Enterprise Networks

An Enterprise Network is an opportunity rich and success prone productive environment that shares investment communities, technologies and customer base.  Over the next twenty years it will replace the more rigid and hierarchical corporation as the dominant enterprise structure of the Information Age.

As shown on the graph, Enterprise Network opportunities will place a layer of more entrepreneurial activities on top of the sharply declining supply of traditional jobs caused by the approaching wave of profound technological unemployment.

The news media will undoubtedly focus on the depressing and inexorable loss of traditional jobs, while more sophisticated media will emphasize the more moderate loss of participants in the economy.  If, however, one makes the shift to the entrepreneurial mindset the outlook is rosy to the point of exciting.

As GDP per capita explodes, people in traditional jobs will find their compensation determined by supply and demand.  Because of advancements in robotics and A.I., for decades it will be a hirer's market and employees will find that their compensation, in real terms, will remain flat and even decrease, in many cases dramatically.  Entrepreneurs' income, on the other hand, will explode right along with GDP per capita.

This very high characteristic income for Information Age careers is an important source of the increasing income and wealth disparities that are developing, especially in the U.S. where the Transformation is most advanced.

There is one serious problem, however.  The Industrial Age image of an entrepreneur is that of a monomanic, visionary, highly self-promotional and intensely goal oriented person.  The Industrial Age entrepreneur was confronted with a series of obstacles to be overcome with high income coming with success, but also bankruptcy the result of failure.  Consequently, the rules of the entrepreneurial game have been constructed so that success does, indeed, require this personality type.  

However, most people don't fit the entrepreneurial personality type.  We see that, unavoidably, if the employer-employee relationship will comprise a relatively small minority of the workforce in the Information Age, a new, more encompassing, paradigm for the entrepreneur needs to be developed.  That new paradigm is expressed within an Enterprise Network which, rather than presenting obstacles, is a success prone environment. 

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First, let's get a visual picture of it.  The red rectangles are funding organizations that today might be called Venture Capital Funds. However, in the Enterprise Network, they will be informal communities of crowdfunders.  Some will have crowdfunding as their primary productive activitiy while most participants will be 'coming along for the ride' and engaged in a different primary productive activity themselves.

The light blue are corporate overhead service providers, which may include accounting, human resource, IT, legal services, etc. on a consultative basis.  In the Industrial Age corporation, corporate departments tell the operating units what to do.  In Enterprise Networks operating units procure counsel as needed, but are free to proceed as they choose.

The green circles are the individual, independently owned and operated, enterprises.  The enterprises will tend to be much smaller than Industrial Age enterprises.  First, consistent with The Age of Boutique Everything and The Cultures of Affluence, they will be providing niche products and services.  Second, consistent with The Income Explosion and Technological Unemployment, they will have highly automated operations.  Each enterprise may also have contractual or equity relationships with other enterprises within the network that may be the result of a vendor or customer relationship, or a strategic partnerships.  

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A few of these enterprises will provide the essential access to markets often on a cash flow positive, percent of sales basis.  What that means is that the enterprise will have the option to pay for access as a percent of their revenue and from the proceeds of sales.  In Internet marketing this is referred to as affiliate sales.  Historically, retail malls have done something similar with a base rent and then a percent of sales after the fact.

This is a significant part of what makes the Enterprise Network a success prone productive environment.  It substantially lowers start up equity requirements, allows for higher internally funded growth rates and greatly simplifies and accelerates profitability. 

The Death of Capitalism
As we explore in The Death of Capitalism, Information Age companies have a theoretical  return on book value of 67%.  In fact, by using more aggressive financing and organizational models, many young enterprises actually achieve results that significantly exceed this.  One study found that young Information Age enterprises can, and do, grow at 200% and many of them will be able to .

From this we can project the following for a startup with $500,000 initial funding:
Year                          Book Value

0                               $       500,000

1                                $   1,500,000
2                               $   4,500,000
3                               $ 13,500,000

There are many ways to estimate market value of an enterprise.  For Information Age enterprises, a 12:1 market to book value is conservative.  Which means that at the end of year three a conservative estimate of market value would be $13,500,000x12=$162,000,000.  If equity crowdfunders are given 20% equity, their year three market value will be $162,000,000x20%=$32,400,000 for an annual return of 300%.  A team of five will have an average net worth at the end of year three of $162,400,000x80%/5=$25,900,000.

