Decentralisation, delamination and digitisation:
Welcome to “Generation D”
Remember the nine-to-five? Remember a time when you didn’t work from home? When you took a couple of weeks on a beach somewhere and forgot all about work? How about a time when you went out for an hour at lunchtime as opposed to eating a sandwich at your desk? The answer is, if you’re over 40, yes. If you’re under 30, I probably sound like an old fart. If you remember any of that you can probably recall a time when you bought 7” singles from HMV, booked flights in person in a travel agents and didn’t trust Amazon to deliver anything in time for Christmas, choosing instead to fight your way round the shops, along with everyone else.
D is for ‘digitisation’
This isn’t just a pointless trip down memory lane. It’s an example of the big, slow, economic shift from the centralised distribution economy of the last century to a decentralised, grass roots economy of the new one. That sounds like a jargon-filled statement typical of tech geeks, but ask yourself this. Do you live in a world where you can only make it as a pop star, journalist, comedian, film maker or writer if (and only if) you land a deal with a big publisher, record label or Hollywood studio? We know the answer is “no” but twenty years ago, it was “yes”.
Here’s another one. Do you live in a world where the editor of a newspaper, the CEO of a big advertising agency or the MD of a high street clothing retailer would laugh you out of their office if you told them they needed a website? I’ve had that in my career, more than once. The answer was “yes” but it’s “no” now. Of course, we could smoke in the office back then, so maybe that had something to do with it.
Just a decade ago, Nokia was worth $90bn more than Apple. Now it’s worth about $600bn less than Apple. Why? Because phones are now computers. Apple is a hardware/software company that makes about 60% of it’s software-side revenue from selling music, films, TV shows and books to people. That’s not a one off, it’s not a glitch in the system. None of it is. It is all part of the same thing, namely the decentralisation of distribution models. The economy is evolving, but for some reason, many of us are still organised into the structures that built the old word i.e. we still want something we call “jobs”.
D is for ‘decentralisation’
The digital age is an era of information parity – a term that describes a world where the separation between the consumption of data, and the production of data, no longer exists. It’s a nebulous concept, but here’s a simple explanation:
All the economically useful information in the world used to be owned by a tiny minority of people. How to make things, how to ship them from A to B, how to sell them and so on. It was like lots of little locked boxes of knowledge and contacts, linked together in long chains that connected the manufacturer to the consumer. Each box was owned by a small group of similar people (companies) who knew exactly where they were in the chain. Their position in the chain determined who they bought from and who they sold to. Then along came digital technology and mobile devices and the boxes got all mixed up, and all the information locked inside leaked out. It’s not happening overnight, but it is happening and can’t be reversed.
This centralised economic model belonged to a time when the salesman knew all the answers, and the consumer had to ask the right questions to get enough information to make a decision. Today, we Google for the answers. Everyone is talking about the stuff you need. Customer reviews, recommendations from your buddies, small scale niche manufacturers shouting “hey, we do that too”, suppliers to one brand offering their services to others, discounters (who previously only supplied to high street shops) are now selling direct at marked down prices. Specialists who only supply one type of product appear in search results and Facebook posts alongside department stores. Variety, range and back-order hard to get items are out there, increasing in availability all the time.
Supply is catching-up with demand, two economic forces that for over a hundred years were manipulated by the middleman distributor who filtered out demand for low volume items because of limited shelf and warehouse space. The cold, hard edges of the old economy was measured in inches. A shelf was only so big. A warehouse could only fit so many boxes. So if the public wanted The Spice Girls, they got the shelf inches on Oxford Street and that small, niche industrial metal band (that hardly anyone listened to) was consigned to the back of some little record store in Camden. Nostalgic, middle class elites will tell you that was a good thing, because hipsters drown in the mainstream, because part of the connoisseur’s journey is knowing where to shop (and living in Camden, presumably) but in reality it was an economic malfunction caused by an inefficient distribution model.
