Shift up your Gear, as the Money Filter Fades Away

How Open Education Can Disrupt the (Near?) Future of Work

8 minutes reading

If you read this post, you probably belong somehow to the Global Upper or Upper Middle Class and have made considerable social progress in your life by education and professional carrier. Most likely you are between 30 and 50 years old, work in middle to upper management of a technology company and you are either European or Latin American. Note that this is just a matter of the effectiveness of the ‘bubble filter’ of the social media, i.e. you are similar to myself. I hope you are happy and proud on your achievements, because I am. Recently, however, feelings like humbleness or gratitude spread through myself as I think about the present and future of work. I like to explain why.

Recently, feelings like humbleness or gratitude spread through myself.

Leading education institutions, such as the Massachusetts Institute of Technology, Berkley and others, are ever more focusing on the Mission: “Making high-quality education accessible to all”. They do this by platform learning like the MIT BLOSSOMS (Blended Learning Open Source Science or Math Studies), where students from everywhere in the world can access high- and highest-level Math, Physics and Engineering classes. It is widely used in the streets of Pakistan and India[1]. Another, even more popular example is the edx platform, an initiative of MIT and Harvard, where they offer open courses, mainly on natural and computer science topics. And it is quite more than just a cocking-course. Many of these courses do meanwhile follow rigorous academic principles, are officially credited (ECTS, US-credit-system), and are recognized by market leaders (IBM, Walmart, PWC, GE to name just a few)[2]. This is a wonderful development. What can be better than being able to study the subject of your desire at a leading institution at your own schedule for almost no money? Hence, I took advantage of this and started in 2018 a Master’s level class in Data Science at the MITx. I can tell from own experience and as a Swiss engineer, it is really the hardest educational challenge I ever passed through. It is top-level stuff, and this is also what they claim – it’s the exact same content they teach in the on-campus classes. Cool!

What humbles me, however, is a side effect of this form of education. I have always been an ambitious guy and striven to be among the best performers in my classes. Far away here. While I am struggling to understand a particular problem in class, there are guys, which seem to have an easy game. They solve in 5 minutes a problem, for which I need 2 or 3 hours. And there are not just a few. Even though it’s hard to count, but there are probably dozens or even hundreds of these genius.

And the story does not end here. While today, many of them are probably struggling to pay the 300 bucks course fee, tomorrow, all these brilliant heads are coming to the labor market. Specialized in the exact same subject than I am, just x-times better. And probably, they would be happy with a much lower salary than I am - freighting, isn't it? I know there are other factors like experience, personality, language skills etc… but still…somehow, we have to compete with these guys. And it does not stop at my class-mates. Think of a world, where each and every person has the same access to the same quality education. Total equality. A wonderful idea, right? But did you ever think about what this means for your personal ‘development’. Where is your relative position as compared to where you are now?

In a world of perfect equality, where is your relative position as compared to now?

Some Math

Let’s make a very simple example, in which we assume that the amount of good jobs, which allow you to be part of the upper middle class, is stable and given by X. I know this is not the case, but still, I think in the short term, economic increase may not create that many new, good jobs. For simplicity, we focus here only on engineering/technical jobs and only on the 4’955 Million adults living on this planet. Let’s further assume perfect competition[3], i.e. companies can choose from a global pool of talents, freelancers or service providers.

In the past, if a company needed qualified labor, they usually had to hire somebody, paying him the mentioned ‘good-job’ salary so the person was able to be part of the upper middle class. This person came with an educational background as engineer or another, similar undergraduate education. To get this diploma, the person was either part of a ‘perfectly working’ system like Switzerland or Sweden, where you have free access to top federal universities, or, if a little less lucky, were American or Brazilian, and had pay or finance somehow a Tuition fee of around 50’000 USD for a reasonably decent University degree[4]. If you wanted to study at one of the Top 50 universities, the cost associated to it would be 3 or 4 times higher. There are maybe 5-10% of the global population, we assume 372 Million adults (7,5%), which are in the fortunate situation and can afford that (or live in Switzerland). If you belong to the 25% smartest of them, and if you have good discipline, you made it through University and today you can compete for one of the X good jobs. This is the rough schema of how the system works today. Mathematically, this schema filters the people first by wealth (say 7,5% as an average) and then by smartness (25%), i.e. your competition for one of the X good jobs is 7,5% x 25% = 1,875% or some 93 Million adults. Your chance to get a good job are X/93 Million. Congrats, as you read this article, chances are that you belong this exclusive selection. As we have seen a very low jobless rate for qualified professionals, we can assume that there is more or less 1 good job for each of these 93 Million qualified people, i.e. 93 Million good jobs.

Now imagine the situation, where the entire pyramid has access to top quality education. With other words, not only 372 Million, but 4’955 Million adults can go to top universities. Of course, one still needs to belong to the 25% smartest and be disciplined to make it to the diploma. However, this is proportional, and we can assume out of 1000 Asians, as many make it as out of 1000 Europeans. Thus, all of a sudden, instead of 93 Million qualified professionals, a full 1’239 Million of them appear on the labor market, all of which are competing for these X good jobs. The Math changes drastically, now your chance for a good Job is X/1’239 Million or 13,3 times lower! While in the past, each of the 93 Million qualified professionals had a good job, now it will be one out of 13!

If 4'955 Million adults had access to top universities, you'd need a minimum IQ of 131 points to get a good job!

