Sunday, July 7, 2019

Growing Old in America: Baby Boomer Nightmare [feedly]

Growing Old in America: Baby Boomer Nightmare
https://economicfront.wordpress.com/2019/07/05/growing-old-in-america-baby-boomer-nightmare/

Despite its reputation as the wealthiest generation, baby boomers (generally considered to be those born between 1946 and 1964) are facing a retirement nightmare.  A 2016 St. Louis Federal Reserve study of the retirement readiness of U.S. families came to the same conclusion but put it more gently: "It could be worrisome that, for many American households, the total balances of their retirement accounts may not be sufficient to ensure a solid life in retirement."

The investment industry, always ready to deflect blame, argues that the problem is the result of the fact that Americans just don't save enough.  But even Barron's, a sister publication of the Wall Street Journal that specializes in financial news, understands what is really happening.  As a recent article in the magazine points out:

Too few Americans are saving for retirement. Those who do save are putting away too little. It is only a matter of time before this sparks an economic and political crisis. . . .

But America's retirement crisis wasn't created because of character flaws or personal irresponsibility. Nor can it realistically be fixed by technocratic fixes.

The ugly, unspoken truth is that many people are just not earning enough money. They barely have enough to cover their daily expenses; they don't have enough left over to be able to save.

The promised golden years are out of reach for most boomers.

Baby boomers are moving rapidly towards retirement.  Those born in 1946 are now 73, those born in 1964 are now 55.  Despite being celebrated for their good economic fortune, especially in contrast to millennials, most boomers face a future that doesn't include retirement with dignity or, in the words of the St. Louis Fed, a solid life.

Although labeled the wealthiest generation, a Stanford Center on Longevity examination of retirement preparedness found that "baby boomers are in a financially weaker position than earlier generations of retirees, in terms of home equity accumulation, financial wealth, and total wealth."

The Stanford Center study divided the boomer generation into two groups, the early boomers (born 1948-1953) and mid-boomers (1954-1959), and compared them to early (before 1942) and later born (1942-47) members of the previous "silent generation."  The following are some of its key findings:

  • Holding age fixed, mid-boomers age around 55-60 years old had saved less than previous generations at the same age.

  • Holding age fixed, a 50-year old mid-boomer had saved less in any retirement plans, including workplace plans and Individual Retirement Account plans, than a 50-year old from prior generations.

  • Holding age fixed, boomers age 55-60 had a higher debt burden than prior generations at the same age, evidenced in a higher debt-to-net worth ratio, a lower liquid-asset to all asset ratio, and a higher loan-to-value ratio.

But boomer problems are not just comparative.  For example, the Stanford study also found that approximately 30 percent of baby boomers had no money saved in retirement plans in 2014, when they were age 58, on average, "leaving them little time to start saving for retirement."  And, the median balance for those who held a retirement account was only $200,000, far too small an amount to generate the income needed to carry a person through a 20- to 30-year retirement.

Looking just at retirement age boomers, a 2018 PBS News Hour report notedthat:

Nearly half of Americans nearing retirement age (65 years old) have less than $25,000 put away, according to the Employee Benefit Research Institute's annual survey. One in four don't even have $1,000 saved.

Adding to the retirement nightmare is the fact that many boomers also remain deep in debt.  A CNBC story reports that:

One-third of homeowners over the age of 65 were still paying off a mortgage in 2012, compared with less than a quarter of people in 1998 — and the median amount they owed nearly doubled to $82,000 from $44,000.

Meanwhile, the number of people aged 60 and older with student debt quadrupled between 2005 and 2015, to 2.8 million from 700,000.

One reason for low boomer financial balances is that this generation was hit hard by the Great Recession and the following years of low interest rates, and has yet to recover. Boomer median household net worth was $224,100 in 2007 and only $184,200 in 2016.

African American and Latinx baby boomers face even greater problems, earning less money and having far less retirement savings than white Americans.  According to Forbes, "The average white family had more than $130,000 in liquid retirement savings (cash in accounts such as 401(k)s, 403(b)s and IRAs) vs. $19,000 for the average African American in 2013, the most recent data available."

Latinx retirement savings also trails that of whites.  For example, in 2014, among working individuals age 55 to 64, only 32.2 percent of Latinx had money in a retirement account compared with 58.5 percent of whites. The average Latinx account held $42,335 while the average white account held $103,526.

