The familiar inscription on the back of the iPhone cover reads: “Designed by Apple in California, Assembled in China.” People who study globalization have tended to focus on the second part of the phrase. According to conventional wisdom, low-wage countries will continue to enjoy a competitive advantage in international labor markets. But a provocative essay in the July/August 2014 Foreign Affairs challenges that view—along with other widely held assumptions.
In “New World Order: Labor, Capital, and Ideas in the Power Law Economy,” Erik Brynjolfsson, professor of management science at MIT’s Sloane School of Management; Andrew McAfee, research scientist at the school’s Initiative on the Digital Economy; and Michael Spence, a New York University economist, point out that, for one thing, the future isn’t particularly bright for China and other places with plentiful sources of cheap labor. The reason, they say, is automation—robotics especially, as well as artificial intelligence, 3-D printing, and other advances. The Chinese company that assembles iPhones, for instance, has already started to replace workers with a “growing army of robots.” The trend is global—and by no means limited to manufacturing: interactive voice response systems are reducing the need for person-to-person interaction. Intelligent machines are displacing low-wage humans.
Factories may return to the United States, but the jobs—and demand for human workers—may not. “People with ideas, not workers or investors, will be the scarcest resource,” according to Brynjolfsson, McAfee, and Spence, who point to Instagram, the photo-sharing platform, by way of example.
The 14 people who created the company didn’t need a lot of unskilled human helpers to do so, nor did they need much physical capital. They built a digital product that benefited from network effects, and when it caught on quickly, they were able to sell it after only a year and a half for nearly three-quarters of a billion dollars—ironically, months after the bankruptcy of another photography company, Kodak.
The writers acknowledge that this game may have few winners. (The phrase “power law” in the subtitle describes markets in which a few players reap the lion’s share of rewards.) They call for social policies to address the inherent inequality in the new order—public investment in education, infrastructure, energy, communications, and basic research health and technology.
There’s room for debate on how much and how quickly automation will alter global markets. But the authors’ discussion of the power of ideas in the digital economy is sound.
We at the Carroll School believe that an education in management must be, first and foremost, an education in ideas. We do not simply train people to perform organizational tasks that will keep shifting in a dynamic economy. We teach students how to think, analyze, attack problems—how to find ideas and put them into play.
This approach, in our view, calls for a management curriculum tightly coupled with the humanities—one that engages students in the world of ideas. It also demands that we focus on the social challenges ahead, addressing them in courses and programs that introduce students to social entrepreneurship and corporate citizenship (among other concerns). Because we believe that “power law” ought not become a law of the jungle, we must foster a sense of the greater good.