Invest in People, Not Just Business

The age of hyper-specialization as the key to embracing macroeconomic digitalization is here. Pundits believe it may be the answer to better, faster, cheaper work and greater workforce flexibility. In fact Professor Tom Malone of my alma mater, the MIT Sloan School of Management even wrote an HBR article about this.

I would like to approach this from a slightly different point of view.

Companies, countries, people, and all order of institution have resorted to hyper-specialization in specific sectors to stake their claim to success in the digital revolution. Countries in particular aim to dominate circumscribed markets, much in the way that countries would exploit their natural resources to dominate certain links in the global supply chain. In my opinion, it’s all reminiscent of science fiction; a dystopian novel to be exact.

Specialization is Not a Promise Land

Were it that mere specialization were the key to success…

Digitalization delivers bouts of creative destruction at unexpected times, and for those who hyper-specialize without diversifying their products and services, such disruption can wreak havoc on entire economic infrastructures. The sad reality is that some recover and others don’t.

This is a healthy dynamic however. It necessitates innovation, efficiency, and even at the cost of displacement of traditional economies, it forces us to rebound and reconsider our approach so as to not leave anyone behind.

Global Flows Leave Some on the Wayside

Despite the potential downsides of specialization and displacement, it is in the best interest of state economies to jump into global, digital flows. Granted not all economies are created equal, but there are digital entry points that are less costly, less damaging to the environment, and far more global than 20th-century globalization made available. 

One of the casualties of specialization at the state-level is traditional industry upheaval. Workers in previously bustling industries may find themselves jobless and notably in geographic regions that were once dominated by industrial activity.

As a result, many workers find themselves in the position to relocate, to learn new skills, or they find themselves destitute. It’s a tragic dynamic that afflicts advanced and emerging economics alike.

Some Navigate the Winds of Change Better Than Others

The United States is no stranger to the profound effects displacement can have on entire communities. We observed such a decline when manufacturing was off-shored to China: thousands of manufacturing jobs were lost and the political repercussions endure to this day. 

To add insult to injury, these displaced workers are neglected in matters of policy. Understandably, this foments resentment toward globalization, immigration, and modern capitalist ethos.

The governments of advanced economies have suffered criticism about their ineptitude in coping with these iniquities. Traditional labor market policies and training systems in most countries are ill designed to handle the massive disruptions that leave millions abject and embittered.

Other governments have implemented unilateral policies to offset the collateral damage with great success.

Invest in People, Not Just Business

Germany may offer a useful model for other countries. It is one of the world’s most connected countries—ranking fourth in our global index. And it has managed to avoid widespread unemployment, even at the height of the global recession, by providing income support, paying companies to retain workers, and taking a proactive approach to labor market reforms and reemployment services.  

Online education could help supplement such programs; especially if governments sponsor them. The problem here is attrition rate. Many online courses boom with applicants but suffer from dire incompletion rates—Coursera, for one, has a 4 percent graduation rate. 

To combat this, some countries have opened their economies to participate more amply in global flows, and to help increase digital literacy in their populations. For some countries this is highly advisable. 

If India had accelerated its participation in every kind of global flow to match advanced nations over the past ten years, its GDP would have been roughly $1.2 trillion higher (or 58 percent larger) by 2014. Although India has immense offshoring activity, it still only ranks 70th in the world for data flows. According to the Internet Association of India, in 2015, it barely had 350 million Internet-users online. Bear in mind that this is one of the most populated (1.3 billion people) nations in the world. 

Granted it isn’t easy to create such widespread infrastructure, nor is it easy to teach millions of people how to use digital resources. Be that as it may, it’s imperative if a whole country is going to progress. Otherwise, governments face growing digital divides that will sooner or later plague the nation.

Thank you for reading. I have written hundreds of articles here on LinkedIn and am also a columnist for Forbes & HuffPost. If any of my articles help you and you'd like to consider nominating me for the LinkedIN Top Voices List then kindly fill out this short form. With immense gratitude.