September 18, 2018
Korok Ray [2 of 2] – Labor, Outsourcing and AI
Last updated January 29, 2019
This is part two of the insightful episode with guest, Dr. Korok Ray, a renowned economist that has served as a senior economist on the Council of Economic Advisers for then US President George Bush, from 2007 to 2009 during the historic financial crisis.
He is an Associate Professor at the May Business School of Texas A&M University and the Director of the Mays Innovation Research Center. He earned his BS in Math and Economics from the University of Chicago and his PhD in Economics from Standford University.
Korok is a labor economist. In this episode, Korok lends his views on labor and outsourcing and shares his essay entitled Online Outsourcing and the Future of Work.
- Korok projects that in the long future there will be less and less full-time jobs as more and more jobs will be projected base or output base. Internet and digital technology will make this possible as it will be easier to distribute workloads and capture granular data on human performance.
- He doesn’t subscribe to the theory that robots will replace the human capital, but instead proposed outsourcing crowdsource innovation will be the ‘undiscovered country of opportunity” that will fuel global economic growth. Employment will no longer be delineated but will become more and more flexible and open-ended.
- Automation or AI may take away basic jobs that do not require strong human judgment. It is yet unknown when this will take place but Korok believed that the best application of AI is integration into interface platforms.
- Organizations will benefit most by tapping the global pool of human capital rather than be limited to local employment. Korok is optimistic that virtual reality technology will revolutionize the outsourcing world.
- In Korok’s opinion, the Philippines BPO industry needs to step up and focus more on providing value-add to the cognitive front by reinventing education and by continuous innovation. This will make the Philippines more attractive to international players given the country’s existing human resources strength. Big international players and multinational companies have outsourced major roles to BPOs in the Philippines.
- Even in the long future, robots, automation, or AI will take some jobs but cannot effectively replace the human capital particularly for roles that require strong human judgment.
- Focusing on the further development of cognitive skills, be relevant in the cognitive front will make the human capital be more irreplaceable and more significant in the outsourcing world.
- Technology, digitalization, and virtual reality world will revolutionize outsourcing to be the future of work or employment.
Hi, and welcome to another episode of the Outsource Accelerator Podcast. My name is Derek Gallimore, and this is Episode No. 188.
So today, I’m joined again by Korok Ray. This is actually part two with out two-part podcast with Korok. So, if you don’t listen to the first episode, part one, I encourage you to do that. You’ll hear more of an introduction, more of a background of Korok and his personal experience with outsourcing and even his personal experience in the White House with George Bush with outsourcing.
So, it’s a really good episode, and that is Episode No. 187. But if you just want to enjoy this episode, of course, please do so.
So Korok is an academic. He earned his PhD in Economics from Stanford University. He has taught at the University of Chicago and also Georgetown University and now he is at Texas A&M University where he is the Director of the Mays Innovation Research Center. Korok work also on the Council of Economic Advisers at the White House from 2007 to 2009 which was during the historic financial crisis. He worked and observed how George Bush worked and noticed that fundamentally there is a lot of outsourcing involved in how the President organized his activities.
So that was the nascent catalyst for Korok to go on his journey with outsourcing and trying to emulate that as much as possible. Again, a lot of this we covered in Episode 187, so I do encourage you to go back and listen to this.
But today in this episode, we talk more about and more specifically about his essay that he has written which is called Online Outsourcing and the Future of Work. So, this essay, we’re very lucky to have the permission from Korok to publish it on our website. Of course, this essay will be in the show notes, and of course in our white paper section of the website. So, do go and check that out. Without further ado though, please enjoy this conversation with Korok. If you want any of the show notes, any of the links or get in touch with Korok just go to our show notes which is at outsourceaccelerator.com/188.
That’s the paper, Online Outsourcing and the Future of Work.
Korok: Yes, that one.
Derek: Fantastic, and we are actually going to post that on our website shortly.
Derek: And we’ll put the links in the show notes. It is a fantastic paper and maybe we can spend a little time going through that now.
Derek: You mentioned, I suppose just going from the start of the paper about the history of outsourcing initially and you have pretty stark projections in there saying that effectively the whole fundamental of employment will change. You’re saying that there’s going to be no more full-time jobs. A lot of it will be project based. And it’s also output based as opposed to input based. So, you really do see the future as being such a stark contrast to how we function today?