In year 3, income will be $13,500,000x67%=$9,045,000 of which equity crowdfunders will earn $1,809,000 and the five team members will average $1,447,200.  Of course, active team members will also receive a salary as well.

While Industrial Age enterprises generally returned 5% to 10% of revenue (turnover in Europe), Information Age enterprises typically return 20% to 30%.  Consequently, total revenue in year three is estimated at $9,045,000/.25=$36,180,000.  While this provides substantial returns to a limited stockholder base and $1.5+ million per year income to the owner/operators, it is still a microcap enterprise with small caps usually defined as between 300 million and 2 billion USD.

In the Industrial Age, because returns on equity were relatively small, the objective of early round funding was to capitalize upon the market to book value premium (usually 2:1 to 3:1) that is created by a profitable enterprise.  Consequently, the 'exit strategy' was key to venture capital.  There are two reasons why this will change in the Information Age.

1. An investment that has grown 64X in three years, upon exit, requires re-investment in 64 new enterprises.  This quickly becomes impractical.  This forces the venture capitalist to chase ever larger deals and larger positions within each deal.
2. In the above example, if the position is not liquidated, annual income is 3.6X initial investment.  Each success, therefore creates the need to find three new investment opportunities per year every year.  Even this quickly becomes impractical and the portfolio, in addition to rapid growth also becomes cash flow positive.  Liquidation of positions would be counter-productive.

This means that equity crowdfunders will return to a portfolio management investment strategy where mature investments will produce positive cash flow which will be used to fund newer enterprises.

Scope of Opportunity  

Since Real GDP in the developed nations is going to increase at least ten-fold during the Transformation, 90% or more of the their 2040 GDP will need to be 'new business'. Additionally, what are currently considered to be 'developing nations', most notably Brazil, Russia, India and China, will likely 'catch up'  Overall, Gross World Product will likely increase more than forty fold.

Consequently, while the markets in publicly traded securities will be bearish for the foreseeable future, the business outlook is strongly bullish and that will translate into a strongly bullish privatestors and entrepreneurs of the Enterprise Networks will be the ones who get it.

There are several reasons why the Information Age Enterprise Networks will replace the traditional hierarchical corporations.

First, they will out compete them because they will be more responsive to changes in the marketplace.  As the Income Explosion, The Cultures of Affluence and The Age of Boutique Everything rapidly change society, culture, economies and markets, the centrally planned and controlled, hierarchical corporations will not be able to respond quickly enough to take advantage of the new opportunities and to avoid the repercussions of the new threats.

Second, large, often multinational, corporations are creatures of the global public equity markets.  Their rates of returns, their structured equity sections, their management relationship with markets and market analysts define them.  As the investment dollars are driven to the private equity markets, with smaller scales and higher risk adjusted rates of return, they will not be able to provide the equity instruments and structures that the new investor wants.  In response, large corporations will likely decentralize and offer shares in subsidiaries and business units for sale in an effort to become competitive with Enterprise Networks.  Some will succeed.  However, they will no longer be what they were.  They will have essentially converted themselves into an Enterprise Network.

Third, Enterprise Networks are free to make superior long term decisions while publicly traded multinationals are driven by the need to 'deliver' on the next quarter's results.  Over time, this superior decision making incentives will result in superior decisions.

On the other side of the coin, the best Knowledge Workers will prefer the relationship being offered by Enterprise Networks over what is offered in a traditional employer/employee relationship.  It is also far superior to the Contractor or Consultant relationship.  The astute reader has, perhaps, already caught that being an entrepreneur in an Enterprise Network does not require start-up capital.  It simply requires the ability to find a place in the structure.  Unlike the current entrepreneurial market, this will not require the participant to be a self-promoter or to possess a monomanic personality.  There are no dictates from on high; the local management team, advised by expert Network consultants, is in charge.

If you are interested in learning more about Polymathica Enterprise Network, please subscribe to The Polymath in the upper right hand corner.  Use the referral number given to you on referral or if you arrived from a search or other source, use 032950

Sorting Out Technological Unemployment

Recently there has been increased media coverage of technological unemployment. It likely began with President Obama's 2011 statement, "There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don't go to a bank teller, or you go to the airport and you're using a kiosk instead of checking in at the gate."  However, the high profile of Google's driverless cars and the well covered Jeopardy victory of IBM's Watson have probably contributed to a general awareness of the accelerating replacement of humans by advanced robots and artificial intelligence software.

