Read my article in FT Business Education 26 January 2015 here

Earlier this month I met my accountant to go through my (very simple) yearly accounts. He made a throwaway remark about the trials of submitting tax returns to Her Majesty’s Revenue and Customs online, so I asked him to elaborate. Twenty minutes later (as long as it took to deal with my figures) he was still going. Here’s what he told me (the short version).

The HMRC computer system has crashed on him so often that he has given up using the website by day and only goes online after 10pm at night. Any improvement after that is relative: each return still takes an hour to file. There is a complicated login and logout procedure to be completed at both beginning and end (gateways and passwords) and for every file there are around 30 ‘noes’ to be clicked (are you in receipt of Job Seekers’ Allowance, child benefit, etc). If the system goes down before you get to the end, you go back to square one. The systems dealing with VAT and tax don’t talk to each other.

When the figures come back from the Revenue, the calculations have not been checked; my accountant says he now spends more time and effort correcting HMRC mistakes than doing the accounts in the first place. His productivity, and billing time chargeable to clients, are thereby both substantially reduced.

Raising queries on accounts is dysfunctionality raised to an art form. In a past life it was possible to discuss a case with a tax inspector, sometimes even one who familiar with the file. (My late previous accountant, a well-known inspector-gamekeeper turned accountant-poacher, was legendary for his epic rows with tax inspectors, usually after lunch, some of which he won, some he lost; I often felt a less abrasive approach might have been more productive, but gains and losses probably evened out over time and – the most important thing – after the row at least you knew where you stood.) The inspector is no longer accessible. Calls that get through (according to a recent Which? assessment one-third don’t) go to a call centre, which despite its impressive ‘Dedicated Priority Helpline’ moniker is essentially a message-taking service for logging and transferring queries to an ‘adviser’ somewhere in a back office. The adviser in turn is supposed to call back within a certain period. Since there is no way of knowing when this will be, it often happens that the accountant is not in to take the call. In which case the query is ‘closed’ and the process starts all over again.

This design is like something out of a Borgesian short story, performing the remarkable trick of making service dramatically bad at the same time as it permits HMRC agents to meet their targets and thus assert the opposite: the service is good. Magic! Under the only measure that makes sense to customers – the elapsed time taken to resolve a query – the service is dire, frequently stretching over weeks. But since HMRC uses measures related to activity (percentage of calls answered, percentage of calls handled within five minutes) rather than to purpose (resolving taxpayers’ tax issues), it has no knowledge of how good or bad its service is from the customer viewpoint, nor that its work backlogs are not the fault of bloody-minded customers but are self-created ‘failure demand’ – new cases that are actually old ones with a new reference number because they weren’t done or done wrong the first time round. Predictably, because managers have no idea what good looks like for the customer, they pin improvement hopes on technology, this case in the guise of voice-recognition software, which equally predictably creates not economies but rage, despair, more failure demand and higher cost. As the late Peter Drucker said somewhere, nothing is so utterly useless as striving to do better what shouldn’t be done at all.

It’s worth recounting this litany because the new HMRC is touted as a flagship of public-sector reform. Some flagship. It’s actually a travesty of reform, a compendium of all the mistakes that have already been made in the private sector, plus a few twists of its own. Thus its IT-led, front- and back-office design faithfully replicates the private-sector scale thinking that has made banks, telecom and utilities a byword for dismal customer service. It has been implemented by big consulting and IT firms that have strong incentives to use expensive computer systems, at the expense of human beings and common sense. Also borrowed from the private-sector chamber of horrors is a reductive, predatory and ultimately self-defeating view of cost. Although it’s impossible to calculate with any degree of accuracy, the new improved HMRC will almost certainly have yielded no global cost saving. Adding insult to injury, however, as my accountant points out with feeling, the costs of the worsened service have been bodily shifted to the user, costs moreover that are difficult to recover since they are incurred in activities that add no value for the ultimate client. In short, what HMRC is a flagship of is what’s wrong with today’s management – pretty much everything, in fact.

Read my article ‘Socially useful business – necessity or nonsense?’ here

It doesn’t take a clairvoyant to predict the two items that will dominate the management agenda in 2015. The first, local and particular to the UK, is public services and more specifically the NHS. The second, more general and more pregnant with unknown unknowns, is the future of work in the app, on-demand or algorithm economy. Bluntly, is the day of the full-time job over?