Derek: Yes. I do think the long, the long, and I’m writing for the long game. The real long term. It’s going to take a long time before that happens. It’s already happening I think we’ve already seen it in the last 20 years. It happened step by step and every day there’s a little bit of a move towards this direction like the growth of the sharing economy. The growth of people choosing to be Uber drivers rather than just taxi drivers or even like even just working for a company. More and more independent work, more and more contract work is pushing towards this tidal wave of the output based pay. And then over time the Internet is going to make this more and more possible. And it will develop hardware sensors that can much more easily capture granular data on human performance which will then be fed into algorithms that can assign and distribute work. So, I think my writing may seem a little alarmist but all I’m trying to do is to take observations from current practice and then project them forward 50 years or 100 years and then I don’t think it seems that unusual.
Derek: Yes, and when I say that, I’m actually playing the devil’s advocate because I’m absolutely wholly 100% agree with you in that sort of progression of where we’re going. I think it’s inevitable and one of the stark reality is that there’s kind of five billion people on the planet that are pretty much completely underutilized that the momentum is strong online as soon as they’re involved in the network. They’re going to start off with obviously very basic fulfillment functions. But then of course they’re on the ladder and they’re going to climb up the ladder. And some people say that is scary but there’s a huge potential because as soon as seven billion people in the world are producing as opposed to just one or two billion that sort of catalyst for change and development enhancement is phenomenal, isn’t it?
Korok: Oh, really! Absolutely is. Yes, and that’s what I’m really optimistic about the future. I don’t subscribe to this robots ruling the earth philosophy at all. I think that you know the savior to that is going to be outsourcing. And one thesis that I didn’t really put in the essay, but I’ve been developing in the last year is really, how do you deploy outsourcing for innovation? And the reason I say innovation is that historically outsourcing has been the kinds of jobs that have been outsourced are jobs on a lower level of the cognitive spectrum. And the jobs that have been retained in the home offices have been more of the harder, more abstract and vague cognitive creative tasks. But I believe that really, the undiscovered country of opportunity in the future will be outsourcing crowdsourced innovation.
And then I think anything is possible. I mean innovation doesn’t have to be locked into a lab into the Apple building of Cupertino California only but rather can be sourced from anywhere in the U.S. Than human, I think as anyone in the world, then human output is really unlimited.
Derek: Yes. And we talk about then is really just creating an efficient interface isn’t it? As you say it’s actually kind of the platform, the interface, and a relatively frictionless one. But then people stop because what I think people get confused about this is actually one of my kind of hypotheses is that, and it’s probably shorter term that yours, that outsourcing in 20 to 30 years will no longer be delineated to just general employment. And you’re just going to be calling it employment.
And it’s irrespective of where people are sitting. Whether they are sitting in Manila or Moscow, or New York. You’re really just hiring people based on their deliverables, based on the price. It becomes very binary. And whether that is a sort of output-based relationship or an input-based relationship. So, it might vary, but effectively I see one of the first major set of milestone is when there’s just no delineation between what we call outsourcing today and employment.
Korok: Yes. I agree with you completely. The nature of employment will morph into becoming much more flexible and open ended.
Derek: Yeah. So, and then AI development. Because AI, automation, robotics, it’s really sending shock waves through Manila at the moment and 20 years outsourcing has really transformed this economy. The country is 10 % towards the GDP and it’s employing white collar workers even if they’re in call centers in fact this is developing a middle class while previously there was none. But people are really concerned now about the development of AI. They think all of these call center jobs, all the sort of data entry jobs will be wiped out by AI. Now I tend to disagree. I think even if it was developed, but it would take a lot longer than people think. But you are actually quite refreshingly thinking that it will only continue to enhance roles, not replace roles. But also, what I noticed quite significantly differently about your perspective is that AI will, tell me if I get this wrong. But AI I’m will basically be utilized to enhance the platform and the interface and make an even more sort of frictionless interaction between the producers and the requesters, is that so? Is that right?
Korok: Yes, that’s right. That is right. Yes. So, I’m not going to deny the fact that AI is going to continue to overtake some of the more basic jobs like transcription or data entry. I mean the AI is for sure are going to move along that margin. But there’s still a lot of, AI still has a lot of room to grow and they are still going to take a long time before we reach anything that requires a really, really strong human judgment. But I think that one of the best applications of AI will be inside these new platforms of the future and really, we need to read, what already happened so far, is that computers have been very good at digitizing books and CD’s. It’s getting a little better at digitizing people like they’re kind of a characteristic on Facebook. But then the real potential is really digitizing their skills and their talents in a really granular way. And then feeding that into having AI chew on that problem I think would have a big social value.
