 Welcome to the Institute for New Economic Thinking Forum on the Future of Work. What's at stake? I'm Steve Clemens. I'm editor-at-large of The Hill and a long-time supporter of Inet. We have a really great couple of panelists today. We have Nobel Laureate and William R. Berkeley Professor of Economics and Business at the Stern School of Business at NYU, joining us from Milan, Michael Spence. We also have Director and Chairman of the Board of the McKinsey Global Institute, James Manica, joining us. I thought I want to tell everybody the format today is going to be a little bit different. There was a great movie in the past called My Dinner with Andre, with William Sean and Andre Gregory, where two people sat down for dinner and really over three hours couldn't stop. So I've got two incredible interlocutors who are going to go in and I'm going to jump in when I can. We did a prep call the other day and it was, I wish we'd had the video going. We could have turned it into a great movie. It was so wonderful. But let me just open with one provocation for the two of them to start, which is in 2016 was the 90th anniversary of McKinsey. McKinsey put out a report on the way in which technology, the coming era of AI, all of the technological revolutions we see coming, was going to be incredibly disruptive in the American economy. And I ask at that point whether there would be net job increase, net job decrease, what the social impacts of that would be, what kinds of impacts would it be across the board? And I want to start with that question because we're not only going to be looking at technology today. We're going to be looking at the broad questions, the social questions, the impact questions, questions about COVID. And so let me just start with James and Michael and ask, have we figured out where this coming age of technology is going to leave society as employed as it is today with less dysfunction and thus problem solving? Or are we going to see greater employment problems, greater inequality from what's coming ahead? James? Well, thank you, Steve. And wonderful to do this with you and with Michael. This is going to be fun. But let me describe a little bit what the work you were talking about. What we did at the time and we've continued to do is to first of all try to understand what exactly is the AI technology and what will it mean and what are the actual developments, whether it's in natural language processing, whether it's in robotics, machine vision, all the different characters of these AI technology. So we try to understand what they were and where we were. We then also try to understand what this looks like and how this maps into the activities and tasks that people do. So we started with the bottoms up mapping of the activities and tasks to understand how this all intersected. And then try to then get a sense of what does this mean for work. And in the case of the US context, we looked at the roughly 800 plus occupations that the Bureau of Labor Statistics looks at to really understand what the impact would be. So let me tell you where we ended up and we've continued to refine this. And I would summarize it as kind of jobs gained, jobs lost and jobs changed. What I mean by that is we actually found that in fact, there will be jobs that will be created. We know that whenever we've had these technological breakthroughs and innovations, they tend to spur productivity growth, which also then leads to job growth. So there will be jobs gained. There will also be jobs lost because we know that some of these occupations have many of their constituent activities that can be automated. And so therefore, if you have an occupation where a lot of its constituent activities can be automated, we'll start to see declines in those jobs. And then we also have jobs changed. And this is actually more important, quite important because the jobs change reflects the fact that many of these technologies automate aspects or particular tasks that each of us do. And so you see these jobs where a good example of this, Steve, is to think about the bank teller as a good historical example. If you remember, if you had looked in 1970, what the bank teller did was mostly count your money, either to take it from you or to give it back to you. And then maybe if they had a little bit of time left over, they'd do something else. But today, that bank teller still exists. They spend much, much, much less time counting your money and either to take it from you or to give it to you because the ATM does that. But the bank teller now does other things. This is an example of jobs changed. So when you put all this together to come back to your original question, our view is that at least for the next few decades, there'll be more jobs created than jobs lost and many more jobs changed. So we don't worry about a jobless future. It's not in the next several decades anyway. At all. But think about how do we manage the transitions as we see some jobs lost, some jobs gained, and some jobs changed. So the question of transitions becomes a fundamental thing. And let me say one more quick thing on what transitions I'm talking about. They're fundamentally about three or four transitions. One is the transition in terms of the skills needed to do work. So the conversation about rescaling, reeducation, lifelong learning becomes quite real because we're going to have to keep up and adapt to the educational skill needs are going to be required. That's the first transition. We're going to need to do that in a big way. The second transition is to how we help people transition from declining occupations to growing occupations. And that's an important occupational set of transitions. Then the other question we're going to need to think about is the impact on wages. Because all of these things, even when we have a future with jobs, the impact on wages is quite real because we know that many of the jobs that are declining have tended to be some of the ones that pay well. And many of the ones that are growing have tended to be some of the ones that don't pay as well. So the impact on the wage picture is an important one that we should discuss at some point today. So these are some of the important transitions we're going to have to think about in the context of work. Michael, can you jump in here and give us a sense of what your dashboard looks like of the factors when it comes to technological change, jobs, and what are the headlines of that that we should be aware of? Well, I mean, I think James has kind of laid out the kind of framework. So there is a subset of people who think that