What comes after the Knowledge Economy: Sustainability Economy, Machine Economy or Human Economy?

We attach labels to the economies according to the work most people do in them. We have seen how the industrial economy replaced the agrarian economy, pulling people from farms to factories. Then the knowledge economy replaced the industrial economy, drawing people from factories to offices. The knowledge economy has been around for 50 to 60 years already[1]. Should we already see the signs of the emergence of what comes next?

Switch from hired hands to hired brains

In order to explore what comes next, let’s first look at what the knowledge economy has brought with it, what it has enabled and what challenges it has created. The rise of the knowledge economy[2] came with growth in knowledge intensive service sectors such as education, communications and information as well as the growth in demand for higher skilled labour and the expansion of the fraction of the population with university degrees. Knowledge and information became key drivers of productivity and growth. To be competitive, companies and organisations started to see a greater role for human capital and the need to attract and retain people with higher skills. They switched from hiring hands to hiring brains. To enhance knowledge production and dissemination within their organisations, firms also needed to reorganise themselves and find new ways of operating and managing their human capital. Working practices focused on collaboration, innovation, learning have emerged as a result of this need. Traditional models of organising firms based on rigid structures and hierarchical decision making, command-and-control cultures became increasingly less suitable for managing knowledge workers.

Increase in trust but growing inequalities

One important change that the knowledge economy brought to society at large is the increase in the importance of trust[3] in society. As collaboration and knowledge production became more important, it inevitably had to be built on more trust between different players in the economy. The problem of the knowledge economy, at least as it is now organised, is that it seems to favour the narrow knowledge elites, leading to growing inequalities in the society. The knowledge economy brought with it huge economies of scale, network and platform effects, as well as incentives to accumulate market power, leading to market distortions and anti-competitive practices. Oligopolies and the “hollowing out of the middle of the job market” as well as the rise of precarious jobs or the “Gig economy” are also the current features of knowledge economy. As a result, we see a growing discontent and a feeling of being left behind by a part of a population in many developed countries, which makes this form of knowledge economy unstable and in need of transformation. In other words, it is a high time to start thinking what lies beyond the knowledge economy.

Rise of Machine Economy?

One trend that was enabled by the knowledge economy is the rise of automation, combined with the rise of artificial intelligence and clever machines. The rise of clever machine can bring enormous benefits for the society, but it also carries a risk of further hollowing of the middle and further polarisation of the job market, with many low skill jobs that are difficult to automate on one side of the divide and very high skills jobs on the other side. Shall we call it the Artificial Intelligence or Machine economy where the competitive advantage for firms lies in the ability to deploy AI, replacing the hired hands?

Rise of Sustainability Economy or Green Age?

Another important trend is the sustainability drive. Now almost nobody doubts the risks of major climate change, if we continue leading our lives, businesses and societies in the way we do now. There is a growing need to rethink the ways we live and to reorganise ourselves to live in more sustainable ways. The knowledge economy enabled us to understand what is going on with climate and the planet and to get together to minimise the damage and to set ourselves on the sustainable path. Governments are coming up with major plans to make their economies climate neutral, changing the ways we produce and consume energy, travel and move around, grow food, eat and much more. Financial markets are incentivised to drop investments in unsustainable companies and favour green investments. Can we say that we are moving to the Sustainability economy or a Green Age where the competitive advantage for firms lies in enabling sustainable living?

These both points are very valid. These two trends will surely change households, business, and economies. But there are other important trends that go less noticed but have a potential to produce a massive change.

Emergence of Human economy?

One such trend stems from the fact that the Knowledge economy increased the level of education significantly for the ever-larger part of the population. It also made the access to knowledge and information much more democratic, faster and cheaper. It globalised the markets and made it easy to work remotely and to cooperate globally, without even exiting your house. The increased of trust in the society is also important here. What it means is that it is now much easier to get knowledge and to start working together on projects, ideas or movements. We have seen how a young girl from Sweden mobilised a huge greening movement world-wide. We have also seen how more than 10.000 programmers worked for free on the largest collaborative project in the history of computing — the Linux operating system. And it is huge now -90% of all world’s cloud infrastructure operates on Linux, 96% of the world’s top 1 million servers run on Linux and only 2 out of top 25 websites in the world do not run on Linux[4]. Wikipedia is another such project. More than 42 million people contribute to its articles for free[5].

What motivates people to work for free in their spare time? The explanation is probably in what Daniel Pink[6] describes as three most powerful human motivators — purpose, autonomy and mastery. Those projects clearly gave people greater purpose, an opportunity to work autonomously and to grow and learn by doing so (mastery). Now consider it against the finding by Gallup that only 20% of employees worldwide are engaged in their work[7]. Roughly 7 in 10 employees are struggling or suffering rather than thriving in their overall work lives. This is a startling statistic and a serious wake-up call. As the Gallup report stated, “suffering destroys human spirit that drives innovation” and ability to innovate is here to stay as key competitive advantage in any form of the economy. Gallup also concludes that “the most successful organisations in the future will not only generate profits, but also will generate thriving employees”.

Dov Seidman[8] says that we are at a watershed moment of the emergence of the Human economy — the economy that prioritises humans and humanity over everything else. Prioritising the wellbeing of people is no longer a nice-to-have goal, it is now a significant differentiating factor of high performing organisations. This shift which will have profound implications for management, for the organisation of firms and the organisation of societies and markets.

Switch from hired brains to hired hearts?

Most importantly, in the human economy, we will shift from hired brains to hired hearts, prioritising human qualities and skills like collaboration, creativity, passion, empathy and innovation over analytical skills — their humanity, in other words. These are the qualities that cannot be easily programmed and replaced by intelligent machines. They will also give a huge competitive advantage to those firms who can have 100% of their hired hearts engaged and contributing, rather than today’s mere 20% of hired brains and hands. The sustainability economy will also fold nicely into the Human economy, as hired hearts will surely want to work for a greater purpose of caring for our planet. And we should make sure that the Machine economy evolves into an ethical Machine economy that creates enabling conditions for the Human economy to emerge and thrive.

All views expressed are personal views.

[1] THE KNOWLEDGE ECONOMY (harvard.edu)

[2] The knowledge economy — Economics Help

[3] THE-KNOWLEDGE-ECONOMY.pdf (oecd.org)

[4] 111+ Mind-boggling Linux Statistics and Facts for 2021 — Linux Rocks! (hostingtribunal.com)

[5] Wikipedia:Who writes Wikipedia? — Wikipedia

[6] Drive | Daniel H. Pink (danpink.com)

[7] State of the Global Workplace Report — Gallup

[8] From the Knowledge Economy to the Human Economy (hbr.org)

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