Much is said these days about the state of the economy (booth US and world) as well as problems like persistent unemployment, the increasing number of people on entitlement programs, etc. Many people wonder aloud about where the jobs of tomorrow will come from and what kind of future and economy their children will live in.
If you stop and think about it logically, the problem is actually much overblown and the analysis starts with this simple picture.
On the left is a flip-style phone common up until about 2007, when the first generation iPhone was introduced. On the right is a Samsung Galaxy SII smartphone. The phone on the left is prepaid and costs about $20 per month. The phone on the right is under contract and costs roughly $50 per month. Given the price difference, you would think most people would avoid the phone on the right, but you’d be wrong. The question then becomes: why do people pay more for the phone on the right? Answer: the phone on the right allows you to do much more stuff than the phone on the left.
In other words, people pay more for the phone on the right because it is more useful than the phone on the left. This leads to the first big lesson: People pay more for things that are more useful to them.
This should not come as a surprise if you think generally about why people spend money. Regardless of what you buy — a car, a sandwich, a vacation to Bora Bora — you spend money in order to solve a problem. The problem might be transportation in the context of a car, hunger in the context of a sandwich, or relaxation/recreation in the context of the Bora Bora vacation.
Additionally, there is this piece of common-sense logic: when you spend money, someone earns it. There is no way to waste money, unless you literally light it on fire or throw it away. When money is spent, you might think you’ve wasted it if you get something less than what you were expecting, but the seller of what you have bought is using that money to buy things for themselves, pay wages, etc. Thus, that money you’ve spent actually has oodles more utility once it leaves your possession.
If you combine these two conclusions then, you get this: people spend money in order to solve their problems and when people spend money, other people earn money.
Thus, the only way for there to be no new jobs in the future is if you believe that all the world’s problems have already been solved.
And that would be silly.
Andy Chen
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