Software Is Eating All the Jobs Too

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A few months ago I was giving a talk in my hometown of Memphis, TN, and someone asked what the city could do to ignite more entrepreneurship among inner city kids. My immediate answer was teach coding– even basic app building skills– along with English and Math in every public school. I was surprised that my brother– an engineer who worked for many years in Silicon Valley before relocating to the Midwest– didn’t necessarily agree. “That depends on whether there are still enough coding jobs for them, or they’ve all gone overseas,” he said.

It was then that the great American panic of a few years ago came rushing back to me. Somehow I’d forgotten all those business school reports and magazine covers warning the US that it wasn’t just the factory jobs going overseas; the white collar engineering jobs were all leaving Silicon Valley too and going to Eastern Europe, India and other pockets of the emerging world. These reports screamed that kids lulled into computer science degrees by the great late 1990s were graduating into the work world out of luck. Just like the Detroit factory worker, there was just no way for them to compete with the thousands of engineers graduating annually in India and China.

It’s amazing just how wrong so many people could be. Just a few years later, one of the only bright spots of employment in the entire country is for coders. In California, the latest numbers show unemployment at a staggering 12%. Yet if you are a coder in Silicon Valley, the world is your oyster.

You can apply for Y-Combinator, you can raise money from hundreds of angels and VCs, you can bootstrap a simple Web or mobile app off of your credit cards, you can work at Google, Facebook, Zynga, Groupon, or one of the thousands of other startups desperate for coding talent. Every entrepreneur tells us hiring is the single hardest challenge they face right now.

Those wacky offices you see Jason Kincaid parading around on TC Cribs are getting wackier as companies like DropBox and Airbnb want their companies to stand out even more to in-demand recruits. Why do you think everyone wants to their company on Cribs? COME LOOK AT HOW FUN IT IS TO WORK HERE!

Recently I asked Dustin Moskovitz–  the Facebook and Asana co-founder and the world’s youngest billionaire– to come be a judge at San Francisco Disrupt. He joked that he was going to tell the smartest entrepreneurs their startups were doomed so they’d give up and enter the workforce instead. At least I think he was joking. (By the way, he’ll give you a $10,000 allowance to pimp your desk if you come work for him.)

As someone who used to work for one of those magazines, let me apologize if you decided not to learn to write software because of all of those covers. But you probably shouldn’t rely on the media to tell you what to do for a living anymore than you should listen to CNBC for investing advice. Either could have screwed you out of a goldmine in recent years.

The idea that all the software jobs would leave the Valley was the second great lie of the early press and excitement around globalization. The first was that America would always stay the “brain” of the global workforce, while everyone else in emerging markets just did our grunt work, leaving us all the innovative, high-paying jobs. I wrote an entire book refuting the implicit naiveté-mixed-with-raciscm of that view, so I won’t argue it again here.

At first blush, it’s strange that both of these myths so fervently believed a few years ago both appear to be false, because they seem at odds. Either you believe people in the rest of the world are smart enough to do the higher level work and freak out about white collar jobs leaving the US as the rest of the world’s worker base gets more sophisticated OR you believe the rest of the world will forever just do the grunt work and more sophisticated US jobs are safe.

But as it turns out there was a fundamental flaw with that either/or dynamic that Marc Andreessen articulated perfectly in his recent Wall Street Journal oped: Software is eating the world. (Ironically, Andreessen became a coder because he read in US News & World Report it was a good way to make money. Lucky for him, he wasn’t born a decade or so later.)

What that means is software jobs are not the zero sum game we anticipated back in the early 2000s when many companies were sending them overseas. Instead, they’ve expanded exponentially as more industries have become fundamentally about virtual delivery.

And the trend isn’t just about a company like Pandora, Zynga or Amazon pushing music, gaming and books to be software-only  products, rather than physical things packaged on shelves. Nor is it just about the new globally exploding market of social media. We’re also seeing the biggest resurgence in companies disrupting the real world since the early days of the Internet, with Airbnb, Uber, Groupon, GetTaxi, and a host of other names taking on long-neglected, fragmented industries in new digital ways. Andreessen and his partners are betting that healthcare and education are next. Accel, too, has been placing some big bets on education.

Not only have software jobs expanded dramatically by industry, they’re expanding dramatically within industries too. You can’t overstate the impact of two billion people being online, and estimates that five billion will have smartphones within the next ten years. Even today, more people have basic mobile phones than have toilets, and those phones can provide a staggering array of digital services from banking to education to news and information.

Because digital companies reach so many more people than the days when we were fretting about the demise of software jobs, the handful of companies that dominate a category like social media are building massive organizations. And, unlike the dot com days, most are doing so profitably.

Silicon Valley isn’t the only place benefitting. Ask entrepreneurs in China how hard it is to recruit and keep video game developers. Or ask me how hard it has been to recruit Chinese bloggers over the last few months. It’s no longer an age when a Web company launches in the US, and years later the rest of the world is ready for those products and features. It’s an age when a Web company launches in the US, and a version of it launches in Germany, Russia, India, China, Brazil and a host of other countries within days, creating a smaller amount of jobs than we have in Silicon Valley but certainly more than those countries had ten years ago. More important: Those jobs are working for local companies, not doing low-level engineering for big US multinationals. That’s a much more meaningful way to break the poverty cycle in the long term, as multinational jobs will only employ so many people with limited upside potential.

Will all of those software jobs be safe? In both the Valley and overseas, the answer is most definitely not. The bulk are being created by startups, and the nature of startups is to IPO, sell or go out of business. They are supposed to be risky, and everyone going to work for one should remember that. The two latter categories could easily result in a huge wave of layoffs in coming years. That’s a far bigger risk for emerging markets just building their startup ecosystems than it is for the Valley.

There will be the regular commenters wringing their hands about a “job bubble”– and while we’re clearly not in a financial or psychological bubble right now, we may well be in a job bubble. It’s way too easy to start a company now, and the gulf between winners who get big enough to go public and everyone else is wider than it has ever been in Silicon Valley. (That’s one reason we’re not in a financial bubble.)

Still, if you are a recipient of that job bubble would you trade places with any the tens of millions of people out of work in the United States right now? I doubt it. Benefitting from a job bubble is not only a first world problem, it’s an upper-class-educated-lucky-to-be-in-the-right-industry-at-the-right-time kind of first world problem. The entire city of Detroit has the right to punch you in the face if you believe that’s the biggest macroeconomic problem the US faces right now.

If you’re worried, save some of that cash you’re raking in for the potential rainy day, and thank God you work in software. In a market like this, better to be the eater than the eaten.