we should worry about joblessness, but I think the majority view now, based on a lot of yours, is that I think of the challenges as essentially twofold. One is that it's well documented across virtually all the developed countries, meaning Europe, North America, Australia, New Zealand, that what David Autor calls job and income polarization is real. And what it means is that middle, is the last thing James said, middle income jobs are vanishing, and including a number of them that are routine and then highly vulnerable to automation. And then the question is, well, see if we're still relatively fully employed outside of the pandemic economy, where are the jobs reappearing? And the answer is, they're reappearing in jobs that aren't being automated at both the upper and lower end of the spectrum. Now, what you'd like to see is modular, the fact that everybody can't be above average is more of them appear at the upper end. But I'm afraid the data show that at least at the start of this set of transitions, James talked about, at least, and in a fair number of countries, the reverse is happening. So the jobs are appearing at the lower end in larger numbers. And as the middle gets hollowed out to use the term of art in the media. And that means basically that there's middle income people who've lost those jobs and are now doing jobs that pay a lot less. And there's unhappiness and so on associated with that. Now, whether this is part of a transition that gets much less difficult once we deal effectively, if we can, with a reskilling of our workforce, right? So you get a short run effect, and then you get a longer run effect that James and I spend a lot of time talking about. But I think there's at least some reasonable hope that a concerted sort of multi-institutional, and by that I mean collaboration between education, government and business, to take this seriously as part of their sort of overall policy agenda or strategy in the case of business. There's a reasonable hope that this will be ameliorated to some extent. And I guess this falls in the category of, well, does anybody really know of great precision where we're going to end up? The answer, I think, the honest answer at this point is no. How has the pandemic changed your assessment of what's going on? What trends has it made very clear and stark? Michael? Yeah, let me take a shot at that because I just wrote something on this. We have known for some time, and I'm going to ask James to jump in on this. We've known for some time that, at least when you look at the public stock markets, that an increasing fraction of the regional value creation is associated with intangible assets. And a significant fraction of those intangible assets are basically digitally related. Not all of them, but a lot of them. And so, and we know those intangible assets are being created by relatively small numbers of people in relation to the size of the population. So what you've got is a situation in which the incremental value creation, which in principle, at some point, we've all got a share. I mean, that's kind of what economies do. It's being created by a small number of people. The intangible assets are owned by a relatively concentrated set of people, including the people who create them. And what you see is a pattern of employment and trying to traditional value creation with a combination of tangible assets, meaning bricks and mortar and stuff like that, and labor, those are diverging. And the straight answer to your question is this became dramatically obvious in the pandemic economy because the digitally enabled intangible assets accelerated in terms of importance and value creation, and the other ones got hammered. And so what was partly visible before became just dramatically, just flashes on the screen. All you've got to do is compare Amazon, or Google, or Alibaba, and the airline stocks. And just to take an example, a final comment on this, because we've talked a lot about this. And James has some important insights based on their research on what's happening in inside industries and sectors. But I looked at the play, a little study done at the University of Chicago. And the question was what fraction of work can be done from home? And the answer for the American economy was roughly a third. And then they looked at it by geography and sector. And by sector, you get a version of what I just said. So if you look at the tech sectors, the answer is like 87 or 90 percent, similarly in finance. If you look at the hospitality sector, the answer is 4 percent. So the other 96 percent have been unemployed or furloughed because of the pandemic economy. And they're not working from home and they're being helped by government programs and so on like that. So as I say, the pandemic economy threw into sharp focus something that we knew was going on before, but it's more extreme and it has made the pandemic economy a big negative shock with respect to distribution. Thank you, James. If I could just add to what Mike just described in one of the pandemic economy has shown us. So for example, Mike's exactly right that we talk as if everybody can work from home. It's really only a third who can. Other people actually have to show up someplace, which is two thirds of everybody else. If you look at, you know, whether it's in Europe or the United States, and let me tell United States as an example, something like about 38 percent or so of workers are vulnerable and vulnerable in the following sense, vulnerable either to being laid off in this COVID moment or furloughed or see reduced work hours or reduced wages. That's a much larger proportion than what we're seeing as counted as unemployed. If you look at that third, its profile is interesting. 