Supersize my downsizing

This received some coverage in this morning's Financial Times, but here is the document, catchily entitled Rethinking the European ICT Agenda. The authors have come up with a list of 10 breakthroughs that would secure European dominance in ICT, and at no. 3 on the list comes "Accelerate the introduction of disruptive technologies," the two key examples cited being RFID and VoIP. Item no. 4 is also of interest: "Realize the vision of 'any content, anytime, anywhere, any platform.' It's heartening to see a national government urging the EU to embrace and promote disruption in the interest of long-term economic growth prospects, and no one could accuse the authors of having their heads in the sand or being reactionary. Still, I'm not convinced that the economic benefits of such developments will necessarily be net benefits, i.e., I'm not sure that the benefits will outweigh the negative impacts.

Several months back, I had an opportunity to debate these and other issues with the management board of a reasonably well-known infrastructure player, at their invitation. In my presentation, I half-jokingly remarked that cheap broadband and virtually free voice was a wonderful thing for consumers and society generally, but only so long as we don't all end up working in fast food restaurants. The CEO bristled at this statement, asserting that every previous technological revolution in recent history had resulted in higher levels of prosperity and productivity. My retort was that, though the carriers may in fact ultimately reap the benefits of cost efficiencies offered by an all-IP world, revenues and headcount would be lower and the overall effects would be deflationary on a long-term view (and a smaller telco sector means fewer analysts - welcome to McDonalds, may I take your order?). Did he, I asked, realistically believe that the large numbers of telco employees ending up in the "surplus to requirements" pile would find new work with the same level of pay and benefits, particularly if the skills they offer are no longer relevant? How many mechanical draftsmen and medical illustrators are finding work today? We can't all go off and form internet start-ups.

Take a country like France. It has 42m employed persons, and depending on which definition you use, something like 4.2m unemployed. France Telecom, through the parent and its French subsidiaries, has around 125k employees in France, and around 42% of total group headcount of 207k is classified as civil servants. In France, FT would account for about 0.3% of national employment numbers, and my guess is that salaries are close to the top of the national range. Let's be conservative and say that, over time, FT only needs 50% of the domestic workforce (I think it will be far less). All things being equal then, this kind of bloodletting within one company alone would seemingly increase the ranks of the unemployed in France by around 1.5%. From there consider some of the ancillary businesses and markets that would be hit (property, retail, entertainment).

I enjoy thinking and writing about disruption, and moreover I think it is entirely inevitable whether the EU sanctions/promotes it or not. However, as we enthuse about how great all of this is, remain sober and at least consider that the long-term benefits to society may not be net benefits, no matter what the corporations and governments say, and spare a thought for those who may be dragged down in the process - and how other industries may be deprived of their custom in the brave new world.