There are more bank tellers today than there were when ATMs were introduced as was pointed out by The Economist. This resulted in President Obama's comment being ridiculed in many circles.  The criticism was improper; while there are more bank tellers today, there are substantially fewer than there would be if ATMs didn't offer an alternative to them. The introduction of ATMs did, indeed, eliminate jobs and cause new bank teller jobs to not be created.

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History
In 1930, John Maynard Keynes published an essay, 'Economic Possibilities for our Grandchildren'.  He summarized his thesis by stating, 'The increase of technical efficiency has been taking place faster than we can deal with the problem of labour absorption; the improvement in the standard of life has been a little too quick...'  Though he didn't coin the term, Technological Unemployment, he was the first luminary of Economics to give it credence.

Keynes' statement properly frames the discussion as a phenomenon of two forces in dynamic equilibrium. Technology, in general, and automation, specifically, reduces the labor component of domestic product and thereby causes unemployment.  However, technological progress is also economically stimulative and the resulting growth in Gross Domestic Product creates jobs.  The problem is one of timing; technological unemployment is immediate but the economic growth takes place over several years.

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The specific mechanisms by which automation results in economic growth is as follows:

     *Enterprises only purchase productivity enhancing technology if the internal rate of return (IRR) substantially exceeds their cost of capital.  They generally establish a corporate 'hurdle rate' that establishes a minimum risk adjusted rate of return that all projects must meet if they are to be implemented.  Therefore, automation decreases labor, increases capital employed and increases profits even as a percentof capital employed.

     *Because the productivity enhancing technology is, subject to patent protection, available to all competitors, in a free marketplace, enterprises will lower their prices to their marginal return on capital in order to capture or defend market share.

     *The price reduction is economically stimulative because the money saved by the consume can then be used to purchase additional items which increases aggregate demand.

     *Research suggests that an inflation rate of 2% optimizes long term Real GDP growth.  Central banks today generally manage their money supply to that goal.  Therefore, generally falling prices results in an increase money supply, which is very stimulative.

However, and this is key, the unemployment is immediate, but the job creation from economic growth takes time.

The faster the rate of the technological progress, the larger the portion of the labor force that is in this transitional state. Also, when technology eliminates a whole job category there is often a period of education for the jobs that remain.  What is lost in much of the contemporary discourse is this ephemeral nature of technological unemployment.  Keynes did not condemn 'technical efficiency' but rather posited that it could happen too quickly.

Long before the term 'technological unemployment' was coined, the early nineteenth century Luddites protested the loss of jobs due to the partial automation of the textile industry.  Because their fear proved to be unfounded, the belief that technological unemployment leads to structural and persistent unemployment is referred to as the Luddite Fallacy.  Despite two centuries of evidence to the contrary there is a growing belief that the technological unemployment in our immediate future will result in a significant, permanent job shortage.  Even leading Economists who are fully aware of the Luddite Fallacy are expressing concern that this time technological unemployment might be permanent.

In the July 21, 2014 Washington Post, Vivek Wadhwa wrote, 'Within two decades, we will have almost unlimited energy, food, and clean water; advances in medicine will allow us to live longer and healthier lives; robots will drive our cars, manufacture our goods, and do our chores,  There won’t be much work for human beings'. What he predicts we will have in twenty years is becoming the consensus, however the permanence of the job destruction is still a matter of controversy.

To a degree the projected job destruction that is becoming the majority opinion scenario is based on a 2013 paper by Frey and Osborne that analyzed current jobs and concluded that 47% of them are at risk in the short term.  The controversy revolves around whether new job categories will arise to employ the displaced workers.  Marshall Brain, in 'Robotic Nation' probably most succinctly stated the neo-luddite position, 'This imaginary new category of employment does not hinge on technology -- it is going to employ people, after all, in massive numbers -- it is going to employ half of today's working population. Why don't we see any evidence of this new category of jobs today?'.

This expresses the fundamental error of the Luddite Fallacy. If half the jobs disappear and the GDP remains constant, it is true that the unemployment rate will increase to over 50%.  However, if the GDP doubles, the unemployment rate will remain unchanged.  This will happen without any fundamentally new job categories. Twice as many people will be doing the remaining 50% of the jobs.  Rather than 50% unemployment, we will see a doubling of standards of living. However, Brain is also incorrect about new job categories. Over time new job categories will emerge.