With private pensions and personal savings inadequate to fund a secure retirement, it is no wonder that so many boomers strongly defend Social Security, the so-called third leg (in addition to private pensions and personal savings) of the retirement "stool."  But, as important as it is, the average Social Security check in 2018 was only $1,422 a month or $17,064 a year.

It should therefore come as no surprise that research by the Institute on Assets and Social Policy finds that one-third of seniors have no money left over at the end of the month or are in debt after meeting necessary expenses.  Or that growing numbers of seniors are making the decision to forego retirement altogether, by either continuing to work to returning to the labor force.

Saying goodbye to retirement

According to the 2019 report titled Boomer Expectations for Retirement, one-third of boomers plan to retire at age 70 or not at all.  And one-third of employed boomers ages 67-72 postponed retirement.

Thus, while labor force participation rates are declining for many age cohorts, they are growing for boomers and older workers. In fact, between April 2000 and January 2018, "there has been essentially no net growth of employment for workers under age 55. Over that same time, employment for workers over age 55 has doubled."

The figure below shows labor force participation rates for six age 50-plus cohorts since the turn of the century. As Jill Mislinski states: "The pattern is clear: The older the cohort, the greater the growth."

Sadly, many of these older workers have had little choice but to accept low-paid, physically demanding work at some of America's richest companies (e.g., Walmart and Amazon) who are delighted to take advantage of their desperation.

Jessica Bruder's 2017 book, Nomadland: Survival in Twenty First Century America, describes mostly white baby boomers who, strapped for money, decide to buy used RVs and travel.  We learn about the friendships they make, and also the minimum wage seasonal jobs they are forced to take to survive. Zhandarka Kurti draws on Bruder's work to highlight their experience with Amazon:

With its motivational slogan of "work hard, have fun, make history," Amazon recruits seasonal workers at various "nomad friendly events" including "RV shows and rallies—in more than a dozen states across America." Older workers are drawn to the opportunity to make good money in a relatively short time. . . . Also ironically, Walmart and Amazon, the two competing retail giants and also the country's largest employers, allow their workers to park overnight, an attractive perk for many older nomads who struggle with food security let alone rent. . . .

While most of the nomads are made aware of the physical aspects of the job [working in Amazon fulfillment centers] during the training seminars, they are nonetheless surprised by just how much pain they are in after a day's work. . . . Older workers constantly complain of chronic pain from work and Amazon's solution is to offer free over-the-counter pain killers. . . . Amazon leaves older workers so physically tired that they have little occasion to enjoy their leisure time. Instead they spent the remainder of their "free" time nursing themselves back to health to survive another workday. . . .

In many ways older workers are Amazon's dream labor force. "They love retirees because we're dependable. We'll show up and work hard, and are basically slave labor" one 78 year-old workamper who previously worked as a teacher in California's community colleges confides in Bruder. Older workers are what Bruder calls "plug-and-play labor" in that they are only around for a short time, are often too tired to complain about the non-existent benefits and are generally appreciative of the jobs regardless of the pain they endure. . . . Amazon also receives federal tax credits to hire older disadvantaged workers and the company predicts that by 2020 one in every four workampers in the US would have worked for Amazon.

It is clear that leading American businesses do not favor bringing back pensions, or boosting wages, or paying higher taxes to strengthen and expand social security and other social services.  Thus, if existing trends are not challenged and reversed, the boomer generation (or at least a significant minority) may well be the last to experience some sort of satisfactory retirement. This development is yet another sign of a failed system.  Boomers need to find ways to help younger generations keep the goal of a satisfying retirement alive, and join in a common fight for the structural changes required to realize it.


 -- via my feedly newsfeed

Trump Is Losing His Trade Wars [feedly]

Trump Is Losing His Trade Wars
https://www.nytimes.com/2019/07/04/opinion/trump-trade-wars.html

Donald Trump's declaration that "trade wars are good, and easy to win" will surely go down in the history books as a classic utterance — but not in a good way. Instead it will go alongside Dick Cheney's prediction, on the eve of the Iraq war, that "we will, in fact, be welcomed as liberators." That is, it will be used to illustrate the arrogance and ignorance that so often drives crucial policy decisions.

