99% vs 1%: Attacking the Wrong Problems

Throughout human history, people have been fighting for a fair go.

‘Occupy Wall Street’ and the push for a ‘Living Wage’ are just two of its most recent manifestations in the US and elsewhere, triggered by the GFC and the growing gap between rich and poor.

This You Tube clip neatly illustrates the point: http://www.youtube.com/watch?v=QPKKQnijnsM&feature=youtu.be

Taxing the Rich

For some, the simple answer is: ‘tax the rich and give to the poor’. Yet we know handouts don’t get to the root of poverty.

Growing the Pie

For others, the answer is just as simple: ‘grow the pie’.

But if economic growth was the answer, the problem should have been solved long ago. In the US, the wealthiest country in the world, around 16% of the population still live in poverty, up from prior decades, and more than many other developed countries[1].

Beneath this appalling statistic are 50 million US citizens, individual people, whose hopes and dreams are shattered in the daily fight for survival.

[1] Wikipedia http://en.wikipedia.org/wiki/Poverty_in_America

Working your Way Out

“Get a job!” is no answer either - if people are incapable.

Many can hardly care for themselves, let alone contribute to the wellbeing of the rest of us. For some it’s addiction to alcohol, drugs or gambling that destroys any chance of living a decent life. Many too are burdened with long lasting mental or physical wounds inherited from birth, or inflicted in life. The young, the old, and chronically ill who lack any income, as well as those who provide unpaid care for them, are also amongst our poorest.

The same problem exists for people who could work, but for whom there are no jobs suitable to their skills and knowledge.

As a result, we have high levels of under-employment (much higher than the official stats admit)[2], while many higher skilled jobs go begging[3]. No one wins.

[2] CNBC http://www.cnbc.com/id/101326426

[3] Forbes http://www.forbes.com/sites/emsi/2013/03/07/americas-skilled-trades-dilemma-shortages-loom-as-most-in-demand-group-of-workers-ages/

The Impact of Automation, Virtualisation and De-monetisation

The problem is only going to grow worse, as more and more of our material and information flows are automated: in agriculture, mining, manufacturing, warehousing, distribution, and even retail[4].

IBM’s ‘Watson’ (supercomputer) will soon be ubiquitous in the cloud, enabling automation of even more ‘higher order’ jobs[5].

While we may like to extend the trend from the past, and envision a world where more ‘high value’ jobs emerge than are lost, there is little evidence of this happening. The new businesses of the 21st Century (Google, Facebook, LinkedIn, even Amazon, etc.) are a source of new ‘knowledge jobs’, but they are not big employers in the overall scheme. And increasingly, they draw their workforce from the global talent pool.

As billions more people are connected via the web, and educated through Massive Open On-line Courses[6], the rivalry for new ‘knowledge’ jobs will escalate.

New Design Competition[7], Freelance Contracting[8] and Crowd Funding[9] sites are a part of the mix, further intensifying global competition in all areas of product and software design… with relatively few winners.

It heralds a ‘rock star economy’, where a few achieve global stardom, while most eke out a living (many in ‘personal services’, such as cleaning), and an increasing number are excluded altogether. As the poverty statistics show, these problems cannot be fixed by just ‘growing the pie’… especially when we can bake a much bigger pie with many less cooks and ingredients. (See Survey below)

[4] Huffington Post http://www.huffingtonpost.co.uk/2014/01/17/rise-of-the-machines-economist_n_4616931.html

[5] IBM http://www-03.ibm.com/innovation/us/watson/

[6] MOOC List http://www.mooc-list.com/content/frequently-asked-questions

[7] 99 Designs http://99designs.com.au/

[8] Freelancer http://www.freelancer.com/

[9] Kickstarter https://www.kickstarter.com/

The System cannot solve the Problem: it is the Problem.

This is because ‘The Economy’ works by paying an income to everyone who participates in the production process (by contributing their capital, skills and knowledge).

Each person’s income is a measure (by the market) of the ‘value’ they create. Essentially, it entitles each participant to take out of the economy what they put in.

Overall:The total received as income by all participants = the total value of goods and services produced.

As a result, it is only the participants who can consume all they produce - as they spend their income. Meaning: those ‘outside the economy’ (the young, the old, the unskilled and incapacitated, and their unpaid carers)… can never benefit from the pie, unless income is shared. This puts lie to the argument that the incapacitated and unskilled can pull themselves up by their own bootstraps… if we just grow the economy.

You can’t get a job if there are none (for which you are qualified), or if you are incapacitated, or if you have to care for someone who can’t pay you.

Sharing is now done through the family (if you have one to support you), and ineffectually via charity and through taxation (if you don’t)… or, much more effectively… through crime.

In an environment where many cannot work due to: some incapacity, or lack of skills and knowledge, or because they are unpaid carers; where employment is falling due to automation; and work is being de-monetised… where are people going to get the money they need to live… without resorting to crime?

Importantly, without money to signal their needs, the market will not even create the goods and services they require. This represents a huge lost opportunity for business.

‘Taxing the rich’, ‘growing the pie’ and exhorting people to ‘get a job’ are not the answer, simply because they are tackling the wrong problems: ‘the rich have too much’, ‘there’s not enough to go round’ and ‘the poor are lazy’.

So what’s the right problem?

The Root Cause of Poverty

The problem is not that the wealthy have too much money. It’s that the poor have too little.

It is also clear that much of the ‘free time’ generated by automation is accruing mainly to one section of society: the un-employed and under-employed.

The Opportunity

What if we could…

  • Improve the lot of the poor, without taking from anyone else?

  • Grow the customer base for all businesses, without the need to increase the population, or expand export markets?

  • Improve the productive capacity of a large section of society (those who simply lack the life-skills and knowledge required in the ever-changing economy)?

  • Create a real ‘Knowledge Economy’ that supports life-long learning

  • Make the rich, and the poor, both richer… at the same time?

To comprehend how, we need to understand the central role of money in the economy. This is the topic of the next post.

The Rock Star Economy: Survey of App Developers

Nearly 70% of all app developers are earning less than $US1000 ($A1066) per month, according to a global survey of 10,000 app developers compiled by analytics firm Vision Mobile.

The alarming figures show 50% of Apple iPhone (iOS) developers and 64% of Google Android developers earn less than $US500 per app per month, and 47% of developers earn less than $100 per month. At the other end of the spectrum, the 1.6% of developers earning more than US$500,000 per month make more than the other 98.4% of app developers combined.

The figures show 67% of app developers primarily target consumers, followed by 16% targeting enterprises and 11% targeting professionals.

Despite this, enterprise apps are far more lucrative for developers, with 57% of enterprise app developers earning at least $500 per month, compared to just 26% for consumer apps.

Globally, Android controls 79% of the smartphone market, with Apple iOS (16%), Windows Phone (3%) and BlackBerry (1%) trailing. Despite this, Android is a priority for just 42% of developers, followed by iOS (32%), Windows Phone (10%) and BlackBerry (3%).

Among many other metrics, the figures also broke down the numbers of the primary language used by developers. It showed 26% of mobile app developers primarily use Java, followed by Objective-C (17%), HTML/CSS/JavaScript (17%), C# (14%), C/C++ (10%), JavaScript (3%), PHP (1%) and Ruby (0.5%).

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