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Originally published Saturday, December 7, 2013 at 8:05 PM

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Disrupters own our economic future

Policymakers must ensure that retraining is ramped up to maintain advanced workforce skills. The payoff is estimated at an economic impact of between $14 trillion and $33 trillion annually worldwide by 2025.


Special to The Seattle Times

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Two weeks ago, I wrote about why Seattle won’t become the next Detroit even if the Puget Sound region loses the Boeing 777X.

It was not an invitation to complacency. If Boeing’s presence here contracts, the consequences will be sweeping.

But for a look at the broader threat level we face, I turned to a report released earlier this year by the McKinsey Global Institute, a unit of the big management-consulting outfit.

The title: “Disruptive technologies: Advances that will transform life, business and the global economy.”

McKinsey researchers looked at 100 potential breakthroughs but narrowed their list to a dozen most likely to come about, with the broadest reach, greatest potential economic value and most likely to dramatically shift the status quo between now and 2025.

They are:

• Mobile Internet, with “increasingly inexpensive and capable mobile computing devices and Internet connectivity.”

• Automation of knowledge work through intelligent software systems.

• The Internet of Things. Networks of low-cost sensors and actuators for data collection, monitoring, decision-making and process optimization.

• Cloud technology.

• Advanced robotics. Robots or robotic tools “with enhanced ‘senses,’ dexterity, and intelligence (that) can take on tasks once thought too delicate or uneconomical to automate.”

• Autonomous or near autonomous vehicles.

• Next-generation genomics. “Fast, low-cost gene sequencing, advanced big-data analytics, and synthetic biology.”

• Sophisticated new energy storage.

• 3-D printing.

• Advanced materials. (That composite wing for the 777X looks even sweeter).

• Cutting-edge techniques for unconventional oil and gas.

• Renewable energy.

Much of this is known, at least on the surface, by almost anyone paying attention. But one goal of identifying these breakthroughs is realism. The researchers’ argument is that most of us don’t realize how much these technologies could drive both economic growth and creative destruction in the next decade.

Looking at the list, it’s tempting to think that Seattle and Washington have much of this covered. We are the disrupters!

Check out Amazon. But then check out Microsoft missing search and tablets. And when was the last time we gave birth to an Amazon?

In other words, Puget Sound business, civic and political leaders have more to worry about, more to plan for, than the 777X.

Or, as the authors of the report write, “As these disruptive technologies continue to evolve and play out, it will be up to business leaders, entrepreneurs, policymakers and citizens to maximize their opportunities while dealing with the challenges.”

In the case of business, for example, it will mean being early adopters. Policymakers must ensure that retraining is ramped up to maintain advanced workforce skills.

The payoff is estimated at an economic impact of between $14 trillion and $33 trillion annually worldwide by 2025.

Consider this as a counter-argument to economists such as Tyler Cowen and Robert Gordon who assert that advanced nations face a prolonged period of stagnation. They argue that the major breakthroughs, from the steam engine and electricity to the automobile and the Internet, are largely played out.

Their work has led to a searching debate among economists. Others, such as Brad DeLong at the University of California at Berkeley, say that our “Lesser Depression” is a cycle that will eventually heal as demand recovers.

Few dispute that the Great Recession left enormous, even irrecoverable, damage to the economy. Persistent high unemployment risks becoming a permanent feature of the labor market.

Even the McKinsey report contains some ominous soundings. For example, tens of thousands of software engineers in our region could be displaced by the automation of knowledge work. Advanced robots are already on the assembly line at Boeing.

McKinsey speaks for the establishment, the same one that brought on the financial crisis through risky innovations. These scenarios, full of promise as well as disruption, fail to account for the fragility of complex systems.

We should also resist the temptations of techno-magic. This can lead to wishful thinking that technology can solve every problem.

Indeed, what’s missing in this view of the future is where the jobs will come from? Many of these technologies are job killers.

They also promise to widen inequality even further. Even if the economic gains are realized, there is little indication they will be widely shared. As a result, the social compact and institutions will come under further stress.

Some of the biggest disruptions are not mentioned.

One is the increasingly tense situation between China and Japan, at the heart of the globalized economy.

Another is climate change, which will be made worse by unconventional methods of extracting oil.

So it is going to be a rough ride. The Puget Sound area can be prepared, but our prosperity and success today is no guarantee of future results.

You may reach Jon Talton at jtalton@seattletimes.com



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About Jon Talton

Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest
jtalton@seattletimes.com

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