Last month’s anti–Wall Street protests happened to coincide with a provocative essay in the McKinsey Quarterly suggesting that a “deep and slow and silent” transformation is taking place as the digital economy begins to supplant the physical economy.
The author, W. Brian Arthur, an economist and technology researcher, argues that this “second economy” goes far beyond the e-commerce and social-media aspects of the Internet and amounts to a transformation likely to exceed the Industrial Revolution.
I won’t attempt to summarize his full argument here (you can find it at www.mckinseyquarterly.com/the_second_economy_2853), but one sentence certainly caught my eye as we were putting the finishing touches on this issue: “Physical jobs are disappearing into the second economy, and I believe this effect is dwarfing the much more publicized effect of jobs disappearing to places like India and China.”
Technology isn’t just allowing companies to get more output from the same number of people, Arthur says. It’s also allowing them to get the same output from fewer people. Anyone lucky enough to be employed today will no doubt agree (even if it hardly seems that computers are doing our work for us).
This means, among other things, that the physical workforce that remains becomes ever more valuable: if you haven’t yet been automated out of a job, you must be capable of doing things that machines can’t do. In short, you must be a genuine asset after all.
Companies have acknowledged this for some time, which is why your bottom desk drawer is home to so many “Employee Appreciation Day” T-shirts and coffee mugs. But now, or soon, companies will have a way to put some very hard numbers to their human-capital assets. Our cover story describes efforts to develop “human-capital financial statements” that can put as much financial rigor around talent management and related workforce issues as traditional financial statements put around debt loads and inventory levels. Senior editor David McCann explains how in “Power from the People.”
The advent of these statements may not lead to more hiring, but at the least they should underscore that “human capital” is not just a grandiose synonym for “labor force,” but a valid term that describes an asset worthy of more attention from the C-suite.