80 percent of them in the U.S. earn less than $40,000 a year. So these are predominantly low-wage workers, 80 percent of them. Close to, again, 80 percent of them have no college degrees. A disproportionate share of them are black and brown people. And, you know, majority of them work in the sectors that Mike was talking about. So retail, hospitality. And in those sectors, as Mike said, it's a tiny proportion that can work from home. So you see the kind of almost, you know, regressive disproportionate impacts that COVID is highlighting. The other thing we should also keep in mind, which is something we've seen in our research, both looking at, you know, Europe and the U.S. in particular, is the incredible change in the geography of work. And this is quite interesting because in the case of the United States, we actually went through, and Steve, you'll find this funny, you know, I now know how many counties there are in America. I think it's something like 3,149, I think. If the number. And in Europe, we looked at these kind of small regions, 1100 microregions. And what you see is that even when we kind of, even before COVID, even when we were saying jobs had recovered, they were very concentrated in a few places, actually. In a few, you know, roughly in a third of the country is where mostly job growth was. And some of these were cities, some of them were kind of growth hubs of one form or another. Everywhere else, not really. So he's starting to see an interesting kind of geography of work. The other thing you see about the geography of work comes back from what Mike was alluding to, which is calling the superstar effect. So we've actually looked at this in the context of the superstar firms or superstar sectors and even superstar cities. And you find all of that work shows you that there's relative concentration of a few places, whether they're companies or sectors or cities, that are generating a huge amount of the economic surplus at the expense of everybody else. People forget that in the United States, 1% of counties essentially generate close to a third of the country's GDP. That's 31 counties generating a third of the US GDP. So these geographic effects are also quite real and quite important. Yeah. Are any of these impacts that the two of you were seeing and talking about, you know, is there any sort of creative destruction moment in here where some of the inequality that we've seen, some of the disproportionate impact, as you were talking about, say in communities of color, seen, you know, racial division, economic division, is there any, I mean, I hate to sound naive, but is there any unseen opportunity to leap frog out of some of those tense inequalities into something different? Well, I think there could be. And I emphasize there could be. I think if we really rethought how the economy works in terms of the, you know, could we think about intangibles differently? Mike alluded to this, and he's done some fabulous work on this. Could we think about how people participate in the economy? I think, you know, historically, the way the majority of people participate in the economy is through their labor primarily. And in a world in which, you know, the marginal contribution of labor or the labor share of the economy declines, that will obviously keep squeezing the proportion that labor gets. But if there are other mechanisms of participation that are, you know, additive to labor, then it gets interesting. Then you start to think about, you know, do we think about, you know, endowments differently? Do we think about mechanism participation? Do we give everybody, make everybody's talk owner? Do we make people, you know, co-owners of things? How do we think about different modes of participation in the economy? That could start to change things. Michael? Yeah, I agree with that. And I think it's urgent. You know, I've come to the conclusion relatively recently that while we have to take seriously this set of transitions James described earlier in the context of work, that we have now reached a point in the way our society is configured in terms of the ownership of assets and so on, that it's going to be very difficult, you know, to sort of round the corner and head off in a different direction. I mean, you know, it takes investment to kind of make these transitions. And the way we're configured now is that a small fraction of people own the assets that are gaining in value. Many people as the MGI and Kinsey Global Institute and others research shows are, you know, having struggling to invest in a house because of biases in the application process, you know, have relatively simple looking balance sheets where because of monetary policy and other things, they can earn next to nothing as a return on their assets. We have, you know, the way the economy works, you know, the places where the people who are making the most money and whose assets are building up, you know, pay a lot for housing and other people can't live there. So we've sort of semi-segregated ourselves without actually having policies that relate to that. That affects the, it's very hard to be precise about this, but the networks of an economy, including the interpersonal networks, not just digital ones really matter, you know, who you know, what contacts you have, another thing. So, you know, right now, I had to be honest with you, Steve, and again, James and I have talked about this. I'd love to be optimistic and there are certain areas that I'd like to talk about in a minute where I am optimistic, but overall, I think we've got a monumental task ahead of us. Where are you optimistic? No, go ahead, James. Yeah, if I could jump in because, Steve, we're going to get optimistic here shortly, but let me just add to what Michael was describing and paint a fuller picture of what it looks like. One of the things that's quite fascinating in the 21st century, because we now have 20 years of the 21st century or close enough, is what's happened to what you might call the social contract. So what do I mean by that? I mean, social contract is a big philosophical topic and all of that, but if you look at at least the economic aspects of that, which is where you think about how people interact in the world, in the economy, either as workers, as consumers, and as savers, if you like, because in some ways, those are some of the more direct economic ways in which we interact with the economy. As workers, it's actually a mixed story. The good news, just to be a little positive here, the good news is that we've actually created an unprecedented number of jobs since 2000 everywhere. So that's a good news. So we've actually created lots of jobs. The tough news on the jobs front is that we've had this income polarization that Mike talked about from some of his work and David Otter's work, but we've also made work a little bit more fragile in the sense that most of the jobs that we've created in the last 20 years are of an alternative variety. So either contingent work or fissured work or part-time work. So it's been a mixed story, but job growth, but income polarization. If you look at it from the point of view of people as consumers and households who are purchasing things against the story of two worlds, one is if you look at the products we buy, such as cell phones, smart TVs, wide goods products, the highly tradable commodities, if you like, that are globally competed and traded, they've become much, much, much cheaper. And the amount of