New technologies are going to further polarize the labor market. We are going to have extremely well-paid, highly skilled people and “replaceable employees” working for peanuts. Professor Katarzyna Śledziewska and professor Renata Włoch in conversation with Maciej Chojnowski
Maciej Chojnowski: In your recent book “Digital Industry. How New Technologies Change the World” you claim that million dollar losses faced by such companies as Uber or Lyft may lead to the conclusion that computerization is a media-generated empty shell rather than an actual revolution. And what is the reality?
Katarzyna Śledziewska*: We are living in interesting times, because the pandemic has forced most of us to switch to online mode. We are doing business, learning, making purchases, communicating with our friends and family, and looking for partners on the internet. We can say we are all taking part in a big experiment. That shift can be performed in different ways.
There are companies whose employees are working from home and everything is fine as if nothing ever happened. They have no problems with invoicing projects, filing applications or building teams for new tasks.
But there are other enterprises where digital tools are provided to employees without much thought and without adapting them specifically to the nature of work the staff do. If our actions are not integrated and carefully planned and if we don’t have any strategy, then arbitrarily used technology will not bring positive results.
Renata Włoch**: Our book highlights the idea that digital transformation shouldn’t be perceived only as a technological change. Technologies, especially the so-called datafication technologies, are necessary to speed up the process of gathering, processing and analyzing data and to use them to obtain a business value. But although it’s a sine qua non, it’s not the only condition that has to be met.
You will also need organizational and procedural changes as well as a completely new approach to the use of human work in organizations – from companies to public institutions. The work is getting dematerialized in a digital economy. Because of the fact that more and more tasks are performed nowadays by the machines or with the use of the machines, employees’ competences will have to change.
In your book you are referring to the hype cycle by Gartner, i.e. to five phases of a technology’s life cycle. Can you say there is a digital technology that has become advanced enough to drive the transformation?
K.Ś.: The hype cycle is very interesting, but it’s still a simplification. That’s why in DELab UW we have applied a different methodology which concentrates more on a quantitative aspect. We have studied scientific articles and professional publications in the context of writing about technology. That approach allows you to see more intricate correlations and realize how complex the process is.
So it’s not so important at what stage we are at the moment when it comes to a specific technology. Technologies come and go. Today, we have so many of them that their number does not matter. What really matters is how companies or public institutions could use them.
R.W.: The fourth technological revolution consists in combinatorial innovation – innovations derive from what has already been invented. Today, innovation is not so much about new inventions but about their more efficient applications.
Researchers analyzing the role of artificial intelligence in achieving the goals of sustainable development claim that it can contribute to productivity and growth throughout the economy. However, Robert Gordon and Jeffrey Funk say that productivity in the USA is lower because innovation of new technologies is limited. What do you think about productivity in the digital era?
K.Ś.: Economics has a problem with measuring the influence of computerization on the economy. Especially, when we talk about the traditional criterion of gross domestic product. Standard economic indicators struggle with identifying the nature of new business models developed by tech companies and platforms; but improved productivity cannot be seen in traditional sectors.
That phenomenon is called the productivity paradox and it has been known since the beginning of ICT development.
On the other hand, you have to remember that implementation of new technologies, specifically digital ones, is connected with high investment costs. There are also many unsuccessful investments. We are still learning.
The biggest problem is not monopoly, but the fact that technology companies have too much influence on the societies. And it wasn’t us who gave them that powerprofessor Katarzyna Śledziewska
R.W.: The problems with measuring the impact of digital technologies prove that digital economy is a completely new economic reality. Perhaps productivity does not fully reflect the role of technology, which in many ways improves the quality of life.
This can be clearly illustrated by the example of globalization. Today, we can often hear we are dealing with slow globalization or even deglobalization. But as a matter of fact, we are dealing with a change in the nature of globalization, where data flows play a significant role.