Each topic is hugely important; each is at a fork in the road. Tiresomely, each is likely to follow the road more travelled, leaving the positive potential unfulfilled. Thus the Conservative recipe for the NHS and the public sector, competition and the import of private-sector firms and practices, is as numbingly irrelevant to the main issue, which is one of management and work design, as Labour’s medicine of higher spending. Meanwhile, NHS boss Simon Stevens thinks that technology is the answer. In a recent interview, he declared that ‘health service new towns’ such as Ebbsfleet in Kent would start from ‘the default assumption that digital interaction will be the main way that people will interact with the health service’… Rather than registering with a family doctor, he predicted, residents would sign up to ‘a virtual primary care service, and then … rather than booking an appointment, [they’d] just be able to call up a doctor or a nurse on [their] iPhone, and have the face-to-face interaction there’.

Well, perhaps. More likely, like almost everyone else, he has been ‘fooled by penicillin’, as the US surgeon Atul Gawande described the syndrome in his riveting 2014 BBC Reith lectures. Pace Fleming and Curie, argued Gawande, the key to excellent health outcomes isn’t brilliant individual discoveries that enable disease to be cured like magic with a couple of injections. It’s the painstaking, error-free application of well-known basic principles. Take the dreadful ebola outbreak in west Africa. Asked about the secret of bringing it under control, a professor of nursing told me, ‘It’s a system, isn’t it? If any part of the system drops, there’s leakage – that’s how the virus spreads’.

Gawande is the originator and author of ‘The Checklist Manifesto’. His case is that in a complex, interconnected world even routine procedures have too many steps and dependencies for any one brain to be able to keep in mind reliably. He found that even in good hospitals a simple checklist carried out before surgery regularly reduces post-op complications by 35 per cent. In Scotland, systematic application of the checklist has so far saved an estimated 9,000 lives. Gawande called his second lecture ‘The Century of the System’: ‘We spent the 20th century reducing problems to atomic particles,’ he explained. But to deliver against those great discoveries, ‘it’s now how things connect up that matters.’

Mutatis mutandis, similar systems considerations apply to the issue of jobs and automation, and management generally. Hyping the app economy, Silicon Valley takes a strongly technology-centric approach: geeks know best, is the attitude, and if they can do it it should be done. In the same way economists look at technology and innovation exclusively from a productivity angle. Economists have traditionally taken an optimistic line: if a technology increases the overall productivity of the economy, then increased overall well being outweighs the temporary discomfort experienced by those whose livelihoods are displaced by the new methods. But there are conspicuously more doubters this time round. Nouriel Roubini, the New York academic who predicted the US housing crash in 2007, wonders ‘Where Will All The Workers Go?’. In a new book, author Nicholas Carr warns that ‘to ensure society’s well being in the future, we may need to place limits on automation’. Noting (‘There’s an app for that’) that the app economy’s ability ‘to deliver labour and services in a variety of new ways will challenge many of the fundamental assumptions of 20th-century capitalism, from the nature of the firm to the structure of careers’, even The Economist concludes that the overall picture is more complex and worrying than many politicians and economists have been prepared to admit.

Why? What’s missing from the economic account is awareness of the shaping managerial forces. As the Peter Drucker Society’s Richard Straub points out, the mismatch that automation is showing up is not primarily with skills but with opportunities to deploy and actualise human potential. In his book, Carr makes a distinction between liberating ‘humanist’ technology and its opposite, an ‘anti-humanist’ variety that simply displaces, deskills and sidelines people. That’s the effect of much current automation. Work by Clayton Christensen, confirmed by others such as William Lazonick, has shown that under pressure from the capital markets, managers have largely given up investing in market-creating innovation. They prefer cost-saving measures that substitute capital for labour, benefiting shareholders and triggering their own bonuses. Hence the decline of the middle-ranking job and the stagnation of wages. Drucker once wrote that the social responsibility of companies was to turn social problems into opportunity, jobs and wealth. But the chances of that happening when Silicon Valley entrepreneurs and corporate managers alike believe that their sole purpose is to enrich the shareholders constituency is precisely nil.