For the reality is that Trump isn't winning his trade wars. True, his tariffs have hurt China and other foreign economies. But they've hurt America too; economists at the New York Fed estimate that the average household will end up paying more than $1,000 a year in higher prices.

And there's no hint that the tariffs are achieving Trump's presumed goal, which is to pressure other countries into making significant policy changes.

What, after all, is a trade war? Neither economists nor historians use the term for situations in which a country imposes tariffs for domestic political reasons, as the United States routinely did until the 1930s. No, it's only a "trade war" if the goal of the tariffs is coercion — imposing pain on other countries to force them to change their policies in our favor.


And while the pain is real, the coercion just isn't happening.

All the tariffs Trump imposed on Canada and Mexico in an attempt to force a renegotiation of the North American Free Trade Agreement led to a new agreement so similar to the old one that you need a magnifying glass to see the differences. (And the new one may not even make it through Congress.)

And at the recent G20 summit, Trump agreed to a pause in the China trade war, holding off on new tariffs, in return, as far as we can tell, for some vaguely conciliatory language.

But why are Trump's trade wars failing? Mexico is a small economy next to a giant, so you might think — Trump almost certainly did think — that it would be easy to browbeat. China is an economic superpower in its own right, but it sells far more to us than it buys in return, which you might imagine makes it vulnerable to U.S. pressure. So why can't Trump impose his economic will?

There are, I'd argue, three reasons.

First, belief that we can easily win trade wars reflects the same kind of solipsism that has so disastrously warped our Iran policy. Too many Americans in positions of power seem unable to grasp the reality that we're not the only country with a distinctive culture, history and identity, proud of our independence and extremely unwilling to make concessions that feel like giving in to foreign bullies. "Millions for defense, but not one cent for tribute" isn't a uniquely American sentiment.

In particular, the idea that China of all nations will agree to a deal that looks like a humiliating capitulation to America is just crazy.

Second, Trump's "tariff men" are living in the past, out of touch with the realities of the modern economy. They talk nostalgically about the policies of William McKinley. But back then the question, "Where was this thing made?" generally had a simple answer. These days, almost every manufactured good is the product of a global value chain that crosses multiple national borders.

This raises the stakes: U.S. business was hysterical at the prospect of disrupting Nafta, because so much of its production relies on Mexican inputs. It also scrambles the effects of tariffs: when you tax goods assembled in China but with many of the components from Korea or Japan, assembly doesn't shift to America, it just moves to other Asian countries like Vietnam.

Finally, Trump's trade war is unpopular — in fact, it polls remarkably poorly — and so is he.

This leaves him politically vulnerable to foreign retaliation. China may not buy as much from America as it sells, but its agricultural market is crucial to farm-state voters Trump desperately needs to hold on to. So Trump's vision of an easy trade victory is turning into a political war of attrition that he, personally, is probably less able to sustain than China's leadership, even though China's economy is feeling the pain.

So how will this end? Trade wars almost never have clear victors, but they often leave long-lasting scars on the world economy. The light-truck tariffs America imposed in 1964 in an unsuccessful effort to force Europe to buy our frozen chickens are still in place, 55 years later.

Trump's trade wars are vastly bigger than the trade wars of the past, but they'll probably have the same result. No doubt Trump will try to spin some trivial foreign concessions as a great victory, but the actual result will just be to make everyone poorer. At the same time, Trump's casual trashing of past trade agreements has badly damaged American credibility, and weakened the international rule of law.

Oh, and did I mention that McKinley's tariffs were deeply unpopular, even at the time? In fact, in his final speech on the subject, McKinley offered what sounds like a direct response to — and rejection of — Trumpism, declaring that "commercial wars are unprofitable," and calling for "good will and friendly trade relations."


 -- via my feedly newsfeed

Trump’s Trade War With China Is Already Changing the World [feedly]

Trump's Trade War With China Is Already Changing the World
https://www.theatlantic.com/international/archive/2019/06/trumps-trade-war-with-china-is-changing-the-world/592411/?utm_source=feed

At a G20 summit in Osaka, Japan, this week, Donald Trump and Xi Jinping are set to have a one-on-one meeting, and hopes are high that a good conversation will restart stalled trade negotiations and convince the White House to hold off on further tariffs against China.