Data are getting increasingly more important not only for services but also for products. We got used to the definition of globalization that prevailed after BrettonWoods [Editor’s note: an international monetary systems agreement of 1944 resulting in the establishment of the International Monetary Fund] and that was based on flows of capital and labor. However, nowadays they are being replaced or supplemented with flows of data, i.e. knowledge.
Digital economy also means new business models. Is the fact that some technology start-ups have very high stock market valuations, despite permanently generating losses, a normal occurrence?
K.Ś.: It depends on what start-ups we are talking about and on what their core activity is. There are so many of them. For instance, Uber or Airbnb are typical platforms connecting many areas of the market. Airbnb has been successful because its creators have found a model to connect people looking for flats to rent with those who own them. The growing popularity of this platform is due to the network effect, which is much greater than the scale effect in the case of traditional service providers.
But it all depends on whether the company is actually able to survive. Airbnb and Uber were very popular all over the world; you might even say they disrupted the functioning of the cities. But we have been hit by the pandemic and we don’t know how long it will take us to eradicate the coronavirus. And, all of the sudden, those companies realized that it is not possible anymore to offer their services.
The network effect, so typical for platforms, and the desire to expand to as many markets as possible are becoming a natural tendency to create monopolies. As a result, the platforms, without being noticed, are turning from transaction enablers to gatekeepers, and we are at their mercy. What can we do about it? Split such companies as was once done in the case of AT&T?
K.Ś.: Let us not forget that technology is constantly evolving. The launch of quantum computers may end – or strengthen – the monopoly of Google and Facebook in the advertising market. Regulators have also a large part to play; in that respect the European Union is doing an excellent job.
I believe that the biggest problem is not the monopoly but the fact that these companies have a huge influence on the societies. And it wasn’t us who gave them that power.
R.W.: Michel Foucault used to say that knowledge is power. When you look at all these platforms, you realize that he was right. These companies derive their competitive advantage from the fact that they are able to reap the benefits of data in an extremely efficient manner and to use them for their business model. And they know a lot about us. Until recently, that knowledge was reserved for the government only. Now the government has to take on a very strong competitor. So far, we have been unable to develop relevant solutions to control such entities. What the European Union is now trying to do is just an experiment the result of which still remains unknown.
We must also remember that the experiment is not carried out in the same way in every country. Platforms, separated from the state which acts as a regulator and tries to bring them under control in one way or another, represent a Western and liberal point of view. But, apart from surveillance capitalism described in detail by Shoshana Zuboff, there is also surveillance statism, where platforms are closely associated with the state.
In China, emerging all-pervasive platforms cannot be compared to any platform in the West. Tencent and Alibaba have been assuming control of more and more areas of the social, economic and political system.
There is also the third European model in which we are trying to authorize the regulator to control the platforms. Of course, those three approaches largely depend on the culture in which they are shaped.
However, even in Europe, for example in Great Britain, where there are a lot of cameras on the streets, new surveillance technologies are willingly used by the state. It seems that corporations and states are interdependent. Don’t you think that civic movements may have a special role to play in this world? Or maybe today’s citizens-consumers have forgotten about their rights?
R.W.: I am pessimistic about it. The individuals, civic movements, non-government organizations, and even the scientific community miss one very important resource which remains in the hands of the entities who have the power: reliable access to data.
So, I think that our only hope for liberating us from surveillance of the state and tech corporations is the movement for open data and open science – all actions that can help us to get access to data.
Education at all levels should provide people with digital background We have to champion the Enlightenment model of freedom through education. Only that the education has to be adapted to technological conditionsprofessor Renata Włoch
But that requires skills in understanding data. That’s why I believe that education at all levels should provide people with digital background. That sounds a bit utopian, but we have to champion the Enlightenment model of freedom through education. But the education has to be adapted to technological conditions.