As with any other method, automation or algorithms are subservient to purpose. The kind of systems thinking that Gawande talks about is helpful here. Could automation and IT help in bringing ebola under control? Unlikely. Could it help in overcoming more banal but also debilitating and poorly treated conditions highlighted by Gawande such as coronary heart disease, asthma, high blood pressure and mental disability? Probably, in due course, through more systematic data collection and prompting to take medication (there are already apps for it). But it’s that way round. The order is: establish purpose, design against demand – and then see how computers can help humans to do it better. Human, not computers, by default.

Happy New Year.

As regular as bonfire night, last week saw the UK’s ritual annual outsourcing row. In 2013 the Institute of Government urged a halt to central outsourcing pending a review on the grounds that Whitehall lacked the management skills to make it work. Last week it was the turn of the Public Accounts Committee to charge that departments were overreliant on a handful of ‘quasi-monopoly’ contractors, two of them under investigation by the Serious Fraud Office for gross overcharging. The ‘markets’ being created by this kind of privatisation, charged the IG, were reducing competition and choice rather than enhancing them.

This is a fail in its own terms: but beyond that choice and competition are in themselves wrong-headed and self-defeating goals. These assertions run so counter to the authorised version that Whitehall simply blanks them out, which is why the outsourcing juggernaut rolls on regardless. This is one of the central themes of John Seddon’s important new book, The Whitehall Effect – How Whitehall Became the Enemy of Great Public Services and What We Can Do About it, which takes as its invaluable task the deconstruction of the current public-service paradigm (which is what it is) and the substitution of a better one.

Disclosure is in order here – while the ideas are distinctively Seddon’s, developed in Vanguard’s hands-on consultancy work across public- and private-sector organisations – I did some editing work on the book. I am proud to have done so, because while, as one Amazon reviewer puts it, Seddon’s narrative will certainly ‘make any rational person angry’, it fulfills a larger ambition. It puts in place a hard evidence base for a replacement offering hope and even (not a word to use lightly) inspiration for those who believe that management and public service have more to offer than cost-cutting, rationing and increasingly intrusive individual performance management.

To my knowledge, no one before has put together a satisfying intellectual pedigree of UK public services explaining both how they have come to assume their current form and why the latter is so dysfunctional. Seddon shows how the computerised call-centre/front-and-back-office/shared service model derives from – and suffers all the disadvantages of – traditional batch manufacturing, with its emphasis on standardisation, economies of scale and unit costs. This model, although still largely followed, was already obsolescent even in manufacturing by the late 1980s. In services, where the nature of demand is infinitely variable, the adoption of standardisation has been predictably disastrous.

As citizens, what we now get are shrink-wrapped, mass-produced service packages designed for lowest cost by commissioners and specifiers. They do such a poor job of meeting real need that they generate more demand (more contacts, more explanation, more referrals and assessments, more useless activity) than they satisfy.

Here in a nutshell is the whole slow-motion nightmare of everlasting austerity: public services that generate demand rather than meet it, apparently justifying more cuts that make matters grindingly worse. As Seddon explains, the ‘choice’ people really want is having their individual needs met; deciding between competing suppliers of similar bog-standard, ill-fitting packages, the Whitehall version of ‘choice’, is a bad joke, a travesty that delivers the worst of both worlds: a kind of market Stalinism in which product and cost are centrally planned and (see the PAC report) contracting is weighted in favour of the largest, cheapest and most cynical suppliers who care most about their shareholders and least about customers and workers.

One by one, Seddon picks off all the current public-service nostrums: as well as choice, personal budgets, commissioning, managing demand (aka rationing), risk management and lean have nothing to do with the purpose of a service in the only way that matters, as a citizen would define it. They are just activity. Some chapters (for example on procurement, aptly subtitled ‘how to ensure you don’t get what you want’) make you want to cry, laugh and smash up the furniture at the same time. As he reminds us, in the absence of real purpose the management measures used – in targets and standards, inspection and regulation and performance management (managing individuals rather than the system) – fill the void, distorting priorities and diverting effort and ingenuity into self-defeating attempts to do the wrong thing righter. The result is degraded services, disengaged citizens and demoralised public-service workers.