Between 1875 and 2000, the high industrial age, initiated by a explosion of higher technology inventions in the last few decades of the 19th Century, U.S. Real GDP per capita increased from $3,339.20 to $44,475.00 (2009USD).  This 13.3X increase in productivity was caused by automation and demonstrates that, in practice, automation doesn't result in massive unemployment but rather in GDP growth. Put simply, the historical evidence says that technological unemployment cures itself by increasing GDP and it can easily handle a 50% loss in jobs.

This is not just a theoretical exercise.   In fact, in a sense,, all current unemployment is technological unemployment.  We can demonstrate this with a simple set of calculations.  In 2013 in the U.S. 143.929 million workers created $15,710.3 billion of GDP for an average of $109,155 each.  There were 10.376 million unemployed for a labor force of 155.044 million.  In 2007 146.047 million workers created $14,873.7 billion of GDP for an average of $101,328.  If the GDP of 2013 was created with the GDP per worker of 2007, it would require 155.044 million workers or precisely the total labor force. ($15,710.3 billion÷$101,328)  In other words, all the unemployment of 2013 can be thought of as resulting from the increase in GDP per worker from 2007 to 2013.

Because over this time period GDP grew at 0.91% per year and GDP per worker grew at 1.25% per year, unemployment grew from 5% to 6.7%.  If GDP per worker had grown at 3% per year from 2007 to 2013 and GDP grew at the same 0.91%, unemployment would be 16.2%.  Over subsequent years GDP would grow more quickly, and lower unemployment. However, that would be scant solace to the unemployed workers of 2013.  This describes precisely what Keynes meant when he talked about growing too quickly.

While the amount of increase in GDP per capita that will result from the impending explosion in automation is highly speculative, many analyses suggest that it may be similar to that experienced during the High Industrial Age. If we assume a 10X increase, the median household income in the U.S. will be 600,000 2015USD.  Clearly such a household will have substantially different spending patterns and purchasing decision criteria than the average household of today.  These, in turn, will transform the labor markets over and above the changes wrought by technological progress.

In summary
Advanced robotics and artificial intelligence will devour corporate organization charts from the bottom up until only upper management remains. However, economic growth will result in little long term change in total employment.

Manufacturing jobs will nearly disappear as most fabrication will be 'black box' with no human intervention.  However, they will be replaced by an explosion in creative careers.

Virtually all menial service jobs will disappear, however, employment will remain relatively constant due to an explosive growth in more professional services.

A comprehensive treatment of this transformation in the workforce would exceed our reliable knowledge of futurity. However, here we will consider the overall structure of the Information Age labor market with sufficient specificity to support the conclusion that the impending burst in technological unemployment, like all events that preceded it, will not result in permanently high levels of unemployment.

Information Age Careers

In the Information Age differences in spending patterns will lead to different labor demands.  We can expect the current decrease in the energy and raw material components of GDP to continue as the economy becomes more information, knowledge and content intensive.  The durable goods component will likely decrease while the design component will increase.  Services will likely increase.  Whole new job categories may indeed arise as products and services not affordable by a sufficiently large market today become broadly affordable.

While the Information Age economy will be at least as complex as the Industrial Age economy, we can describe three broad classes of jobs that will dominate careers, 1) Owner/operators and Executives 2) Creatives and 3) Services.

Owner/Operators and Executives
Automation is eating corporate organizations from the bottom, up.  Since we know that computers play chess and Jeopardy better than humans and diagnose diseases better than doctors, it seems unlikely that technical expertise alone will save any corporate job.  However the computer consumption of the org chart will end before it is completely devoured.

In order to understand the process of transformation for corporate careers, we will use a stylized example of an enterprise that has one CEO, 5 VPs, 25 managers and 125 professionals.  In the first phase computers replace all professionals.  Those displaced professionals start four new enterprises, with, in total, 4 CEOs, 20 VPs and 100 managers.  In this stylized example, the remaining professional goes off to write the great American novel.  The corporate portion of GDP has grown 5X.

Next, computers replace all managers or 125 more workers. They create 20 enterprises with 20 CEOs and 100 VPs.  In order to balance the equation, we will assume that five start a Rock & Roll band.  The corporate portion of GDP increases 25X in total.

Now, the software salesman comes knocking with a new release that eliminates the VPs.  This time the CEO says no. He or she does so because enterprises are not just productive environments; they are also social environments.  The CEO does not want to come to work and be alone.  (S)he also realizes that the loss of diversity of perspectives would introduce significant risk.  In other words, even in an artificial intelligence future, there is an irreducible 3% to 5% of the workforce.