consumer surplus that we've created in these highly competed, globally traded products is phenomenal. It's been a wonderful thing. If you plot to the chart, you'd see the price declines have been off the charts. However, some of the other basics like housing, education, healthcare, and depending on where you live, transportation, those have actually grown, become more expensive in a way that is actually outstripped in many household incomes. So if you look at, for example, middle and especially low-income households, the share of their budgets that are now consumed by the cost of housing, healthcare, and education, well, healthcare depends on what country you're in, is grown. So you certainly find that, and this hasn't kept up with the wage, what's happened on the wage front. So that's created a set of challenges. Then you look at people as savers. And the picture on savers is because the incomes have been polarized, many people haven't saved. We've also seen institutional arrangements for saving, whether it's pensions and others, also pullback. So people are having to do more themselves at a time when they kind of want to do more than themselves to save. In fact, the rough numbers on this one, Steve, is that most people in the advanced economies, and we've looked at this at the roughly 20-something OECD countries to look at this picture, most people have enough savings, either themselves or the pension funds, et cetera, to cover 10 years, when in fact most people are going to be in retirement for double that. So this social contract looks very, very challenged, and it's affected again middle-income households the most, as Mike pointed out, but also low-income households in particular. And this is a real challenge. So James, I want to thank you for making it even more bleak to give. I was excited when Mike mentioned that he was optimistic about anything. It gave me a perk up. But as Mike responds and shares with us what he is optimistic about and sees opportunities around, I just want to ask you whether, like Andrew Yang was out there talking about a universal basic income or some model of that when you talk about transportation and housing and health care, whether America in particular, I know we're talking about the world, whether America in particular needs to rethink some of the packaging of those common goods and just realities of life for people. When you've got so much wealth stacked up on an end and so much stress and fragility, as James just said on the other, does that need to be rethought? But let's go to the optimism first, but maybe Michael can reference my obsession with universal basic income as well. Well, no, let me respond to that. I think we have to think about these things. I mean, people are thinking about universal basic income and things that are like it and, you know, having a reasonably sensible debate about the pros and cons. People properly point out that we want, you know, some version of decent work, meaning rewarding that isn't really captured by that. So that's another dimension. I live in Europe, you know. So one of the strengths in Europe is, you know, I'm not saying this place is perfect or they put together economically or in other ways, but the social services and social safety nets are more elaborate. And so education is less expensive. You know, health is less expensive. I mean, these are, you know, we go down the list of things that James just, you know, mentioned on the consumption side, especially the ones that have gone up astronomically in terms of cost to the consumer. You know, that's a big deal part of the problem. And there's even a, you know, some version of a less well-developed discussion of this, which I think is really important, which is, you know, we can't get out of this in my view if 10% of the population owns some enormous fraction of the assets, including the really valuable ones. You know, so somewhere along the line, in addition to dealing with income, I think we have to deal with the opportunities to participate in the, as investors, as savers, investors in the prosperity of the economy overall. Now, that's a, you know, if anybody waited out on stage and said, I know how to do that, you know, they probably would be accused of lack of humility. But that doesn't mean that, you know, creative minds with the right values can't address it. Maybe I'll just, let me say briefly, you know, my background in economics as a applied economic theorist was studying informational gaps and asymmetries in markets, and these are all over the place. They're also all over the place now in economics, thanks to a lot of work by a lot of talented people. But the thing that fascinates me is in the area of creating markets and, you know, financial services and other things, the digital economy is closing these gaps. So I've been participating with some folks in China who have been studying this. In Hangzhou, they're related to Alibaba and financial, so they have a fair amount of data in that part of the world at their disposal. And it's pretty clear that what's going on is that people who are anonymous and unserved and for whom there are no markets for things like credit in the digital era become identifiable. I mean, in the language we used to use, Steve, the digital economy and data properly and responsibly managed is creating new screening and signaling mechanisms that enable markets to come into existence. The so-called adverse selection problem that George Akerlof so colorfully described is it's not being crushed, but it's being reduced in terms of impact very substantially. And what I like about this is I don't know, I guess nobody knows, you know, whether this is going to, you know, raise the kind of top line growth figure, but it's certainly going to increase the inclusiveness of the economy. And I think this kind of responsible application of digital technology is actually, has lessons for all of us. I mean, we have underserved communities who struggle to deal with the existing institutions and vice versa. I'll just finish with an example just so it's clear what I mean. There's an entity that was created two or three years ago called My Bank, and its purpose is to bring into the economy in terms of access to financial services, especially credit, very small businesses in the Chinese economy. These are businesses that have five or fewer employees. They have no absent the digital world. They have no track record. They have no collateral that's worth anything. And they're so small it isn't worth it for a bank operating by its traditional style to deal with them. And so they just get left