Job Creation: What does it take to make it happen? Part 1 of 3

First part below. Second part here. Third part on its way.

Over the last few weeks, I have been part of multiple conversations around Job creation. Consultation meetings, workshops, strategy reviews, LinkedIn conversations and online chats have predicted doom (“Automation”) or a silver bullet (“Entrepreneurship”) to solve the crisis. At a recent event, a leading philanthropist got up and asked what has been on everyone’s mind – “Where should we put our money?”. I have been framing my thoughts around this complex question to answer it to myself to the best of my ability.

The fundamental premise of my argument is that it is important to look at Job creation as a systemic problem and not just from a perspective of supply or demand alone. The first part of this article outlines four interlocking systems that are working in parallel to address the issue of job creation: Technology, Policy, Talent and Market. Each of these systems have a role to play in unlocking value that actually results in Job creation and livelihoods for people. The second part ties the four systems together and aims to make tangible recommendations for the short-term. The third part takes a more mid-term view of the issue and highlights the role of the Philanthropy

Note: I am neither a macroeconomist or a policy expert. Nor is my understanding of this system complete. As always, articulation of argument is an effort to understand the issue better.

The four interlocking systems  

Technology unlocks opportunity

Technology is one of the fundamental drivers to unlock potential value. By redefining what it possible, it creates new opportunities for value creation. But by itself Technology doesn’t create value and rely on Markets to make it happen. And Markets often take years (sometimes decades) to translate a technology disruption into something that will solve a real customer problem and can be made into a business. As Raghuram Rajan argues, the industry still hasn’t unlocked the value of the current ICT revolution completely yet and we are still very much in the early stages of the ICT revolution. So inherently investments in Technology are long-term in nature.

Publicly funded research and development is critical for us to continue to drive new frontiers of development independent of their immediate value to the market. Mariana Mazzucato argues how every single technological innovation that made the marvels of the Silicon Valley possible, including Google search engine, Tesla’s Electric car, Apple’s iPhone, was research funded through federal budgets of countries, especially the United States. As Sanjay Anandaram argues in this incisive piece, one of the critical risks that we carry today is our insignificant investment in R&D. And for countries like India, while it is important to drive the frontiers of innovation in R&D, it is also important to be connected to global communities of research and innovation to understand and predict emerging market models that can be disruptive.

Policy enables value creation and distribution 

Policy is one of the critical levers to creating an enabling environment for adoption of technology and the flourishing of the market. Policy has a critical role to play in ensuring that the value unlocked by the Market is equitably shared among the staff and the employees as well. The posterchild for Policies unlocking value was the 90s IT sector boom that single-handedly created the new middle class in India and continues to have a far-reaching impact on social and economic structure of the urban India today.

Given that we are in the cusp of the clean energy and consumer internet booms in the country, much depends on the policies and frameworks Indian Government is going to put in place to ensure that we unlock the value of these technological shifts. Similarly, there is a growing discourse around India’s willingness to open its markets again especially in the context of the rising Asian forces. How we navigate these choices will have a strong impact on our financial well-being and overall relevance in the Asian Ecosystem, which will account for 50% of Global GDP and 40% of Global Consumption.

Policy will have a significant role to play in unlocking the 770B USD that could be added to India’s GDP by bringing more women to the workplace. Similarly, Policy is a strong lever to ensure that the social protection of workers – be it construction workers, informal labourers or contract staff – becomes the responsibility of the Industry, which today takes a “don’t ask, don’t tell” policy towards these issues.

Talent readiness is critical for value creation and absorption 

The current discussion on Talent is often seen as from the measure of skills and ability. However, the spectrum of talent is defined by two axes: Agency and Ability. Agency is one’s capacity to pursue an opportunity presented to them and is often determined by one’s background. Ability is about having the relevant capabilities to leverage the opportunity. A person from an economically, intellectually, physically or socially disadvantaged background has low agency to pursue the opportunities that get presented to them. They have structural challenges in getting the right education and opportunities. Low agency manifests in the form of limited intent to engage, low awareness of the potential possibilities and skewed aspirations.