Derek: And it’s still, it’s very difficult to produce, isn’t it? It’s not when you learn a foreign language, you can generally understand the foreign language far sooner than you can have an engaging conversation in the foreign language. And I think it’s easier for AI to kind of understand how humans work. But then for them to actually become a human is quite another step, isn’t it?
Korok: Yes, exactly right.
Derek: So, you see, it is difficult. And I wonder how, because if you look at human management, there’s always been these academic arguments between kind of a hierarchy within workplaces or flat management structures. And I think ultimately you’re dealing with humans haven’t really changed much for the last million years and it’s difficult to kind of come in with a modern overlay and say that this is more efficient, so now just conform. We are sort of fundamentally stuck to our roots in some regard, aren’t we? And so, do you think that will have ultimately like it might be far more efficient to have completely decentralized, completely kind of AI distributed workforce, and things like that, and output-base product. But do you think it’s going to be the human aspect that gets in the way where people just say look we prefer it like this?
Korok: Well, in my essay, I might be a little bit of an alarmist and really, the reality is there will always be full time work because some things you just need someone kind of face to face and available in front of you. And it’s sufficient to just simply give them instructions. But the reality is that, for most organizations much more of their work will benefit by accessing a global talent market rather than simply a few random people you happen to hire in your own city. And so, the reason I’m optimistic is that I believe technology will emerge over time that will all make outsourcing easier. One of the best is virtual reality. I mean when VR really takes off and it makes face to face kind of seamless communication of someone who’s across the world but feels like they’re in front of you. That’s going to make the world way smaller and I think it’s going to really had a lot of help for the outsourcing revolution.
Derek: Yes, and then it just becomes an employment, doesn’t it? You are no longer delineating at all. And you mentioned in your essay as well, the case study for the Philippines and you mention personal experience there. Can I draw on your viewpoint? You’ve never been to the Philippines. I have invited you here so hopefully that will happen one day. I’m based in the Philippines and I’m reaching out to the US. Trying to encourage the U.S. and other Western countries. But trying to encourage businesses and people as much as possible to consider outsourcing. Where do you see the general awareness of outsourcing, the general acceptance of outsourcing in the kind of mid-level U.S. business life at the moment?
Korok: Let me tell you where the perception is now is that, right now I imagine most people that I talk to think of the Philippines as a place to send to either run your call center, or to outsourced basic work like data entry. You know in my opinion the Philippines as a community, as a nation sort of needs to kind of, I guess reimagine themselves and redesign their education a little bit and focus more on the cognitive tasks and providing real value on the cognitive front. And that I think is an enormous opportunity that big businesses do not yet utilize. And I think that could meet the undiscovered country and then how to do that effectively. It’s not obvious how to do it. It’s a challenge both technically and conceptually. Because I run an innovation center and people are always curious about how do you actually get innovation and how does it work. And a lot of it means just running a lot of different experiments, trying a lot of different ideas. And the more experiments you can run, the better off you are, and you shouldn’t be limited to just the people that are in your own research lab. But somehow if those people could then access a global network of people to help and come up with ideas. That would really be something.
Derek: Yes, it’s kind of dominance, isn’t it? The more people the, the more experiments you run then you’re going to get closer towards evolution faster…
Derek: … and the more people are doing it, it really just multiplies that, isn’t it? We a Outsource Accelerator, we are actually trying to promote the Philippines as the Swiss banking of outsourcing. Because I believe it has reasonable claim to that mantle since it has such incredible English-speaking population, young population. It’s been one of the longest actors in the outsourcing supply. So, we’re trying to brand it as that and get to people moving out the skill and supply ladder. Because yes, you’re right, I think there’s an unfortunate hangover of people associating outsourcing with really bad call center experience when they’re angrily phoning their bank about 20, 30 years ago. And I think there’s an unfortunate hangover there, isn’t there? And there’s kind of, you mention outsourcing and people. I supposed one aspect is it’s tribalism. It’s like all jobs are going offshore but then the next one is you can easily blame the scapegoat by saying that there’s been a bad customer service experience and things like that. So, I think there’s probably a bit of a hangover from the call center days of 20 years ago. Hopefully there is the opportunity of basically even if people just come over here for backend admin. They will see the potential and then can basically move up the skill set ladder themselves within their own…
Korok: Yeah that’s right.
