6 Imperative Things You Need To Know About The Global Economy


Nobody knows what’s going on. Your programmer friend is getting paid in gold bars, your kinda-smart friend with no specialized skill is making way too much money in consulting, and pretty much everyone else is waiting for a job to show up that isn’t miserable.

Tyler Cowen’s book Average is Over explains how machines getting smarter will effect our working relationships with them. It’s an especially important book for anyone entering the work force. Here are some of the hardest hitting takeaways I got from the book:

1. What matters now. And what doesn’t.

What matters it what’s scarce. The more scarce the service you provide the better you are. Align yourself accordingly:

“In today’s global economy here is what is scarce:

  1. Quality land and natural resources
  2. Intellectual property, or good ideas about what should be produced
  3. Quality labor with unique skills

Here is what is not scarce these days:

  1. Unskilled labor, as more countries join the global economy
  2. Money in the bank or held in government securities, which you can think of as simple capital, not attached to any special ownership rights (we know there is a lot of it because it has been earning zero or negative real rates of return)”

Chances are you don’t own a bunch of land, I’m sure you can learn to identify what kind of land is quality, though. You can learn what kind of products need to be produced (like the kind that replace human labor). You can learn to make your skills unique.

Aim at providing what is scarce and you will always be in demand.

2. Longer Paths To Mastery

The foundational knowledge you need to be an expert in most fields is F’ing huge. There is potential, though, in the brand new fields… like social networking (or whatever has come about since).

“As a general rule, the age structure of achievement is being ratcheted upward due to specialization and the growth of knowledge. Mathematicians used to prove theorems at age twenty, but now it happens at age thirty because there is so much more to learn along the way. If you are a talented twenty-two-year -old, just out of Harvard, you probably cannot walk into a furniture factory and quickly design a better machine. Young people have made fundamental contributions in some of the internet and social networking sectors, precisely because of the immaturity of those sectors. Mark Zuckerberg needed a good grasp on MySpace, but he didn’t have to master decades of previous efforts on online social networks. He was close to starting from scratch. In those cases, young people tend to dominate the sector, but of course that won’t cover the furniture factory.”

There’s potential for massive returns when you go into barely-tested waters.

3. Generalization Rises in Value As We Get More Specialized

As the world gets more specialized, the ability to look up and take a broader perspective becomes more important.. This describes the role of consultants and CEOs.

“The more the rest of the world specializes in production, the more that general intelligence can produce some value. Forget about a detailed knowledge of the factory floor, the specialists in Dayton are missing out on the big picture. Try some simple questions and admonitions: “Hey you, think about what you are doing! Are you sure? How about this? Are you sure that’s the best way to treat your workers?” “Do you really understand what is going on in global markets? Come take a look at my PowerPoint.”

4. “…over 40% of adult, non-senior Americans don’t consider it worthwhile to have a job.”

Maybe expectations are too high. Maybe job availability is shit. It’s probably a mix. But it’s ugly. We are in the thick of a messy shift.

5. America’s Still Got It/h3>

Watching the news you would think that nothing is made in America and we are all screwed. This misses several important points:

  1. “That leaves Chinese imports, measured in terms of true net impact, at about 1.3 percent of American spending.”
  2. “It is too easy to press the “now we are competing with 2.5 billion Indians and Chinese” argument too far. Americans have had competitors for a long time. For instance, the 1948-1973 period is often considered the glory years of industrial America. Yet during this time the Western European nations rose from wartime destruction to near parity in living standards with the United States. Japan grew rapidly too.”
  3. Because of the progress of machines and the importance of technology in manufacturing a lot factories are coming back to America. Mexico is becoming a “destination for new manufacturing investments” as well. Canada’s resources and labor are also helping. “When you combine these developments with fracking and the greater production of domestic oil and natural gas resources, the North American nations are well positioned to be dominant export powers going forward. North America also has the logistical abilities, and a strong enough trade-protecting military, to enable its export business to prosper. We will likely see a new American Century, or rather a North American Century, and if any countries should be worried it is those with low wages, including China. Unless those countries make the next leap up the technology ladder, competing on the basis of capital as well as labor, many of their current competitive advantages will erode.”

6. Geography Matters More Now

Areas of growth are becoming more concentrated and so are the communities in them.

“…if you wish to be a high earner, learning from other well-educated people, geographic proximity is growing in importance, whether in companies or in leading amenities-rich cities or most likely in both.”

You’ve got to get yourself in an environment that supports your aims. It’s true that the internet gives you access to any group imaginable. Virtual connections can never match being physically surrounded by people doing what you want to be doing. The biggest lessons to are in the assumptions, energy, and common actions taken by those you’re trying to learn from.

featured image – Flickr / cote