D is for ‘Delamination’
The same space-constraint economics applied to FMCG products. Foodstuffs. Clothes. Electronics. Entertainment. Everything. If it had a critical mass market, it made large scale distribution, if it didn’t, consumers struggled to find a niche outlet. But in the world of social networks and search engines, there are no niche outlets any more. You just search, or ask, and someone either has what you want… or knows someone else who does.
This is a surface effect of a fundamental economic and cultural change in how we live. And the workplace is changing with it. “Jobs” are delaminating. More jargon, I know, so here’s another explanation:
Jobs used to be a tightly wrapped sausage of contracts, like a cigar, comprised of layers – between the company and clients, between the employee and the company, between the government and the company and so on – pretty much anything from tax relationships to selling boxes of stuff has a contract attached to it, and those contracts were wrapped around people. The contracts themselves would peel off when completed, and another would wrap itself around the employee responsible. Today, because the supply chain is decentralised and the employer/employee is operating in a world of information parity, those contracts aren’t wrapping as snugly as they used to. We work different hours, we work at home, we have side jobs, joint ventures, we change jobs on an increasingly short time interval (we used to want jobs for life), we change careers, we go on training courses, we move more seamlessly between education and the workplace. The net effect is the concept of a “job” itself is changing.
I don’t have a job. I’m a collection of contracts. I’ve co-created a few start-ups, do my own consulting work, write and publish books, give talks and sometimes even write things for other companies (newspapers, another archaic business model). I’m not alone. Since 2008 and the dark days of the credit crunch (another archaic business ecosystem collapsing) we’ve seen the UK self-employed job figures expand by over half a million people. And it’s still growing.
It’s easy, but totally wrong, to see this surge as a response to the recession years. The idea that because big companies are cutting jobs, people simply create their own is a very shallow, superficial analysis of the economics of the labour market. A more accurate view is to consider that self-employment creates the kind of contract containers that the economy needs. Put simply, the old “employee” container isn’t flexible or adaptable enough to service the requirements of the decentralised economy of the 21st century. How we make money (and how much making it costs us) is the thing that has changed. It’s basic bang-per-buck economics and in the last five years, the biggest bang comes from spending bucks on self-employed folks.
D is for ‘duh’
Economics describes the functioning of ecosystems. Complex, interdependent webs of life, whether it’s in your garden or your workplace. The power of computing and the sheer abundance of information that has brought the world, has shortened the lifespan of all systems based on pre-digital principles. We used to measure the lifespan of technology in years, now it makes more sense to consider it in terms of months. We used to consider job tenure in decades, now a couple of years is pretty average. We used to have industries that were rock solid for over a hundred years (like newspapers and investment banking) that have crashed in the last ten. Meanwhile the likes of Google and Facebook have soared from garage to global domination in the same time frame. These aren’t blips. It’s systemic change on a global scale.
We call that “evolution” when applied to the natural world. The same is true of economics.
So what’s your next career move? Another contract wrapper from the last century or something more relevant to the economic and social times you’re living in? The answer is best expressed by a comment from an investment manager buddy of mine, @BaldwinBerges who said:
“Imagine going to your mother, back in the 1970s, and telling her that when you grew up, you’d have a phone the size of a packet of fags and it would do your grocery shopping, play movies and answer pretty much any question about anything you could ask it? How would she have reacted?”
She wouldn’t have believed you. But mums know everything, don’t they?
Andrew Walker started out as a game developer in a dot.com bubble agency, then built his own creative agency and two successful tech companies.
He is the author of ScrewProof: Doing deals that won’t f*ck up and he runs a website and podcast series called ManVsBrain.com that explores the way we make decisions. He’s written for blogs, magazines and newspapers about new technologies & their impact on culture, economics and politics.
You can see him in action for yourself at Huckletree on 14th May at 7pm, where he’ll be involving the audience in his own inimitable way in an interactive, games filled evening.