How will the “second economy” affect jobs?

The second economy may be the biggest economic factor you’ve never heard of.

Brian Arthur’s definition of the second economy is when what was formerly a physical task becomes digital. Imagine for a moment, you want to place an order from a catalog 20 years ago (if you can remember that far back!). You would fill out an order form and put it in the mail, or call the company up on the phone. Either way, someone on the other end would record your order, process your payment, arrange to have your goods pulled from the warehouse, box them up, and ship them.

Now, you go online to place the order, and a computer registers your request, processes your payment, sends the goods request to the warehouse, and — if you’re working with a sophisticated distribution system like Amazon’s — a robot pulls the merchandise, it’s packaged on a conveyor system, and shipped.

All of those formerly physical tasks are now taken over by computers working with other computers.

And it’s happening everywhere, all the time, almost entirely out of sight. By Arthur’s estimation, even though the second economy produces nothing tangible, it will be as large as the first, physical, economy by transactions and dollar value in the next few years.

On one hand, the second economy and the proliferation and democratization of the tools that go along with it, can have its upsides. The Maker movement and citizen scientists recording all manner of data about their physical bodies and health have the potential to create lasting change across many fields.

On the other hand, the second economy is responsible for the disappearance of many times more jobs than outsourcing to India or China. The truth is that we’re seeing a radical destruction of manufacturing jobs and administrative jobs, and some thought leaders suggest that the service economy is next, with the advent of waiter bots, receptionist bots, etc. There are far fewer paralegals, bookkeepers, telephone operators, or draftsmen than there used to be.

They’ve been replaced by machines.

As these job opportunities for flesh and blood humans dwindle, a larger and larger portion of the population will find it increasingly more and more difficult to find work. Jobs will may eventually be clustered at either end of the spectrum, in very low-wage unskilled positions filling the gaps between what the computers can and can’t do (yet), and the very high-wage, highly specialized positions that require a high degree of training or intelligence or both, such as programming the computers.

Of course, the economy may adapt. How, we can’t easily predict. But the fact remains that the second economy is destroying job opportunities almost as fast as it’s making calculations.

Will the second economy wipe out 100 million jobs? It’s possible it already has.

Big data and the second economy

Much of this second, parallel economy feeds on data. Information from one system triggers a reaction or a process of another system. When you check in for an international flight, for example, the check in system might tell the baggage handling system the number of bags you’re bringing and alert air traffic control that the flight is getting ready to take off.

This data and the processes it spawns are changing the way things are done. For example, data collected about consumption habits is being used to drive advertising, which is transforming traditional marketing and advertising roles. It’s not hard to imagine a time in the near future when a set of data — brand standards, consumption habits, color psychology — are fed into a computer program which then spits out a perfectly optimized advertisement.

No graphic designer need apply.

In the short term this is likely to create jobs, especially in analytics and programming. Experts estimate that fully one third of Fortune 500 organizations will start to see major problems with their business intelligence by 2017.

But solving those problems has the potential to eliminate other jobs.

The Internet of Things

Sensors make it possible to get data in places we never could before, like sniffers that can tell when fruit in a warehouse is about to spoil, and sensors on jet engines that can predict when the physical parts will require maintenance.

Are these sniffers and sensors putting people out of work? Maybe not directly, not yet, but the potentiality is there. As the technology improves, it’s possible that the airline decides it can rely on the sensors to check an aircraft between flights, and no longer needs a ground crew to do that job.

It seems that one of the biggest dangers here is that as the machines get smarter, the people can get… well, dumber. Or, at least, less specialized and less well trained.

The produce manager who used to spend years working up to his position learning the signs that a bunch of apples was about to turn no longer needs that specialized skill that used to make him good at his job; he can rely on his sniffers to do the job for him.

What are your thoughts on this silent disappearance of jobs? Do you believe the second economy is a good thing, spurring us on to new developments and new business models? Or is it a silent job killer, with major implications for our economy?

This article is published in collaboration with LinkedIn. Publication does not imply endorsement of views by the World Economic Forum. 

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Author: Bernard Marr is a globally recognized expert in strategy, performance management, analytics, KPIs and big data.

Image: A flying sushi service tray known as the “itray”, created using miniature remote-controlled helicopter rotor blades. REUTERS/Neil Hall