Transforming Workers and Work

Learning how to read the new knowledge economy.

THOUSANDS OF PROFESSIONAL JOBS IN THIS COUNTRY have been downsized or offshored, and the Americans who held them have been laid off. Where are those people now? Few have starved to death or the tabloids would have told us. Few have jumped from bridges or the security camera footage would be all over YouTube. All those poor souls somehow have continued to earn enough for bare subsistence, or better.

Like it or not, the underemployed eventually realize that they have become small-business people. They did not register with the SBA for loans; they just began creating wealth for themselves by selling stuff or services to others.

We live in the most adaptable organism on earth. With a computer and a link to a network, we can use our knowledge to adapt and create wealth.

FARMERS AND FACTORY WORKERS could tell us that economic activity has always had a knowledge component. It's hard to create much wealth without skills. Now, for the first time in human history, knowledge is becoming the dominating determinant of wealth creation.

There are giant companies, such as Microsoft, that manufacture almost nothing. They don't ship anything except computer disks loaded with data, and sometimes not even that. Even an old-line "heavy-iron" company like IBM has transformed its manufacturing business into a different kind of wealth-creating enterprise, in which 60% of sales come from service contracts.

These critical economic facts are lost in the old and endless reporting of the mess the management of General Motors has created for itself over the past 20 years. (Insulting the intelligence of consumers is not rewarded in a knowledge economy.)

The new economy is a lot more complex than any description we are likely to hear from a TV money-honey. The knowledge economy is creating wealth around the world, unhindered by hysteria about housing, banking or oil. This unreported news is why all the old economic indicators are all over the place. We do not yet know how to read the knowledge economy, but we are in it and learning every day.

America's leadership in the global economy rests on its productivity. And modern American productivity rests on knowledge. Individuals now do business around the world the way only big corporations could a few years ago. The order-fulfillment cycle has gone from a few weeks to a few minutes. Wealth is created much faster. We now do things better and faster with a higher return on investment. Velocity multiplies productivity.

In the past, agriculture, mining, energy and manufacturing were the foundations of American productivity. Farming feeds more people than ever, but only 2% of Americans work on farms. Mining has gone from pick and shovel operations employing millions to hundred-ton machines. Oil drilling has left Oil City, Pa., far behind. These two segments now employ only 0.5% of our work force.

Much manufacturing has gone to China, but we continue to lead the world in manufacturing productivity because we lead the world in the application of manufacturing knowledge. Only 10% of our workers toil in factories to make physical goods.

Yet we eat better and more cheaply than ever. We produce and consume more raw materials and manufacture more and better goods than ever. Productivity statistics prove it, even though some still think that increasing output per labor hour means bosses are driving workers longer hours for less pay. It's exactly the opposite.

IT'S NEWS TO MOST AMERICANS, unfortunately, that Mexican workers are five times more productive when they migrate to the United States than they were in their home country. The rule of law and the capital infrastructure of our country contribute greatly to productivity. Workers work better with more powerful tools. It is easier to get more done faster in the U.S.

It is also easier to acquire the skills that the knowledge economy needs. Although we are "a nation at risk" of failing to educate everyone, in which some children are left behind, we are also a nation succeeding in educating those who know what they want and how to get it. Education to Grade 12 is free and open to all; the first couple of years of higher education are nearly free at a vast network of community colleges. Such investments in "human capital" pay off almost without risk. At higher levels of educational prestige, the knowledge industry selects a few for very large returns on investment -- and pays for scholarships and university endowments for the best of those who need it. The world recognizes this. Our colleges have gone global, selling our most important product, knowledge, to the students of the world.

KNOWLEDGE COMES IN MANY forms, not just wrapped up in an Ivy League diploma. Very specific information can be applied in new ways to create new wealth in the new world. How can a talented teen born in Siberia become a multimillionaire before she turns 20? Get her out of Siberia and into tennis training in Florida. Buying knowledge and then applying it to increase value is how the system works. When it became apparent Maria Sharapova was going to grow very tall, her father bought additional specialized knowledge from a coach in California who had a track record of helping tall players hit ground strokes.

These investments made Maria a global brand, not just a tennis player. Her looks and her well-known name are employed by companies that use her "brand recognition" to sell products. Her story is older than Baby Ruth candy bars, but the global reach and the speed of wealth-creation are new.

We are the world's masters of the new knowledge economy and we are just discovering what that means.