While computers will perform nearly all of the day to day, nuts and bolts operations, humans will remain the decision makers.  They will do so because humans don't want to turn the reigns over to computers.  Computers have neither the inclination nor the capability to contest the issue. Consequently, humans stay in charge.  They won't need to work very much because computers will be superb advisors and even better subordinates

Nearly all professionals enter the workforce with the aspiration to one day become VP or CEO.  Consequently this process of automation, over time, will be perceived as a positive event providing a vastly improved opportunity for promotion.  The primary challenge will be seasoning executives when the entry level jobs are at the vice president level.

The preceding example suggests that the percent of people employed in the operation of an enterprise will decrease by 96%.  If GDP grows by less than 25X the labor hours needed in office activities will decrease.  This can be ameliorated through shorter work weeks which will be consistent with automated decision support.  A 20 hour work week is not unreasonable and consistent with a 12X increase in GDP per capita.

However, we should learn a lesson from Keynes.  He predicted that 'our grandchildren' would work 30 hours week.  However, the average work week is actually 37 hours per week.  That is still down substantially from 1930, but not as low as he predicted.  Consequently, we should assume that the 20 hour work week will probably be missed as well.  This means that the percentage of the workforce engaged in corporate activities will likely decrease moderately.

The Creatives

Designers
Many, perhaps most, fabrication will take place in facilities that robotically receive raw materials delivered robotically, move materials within the facility robotically, robotically fabricate the product, move finished goods to warehousing with robotic forklifts, robotically move finished goods to robotic picking lines with orders moved robotically to robotic trucks to transport orders to the purchasers.  This 'black box' manufacturing will be the norm.

It is common to think that the 'middle class' of the Information Age will be small, highly educated and technically oriented.  This preception is what leads to much of the anxiety over a high, persistant unemployment.  This is a misapprehension resulting from the mistake of imagining the future to be 'like today only more so'.

While both the Owner/Operator and Middle Class will contain some scientists and technologists, most of the Middle class will create and manage design and brand value-added.

These jobs will not be lost to automation because the one thing computers can't do is be human and we humans want humans doing these jobs.  For example, we are willing to pay more for perfume by Taylor Swift or Beyonce than a perfume of equal quality without the endorsement.  Essentially, the simple process of a celebrity selecting one fragrance among several as their favorite adds substantial value to it.  This is a essentially human activity that cannot be automated; perfume by R2D2 or shoes by HAL simply will not command designer prices.

Today, only a small percent of consumers have suffcient financial resources to routinely purchase high design and brand content products.  However, when median household income reaches mid six figure 2015USD most people will be able to afford designer products.  All evidence indicates that they will buy them.  In other words, while the 600,000 2015USD income household of the Information Age will not be exactly like the 600,000 2015USD income household of today, over time their purchasing patterns will likely be similar. 

For example, the typical family spends 7% of their income on clothes.  For the average $60,000 per year family that is $4,200.  Clearly dad is not going to work in $3,000 Armani suits nor is mom wearing $3,000 St. John ensembles.  The $300 Men's Warehouse and Limited outfits that most dads and moms currently buy have relatively low design and brand components while Armani and St.John are dominated by these price components.  

As incomes increase 10X or more, clothing budgets will grow large enough to accommodate high design and brand value purchases.  For several reasons product category sales may actually increase by somewhat more that 10X.  However, the important point is that the clothes that are currently being purchased by most families may have no more than a 2%-3%, design and brand value component.  The designer clothes that will come to be the norm typically have a 20% to 30% design and brand value component.  Consequently, while budgets may increase 10X, the design and brand component will likely increase 100X.

According to the U.S. Bureau of Labor Statistics there are 22,300 fashion designers in the U.S. This could easily increase to 1,000,000.  The design process will likely rely heavily upon A.I. design assistance, but fashion designers will still make the final decisions and their names will be on the labels.

Second, many product categories that currently have very little design component will routinely be custom designed in the future.  3D printing, while not as cost effective as extrusion and injection fabrication meyhods in large runs, is much less expensive in short runs.  When combined with advanced robotics and advances in material science nearly all durable goods will become custom designed.

The largest absolute increase in design value added will likely be in cars.  A Rolls Royce Ghost costs about 15X more than a Toyota Camry.  The Ghost is larger, heavier and generally uses more costly materials.  However, most of its greater cost is in design and brand value.  While built individually, Rolls Royce and Bentley are still production automobiles.  However, Rolls Royce has its Bespoke program and Bentley has its Mulliner program where, as Rolls puts it, you commission rather than order your car.

