When Blockbuster Video rented DVD’s and tapes it alone employed over 60,000 workers in 9,000 stores. To understand the impact this business model had on the economy one must take into consideration all the businesses that supported the Blockbuster stores. Take a step back and consider that those numbers didn’t include the workers who built the building, moved snow, cut grass, picked up litter in the lot, laid the asphalt to make the parking lot, the electricians who kept the lights burning, the clerks who sold the light bulbs when a bulb burned out, janitors who kept the store clean, the roofers who kept the roof membranes from leaking, the landlords who owned the buildings, the glass vendors who supplied new window panes, the utility companies, the water companies, the door makers and all the other workers who either directly did work at the store locations or who indirectly who were employed selling products and services to keep the stores operating. All of these people earned income from the support work, paid taxes along with payroll taxes. You might think so what, who cares, but you should.
The bottom line is that well over a million jobs were eliminated by the advent of newer technology, which isn’t in and of itself a bad thing, but has serious consequences to society.
So while ISU researchers are busy figuring out how to unemploy snowplow drivers, auto workers, fuel operators and all other support service workers, shouldn’t they also be required to figure out how to employ those who disruptive innovation displaces?
Amazon has about 90 warehouses in 50 locations as compared to the 9,000 commercial real estate opportunities Blockbuster created. So while old tech may not have been cutting edge, it did create more opportunities for more people who all paid taxes to support the governmental services we all require in an orderly society. Today’s technology does more for just a few and less for the many. In turn we all do less for local governments who in turn burden local citizens with higher real estate taxes for fewer services. This is a cycle which has serious long term consequences for all of our local communities.
And what are some of those consequences?
The new technology leads to just a few people becoming billionaires while the masses in return receive unemployment benefits for six months before being shown their new McJob pushing food across the counter at the newest Chick-fil-A.
The loss of jobs leads to higher unemployment, loss of opportunities for local investors to own the real estate, lower tax receipts, higher crime, higher taxes and an overall lower standard of living in the United States. (Unless of course you Bill Gates, Jeff Bezos, Larry Page or Reed Hastings.) It is closer to home than you may realize.
Researchers at Iowa State University are being paid by the Federal Aviation Administration to put snow plow operators out of business with what will probably conclude with the installation of a solar panel. Now while I find the idea interesting government policy is woefully behind in adjusting. When new tech is being developed we need to ask how it will affect the job market. Like an environmental impact study, there should be an economic jobs impact study when disruptive technology is under consideration for public services.
Here is one definition of disruptive technology.
A disruptive innovation is an innovation that helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology.
Pay attention to this part of the definition: “disrupts an existing market and value network (over a few years or decades)”. The use of newer technologies has major consequences to society when there is no corresponding creation of jobs from those that are being displaced. Instead the world gets a few more billionaires and a hundred thousand people that taxpayers will support through any of the various entitlement programs. To better understand these secular changes governments need to undertand the difference between secular versus cyclical changes.
Knowing the difference between secular versus cyclical economic changes in society will assist in adjusting taxation. Why aren't Internet sales taxed at a 25% tax rate? If Amazon can destroy the Mall of America and our local malls, why not make it pay for the problems of unemployment?
So while ISU researchers are busy figuring out how to unemploy snowplow drivers, auto workers, fuel operators and all other support service workers shouldn’t they also be required to figure out how to employ those who disruptive innovation displaces?
Here is the article from the Business Record Daily.
Researchers work to eliminate the snow shovel
Students and staff at Iowa State University are developing new technologies to help melt away ice and snow, all with a goal of getting it on airport runways within the next year. Researchers at are trying to make ice, snow and resulting flight delays a thing of the past. They're looking at three different technologies, one being the application of a superhydrophobic coating to pavement. The coatings, similar to DuPont Co.'s Teflon, prevent liquids from sticking to that pavement. The other two involve heating the concrete. One method heats up the surface by pumping a warm natural gas through it. The second heats up concrete by applying a direct voltage. ISU's department of civil construction and engineering is doing it with $750,000 of funding provided by the Federal Aviation Administration. Associate professor Halil Ceylan said it's the first time the FAA has sponsored a project of this scale. They're now looking into advanced construction, developing 3-D models to see how they can implement these ideas on a large scale beginning on airport runways. They've already garnered the interest of the international airports in Des Moines and Minneapolis-St. Paul. Ceylan said he received a call from the Dallas-Fort Worth Airport saying they were interested. He said the cost of implementing the new cement would be worth it in the long run. Ceylan also said this could also be used in sidewalks and driveways.
Toilet Paper vs Televisions or Exotic Cars
Contrarians spend a great deal of time figuring out if what is happening is a cyclical or secular change. It is short term change versus long term transformation of an industry.
- Understanding secular vs cyclical, Contrarian Investors’ Journal [See the quote below.]
- The Importance of Secular Vs. Cyclical, CNBC
- Investor conundrum: Cyclical or secular?, by Lee Brodie of CNBC
Secular - occurring only once in the course of an age or century; taking place over an extremely or indefinitely long period of time
Cycle – a sequence of events that is repeated again and again, especially a causal sequence; a period of time between repetitions of an event or phenomenon that occurs regularly