned that the website Dave logged onto was set up by the IATN—the International Automotive Technicians Network—which itself began as chartered non-profit back in 1972. The network has grown enormously since then, with nearly 50,000 users worldwide: archives, databases for all cars, a library of technical literature, and over a dozen engineering forums on leading edge automotive design problems. Dave was logging into a “groupware” site, which other mechanics haphazardly checked, to see if they could help a fellow member, or solve a product of their own.

Three hours later, I was driving by the garage again and stopped in. Dave was about to call me. He showed me pages of responses, which produced a consistent number of solutions (17 of 21 were more or less identical), describing methods of repair, parts descriptions, parts numbers, software settings, and part sourcing. He was also able to determine whether his diagnostic computer could actually reset the relevant module. By the end of the day, he said, he could give me a complete analysis and estimate, educating me to the module's engineering in the process. Even if I could not give the car to him, he told me, the printout would help me “ask intelligent questions” of the dealer.

NOW, DAVE IS not one for policy clich├ęs. But if the “ownership society” had ever needed a poster-child, it could have done worse than capture the smile of reason on his face as he revealed his powers to me. Dave could not have survived as an independent entrepreneur of this sort a mere fifteen years ago and he knew it. His two bays had become five. His peer-to-peer information network, his “platform,” had matured into a settled work environment, which meant the world to him: from diagnostic machines to parts ordering systems. These integrated technologies are now so pervasive that our children simply take them for granted. But to those of us who came into our own in the 1960s and 1970s, Dave included, they remain magical.

Dave's platform did not just enable him to fix the problem with my car. It meant he could learn to fix ever more complex problems on a proliferating number of cars. It enabled him to become (or at least perform like) a master technician without having to go for additional formal training. The key was to have good information about information.

For every problem with every car, in other words, Dave now saw an opportunity to assemble snips of knowledge into a “deliverable”—a bundle of technical know-how with market “know-about.” He became a better business strategist as well. He might procure components and tools from suppliers from virtually anywhere—California, Mexico, Canada, even the Far East—and then use inventory control software to track how to maintain margins on parts, distinguishing between parts used everyday (such as bolts), and parts ordered only once in while (such as ball-joints).

Dave could learn what his competitors were charging, or paying for parts. He could instantly explore the burgeoning roster of mechanics who were also his brains-trust. He could help maintain the evolving skills of his employees, anyone of whom might become a competitor.

In short, the platform enabled Dave to offer—not standard services—but custom “solutions,” much like an IBM consultant or a Siemens engineer. The platform meant that Dave could compete with, not go to work for, the dealers in Concord or Manchester. It meant not having to offer only “commodity-like” services, like oil changes—and then see his prices (and style of life) eroded by competition from the Jiffy Lube a half-hour away off south 93.

AND ANOTHER THING. Dave would not be (as Adam Smith once put it) “mutilated” by repetitive, mind-numbing tasks in some industrial division of labor. The platform meant that he would have to out his mind to things, even that his wife Carla, a literature graduate of the local college, Colby-Sawyer, could work with him on the myriad human problems involved in customer care—and not get swamped by tedium. It meant that, together, they could establish something like a family practice for cars, and charge accordingly, hiring two or three like-minded people to the team.

What would life have been like without the platform? Had Dave worked only on tire changes and lubrication jobs, he would have had few opportunities to speak his mind or even open his mouth. But now his work day-in and day-out—learning, teaching, serving, persuading—reinforced the skills he needed to perform as a citizen. He had to cultivate a reputation for excellence, and learn to manage all kinds of personalities in stressful situations. For nothing but his reputation could stop others from opening up on the other side of the lake. He had to challenge the prevailing wisdom about what a local garage was, and move his customers to expect ever greater sophistication from him—even to become a community resource. (Every week, Dave now takes out an ad in the local Shopper, answering questions about car repair like the “Car Talk” duo on NPR.)

Was there a social compact here, an implicit deal between citizens and their commonwealth? There certainly was, and Dave’s side of it was to take ownership of his professional life. To make the most of his information resources, Dave had to commit to progress in a technical field, much like a physician. The solutions Dave provided entailed complex engineering, but none of the people at Marshall's Garage had to be an engineer. The knowledge they competed with was embedded in a virtual community which could be instantly called upon. What the garage team really needed was an openness to teamwork, or more accurately, to the act of problem-solving itself.

BUT HERE IS the sad reality impinging on unemployment. For there was greater social risk to the compact, too, and it was not hard to imagine what became of car mechanics who, unlike Dave, were not prepared to hold up their end of the deal. You ran into many such people in rural New Hampshire: not-quite-enough schooling, too much beer, too much TV. One year, a guy I came to know was pumping gas in New London, until self-service equipment did in his job. The next year he was working as a clerk in a convenience store, where inventory control software had turned his job into a minimum wage job.

Once, when Dave was growing, up such badly educated people held more or less steady (though, let’s face it, distasteful) assembly jobs in the gear factories, or wool mills, or shoe factories that had studded the roads and rivers of the state. People with high school education had held sales jobs in small retail stores and banks. Most of those jobs have been lost to the platform in the larger sense, that is, to networks connected to robots governed by custom software or computer-integrated machine tools; or to scheduling and book-keeping software, or even just to ATMs. Most famously, perhaps, such jobs have been lost to Wal-Mart’s outsourcing logistics, while the low prices of the things ordinary wage-earners buy at Wal-Mart keep them in what resembles a middle class.

Labor unions could not make a difference here. It was precisely because direct labor used to be so simple, mechanical and yet critical to value creation that labor unions made sense. The logic behind unions may still apply to some kinds of work—fast-food servers, apparel assemblers, hospital orderlies. But any job that is simple and repetitive, that requires so little individual creativity that an employee would rather join a union than negotiate an individual career path, has become a prime target for the computer-integrative technologies.

All of this has meant that tens of millions of people—people with children, people hobbled by dullness and self-doubt, people who played by rules that simply evaporated from the time they were 15 to the time they were 35—are hard pressed to see a future. When President Obama spoke during the campaign of people consoling themselves with guns and fundamentalism (and, he might have added, FOX), he was putting his finger on the crisis. After all, the school system we conceived, the union movements we adjusted to, the “leading” economic indicators we tracked, the Government programs the New Deal put in place—none of these things assumed that virtually every member of society would need the equivalent of college-level skill just to get a decent job. Paul Krugman said he hoped Obama would be a new FDR. But FDR is not what we need. By comparison, FDR's challenge was simple. We need the equivalent of nation building here at home.

For people with college educations like Dave and Carla, working conditions have generally improved, no doubt, even when we do not work for ourselves. Salaries for college graduates, on average, are more than 100 per cent more than for high school graduates. And then there are the perks. But everyone, including highly educated people, are dealing with higher levels of risk. Knowledge companies do not survive like the old industrial ones did. On the whole, the old command-and control corporation has been replaced by the love-'em-and-leave-'em corporation. (Duke University’s Arie Lewin has shown that even Fortune 500 companies fail or are acquired at a rate three times faster than was the case in the 1980s.)

So the dangers of the knowledge economy are clear enough, but so are the opportunities. Once, in an economy defined by the industrial division of labor, a person who owned none of what Marxists called the “means of production” was helpless and periodically desperate. The welfare state acted to assure that all citizens remained consumers—which stimulated the economy as it saved their lives. But the great danger was once periodic unemployment for have-nots. Now it is chronic unemployability for know-nots. The challenge is to be a qualified producer, not just a qualified consumer. What we need, rather, is a mentor state, about which more in the weeks ahead.