In the U.S., alone, there may be 750,000 automotive designers as nearly everyone buys electric, self-driving, but bespoke automobiles.  In fact, the practice of commissioning a coach builder to place a custom designed body on a more standard chassis that was common in the early 20th century may return.

While most commercial real estate is individually designed, currently most residential housing is built from plans that are duplicated hundreds, even thousands, of times.  In the Information Age houses will be much larger and will almost always be custom designed.  Architectural design is already substantially computer assisted.  While that trend will undoubtedly continue, the number of U.S. architects will likely increase from 107,400 to over 500,000.

Today, households spend a surprisingly small amount on furniture and the interior design process.  That is a characteristic of 60,000 2015USD households and their prioritization of a very limited household budget.  600,000 2015USD households go through a very different process than a trip to the 'big box' furniture retailers or Sears.

Typically, they will retain and interior designer.  The designer will render a prospective design for a room that will include custom furniture with selected fabrics.  Window treatments, art, table clothes, bedding, etc. is carefully selected and often custom made.In other words, the room will be unique on a very fundamental level.

Typically, some designers have some furniture at their retail establishment but usually design from many large categories.  They do not charge a design fee but rather take the retailer share for their services.  While a room designed and executed by an interior designer is expensive, it is an inherently more efficient process.

Reflective of the relatively small budget that most households have for interior design services, there are only about 55,000 today.  However, because the percent of households utilizing interior designers will increase and the design content compared to 'big box' store furniture will also dramatically increase, the number of interior designers may increase to 500,000.

What is true for perfume, fashion, cars, houses and furniture will also be true for housewares, millwork, towels, sheets, electronics, etc.  This emergent Age of Boutique Everything could make Product Designer the single largest career category.

Writers
Writers are everywhere, already.  They inform us of the news, analyze it, tell us what to think about it.  They tell us how to use our phones, computers, microwaves, televisions, blow dryers, how to assemble toys, etc.  They write books and magazine articles to entertain and inform us.  Even when we watch TV or movies it all started with a writer.

A typical $25 hardbound book sold in a 'bricks and mortar' bookstore typically will pay the author less than $4 per sale.  An e-book costs about $10 and the author receives $7.  At the same dollar sales, this translates to four times more income for writers.  However, as incomes skyrocket and liesure time increases, both from shorter work weeks and more self-maintaining houses, the absolute number of books will likely skyrocket as well.  Consequently, book writers will likely increase tenfold as the prevailing income also increases substantially.

In America, we have gone from three commercial television networks, a public station and an independent station to the equivalent of over twenty networks today delivered by satellite or cable.  Internet television will expand that to well over 100 network equivalents.  This explosion of original programming is increasing the number of writers,  while simultaneously lowering compensation.  However, as incomes increase and viewers transition to episode and season purchases, at substantially higher revenue per viewer, incomes will increase as well.

Today the financially successful script writer is rare.  They will be far more common in the Information Age.  Today, computers check spelling and some elements of style.  In the future scripts may be computer checked in real time for conformity to the show and characters.  However, humans will still submit scripts with their names on them.

Magazines and newspapers are in trouble today while, if anything, via the Internet, people consume more print material than ever.  The delivery of this content, from a business viewpoint, is still in great disarray.  However, as it evolves and streamlines, it will provide higher income for more writers than magazines and newspapers did in their primer.

First, nearly all the value-added of Internet content is provided by the writer and editor.  There is no cost of printing or delivery.  Second, because Internet publication has such low entry and maintenance costs, it is capable of delivering smaller, more highly targeted audiences to advertisers.  If an advertiser is required to advertise to 1,000,000 people in order to reach 10,000 potential customers, he will not be able to pay a very high CPM.  However, if he only needs to advertise to 50,000 people to reach the same 10,000 potential customers, he can afford to pay a CPM twenty times higher.

With the emergent Age of Boutique Everything there will be an explosion of niche marketers looking to advertise in niche publications at very high CPM.  This means more writers will be needed to satisfy the explosion in niche publications and the very high CPM will pass on to the writers in the form of higher payments.