Two Oxford researchers, Rebecca Eynon and Erin Young, have recently decided to take a closer look at the role of artificial intelligence in the development of lifelong learning. They have analyzed the approaches of scientists, businesses and politicians from various countries. The results have shown that for the scientific community AI means mainly the methodology of solving scientific problems. For companies and corporations, AI has proven to be a narrative used to stimulate the economy and to make profits without bothering about advanced tools. Decision makers have perceived AI as a rhetoric tool or a prop used to manifest their progressiveness. The influence of actual social needs on technological development is still negligible.
R.W.: That is certainly true but on the other hand the Polish government wants expert reports to be prepared by the universities. And so does the European Commission. Obviously, what scientists say is not always put into practice. But for example in the American context, this relation is not as strong. In America scientific centers collaborate more with business entities. That’s why it is so important to change the education model, e.g. doctoral studies. We needs PhDs not only to become members of the academic community but also to collaborate with public institutions and commercial companies. That would be an opportunity for a completely new model of communication between those two worlds.
K.Ś.: The state is responsible for educating its citizens. Unfortunately, lecturers at most faculties do not care to think about the fact that the world is constantly changing and that our professions are evolving too.
If our society is well educated, they will choose well educated politicians. They will also support non-government organizations, such as Panopticon and Centrum Cyfrowe, which tackle those issues on a daily basis.
There is only question: Who is to pull the switch? The authors of the article say that today the business narrative, i.e. the product mindset, is prevalent. And that does not lead to being concerned about development of technologies that would be beneficial for the society. So how can we get more empowered?
K.Ś.: We need a whole ecosystem. It is obvious that the process should involve the state, especially when the state, e.g. in Poland, is responsible for education.
On the other hand, the knowledge is so extensive and the world is changing so fast that cooperation between different actors is a must. Business entities, NGOs, learning providers and open universities should join their forces. The ecosystem will probably be very dispersed. Depending on their needs and their role, everyone will look for a different type of knowledge that is provided in a different way.
Some believe that technological development is spontaneous. According to the extreme version of technological determinism, development will always be there, regardless of our efforts to control it. Others claim that it can be influenced in one way or another. Referring to AI, Aleksandra Przegalińska wrote not so long ago that we shouldn’t implement everything right away. Shouldn’t we slow down a bit?
K.Ś.: I agree. Technologies shouldn’t be implemented without due consideration. We need more insight and cooperation with scientific and non-government organizations. That’s the idea of creating a flexible ecosystem.
R.W.: Cybersecurity is going to be crucial. The coronavirus crisis has shown that the digital infrastructure is now the fundamental basis that makes it possible for us to work, live our private life and contact with other people. If it comes under attack, the whole country and society may be paralyzed.
And we have to realize that, in most cases, the infrastructure is not maintained by the state. As far as many aspects are concerned, the state can’t even allow that to happen. That results in undermining the traditional division between what’s private and what’s public.
Let’s move on to the problem of labor and technological unemployment. In your book the issues pertaining to the task-oriented economy, aka gig economy, have been extensively discussed. Is the middle class, which until now has been the driving force of the economy, in danger of disappearing?
R.W.: It seems to me that referring to the middle class, productivity or GDP is slowly becoming outdated as it doesn’t accurately describe the reality. Being a member of a particular class is now more about a lifestyle defined by consumption, which is becoming more common in the virtual world.
New technologies are establishing an even stronger delineation between the primary and secondary labor market. The primary market will mean well-paid professional activities (and not clearly defined professions) requiring very high skills: creativity, ability to work with data or artificial intelligence.
Conversely, people on the secondary market will not need any special skills but they will get relatively low salaries and will be replaceable, as Manuel Castells puts it.
The fourth technological revolution consists in combinatorial innovation – innovations derive from what has already been invented. Today, innovation is not so much about new inventions but about their more efficient applicationsprofessor Renata Włoch
K.Ś.: Furthermore, the use of platforms will result in abandoning the concept of local or international labor markets, which will force us to think more globally. The breakthrough will come if we implement solutions capable of integrating the tasks that are scattered around the world. In the global market, employers will compete for highly-skilled people. Those whose competences are easily replaceable will have to fight between themselves to be noticed by the employers. We may witness strong polarization, which could prove dangerous.
