Today’s start-ups aren’t looking to replace a particular job, they’re looking to reimagine entire industries.
Kodak, an icon of the photography industry, which once had 145,000 employees, was pushed to file for bankruptcy in 2012. Meanwhile, Instagram, with fewer than 20 employees, managed to outpace Kodak in its own game but on the digital front. Today, Instagram is worth hundreds of billions of dollars and has 450 employees. Kodak is still alive but has reduced its workforce to 4,500 people and has a capital of “just” over a billion dollars. A similar fate befell Blockbuster, which went from having more than 60,000 employees and 9,000 stores worldwide to being unable to compete with the paradigm shift driven by Netflix. Today, Blockbuster has only one store open in the world. This branch in Bend, Oregon, is visited annually by thousands of nostalgic tourists for VHS and DVDs.
Toutiao, known to many as the Chinese BuzzFeed, is a news portal that does not employ writers or editors[160]. While BuzzFeed, The Washington Post, or any other news portal employs editors eager to write the next big story or viral article, Toutiao uses the power of its algorithms to write or edit an article. Toutiao has algorithms capable of accurately detecting the spread of fake news among the sources that feed its database.
The model chosen by this Chinese giant has yielded positive results. While Toutiao’s parent company, ByteDance Ltd, which also owns other apps like TikTok, has been valued at over $180 billion, BuzzFeed’s valuation is just over $1.7 billion.
Smart Finance is an online money lender that does not have a human analyst review each application. This start-up applies its own AI algorithms to carry out hundreds of thousands of small loans, but instead of asking users how much money they usually earn, it asks for access to some data from their mobile phones. Does it automatically enter our bank accounts through home banking once we provide our phone data? No. It looks at other things that many of us would find trivial. Smart Finance’s algorithms pay close attention to how quickly you type on your phone, how much battery you have left, whether you are currently charging the phone, if you frequently order food delivery, and over a thousand other behaviors or parameters. These relationships have been invisible to the human eye until now and are still too complex to be discovered by ourselves. These are relationships we don’t understand a priori how they are connected to one variable or another. However, they are there. The data shows that when a person applies for a loan with less than 12% battery remaining on their cell phone, there is only a 43% chance they will repay the money as agreed[161].
There is no doubt that technology has created numerous job opportunities in recent decades, jobs that we couldn’t imagine in the 90s. In fact, although Google or Apple today hire proportionately fewer people than past giants like General Motors or AT&T, new giants have created millions of indirect jobs, for example, through Google or Apple’s app stores, where thousands of developers worldwide upload their creations. Even so, a 2016 World Bank report estimated that the information and telecommunications industry employed approximately 1% of workers in developing countries[162]. In fact, even in the United States, the cradle of so many large tech companies, the tech sector companies do not represent much more than 3% of direct employment with about 4 million jobs out of a total of 135 million jobs in the U.S. market[163] [164]. The fact that wealth creation today requires fewer workers than decades ago is only possible because tech companies with digital products have marginal costs tending to zero as they expand. That is the new economy, the information economy. What is the real meaning of this often-repeated phrase? It means that information has become another commodity. In the exchange of material goods, everything boils down to a zero-sum game. That is, if I have an apple and you have $100 or a shirt, and we decide to trade them hand to hand, the number of objects in circulation remains the same; only the holder of the power or rights over these goods changes. However, in the information economy, you can have an idea, I can have another, and we can share them, so that both of us have the same ideas and information, making it no longer a zero-sum game. Similarly, if an online service company decides to offer its service in a new country, it does not necessarily need to open a factory or office there.
[160] Hariharan, A. (2017). “The Hidden Forces behind Toutiao: China’s Content King.” Y Combinator. Viewed on February 15, 2023, at www.ycombinator.com/blog/the-hidden-forces-behind-toutiao-chinas-content-king.
[161] Diamandis, P. H. (2018). AI Superpowers by Kai-Fu Lee. Diamandis. Viewed on February 15, 2023, at https://www.diamandis.com/blog/kai-fu-lee-ai-superpowers.
[162] World Development Report 2016: Digital Dividends. World Bank. (2016). Viewed on August 5, 2021, at https://www.worldbank.org/en/publication/wdr2016.
[163] Mearian, L. (2023). How many jobs are available in technology in the US? Computerworld. Viewed on August 8, 2023, at https://www.computerworld.com/article/3542681/how-many-jobs-are-available-in-technology.html.
[164] Full-time employees U.S. 2023. (2023). Statista. Viewed on August 1, 2023, at https://www.statista.com/statistics/192361/unadjusted-monthly-number-of-full-time-employees-in-the-us.