By definition, a paradigm is monolithic; at some point, it can no longer be incrementally force-fitted to the emerging evidence and has to be replaced. In other words, you can’t get to where we want to be by altering targets and standards. Getting over this hump is hard – ‘it is difficult,’ as Upton Sinclair noted, ‘to get a man to understand something when his livelihood depends on his not understanding it’ – which is why the careful dismantling of the monolith is essential part of Seddon’s project. But as important is the positive element, ‘the principles and practice’, to quote Lord Victor Adebowale’s foreword, ‘of how public services could empower citizens, could be exciting (yes, exciting) to deliver, and could genuinely add value to the lives of the public who pay for them’.

They could also return lost legitimacy to politics and Whitehall. ‘Politicians don’t know much about management,’ writes Seddon. But nor should they. Their mandated role is not to micro-manage but to focus on the purpose of public services for the people they represent. This ‘puts politicians where they need to be: connected to [their voters], able to appreciate the value of public services in their terms… but also to understand how better services build stronger communities, resolve social problems and lower costs’. Leaders of public services should be freed up to determine the measures and methods they use to meet these ends, with the role of ‘intelligent’ inspection and regulation restricted to testing whether the methods (whatever they are) really do drive improvement against purpose.

One of the ironies is that, when people can break the straitjacket of the dominant paradigm, such an agenda transcends considerations of right and left. Thus, in the US it is gaining traction in avowedly hard-right states like Texas and Utah, where politicians and technocrats are flocking to see how officials are respectively slashing prison populations (Texas of all places has closed three prisons so far) and dramatically reducing homelessness by resolving the issues that threw individuals off course and getting them on their feet again. The motivation is simple: it costs the taxpayer too much to keep people in prison or in homeless shelters, much less to do whatever it takes to get them off the state’s books, permanently. One state’s ‘financial rectitude’ is another’s ‘enlightened treatment of social problems’; whatever, it’s a result.

Under the radar, many similar initiatives in the UK public sector are producing the same kind of results, which Seddon has documented in a number of previous books and articles. This, though, is the most important and authoritative. In the run-up to the election, it has a direct message for every voter and politician as well as service leader: this is a set of ideas whose time has surely come.

Read my article in FT Business Education, 1 December 2014, here

One of the emerging sub-themes in debates on the ‘great transformation’ at the engrossing Global Peter Drucker Forum a couple of weeks ago was measures. Everyone agreed that measures were important (‘what gets measured gets managed’, etc), but there was less clarity about what in the transformed world they should look like.

‘What are the metrics for the new economy?’ pondered one Silicon Valley entrepreneur. In a plenary on the same subject, along with junking shareholder value (MSV) and top-down hierarchical management practices, speakers and audience debated whether ‘creative companies’ should abandon narrow financial metrics for broader, more inclusive ones.

My observation that the three items the plenary was questioning (purpose, measures and method) were systemically linked brought a gratifying name-check from the platform. Actually, I claim no credit for the idea: that belongs to John Seddon, who along with his colleagues at consultancy Vanguard have observed and tested the link in hundreds of service improvement assignments in both public and private sectors.

Seddon’s insight is that this invisible link is not just important: whether managers know it or not, it is what makes the organisation tick.

Here’s how it works. When measures are derived from purpose (what the organisation is there to deliver from the customer’s point of view), they guide method, in a good way. Thus, when Taichii Ohno, architect of the Toyota Production System, was asked near the end of his career what he was working on, he replied: ‘Shortening the time between receiving a customer’s order and taking his cheque’. The purpose of the TPS is to deliver to the customer exactly the car ordered as fast as possible. The metric of end-to-end time drives quality (there’s no point delivering a manual if the buyer wants an automatic) and all the methods, from kanban to factory layout to near-instant machine set-up times, that managers and front-line production workers have devised to get delivery times for some Toyota vehicles down to one or two days. Apple uses similar principles and measures in building computers to order.

End-to-end time and quality put the emphasis on flow rather than quantity, and are the secret of high-performing customer service and service delivery systems too. One of the key functions of measures is to connect actions with consequences. They foster self-knowledge and learning. If this is our purpose, as defined by the customer, what is our capability and how reliably do we meet it? Knowing our real capability (often a wake-up call to managers who have never posed the question before), what methods do we use to improve against the purpose? If we do this, what are the consequences in terms of desired outcomes?