out, or they borrow from friends and family, and we get, you know, some kind of relatively poor substitute for a really inclusive pattern. And they can serve them now, and they can serve them properly. They can extend credit. They don't have high default rates. And they price the credit properly. So what I'm, I guess, trying to push here is, you know, a little creative thinking on our own underserved communities and thinking carefully about the applications of digital technology to try to increase what I say, reduce anonymity and increase access. I mean, I should just say, just in reaction before James jumped in, that, you know, this is one of the things I found fascinating where PayPal created an entire line of new business by using kind of local reputational research, not based on traditional criteria, looking at communities, and began, when you kind of look at the small business loan lower threshold at large banks, it's still very high. And so lots of people were behind that. So PayPal, Dan Shulman, the CEO, has developed this very different business model that's pumping finance in at that level, just along the lines that you shared, Michael. I'm sorry, James. And I want to tell everyone, by the way, please share your questions on the Q&A panel, the Q&A link. We're going to be going to questions in just a bit. And we'd love to have your questions for both of our superstars, yes. James? Yeah, I was going to add to what Michael and you are both describing, which is, I think we, you know, one of the most exciting things is the serenity of what you might need or financial inclusion. And part of that is fintech, part of that is e-commerce. But in digital financial inclusion, we should also include even things like people being able to establish who they are. One of the things that's quite fascinating in developing countries, especially in India, has had an inter-experiment, very large-scale experiment on this, is that the number of people who can actually establish where they live and who they are, absent digital technologies is actually not that large. But, you know, they've tried to scale that up by expanding with digital identifications and other mechanisms. Now, all of a sudden, not only can I participate in banking and fintech in the way that you're both describing and get access to loans and so forth, but I can also establish who I am. I can get a job. I can also establish other kinds of property rights and other things. So the scope and scale of digital financial inclusion in the developing world, but also, quite frankly, even in advanced economies, is actually very, very large. This is pretty exciting. And, you know, I'm glad that, you know, Michael pointed this out around, you know, the role that this plays around information signaling. This is a game-changing inclusion kind of mechanism. I was talking to, for example, one of my friends runs a mobile company, a very large mobile company in Africa. One of the things that they've been able to do, for example, is to dramatically lower the threshold for cash transfers you can do to, you know, pennies or the amount of levels you need to be able to have to establish what is essentially a bank account is far, far, far, far lower than what a traditional banking system can do. This is game-changing. But I should comment on your UBI point, by the way. We just wrote a little paper looking at how, you know, Finland is just run the most well-instrumented experiment over the last two years, by the way, on UBI. And the results are fascinating, among them the fact that it didn't reduce people's appetite to work. In fact, it actually increased it. And it created all kinds of flexibility. The reason why this is important, and, you know, Steve, you may know this, but I'm currently co-chairing California's Feature of Work Commission that the governor of California set up. And one of the things we've now realized in this COVID moment is that the nature of safety nets really matters. Because if you've got safety nets out there, health safety nets or income safety nets that are tied to employers, guess what happens when those employers shut down, right? Guess what happens? So we're going to have to really think hard about how we reimagine safety nets. Now, this isn't to say UBI is a silver bullet to answer to this question, but we're going to have to get interestingly creative about what is the nature of safety nets in the 21st century. I think it's so important, James, you know, that I was involved with the very early days of New America and, you know, trying to find ways to smartly decouple benefits and have benefits, you know, you know, arm people, give them toolkits to navigate and surf the turbulent economy. But it seemed like, you know, workers and employees were, you know, the most handicapped of all the other factors out there. Let me just ask you a kind of large medic question before we go to our audience. And, you know, we are talking a bit about technology. So as we talk about 5G, which is really a holding place for thinking about quantum computing and AI and Internet of Things, you know, big data. All of these elements come together. Brad Smith, the president of Microsoft, wrote a book called Tools and Weapons and said that these new technologies, particularly AI and what it can do in, you know, facial recognition software and all the other dimensions, they can be very helpful tools to society or they can be nightmares of a 1984 or well, you know, George Orwellian type security state in the future. And so I'm just wondering, you know, both of you have so many insights into the economic dimensions of this, but part of what we're talking about coming at us, whether, you know, I asked Eric Schmidt once, how will AI seduce the American public to love it? And he said better health outcomes and diagnoses and decreasing fraud. But if those same, you know, elements that will help people in one way or another, also kind of imprison them, restrict them, restrict their freedoms, cause other large externality problems, I'm just interested in your insights on those dimensions of technology and society, because we've got to think about that. Do you have thoughts on that, Michael? Yeah, I think we both do. So I guess the way I would frame it, Eric Schmidt once said, you know, we're entering an era, he's talking about AI, where your cell phone is going to know what you're going to do before you do. And that's a little scary. I think the challenge here is the responsible use of data, right? I mean, for example, in the pandemic economy, we've made, you know, an inadequate use of digital data that