This post first appeared on Harvard Business Review's blog, and is posted in conjunction with the publication of the October 2014 issue of the magazine's feature article, "The Rise (and Likely Fall) of the Talent Economy," which can be read in full here.
As I describe in my article in this month's HBR, up to 1960, the U.S. economy had evolved at a glacial pace and had exhibited remarkably narrow and limited creative intensity. At the turn of the 20th century, the proportion of workers who had to exercise significant independent judgment and decision-making in their jobs had been just 13%, and the remaining 87% of workers across all job classifications worked in routine-oriented jobs in which their superior determined what they were supposed to do all day and, to a great extent, how they were supposed to do it. By 1960, the percentage of creativity-oriented jobs had risen to just 16%, representing a change in job content for only 3 in every 100 workers over a 60-year period. In 1960, therefore, 84% of all jobs held by Americans involved minimal independent judgment and decision-making.
This was truly an era in which to prosper a company had to have capital and to own natural resources; but really didn't need much in the way of uniquely talented employees. Rather they needed lots and lots of competent and compliant ones.
From 1960, however, the economy started morphing in a fashion that required more and more workers to express meaningful judgment and decision-making. The growth in these jobs accelerated during 1960-2010 at a rate four times that of 1910-1960 -- so much so that by 2010, the proportion of creative jobs had more than doubled to comprise 33% of the workforce.
This came as no surprise to Peter Drucker, who repeatedly predicted fundamental changes in the U.S. economy during the 20th century. As early as 1959 he was arguing argued that the economy was changing from one in which the key assets were strong legs, arms and backs to one in which the most important muscle was the one between an employee's ears. These knowledge workers would be different, he suggested, they would not be able to distance themselves from their day-to-day work because their work was a product of their brain -- they were their work. This meant that they needed to be treated more like volunteers than employees, an amazingly prescient observation.
The growing creativity of work of the past five decades has shown up in stock values as well. In 1960, just eight of the top 50 market capitalization companies owed their position to creative talent. Predictably, perhaps, the largest was IBM, which in 1960 stood at #4. But there were also Eastman Kodak (#11), P&G (#15), General Foods (#19), Coca Cola (#34), American Home Products (#40), Campbell Soup (#48), and RCA (#49). They were still outliers; far more common were firms that owed their position to their control of natural resources, such as oil or minerals, or real estate.
But these heralds were soon joined by many more and moved from being a small minority to the dominant force in the economy, comprising 28 of the top 50 companies.
It is hard to think about this transformation as anything but a positive thing. Twenty of every 100 American workers who would have had a routine-intensive job a century ago have a creativity-intensive one now. But it has come with a cost to the capitalists who own these companies. Competent and compliant workers also meant cheap workers. Workers who must demonstrate meaningful independent judgment and decision-making don't come cheap and they certainly don't exhibit compliance as one of their leading characteristics.
Capitalists used to spend their time battling unionized labor for the spoils of their joint economic pie -- and generally capitalists were successful. Now their battle is with the high-end talent upon whom capital is entirely dependent to make the decisions that will make the company they own profitable or not. That talent has a hell of a lot more bargaining power than organized labor ever had. (And labor itself is now essentially friendless.)
Drucker was right on two fronts: talent-laden knowledge workers would become a dominant force and they would have to be treated with kid gloves as if they were volunteers. But it is unclear whether Drucker realized that they would need to be treated as ultra-highly paid volunteers and become in the 21st Century capitalists' principal economic adversary.
To read "The Rise (and Likely Fall) of the Talent Economy," click here.
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