By contrast, look at what happens when purpose goes by default or is set by a manager or, as is usually the case in public services, by an inspector or regulator. Measures still drive practice and method – but not in a good way. In both public and private sectors, for example, customer contact centres use measures that reflect top management’s view of service. Based on the desire to control cost and achieve economies of scale, they usually measure functional performance and activity (time to pick up the phone, call-handling time, number of calls per day) and instead of learning and improvement are used to secure compliance and manage performance through targets, standards and league tables. In relation to real customer purpose (‘solve my problem as quickly as possible’) they are arbitrary and irrelevant; in the absence of connection to the customer, meeting them becomes the purpose – ie satisfying the manager or inspector rather than the customer. Because they ignore the hidden thread that links them to purpose and method, managers using such measures are, in systems guru Russ Ackoff’s immortal phrase, condemned to ‘do the wrong thing righter’, which actually makes them wronger, worsening service and driving up cost.

Why does customer service by banks, phone companies and public services never get better? Because what managers and politicians and managers view as great service – that is, meeting all their targets and standards – has no bearing on quality as experienced by the customer. Hence the phenomenon of MP’s surgeries full of constituents complaining loudly about lousy service by departments or services officially rated as five-star, or top-ranked units suddenly being placed in special measures as they are hit by scandal. As Vanguard’s Andy Brogan puts it, ‘It’s not simply a case of defining the right measures – that’s a hygiene factor. What’s critical is what the measures are used for. The problem is not just that we end up doing the wrong things, it is that they keep us blind to the impact on the true purpose.’

The relationship between purpose, measures and method also helps explain performance at corporate level too. Drucker said that the sole valid purpose of a business is to create and keep a customer. Toyota and Apple have internalised this insight, and their measures and methods are all geared to support it. In this vision profit is not the purpose but a function of how well they are meeting it. Chiming with this, Jim Collins and Jerry Porras in their research found that companies defining their purpose directly in terms of maximising shareholder value did less well for shareholders than comparators that focused on doing right for customers.

It’s not hard to see why. If you use measures that cause you to do the right thing better, then you’re driving in the opposite direction from those that are doing the wrong thing, however well, and customers reward you accordingly. The other way round, as has been said many times, no one gets out of bed in the morning itching to make money for shareholders. Workers have to be incentivised and dragooned into doing so with measures using budgets, targets and standards focused on the financials (what the manager wants, not the customer), all of which can be and frequently are gamed as people strive to meet their de facto purpose.

The tighter the linkages in such perverse couplings, the more likely they are to end in tears. At the extreme, the dynamic so corrupts the original goals that outcomes turn into their linguistic opposite, a process that John Lanchester in his recent How To Speak Money terms ‘reversification’: ‘enhancements’ that make service worse, ‘securitisation’ as risk, ‘credit’ as debt and HR as sacking people. At the far end of this road lie whole organisations that are negative versions of themselves: benefits offices whose job is to refuse applicants, banks that make people poorer, medical practice as at Mid Staffs that kills patients rather than cure, shareholder-value maximising companies that destroy value. These pathologies then drive ever tighter compensating rules and regulations until they end up reversifying management itself: a technology that, as Drucker pointed out, all too often makes it harder for people to work, not easier, a creator of problems rather than solutions.

So yes, measures are more important even than people think. While good measures foster learning and improvement, bad measures do the reverse, not only causing people to do the wrong things but also blinding them to the effects. The tests of a good measure are the same in the new economy as in the old: they are related to purpose and what matters as defined by the customer; they are used by people doing the work, in the work, to understand and improve the work; and they make visible to the people who do that work the consequences of their actions for the achievement of their purpose.

J D Wetherspoon is a successful pub group with a long-term view. In contrast to the rest of the industry, sales are buoyant, and the company has opened 40 new pubs this year. But the news in its recent quarterly results that it had awarded its employees a 5 per cent pay rise sent its shares tumbling. On the other hand aeroengine maker Rolls Royce, which has had a poor couple of years, was rewarded by a boost to the share price after it announced it was cutting its workforce by more than 2,000, many of them in the UK.