would have helped us, right? We're all walking around. We're equally dangerous to each other. The Asian economies have done better at that. Why is that? Well, part of the reason is we have different, you know, values with respect to sort of privacy and other things. And the other problem we have is that we don't trust any enough institutions to handle our data responsibly. So I think there's a big challenge here. Most of the benefits that we're talking about, and I was talking about before, are unachievable. If you are put in a situation where basically people don't trust the people who have the data, right? And these trust issues, you know, don't get talked about enough. Every single e-commerce platform has a payment system that they had to date. And you know why they created it? Not because they wanted some high-tech digital mobile payment system. They created it because the buyers didn't trust the sellers and vice versa. The buyer didn't think he was going to get the product, and the seller didn't think he was going to get the money. And this was true in Latin America, Mercado Libre, and they created Mercado Power. And it's exactly the origin of Alipay, now, you know, a high-tech sort of, you know, Marvel out there in the world. But these issues are fundamental. And now the issue that we have to face if we're going to take advantage of all of these things that are possible is we have to have both trust and governance systems that give people confidence, that their data will be managed, whatever the differences and values across countries and societies. And there are differences, right? Whatever those differences are, those values are respected in the way that data is managed. James, over to you. Yeah, I think I agree. I think the governance rights really, really matters because one of the things that's fascinating about this class of technology, Steve, is you might call them dual use technologies if you want to use that language, which is there's a class, a whole class of them, communication technologies, whether it's 5G and so forth, artificial intelligence, you could even add biotech to that. So there's a whole class of these technologies where the innovation, economic, and even societal benefits are huge, huge. But at the same time, they could be misused. And misuse here, and by the way, on the misuse side of these technologies, we shouldn't just focus on governments. We've also got criminal elements to that. We can also have other activists or disruptors of any kind or scale. So the actors on the misuse side are quite wide. And by the way, and look at what we're seeing with deep fakes using AI technology and what's possible with that. So I think we have to solve for these governance mechanisms that create trust and get, and that's one of the, I think, one of the global challenges of the next few decades is, in fact, how do we build governance mechanisms to allow us to fully capture the benefit and economic value and societal value of these technologies while at the same time building trust systems? I think one of the things that makes this difficult, if you think about other dual use technologies of the past, think about nuclear science, if I could call it that, huge benefit in terms of power and energy generation could be used for weapons. The difference with those technologies, if you like, was that with those technologies, they were largely all in the hands of governments. They were not in the private sector. This set here is, it's in the private sector and it's in governments. In fact, the most advanced versions of them are actually in the private sector, much more than in the governments. So that's one difference. Another difference is that it's hard to detect their use. So it's very hard today for anybody to just set off a nuclear weapon on anywhere on the planet without anybody knowing. But do we always know when somebody's used AI technology to do something? Not really. So it's a much, much more complicated setup. And I think global cooperation on this is going to be so fundamental. The good news is that you are seeing some companies start to create some of their own kind of peer pressure self-governing mechanism. So one example of this is the partnership on AI, which several companies signed up to kind of a self-governance set of principles around the use of AI. And I think they now have 800 members. But the founding members were companies like Google and Facebook and Microsoft, et cetera. So I think governance mechanisms are going to have to emerge from somewhere. Well, I think my dinner with Michael and James is going really well. But now we're at the dessert portion and we've got a lot of questions from folks. So I'm going to ask both of you to be as brief as possible so we can cook through some of these. I'm going to start at a respect for Rob Johnson, who built INET. Rob Johnson asks, what social reforms of our governance system do we need to make so that we can incorporate the potential of technology to increase the balance and coherence of society? Which I think is when he says, can tech contribute to the integrity of democracy? Or can democracy mitigate the extremes of inequality that technological changes has caused? Michael, quick thoughts? I think that properly used technology has an important role to play in the inclusiveness agenda. I don't need to repeat it. And I believe that it has an important role to play in data, privacy, and security. So dealing with that enabling factor. And finally, I think that while it's a more challenging sort of complicated problem, I think that technology does not, in my view, have to be a negative factor as it appears to be now in much of the sort of political process, that kind of negative factor that really worries people. James? Yeah, I think to the extent that technology is contributing to two things in our social policy. One, which is creating prosperity, innovation, and things that are good for society that's important. But also to the extent that it's also promoting inclusion and inclusivity in the ways that Michael is describing before, then it's a powerful force. Great. Let me take this question and direct it to James real quickly from Jesus Salgado from University Dodd Polytechnic. He says, I'd like to know the impressions from you about whether AI systems apply to worker management, whether this has an impact on workers' health, their physical and psychosocial health, and the safety of workers? Well, I think it certainly has the potential to improve safety, for sure. One of the things that we're seeing, particularly in this COVID moment, by the way, is how