A large number, and definitely not all, of those with low agency have low baseline ability as well due to issues such as nutrition and parents’ education. Similarly, those with high agency often have high baseline ability though there are a fair share of those who start with low ability as well. It is hence critical to separate and independently address each of these following challenges

• How do we ensure that people with the agency and ability get the highest quality education that can create breakthrough innovation that can help us pioneer new grounds?
• How do we ensure that people without the agency but high baseline ability are identified, supported to ensure they achieve escape velocity to shift from their current context?
• How do we ensure that we as a nation achieve equity by building enabling models for those with low agency and low ability?
• How do we ensure we recognise those with high agency and low ability and support them in finding meaning in a highly competitive environment?

When opportunities emerge for Job creation, it is extremely critical for the talent to have both the agency and the ability to unlock the value. For instance, look at the spectrum of value that the Consumer Internet industry has created today across the entrepreneurs, the technologists, the delivery boys on the ground and the countless others who have been left behind.

Market is the cauldron that translates opportunity to value

The Market is always seen as the starting point for the discussion around conversations around Skilling and livelihood. There have been clarion calls for Market to play an active role in participating in shaping the talent for the future. However, the truth is that the Market is actually shaped actively by the above three systems – Market thrives when it has the right policy environment and talent supply to translate a technology innovation into market value. It continues to adapt, and sometimes work around, the current policy, technology and talent supply. And at any point in time, the Market (or an industry in particular) is in one of the following states:

High disruption – High Innovation (High-High): The industry is impacted by a technological opportunity or a policy enablement which has opened a significant window. And smart entrepreneurs are creating enduring institutions that are creating long-term value. Think IT sector in the 90s, Consumer Internet industry and the Aviation industry today.

Low Disruption & High Innovation (Low-High): Market leaders or breakthrough entrepreneurs try and innovate in a seemingly mature market to create differentiation for their brand. For instance, Asian Paints moving from a product to a service model when no one was expecting an innovation in the painting industry. Apple creating a phone that could be a platform created an entire industry of app developers.

Low Disruption & Low Innovation (Low-Low): This quadrant accounts for the largest share of companies today. They have established business models and a steady rate of growth. The core focus of the middle management layer (that often hires talent) is predictability and efficiency. Their operating models are already based on budgets that are defined top down on assumptions on talent in the market.

As you can see, new job creation happens predominantly in cases 1 and 2, where new value is unlocked in the market. And when it does, the entrepreneur ecosystem is quick to tap into this opportunity to address this need through a wide range of solutions. On the other hand, the Low-Low companies don’t create any new jobs. The jobs they are hiring for is only due to ongoing attrition of their workforce or fluctuating market share across companies. The middle management often doesn’t have the agency or intent to increase salaries if they find better talent. What these companies need are not skilling institutions but staffing & placement companies. 

How do these systems engage with each other 

While we have discussed these systems separately, it is important to recognise how these systems interact with each other so that we know what we need to do to create value. 

Firstly, each of these are interconnected systems. Market depends on Technology, Policy and People. Technology in turn depends on People and is impacted by Policy and Market on its adoption. And People in turn depend on Policy and Market. Hence it is hard to impact one of these and not see a corresponding impact on the other.

Secondly, these are asynchronous systems. A shift in technology does not immediately result in Market disruption and sometimes can take decades. Similarly, building the ability of the people cannot always happen once the Market opportunity is unlocked. As a corollary, building a cadre of smart and capable people does not assure predictable returns in terms of Technology and Market value. Significant momentum across all of these systems in parallel is a critical precondition for mass value creation but it cannot be timed by anyone.

Thirdly, a minor incremental shift in one is not going to have a perceptible shift in another. Hence, skilling even thousand people on an incremental skill is not going to shift the hiring behaviour of the industry which has its systems optimised for a much larger whole. Or some companies adopting a certain approach to hiring is not going to make a significant shift in the way talent is shaped.

In the next part of the series, we look what all of these mean to the Livelihood ecosystem

(to be continued ...)