Welcome to the new normal. Perhaps not surprisingly, Wetherspoon CEO Tim Martin is an exception in his willingness (and ability) to raise two fingers to the City. Most others are less brave. The cumulative effect of 30 years of of diminishing corporate courage and increasingly overweening finance is that the UK in 2014, the 13th most prosperous nation in the world, now has 5.28 million people, or one-sixth of the employed population, working for less than a living wage (currently defined as £7.85p an hour). Unemployment is falling, but the slack is being taken up by the self-employed, now numbering 1.7m, and more likely to be cab drivers than entrepreneurs. In today’s hour-glass shaped jobs economy, cab drivers, carers and pittance-earners in the ironically named sharing economy is all they’ll ever be. Real wages have been falling for seven straight years; as a share of GDP they have lost 10 percentage points since 1973. Only one in seven people in the UK (one in 18 in the north of England) says that they have felt the effects of the ‘recovery’; more than half believe the UK’s best days are gone. More austerity – much more – is in the pipeline, and the climate of antagonism, tacit or overt, against immigration, Europe and the poor is the ugliest in my lifetime.

The underlying truth is: for most people there isn’t going to be a recovery. This is pretty much as good as it gets. As Paul Mason notes in his piece, it is financialisation – companies dancing to the tune of the insatiable capital markets – that is the primarily cause of widening inequality, not technology or globalisation, the two other usual suspects. In other words, business as usual has become the problem we need to solve. Capitalism UK (and US) style is broken, unable to provide not only luxuries but the basics: proper livelihoods for the employed, pensions for those retired, or reliable investment returns for all but a handful of CEOs and hedge-fund activists who thrive on market volatility.

This is the backdrop against which academics, managers and commentators (including this one) will meet this week in Vienna for the 2014 Global Peter Drucker Forum. The theme of the Forum, set up to commemorate the man who was one of the first and most influential of all management thinkers, this year is the ‘great transformation’: what it will take in management terms to get beyond today’s stasis and trigger a real recovery. It’s a worthy cause, and one that measures how far the discipline has diverged in the last 30 years from the human-centred ‘liberal art’ (his words) that the Viennese-born Drucker espoused.

‘We have arrived at a turning point,’ says the Forum’s launch abstract. ‘Either the world will embark on a route to long-term growth and prosperity, or we will manage our way to economic decline’. This puts managers in an unaccustomed and uncomfortable position. As the FT’s Andrew Hill put it in a penetrating piece, what has come to be management’s default mode – internally focused, often detached from purpose, numbers- rather than people oriented, with scant appetite for change – will suddenly no longer do. Quoting Henry Mintzberg, who pointed out that east Europeans pushed through obstacles to change 25 years ago because they ‘understood full well how enslaved they were by their system of governance’, Hill notes that not only have default managers lost sight of their part in perpetuating today’s failing system, ‘more worryingly they fail to recognise they have the potential to change it’.

One plenary forum session takes the bull by the horns to pose three questions: Should firms shift their focus from maximising shareholder value to adding value for customers and citizens? Should they change from narrow financial to more inclusive metrics? Should they abandon traditional hierarchical management for approaches that encourage initiative and creativity rather than compliance? To all of which the answer is yes. Drucker always insisted that the company was a social institution that could only harness the potential of its people if it fully respected them. If not a noble calling, management was a central resource of society whose ‘very survival … is dependent on the performance, the competence, the earnestness and the values of their managers’. As usual he was ahead of his time. Never was that more true, or a reset of the management default more urgent.

Read my piece on the October Foundation Forum, ‘Where’s My Mojo Gone?’, here

In its October 4 edition, The Economist ran a special report with accompanying leader on ‘The the third wave’ – the ‘modern digital revolution’ now breaking and its consequences for the world economy. This being The Economist, the overall conclusion, adduced from the historical evidence of the first and second industrial revolutions, is cautiously optimistic: ‘this newspaper believes that technology is, by and large, an engine of progress’. Yet despite the proviso that the favourable results could on past precedent take many years to feed through, or more desperately that the technological revolution could ‘create vast numbers of jobs nobody has yet imagined, or boost the productivity of less-skilled workers in entirely novel ways, perhaps through robotic exoskeletons or brain implants’, the interesting thing is how little the positive conclusion is supported by what has gone before. The evidence simply doesn’t justify it. A truer flavour of the piece is given by the title of the accompanying leader, ‘Wealth without workers, workers without wealth’.