Derek: … organization.
Korok: That’s right. Yes, absolutely.
Derek: And where do you see your own ventures going, could you imagine that? Because when I first came over here we started with customer service and again that seems like the gateway very commonly. But then I soon realized that why not hire the operations manager here. Why not hire the marketing manager here? And then almost, it became apparent.
Why not run the entire organization here and just have the minimum required staffing in London, which is actually where my operation was being kind of executed, I suppose you could say. Do you see a common evolution without people like that? And are you seeing that internally within your own interests? That basically there’s a creep of functions and eventually you almost tip the pyramid upside down?
Korok: Yes. I think what I don’t know whether it’s all going to reside in one country like the Philippines or whether it will be scattered across multiple countries. I could imagine that there are certain countries that might like Ukraine for example, that specialize in software development and more of the data entry goes to other countries. So, but I do believe that what we’ll see more of in the future is companies that are very lean in some parts of the world, and then have big back offices in other parts that we may not even see as much.
Derek: Yes absolutely. I mean there’s Deutsche Bank in Manila here. They have about two and a half thousand staff and I know some of the management there. And they said that it just started with customer service and then it progressed into kind of flight back office functions. But then they said that “we’re hiring mathematicians” and they are doing all of the most complex modeling for all of Deutsche Bank worldwide now in the Philippines.
Korok: Oh, wow!
Derek: And now it’s an evitable creep because you know if you’re in a country 20 years, you’ve got the actual runway yourself to take someone from, I supposed a professional cradle to grave and make them into whatever you need then. You educate them, take them through the processes. And so, yes, Deutsche Bank is just pulling more and more of its increasingly technical roles over to the Philippines.
Korok: Oh, that’s great.
Derek: So, there’s definite potential. But eventually I suppose it’s really just going to be, there’s going to be an equilibrium somewhere. There isn’t there and the only kind of balancer is the cost of living. But eventually the cost of having these outputs produced will kind of equalize with just a bit of a margin depending on the cost of living environment. Do you see that it will happen?
Korok: Yes. I mean I think economically what’s happening is the reason we see cost of living is high in certain areas is because the wages are high. And their wages are high usually because there is some historical reason why the capital owners like or the high skilled people live in some areas. But as work becomes mobile, very mobile, the cost of living should equalize and so what will happen over time if the Philippines keep growing, their cost of living will start to go up. And that’s a long ways away but eventually that will happen. And so, if really then, you’ll see a much more even distribution of like the land and house prices where it will be much more uniform than it is today.
Derek: Yes, absolutely. Which is again a fantastic thing for the humanity of the world, really isn’t it?
Korok: Yes, that’s right.
Derek: I mean it’s about getting people a fairer environment to work from.
Korok: That’s right.
Derek: Fantastic. So, thank you so much Korok. I’ve really enjoyed this. And if anybody wants to get in touch with you again we will have your most recent essay. The Online Outsourcing and the Future of Work available in the show notes and on our web site. And of course, we will have all of your contact details in there. But if anyone wants to engage with you, if anyone wants to read more about your work how can they do that?
Korok: Yes. Thank you Derek for having me. I would love visitors to my website it’s korokray.com, k-o-r-o-k-r-a-y.com. That is where all my writing is there as well as all my writing about outsourcing, my academic research is there. And you can always feel free to email me, you can reach me at email@example.com. My university email address.
Derek: Fantastic! Thank you so much. And of course, will have all of that in the show notes. Thank you so much and I’ve really enjoyed this talk.
Korok: Okay, thank you so much Derek. Great talking to you.
Derek: That was Korok Ray, amongst other things, he is the Director of the Mays Innovation Research Center and has a PhD in Economics from Standford University. I just had so much fun discussing outsourcing, the future of employment, and the potential of all of this on the world economy and the standards of living for all of us. So, I’ve really learned a huge amount.
Of course, Korok was here talking about his essay that he has given us permission to publish on our website which I’m absolutely thrilled about. The essay is called Online Outsourcing and the Future of Work. I really recommend that everyone out there who has grabbed a copy of this, and has read, and I would love your opinion on what we discussed today and what is discussed within that easy.
If you want any of these, if you want to get in touch with Korok, if you want the essay then go to our show notes, all of the links are in there that is at outsourceaccelerator.com/188.
And of course, if you want to get in touch with this, if you want to ask us anything, then drop us an email to firstname.lastname@example.org. See you next time.