The Future Of Work? Individuals Mimicking Firms, With Appropriate Access To Capital, Technology And Favored Contractual Relationships.

There’s been a lot of discussion about “The Future Of Work” that worries about technology replacing workers and leaving them beached – unable to earn a wage or a salary because their job has been automated or replaced.

That’s very old-fashioned and out-of-date thinking. It’s so old, it’s what economists call neo-classical. It portrays the firm as a production function that assembles capital goods (technology) and labor and combines them to produce an output. In this equation, labor (jobs) can be substituted by technology.

But today, the neo-classical production function does not exist in many industries, where there are hybrids of digital and physical assets or fully digital industries that exist purely via the exchange and manipulation of data and information flows (think AirBnB and Uber).

Old fashioned economic thinking extends to what the neo-classicists call “the theory of the firm” – what is a firm and why does it exist. This thinking sees the firm as an actor in a market where it operates to maximize profits.

In reality, the firm itself is a market, a tangle of contracts with owners of labor, who might be employees or contractors or suppliers or even customers. The firm can also contract for technology – owning it, renting it, or consuming it in the form of services (utilizing the cloud technology of AWS, for example, or the services of a trucking company for delivery).

Why assume that the AI and bots and productive technologies of the future are a resource only for firms? Inside the firm or outside the firm, technology resources could be owned or controlled by individuals. In fact, it is often the case today that workers in firms own their own technologies in the form of smartphones and tablets. Why couldn’t they own a bot and bring it to work?

There is a tendency – left over from neo-classical times and neo-classical thinking – to privilege the firm as the owner of capital. But there is no need to maintain that privilege today. The boundary between firms as capital owners and workers as capital users is dissolving.

Professor Irene Ng points to the new pathway as workers mimicking firms. They might be set up as an owner-operated contractor, or an independent consulting firm or a start-up, often using digital platforms and benefitting from the lower co-ordination costs they bring.

Mimicking a firm gives a worker new privileges:

the ability to solicit capital, acquire technology and contract further labor or assistance – all resources that are set within a legal framework and an institutional structure that accord a multitude of benefits, but also encompass risks.

Mimicking Firms: Future Of Work And Theory Of The Firm In A Digital Age; Irene Ng; Journal Of Creating Value.

Workers can be entrepreneurs and contractors, with business contracts as well as contracts in wages, and should be able to choose the contract that best suits their preferences. They should be able to acquire capital, debt and technology as they improve and enhance their human capital and social capital. This “hybrid actor”, as Professor Ng terms it, can be both firm-like and labor-like, especially in acquiring the resources generated by technology. Corporations can contract with both the individuals and their technology.

Call it the gig economy, or call it new entrepreneurialism; in any case it is the opening for individuals to acquire the resources necessary to position themselves to benefit from technology, rather than be displaced by it in the pessimistic fear mongering of the neo-classical interpreters of the future of work.

The future focus is more on the ownership structure of the firm and the nested relationships of internal and external markets for labor and technology. The innovative thinking will emanate from individuals – the workers who transform themselves into technology owners and capitalists-for-hire – and not from economists.