AI and machine learning techniques are actually helping us understand the workplace from a safety standpoint much better and anticipate things that can happen in the workplace much better. So that's a good thing. I think where it becomes more complicated is if we start to then collect a lot of information about workers, then we have to think about how do we enable worker privacy in the workplace if we start to capture a lot of information? I think there's a balance there to be managed. I think on the question of health, it actually depends. I mean, it depends. If you think about health in the sense of pandemics and infection and so forth, it can absolutely help. I mean, many of the techniques that are being used for contact tracing and so forth actually are using these technologies. But if you think about health in the sense of either attention and addictive behaviors, then that's a whole different conversation. That's a much longer conversation. Thank you. We'll do that in the next iNet show. Michael, we have somebody in Italy from the University of Bologna, Paolo Onofri, asking interesting questions. How do you think the transitions mentioned in technology and education are going to combine with the demographic transition? And if I can just piggyback on Paolo's very interesting question, do we need to rethink to some degree education in a way? We used to talk about living in a digital world now we've all been forced to. We often talk about lifelong education and refreshes and continuing, but we've never really done it, not in the United States. So I'd like to just piggyback on Paolo's question. Gosh, I mean, there's, you know, if you think of that as in terms of a model, I mean, there's a lot of variables. So we are aging, and that is a relevant part of the challenge, because in older society, that may have to work longer because we're living longer and we can't afford to stop working at 50 anymore, maybe a different education and training and reskilling and retraining challenge than the younger population. So it's certainly relevant. I think there's two things that characterize the American situation relative to what I think of as best practice. One is just, it's not easy to figure out how to do this. Okay, so it's not just money, but you can underfund it. And you know, there's been articles written about the dramatic difference in the fraction of GDP devoted to sort of training after you finished your schooling in places like Denmark, relative to the United States. So we talk a lot and so far, you know, at least on the public sector side, we've done, you know, a little less action rather than talk. But I think, you know, the other thing I guess I would say, and James can add to this, is I think digital technology is a really powerful weapon across the board with respect to education, training and skills. And the startups that I'm aware of are across the world and they're blossoming because of the demands of the pandemic, the mobility restrictions of the pandemic economy are just accelerating the creation of these vehicles. And I think if we embrace them and use them effectively, they'll make a major dent in the sort of educational training side. Yeah, we've got a question. Oh, go ahead, James. That's a quick, quick add to Mike's comment. I think on the education front, one of the things we've seen in the US, but in particular in Europe, because we just did some research on skills in Europe in particular in the future of work, is a bit of a mismatch, which is, if you look at the growth and demand for jobs in Europe, there's a mismatch between what those jobs need and what the training educational systems are delivering. So and what seems to be most in demand are going to be these STEM based digital skills, but also emotional social skills in an interesting way. So it seems to be a combination, not just of STEM, but some of these social emotional skills that seem to be in high demand. So our education systems are going to have to reflect that. And right now there's a mismatch. Michael, we've got a question from Samyak Jain from Rethinking Economics and says, isn't it better for government to create large numbers of state jobs for people instead of spending money in UBI schemes, because people don't only need money to survive, but also identity and a sense of fulfillment, which comes from work. I'd love your comments on that, but I would say that this is one of the comments that Joe Biden has been making about the value of work. There are people like Ernie Moniz, former energy secretary, have been promoting a kind of WPP-like energy jobs coalition so that we build out in the next big energy infrastructure investments of the country around new energy, a big jobs program. So just want to add that. Michael, your thoughts? Well, very quickly, I think the answer is, or the reaction is positive, provided that you are creating jobs that are adding value to the economy. So in an environment where there are obvious areas of underinvestment on the public sector side, it's a no-brainer. You can up the levels of public sector investment, which involves creating jobs, and you're doing good on two fronts. You're employing people. They're actually contributing to society, and you're increasing the asset base of the economy, so you're improving the future and so on. You've got to afford to be able to do it. So it's a bit of a challenge when you're running up government debt as fast as we are. But the caution is it's not better to create jobs that are unproductive just to employ people. James and I have both spent a lot of time in developing countries, and the fallback position when the private sector is stuttering in creating jobs is to do it in the government sector. And so I'm not going to name countries, but I can tell you I've been places where everybody in university is training for a government job because those are the ones everybody wants because they're stable, secure, high-paying, and so on. And that's a prescription for stagnation. So that's the qualification. If you accept this proviso, do it because it's advancing something in society, then it's fine, and an important policy too. And we have two arenas where it would be advancing society. One is climate adaptation. There's a lot of work to retrofit our economic systems for, in fact, a more climate resilient future. So that's work that's worth doing. And depending on which country you're in, infrastructure, especially in the United States where the infrastructure is terrible. So that's work that's worth doing. Here's an interesting question from Morris Pearl from Patriotic