Fine Art
Today, the $60,000 income family buys a limited number of prints and cast resin statuary from general merchandise stores.  The $600,000 income family, on the other hand, buys original art from galleries.  In the Information Age, 50% of the households will earn $600,000 per year.  Today only about 0.5% do.  That suggests a 100X increase in expenditures for fine art.  With this explosion in demand, it is likely that semi automation of the artistic process will be welcomed by artist and consumer alike, and both the number and income of painters, sculptors, computere graphic artists, etc. will increase dramatically.  Yes, AI will likely be able to create fine art.  However, it will still pass through artists that can sign the work and created the value added of human emotion.

Today, other than support for public television, only a small percentage of the population could be considered 'patrons of the arts'.  As incomes explode, perhaps as much as 20% of families will participate in programmatic patronage.  This may range from a commitment to purchase all books published by an author up to endowing a chair in their local symphony or loaning art to the local museum.  This increased penchant for patronage in combination with the greater purchases in the arts means that we will experience a renaissance in the arts and a concomitant explosion of professional artists.

Music Creatives
Kevin Kelly published a well known article entitled '1,000 True Fans' in which he suggested that many artists could make a livable income by getting $100 per year from 1,000 people.  It resonated with its audience because today the industry has a very small number of people who make enormous income, a somewhat larger but still small number of musicians who make a middle class income and a very large population who would like to be full time musicians but are unable to earn enough.

Undoubtedly, an orchestra of robots could play Beethoven's Fifth Symphony credibly.  However, even if they could play it better than a human orchestra, people might go to see the performance out of curiosity, but they won't buy a season ticket.  A night at the symphony is a social event as well as a musical event.  If the performance is not done by people, one may as well stay home and listen to a CD.

While there are and will continue to be a relatively small number of mega-stars, most musicians will engage in 1) local performances 'in concert', 2) peformance in restaurants, clubs and some retail establishments, 3) performance for parties, wedding receptions, etc., 4) music instruction, and 5) street performance.  As incomes explode, the demand for most of these categories will increase as will the prevailing compensation.

Today there are 167,400 musicians in the U.S. That could easily increase to 1,500,000 which will probably stretch the available market of sufficiently talented people.

Video Entertainment
In addition to the writers mentioned earlier, the production of video entertainment employs many Creatives.  These include actors, directors, wardrobe and set designers, soundtrack composers, etc.  While 'extras' will likely be computer generated in the future the main characters will remain human because we want them to be.  

A typical ad supported one hour television show will earn about $.75 per viewer.  The typical season pass for a series purchased for download is about $1.67 or more than twice as much.  However, that will increase over time as incomes increase and people are willing to pay more for more targeted programming.  As the total industry revenue increases in an industry already characterized by high salaries, the number of workers will continue to increase.

Computer Games
Computer games, both for download and MMORPGs, have exploded and now have total annual revenue of about $25 billion in the U.S. and $125 billion worldwide.  The design content on computer games is massive and is consequently fueling growth in Designer roles.  It is already a highly compensated job and A.I. is likely to substantially increase productivity and, thus, income in the next 10 to 20 years.

As large as the industry already is, it is still dominated by younger people with 40% of the population not involved.  The average person who owns a video game owns two.  In other words, this is an industry that will continue to grow at a fast rate for quite some time.  However, because it will likely automate, the number of jobs may actually decrease while the annual income explodes to some of the highest in the whole economy.

Services
The Fashion Consultant
In the high fashion centers such as Rodeo Drive in Beverly Hills, Michigan Ave in Chicago or Bal Harbour Shops in Miami, the purchasing process is very different from the Mall.  First, people don't work with the sales clerk who happens to be on duty when they walk in; they have a fashion consultant with extensive notes on the customer, their preferences and their previous purchases.  They frequenly will call the customer with something like, 'We just got something in that is just YOU.  The second I saw it, I knew you have to see it.  Can you come in sometime over the next couple of days?  I will set it aside in your size with a few other selections that I think you will like.'

When the customer arrives she is greeted by her fashion consultant who will talk with her about the outfits, suggest purses, shoes, etc.  When a dress costs $2,500, it can be and is a high touch, high attention purchase experience.  This is what people in the 600,000 2015USD income range are accustomed to and for those who are entering that income level, after a short period of adjustment, it is usually an easy thing to which to become accustomed.

Because clothing is one of the largest discretionary budget items in most households, this retail consulting job will be one of the largest job categories, comprising, perhaps, as much as 5% of the labor market.  Because fashion consultants can generate several thousand dollars per hour in sales, these will not be low income jobs.

