A couple weeks ago, a coworker of mine and I were talking about outsourcing and how it will affect the economy and things like that. It arose out of a humor bit that somebody apparently posted at Slashdot about how they told their boss they were telecommuting, outsourced their work to a guy in India working for $12k/year, and got paid a nice salary to do nothing but pass bits around. My coworker’s question was what happens when places like India and China have caught up to America in standard of living. He felt that it would have to be a zero-sum game where if they’re getting brought out of poverty, our standard of living would inevitably have to suffer. I made up a counterargument on the fly, but I like it, especially because it’s abnormally optimistic for me, so I’m going to share yet another crackpot theory with you all.

Here goes. Why do we think outsourcing is bad? Because jobs that go overseas means less jobs here means less work here. Now it’s possible that I’ve been reading too much of The Economist, but I tend to believe that outsourcing will result in a reallocation of jobs rather than a removal. What are the jobs that are going away? Typically jobs that are manual labor intensive, or drudge work in other ways. What do all these jobs have in common? They are well on the way to being automated in some form or another. Even the programming jobs going overseas are generally pretty standard bolt-together-parts type coding rather than innovative system architecture.

America has been doing this sort of job reallocation for over a century now. Something like 3% of the American population works on a farm at this point. And yet American farms produce more than enough food for the entire country. I don’t know what the percentage a century ago was, but I’m pretty sure it was a lot higher. However, as labor-saving machinery such as tractors became prevalent, as well as irrigation and fertilizers and other yield-enhancers, the productivity of our farms per farmer grew by enormous leaps and bounds. Where did all those former farmers go? Into the city to work at factories is my guess.

Now that the factory jobs are disappearing, partially due to outsourcing and partially due to the automation of routine labor-intensive tasks, people are going to have to adjust again. And I think they will (despite tendencies to cling to the industrial way of doing things).

The common theme I see here is innovation. This is my wild-eyed technology-is-great optimistic side talking. And I’m not even a Singularity believer. But I look at the last century and am amazed by the incredible strides we have made in our standard of living in that time. Working-class people today have access to amenities that the nobility could only dream of a century ago, even with hordes of servants at their beck and call. We have increased our productivity to such a large extent that most of us are not involved with the satisfaction of our basic needs like food and shelter. What have we evolved to? I think that Richard Florida nailed it with his book The Rise of the Creative Class. America is now an innovation society. And I think that’s a good thing.

Innovation is what breaks us free from the zero-sum game of economics. In a normal transaction, no new value is created, so the pool of wealth remains constant. Innovation increases the value pool by increasing the efficiency with which products are made, as well as enabling totally new products that raise the standard of living.

So here’s the totally starry-eyed optimist answer to my coworker’s question. As more and more jobs disappear off the low end of the scale, either due to outsourcing or due to automation, that means more and more resources available to devote to innovation. Less muscle power, more mind power. The more minds you have working on a problem, the better. So more minds working on innovation means more productivity gains, which in turn frees up even more people to work on innovation, and we’re in a nice little virtuous circle where the standard of living keeps on increasing for everyone.

Interestingly, while I was kicking this idea around in my head and trying to find the time to write it up, I saw another blog post about innovation. I have to agree with his assessment of the value of the Internet to society (c.f. the end of my rant about the internet), and I’m definitely not a change for change’s sake kind of person, but I can definitely see ways in which my life is materially better than somebody’s fifty years ago. Maybe not spiritually. But materially. And as more people have more time to spend finding solutions to the problems that vex them (which is what the open source movement is all about, really), I think that the virtuous circle of innovation will only continue to benefit all of us.

Don’t worry, I’ll snap out of this optimism shortly. In fact, I’ve got another rant lined up that I’ll probably write up in just a minute that will demonstrate my normal misanthropic negative tendencies. But I figured the unaccustomed optimism about the future would be a nice change of pace…