How to deal with pauperization of the people who will not posses most desired skills?
R.W.: I think that we should focus on development of high-quality public services and prevent excessive privatization. And I don’t mean only healthcare or education but also digital services without which we cannot live and which define the quality and the style of our lives. In my opinion, that is the main problem.
Will new technologies exacerbate the ecological crisis or will they help us to fight it?
R.W.: Not so long ago we could hear about Microsoft intending to build a huge server facility in Poland. Why has our country become a great place for investments all of the sudden? To a large extent, it’s about cheaper energy from non-renewable energy sources causing much pollution.
Blockchain, which carried the promise of ensuring privacy and solving many problems related to economic contracts, has also proved to be very energy-consuming, especially if implemented on a larger scale.
There is a certain paradox: the technology, which seems very progressive, contributes to aggravation of basic problems which we have to deal with and which will define our life, politics and economy.
K.Ś.: But on the other hand, that technology is a driving force for development of circular economy in which we share our resources. So there are upsides and downsides.
Do you think digital transformation means more threats or more opportunities?
K.Ś.: We believe it will offer many opportunities. However, the more you get into it, the more you realize there are many threats as well.
But progress cannot be stopped. Fending it off is very dangerous because it means that we are not even trying to know the reality. We are the ones to decide if want to remain passive consumers or to gain knowledge to control it and to influence the development process.
R.W.: We live in a world where power comes from knowledge. Being able to gain it has never been more important.
Hype Cycle – a graphical representation developed by the advisory firm Gartner to show the maturity and adoption of specific technologies referring to the so-called media hype about technologies. Each cycle is drilled down into five phases:
- Innovation trigger: Information on a specific technology appears in the media despite the fact that often the product itself hasn’t been commercialized yet.
- Peak of inflated expectations: the media inform about a success and potential applications of a specific innovation, despite known failures thereof. Although some companies decide to launch it, most don’t.
- Trough of disillusionment: as implementations fail to deliver, the interest in a new technology wanes. Many producers disappear from the market; others try to adapt their products to users’ expectations.
- Slope of enlightenment: a specific technology is increasingly more often used in companies, with second and third generation products appearing in the market. However, many companies balk at implementing the technology.
- Plateau of productivity: the technology is getting more profitable and more common.
Despite being often used with regard to different technologies, the hype cycle has been criticized for its arbitrariness and lack of objectivity.
*Katarzyna Śledziewska, PhD, DSc – co-author of the book “Digital Industry. How New Technologies Change the World”, WUW 2020. She is the Executive Director of DELab UW. She is responsible for international projects (including NGI FORWARD, Horizon 2020). Her interests focus mainly on digital and international economy, the Digital Single Market, economic integration and regionalism. She is an assistant professor at the Faulty of Economic Sciences, University of Warsaw, and delivers lectures on the theory of economic integration and regional groupings as well as on the analysis of economic development with the use of empirical methods. She is also a member of Readie (Europe’s Research Alliance for a Digital Economy) and a member of the Board of the Polish Economic Institute.
**Renata Włoch, PhD, DSc majored in Sociology and International Relations, University of Warsaw. She combines her work in the Institute of Sociology, University of Warsaw, with being involved in projects implemented in DELab UW. She is the author of numerous expert opinions and reports for businesses and public institutions, and institutional evaluations (including of Breughel, a Brussels think tank, and the think tank system in Albania). In DELab she is responsible for analyzing social changes resulting from digital transformation, especially those occurring on the labor market and in the education system. The common denominator for her scientific interests is globalization; currently her focus is on the analysis of digital dimension of global political, economic, social and cultural processes.
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