Briefly speaking, the report notes that ubiquitous computing driven by Moore’s law (which predicts that computing power per chip doubles every two years while halving in cost) is about to unleash a tsunami of economic disruption which upends all established ideas about the job split between humans and computers. Nearly half of all US jobs could be automated away in the next 20 years, according to one estimate. The income distribution is being hollowed out, with many fewer jobs in the middle tier, many more at the bottom and a very, very few soaring away at the top. In the developing world, the change threatens traditional routes to development through ‘premature deindustrialisation’. As the author concedes, whether the digital revolution will bring mass digital job creation to make up for the mass job destruction – or as I would put it, whether it represents progress or a step backwards for human civilisation – remains to be seen.

As you would expect, the report is well written and thought-provoking. But all the sources, references and thinking here are economic. In this analysis everything is down to economic determinism, and nothing to human decisions and motivations. This is a common failing in neo-liberal economics, and it substantially undermines even the report’s hesitant techno-optimistic conclusions

There is no mention here, for example, of the rise of big data, giant computing ‘clouds’ and National Security Agency pointing ‘to a future in which technology’s ability to set mankind free is far from guaranteed’, as a recent FT book review mildly puts it. No mention either of the point (made in the same review) that the new digital reality looks suspiciously like the old one before PCs, a world of centralised computing but this time concentrated in the hands of a few giant companies and governments. It ignores the ‘winner takes all’ tendencies this enables, brilliantly illustrated by the woefully-misnamed ‘sharing’ economy, which crunches up real jobs and spits out the remains as pitifully paid micro-jobs – all this at a time when, as the survey does acknowledge, computers are having no mitigating effects at all on the costs of living basics such as housing, healthcare and education, which are soaring everywhere. There is no mention of the issue of power – the fact that the US banks at least, and some of the internet companies, now far outstrip the ability, or willingness, of the authorities to regulate them.

Most glaring of all, comparisons with previous technological upheavals – the first Industrial Revolution in the late 18th century and the second a century later that brought in electricity and the internal combustion engine – are vitiated by the fact that in neither of those cases were the outcomes influenced if not determined by an ideology that dictates that the sole beneficiaries of corporate activity are shareholders. There were of course plenty of immediate losers both times round, and it took time for the cumulative benefits to spread through the economy. But even though capital emerged dominant over labour, by the early 20th century there were sufficient countervailing forces in the shape of trade unions and enlightened employers to ensure that until well after the mid-century the labour share of GDP remained robust and stable.

Is it coincidence that the decline of the labour share, the hollowing out of the Anglophone economies and widening income inequality all began in the late 1970s and 1980s with the advent of the shareholder value movement and have picked up pace ever since? As just one example, Thomas Piketty has identified the emergence of corporate ‘super-managers’ as an important element in increasing wealth and wage inequality. While the Economist author assumes that pay differentials are simply the market reflection of different levels of talent, no one who has looked at it in detail can doubt that soaring pay for CEOs and collapsing pay for everyone else are two sides of the same coin, driven in different directions by the incentives created by governance based on maximising shareholder value. Here is not the place for a description of the multiple pathologies associated with shareholder primacy (there is an impressive list compiled by the consistently excellent Steve Denning on his Forbes blog here and a more academic statement of doubts here) – but as I have argued before, at the very least they are shaping the way the digital revolution plays out in practice, and not in a good way.

The Economist’s leader on the subject warns that governments will have to react faster than they did last time, when it took 100 years to make the education investment that enabled workers to benefit from the original industrial revolution. But while no one would quarrel with better education per se, it’s an illusion to think that this time it can solve a problem that’s posed on a wholly different plane. The big issue this time round isn’t levels of education, it’s the investment behaviour of CEOs. To echo city economist Andrew Smithers, if we can’t change the incentives that govern CEOs’ allocation of corporate resources, all the rest is whistling in the wind.