Millionaires. Morris asked, is this new phenomenon of a tiny number of people generating all of the value in an economy very different from something like a railroad or an automobile maker or a mine that needs people? Does this require a new policy, a new tax policy that results in redistribution? Do you have thoughts on that, James? No, but I think it requires different mechanisms people to participate, as we've talked about before. So whether it's different acid ownership or different mechanisms, I think it also requires ways to provide mechanisms for people to sustain themselves. And so that could be, so one of the things we, most of our policy systems don't do is we haven't actually created enough incentives, for example, for companies to train and educate people on the job. We create all kinds of incentives for companies to invest in R&D, we give them R&D tax credits, we write capital, those are all important and the right things to do. We don't do nearly as much when it comes to human capital development. So incentives to encourage human capital development are pretty critical. Good. Yep. Let's see here. We have one from, we've done that topic already, I apologize. Jay Paukington from the NSU for New Economic Thinking says, what is the future of work in the informal sectors in advanced economies as well as developing ones? Michael? Well, there's a, I don't know whether you call it informal because it has a kind of technical meaning in developing countries. So it has a negative connotation because you're kind of out there on your own without the things. But I think we are going to have a contract, gig, big component of the economy and provided it's underpinned with accessible, you know, essentially social insurance, social support mechanisms that are affordable for everybody. So as an inclusive, you know, then I don't think that's necessarily a bad thing. But, you know, it doesn't imply that there's economic insecurity with the right mechanisms of the type that James talked about before under the social contract. So I'm not, yes, I think we are going to have a big quote in formal economy. And if we do things where it's, it may be a net positive in terms of, you know, flexibility with respect to work and the way you engage with the economy, a lot of people. We have a couple of questions for both of you about, you know, I'm going to blur them together. But somebody's asked, is there a digital economy that can leapfrog traditional economy like bartering? And we've had a number of questions about blockchain and cryptocurrencies and whether transactions in this arena restores trust in technology. It's an interesting question. And how you see these other methods of transactions and a digital economy coming in to, you know, be a high trust economy replacing maybe what we have today. I'm sort of blurring them together. Sorry if that's inarticulate. You see both. Go ahead, James. Go ahead, Mike. No, I was just going to say, if you go to developing countries, you see the leapfrogging phenomenon clear as a bell. I mean cash to mobile payment systems, you know, with nothing in the middle. And most people, I think, you know, who study these things think, you know, that's one of the reasons we go more slowly in that direction because we already have reasonably adequate, you know, substitutes in the form of debit cards, credit cards, cash, and other things. But I think whether it's a net positive or not depends crucially on what we talked about before. So in China, you know, Alipay, now Ant Financial or Ant Group was created to solve a trust problem. I think by and large, they have maintained, you know, their reputation for dealing in a trustworthy way. They are going to be regulated by the government as they should be with capital requirements because they may not be just super terrific at assessing financial risk as they get into, you know, being a bank or a money market fund or so on. On the other hand, the peer-to-peer lending in that context was a disaster, right? I mean, inadequate disclosure. Entities that weren't trust turned out to be just basically been shut down. So I think the answer is, yes, the potential is there, but it requires, you know, alert regulation and highly responsible behavior and integrity on the part of the players who come out being the important players in, you know, especially the platforms. Thoughts, James? Yeah, I would agree with exactly what Michael just described. I think it's correct because I think the emergence of barter systems is showing itself up in the growth of things that look like digital marketplaces. Now, some of those are obviously people are transacting in money, but we're going to see many others transacting in other mechanisms of exchange as well. But I think the key is, as Mike said, is about how do we think about building trust and transparency to those systems? Because one of the things that's emerging in marketplaces often is, yes, the challenge of trust, but also just transparency. So it's a classic question of, in a digital market or any marketplace for that matter, how do I know the supply-demand asymmetries are really what they are? If prices go up, is that really because supply-demand asymmetries really gone up or not? So questions about transparency, questions about trust become really, really important, but there's no question that the arenas where we're going to see these digital marketplaces show up is vast when we're running just scratch the surface of these marketplaces. Look, having dinner with the two of you and my fantasy dinner here, there was a course that I wanted to have. We'll have to leave till next time, which is to discuss broad implications of China and what's going on on that front. It would have been a lot of fun to do, but I think this has been a superb conversation, and we got in a really good number of questions. I'm sorry we couldn't get them to them all, everyone, but I think we did a very good job. I want to tell everyone that next Tuesday at 12 p.m., the INET will have a forum called What is Technology? With Long Chen, Anton, I'm going to make this wrong, Conor Neck and John Van Renen, if you haven't already registered, you should do that at the right of the INET website, and you can join that next week at 12 p.m. We also have a Young Scholars Initiative that will be taking place right after this, and if you're part of that group, you can click on the link for that also at the bottom of your screen, but I just want to give a big thanks to Michael Spence and to James Manica for a superb conversation covering a lot of ground and territory, so thank you both.