Restaraunts and Pubs
Families who earn today's median income allocate their resources with a keen eye toward the bottom two levels of Maslow''s Hierarchy.  However, families at the future median of 600,000 2015USD will have different priorities. In the Information Age people will have domestic robots and will not visit restaurants solely to avoid cooking and cleaning.  When they go to a restaurant it will be because they want to 'get out and do something'.  It is inherently a social event.

All jobs in restaurants and pubs that don't enhance the social experience will be automated. The busboy and dishwasher will be robots.  In the lower priced restaurants, food preparation will be totally automated but in mid to high priced restaurants, there will be a master chef and, perhaps, a pastry chef.  These chefs, though in a service industry, are actually creatives.  Most people will choose their restaurant partially to experiece the culinary genius of the chef.

The guests will be ushered to their table by a personal attendant who will advise as to the menu and appear to take their order.  In reality the attendent is wearing a microphone with a speech recognition AI program that plans and, as sous chef, executes the order.  The meal will typically arrive on a robot cart a few seconds after the attendent arrives at the table to serve it.

Science Fiction is replete with robot bartenders and cocktail waitresses.. They will go the way of flying cars.  There is absolutely no reason to visit a pub save as a social experience. Bartenders and cocktail waitresses have been and will continue to be an important element of the milieu..  Both bartenders and waitresses will wear microphones attached to drink preparing robots. They are not there to take, prepare and deliver drink orders; they are there to assure a minimum level of social interaction.

Service Professionals
Virtually all service professionals will be negatively affected by automation.  IBM's Dr. Watson is already a better diagnostician than any human doctor.  In the not too distant future, it will query patients for symptoms, order tests and deliver DX and Rx to the physician.  The doctor's role will be reduced to explaining it to the patient and dealing with the emotional issues.  Watson could do that, too, but few patients will want it over a human.  Educational requirements and compensation will fall relative to other professions.

Attorneys, in the future, will have AI that does legal research, writes contracts and briefs, prepares discovery and interrogatories.  However, few people would be happy with a legal system that gives no room for humanity.  Consequently, attorneys will interact with clients, judges and juries. Judges will be advised by expert systems on precedents, related appeal reversals, etc.  Income will likely not keep pace on a percentile basis but will still will be above 50%'ile.  Demand for legal professionals will almost surely decrease substantially.

Realtors, Insurance Agents, Personal Bankers and Investment Advisors will change very little save that, due to substantially greater client income and wealth, their numbers and income will be substantially higher.  As with other service professioals, they will be substantially advised by A.I.  In upper income communities, concierge services that provide a single source for these professional services are becoming popular and may be the face of the future.

Personal Trainers, Advisors and Coaches
The upper income households today commonly have personal trainers, nutritionists, yoga instructors, massage therapists, etc.  When the median household income is $600,000 many, perhaps most, people will retain several such trainers, advisors and coaches.  Robots can do most of these jobs, but in truth, these are social events and that the social leader is human is critical.  Will some lower income people register for robot led Pilate's?  Probably.  But it will be the exception.

Synthesis and Conclusion
While we are almost surely facing high technological unemployment prior to 2020, it will resolve within a decade as the stimulative effects of the resultant deflationary forces take hold.  By 2040, GDP per capita will exceed 500,000 2015 USD over most of the world and median household income will exceed 600,000 2015USD.

AI and expert systems are likely to completely automate the office within ten to fifteen years, the process will stop at the upper management level.  Gains in Real GDP, however, will increase sufficiently to keep the number of office workers close to current levels

An explosion in creative jobs will replace the nearly complete loss of manufacturing jobs and small decrease in office jobs.  The Creatives will be dominated by product designers followed by writers, composers, musicians, actors, painters and sculptors.

Like Owner/Operators the incomes of Creatives will cover a wide range from local entertainers to top level fashion designers, top musicians, etc.  The median will likely be 40% or so below Owner/Operators.

Menial service jobs such as drivers, bus boys, window washers, hotel housekeepers, fast food workers, gardeners, retail stockers, etc. will disappear entirely. Most of the remaining service jobs will require professional skill sets and will be viewed more as performance art or consultancy than servitude.


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CPMs Highest Among TV Broadcast Nets, Online Video Limited

• by Wayne Friedman, March 27, 2014, 10:45 AM

http://www.mediapost.com/publications/article/222378/cpms-highest-among-tv-broadcast-nets-online-video.html?edition=

Essential Facts About the Computer and Video Game Industry

http://www.theesa.com/wp-content/uploads/2014/10/ESA_EF_2014.pdf