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Here In Silicon Valley, Are We Killing Jobs And Making The Rich Richer?

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Editor’s note: Adam Rodnitzky is a serial entrepreneur and co-founder of Favo.rs. Rodnitzky is based in San Francisco and you can follow him on twitter @rodtwitzky.

As the Occupy Wall Street movement keeps growing, many of the issues raised by the protestors continue to gain support from the average American. In particular, the erosion of the middle class due to job losses and the increasingly large income gap have become key issues in the 2012 presidential elections.

At the moment, Wall Street and big corporations are getting the lion’s share of blame for these issues, but the reality is that no single region or industry is solely responsible for our current woes. In fact, we’re all doing our part—including us here in Silicon Valley.

Think about it. The success of most tech companies’ products is predicated on delivering scale and efficiency, also known as the ability to do more with less. That “more” typically means more wealth generated. And that “less” typically means with less and/or less expensive labor. In other words, the primary export for many Silicon Valley companies can be simplified down to labor substitution. In the near term, there are a variety of unfortunate ways in which this is manifesting itself as a social fabric-eroding, wealth-concentrating job killer. For the future? I believe there is a different story.

In one of his most insightful blog posts, Josh Kopelman outlined a philosophy that powers many of today’s most successful technology-enabled retail and services companies. Put simply: If you can enter a big market where the incumbents charge a lot for their product, yet you can sell an equivalent or better product for less, then you’ve changed the game and shrunk the market.

This scenario has been replayed a hundred times over in movie rentals, bookstores, record stores, and so on.  With the disappearance of each of these bricks and mortar stalwarts, tens of thousands of positions have been made obsolete in a matter of years. All the wealth in these markets has been shrunk to a fraction of what it was before. And what wealth remains has been redistributed to a smaller number of people. Sound familiar? Job losses. Growing income gap. Check and check.

Yet it isn’t just the employees of old-school bricks and mortar retailers that are suffering. The disruption has been moving up the corporate ladder for decades as well. After all, the single biggest line item for most organizations happens to be an easily-adjusted variable cost: labor. When that labor is expensive middle- and upper-management, then any opportunity to minimize or eliminate those costs will be considered.

There are few remaining professional frontiers that have not been touched by the cold hand of automation and outsourcing, and employers that choose not to leverage this new global marketplace for talent and software will suffer at the hands of their competitors. Coming soon to a web near you: virtual lawyers, remote marketers and automated accountants. Those corporations who do enable these new methods of production increasingly benefit from growing profits distributed to a shrinking payroll. The result? The winners win more, while the losers get nothing. Sound familiar? Job losses. Growing income gap. Check and check.

At this point, then, we must ask ourselves a question: are we actually a bastion of evil, disguising ourselves as an innocent collection of the crazy ones and the risk-takers? Am I suggesting that we should stop developing the next revolutionary business or technology that risks destroying the status quo and putting hundreds of thousands of people out of work? The answer is resoundingly no and no.

As we continue to create these new technologies that eliminate labor at the large corporate level, we are also creating new opportunities to build jobs and wealth at the small business level. And, as it turns out, these new jobs often fit nicely into the gaps created by what is being creatively destroyed in the old guard.

To take just one example, traditional retail markets once disrupted by large online retailers are being disrupted again by a new wave of micro merchants. Companies like AirBnB, Etsy, HiGear, and Foodzie are powering this new peer-to-peer retail revolution that puts the national power of a branded retail or service business into the hands of individuals and local merchants – and more are on the way. These new markets allow individuals to create new companies, and as those companies grow, they create new jobs and redistribute wealth.

Large corporations that eliminated employees in the name of outsourcing and automation are now facing increasingly stiff competition from small businesses with access to these same efficiency-enhancing tools. From sophisticated CRM systems to low-cost marketing automation tools like LoopFuse, it’s easier than ever for these once disadvantaged small businesses to successfully compete against much larger ones. That brings in more work to smaller, local companies, thereby creating new jobs and redistributing wealth.

And that’s the other side of the coin.  Professionals whose jobs were eliminated due to automation and outsourcing can now outsource themselves on automated marketplaces. Many of these skilled professionals are finding new homes as independent knowledge workers connected to a broad base of smaller organizations via evolved crowdsourcing marketplaces like oDesk and Trada. Once again, this is creating employment and redistributing wealth back into more hands.

So perhaps we’re not evil. After all, the technologies we are creating in Silicon Valley are inevitable. If we don’t build them, someone else will. They are also disruptive and game changing. Those who don’t use them will suffer at the hands of their competitors. Yet most importantly, we have built them to be inherently democratic. There are no velvet ropes keeping these efficiency enablers solely in the domain of large corporations.

We may be killing jobs and concentrating wealth in the short term, but in the longer term we are creating tools that are giving thousands of unemployed and underemployed people the ability to take charge of their future and redistribute wealth back into their own hands. While the markets that these new companies participate in may shrink in size and rely on less upper management, one thing they certainly don’t leave out is the need for employees.

And therein lies a world of new occupations for Main Street, courtesy of your friends here in Silicon Valley.

Photo credit: Bob Jagendorf/Getty