Assuming that the amount X of jobs will be stable, and companies would select completely rational based on intellectual performance, you would need to be among the 1,87% smartest people to get a good job. In fact, we can assume that the level of qualification for the same job will increase drastically. Assuming the IQ to be normally distributed ~N(100, 15), the minimum IQ for getting one of these 93 Million good jobs will be 131,2 points!! This is almost a genius! Maybe I still have a chance to get a decent accountant in my life ;).

Jokes aside, I think that the top 2-5% or so of the global workforce will be hired in top-jobs and will have very stable and good conditions. Such companies are mostly top 500 companies, which compete for the best talents. But what happens with all these other good people? I think there will be two groups:

1. The Challenged

These people are qualified professionals, such as accountants, technical managers, engineers, project managers, qualified sales people. They do not belong to the few % best worldwide, but are very good in a particular niche. They will still see big demand for their services on the market, however, probably not any longer in stable, 9 to 5 jobs. Mid-sized companies simply have not enough work of this specialty to fill a 100% job. Also, they cannot afford to hire these people for anything, which is not their specialty, i.e. engineers using half of their time filling in simple technical specification in a excel sheet (they would not be able to compete against the top-tier platform companies). Hence, the trend of the time will be task-outsourcing. Specialized engineering tasks, sales tasks and financial management will be outsourced to good specialists or the specialists will be ‘assigned’ for limited time for the task at hand. This is already happening in large parts, if we look at the freelance programmer community, accounting, sales on commission etc… All these professionals will be mentally challenged, because they have to shift from a comfortable 9 to 5 job to an entrepreneurial life. If they accept this challenge, however, they will be much better off than today. Apparently, they will be able to charge high fees for their specialized services and the flexibility they gain contribute very positively to their mental health and their family life. It will be possible that they make 20’000 USD/month while working maybe 30 hours per week. Hence, these people need to shift up their gear, in a mental sense, and they can have the best time of their lives.

If these people shift up their gear, in a mental sense, they can make 20'000 USD monthly working 30 hours a week.

2. The Big Losers

There is another group. The biggest one, unfortunately. The people, which today are ‘second-ranked’ office or low-end managerial professionals, as well as low performers. These people see their jobs canceled because of digitization. For example, nobody will need own marketing design or translation people anymore. Also many administrative and coordination tasks, as well as simple sales activities, will not be needed anymore. If the people are not capable to build up an own business, or compete efficiently on the freelancer market, they will drift down to Uber drivers or other similar standardized platform driven services. Something we observe already in the USA and Brazil. Also, the bigger part of the service community falls into this group. The service clerks (Restaurants, Hotels, Taxis etc..) will see their businesses struggling as the platform giants grasp an ever-bigger piece of their market. They will end up in platform service jobs as well. They will have the same or less income, but work on demand and have no social security. They need will need to shift up their gear to survive. You should see now that you are not part of this group.

These people need to shift up their gear - just to survive!

The last part are all people, which work with their hands or physical presence. These jobs will not change much. Eventually, I can go back and work as an electrician.

Oh yes, we almost forgot one group. The rich, the investors, the capitalists. I refer to people from wealthy families, which, in principle, do not need to work for their living. Many of them are active as investors, angels, kind-of-entrepreneurs (not sure if you can call somebody an entrepreneur if he does not need to have great care with money). Certainly, they will have an immunity against all these disruptions. In the end, money is money. However, I think this is only temporary. Monetary driven capitalism is coming to an end and there is much more money than there are investment opportunities, i.e. smart business ideas, and, knowingly, money does not grow (I hope you know that, don’t you?). After the IT bubble and the subprime crisis, the recent (desperate) hunt for unicorns is just the most recent episode of the same problem. Throwing money at thighs you don't really understand - I don't know if this plays out well (ask Warren Buffet - "Stay in your competency circle!"). Again, also the children of the rich will have to compete with Millions of African genius at HARVARDx. Wealthy people have seen good times. Good times create weak people and weak people are usually not able to shift up their gears. Rashid bin Saeed Al Maktoum, the founder of Dubai, knows this better than anybody else…

The disruption has already begun. Shift up your gear, or you will be riding a camel, sooner than you think. 

Concluding...

These are challenging times for us, upper-middle class professionals. However, I still find it fantastic. Not only do Billions of Africans and Asians get a fair chance through access to education, which will most probably reduces the worst problems of this world. Also, I think it is good that old structures are getting broken up and our lethargic, affluent society gets shaken a little bit. Additional competition can only be good for economy, in this we believe. Don't we?

Ex nihilo nihilo fit! - Michael C. Rubin

Acknowledgement: I admit that the above is an overly simplified view. I do not claim absolute truth for it, but rather, wanting to show a simplified mechanism. If and to what degree this will materialize is up for debate. This is how you work in science, right? Designing a simplified schema and then go into verification and public discussion. Anyway, the topic is very complex, and I do not even scratch its surface. So please, dear reader, feel free to comment and debate.

Sources:

I am not so a smart guy, hence, most of the above is intellectually stolen. Still, below the main sources are mentioned.

[1] https://news.mit.edu/2019/making-high-quality-education-accessible-to-all-0715

[2] https://courses.edx.org

[3] I know this assumption is not correct in practical terms, as the relations are much more complex. If you are, by coincidence, an economist, investor or business administrator, and you believe in the neo-liberal economic theory (Milton Friedman etc..), please let me tell you that the basis of all your thinking is probably much more simplistic than my little 5-minute-assumption here. In the end, today, we have a globally working freelancer-platform market for engineering jobs and some 30 million Americans are assumed to earn their money as freelancers. Hence, we are certainly much closer to perfect competition than 1962 (I hope you know what this date refers to!).

[4] https://www.timeshighereducation.com/student/advice/cost-studying-university-united-states