For Alfred LaSpina, the outcome may not matter very much, though. When LaSpina, the new vice president of eLumigen, based in Troy, Michigan, began thinking about a supply chain for the startup's industrial lighting products, China automatically came to mind: LaSpina—an old friend of mine—has had experience with manufacturing in China before, and knew he could find reliable, experienced suppliers there. Then came Trump's unexpected tariff hike on Chinese imports in May. LaSpina and his colleagues began to think twice, and they are now looking into alternative options in Southeast Asia. With so much uncertainty in the relationship between Beijing and Washington, he believes that's just the smart thing to do.

"If tariffs or disruption rear its head again, you can't afford to not have product coming in," he told me.

LaSpina's dilemma is just one small example of how the confrontation between the United States and China is already reshaping the world—in both good and bad ways—and even a final trade pact may not slow the momentum for change. Deteriorating ties between the two countries are influencing everything from grand geopolitical strategy to our daily lives: where products at your local Walmart are made; where jobs will be created or lost; the technology we will (and won't) be using; who may be studying next to you at Harvard; and how to invest your money.

[Read: To China, all's fair in love and trade wars]

That means we could be at a history-altering moment. Since the 1990s, policymakers and business titans have assumed that the globe will become more and more integrated. Perhaps the greatest symbol of that process was the relationship between the U.S. and China. Here were two powers with polar-opposite political systems and ideologies that were still becoming intertwined through bonds of trade, money and individuals—so much so that a term was coined to describe it: Chimerica. China became the central hub of planet-spanning links of production and exchange. Sure, people had the occasional gripes about human rights, closed markets, and other issues. But with the fall of the Soviet Union and the end of the Cold War, the creation of one world seemed the inevitable future.

Not anymore. With that partnership between the U.S. and China anything but assured, businesses are redrawing the map of global production. Apple is reportedly exploring shifting final assembly of as much as a third of some devices out of China to Southeast Asia or elsewhere. (Apple did not respond to a request for comment.) Terry Gou, the founder of Taiwan's Foxconn, which makes Apple gear in Chinese factories, recently said he would urge Apple to produce outside of China.

Other lesser-known companies such as Giant Manufacturing, the world's largest bicycle maker, have already shifted production for U.S. customers. Giant has moved the manufacture of many U.S.-bound models to its home base in Taiwan, and is opening a new factory in Hungary. "The world is no longer flat," Giant's chairwoman, Bonnie Tu, told Bloomberg.

These are far from isolated cases: A survey released in May by two branches of the American Chamber of Commerce in China revealed that about 40 percent of respondents said they have relocated or are considering moving manufacturing operations out of China.

This process has been underway for some time, due to rising costs in China and other factory. American toymaker Hasbro says it has been steadily reducing the share of products sold in the U.S. that are made in China, from 80 percent in 2012 to 67 percent at the end of 2018, and plans to shrink that further in coming years. But the trade war has compelled chief executives to step on the gas. "What companies are doing is accelerating their plans to move out of China," Stephen Lamar, executive vice president of the American Apparel & Footwear Association, told me. He calls it a "generational shift" in how U.S. companies are sourcing their products.

For some countries, that comes as good news. Businesses looking to shift assembly lines from China tend to target other emerging economies as a new base. Modern economic history tells us that the jobs created by such factories in poor countries can jumpstart economic growth and alleviate poverty (as happened in China itself). Already places such as Vietnam have benefited by siphoning factories away from China.

[Read: Things weren't always this bad]

The United States, meanwhile, is probably facing a reordering of its trading relationships (and possibly of its trade disputes, too). Contrary to Trump's boasts, few U.S. firms are "reshoring," or moving production back to the United States from China. (In the American Chamber of Commerce in China survey, fewer than 6 percent said they were considering such a shift.) That means the trade deficit that so irritates the president will likely be reapportioned across different countries. For China, the changing face of global manufacturing puts pressure on Chinese firms to "move up the value chain," as economists call it. No longer able to rely on basic export manufacturing to sustain employment, China's business owners will have to learn to produce higher-quality, more innovative goods to keep the country's growth miracle alive. That's what Beijing's contentious industrial policies—fostering cutting-edge sectors from electric vehicles to microchips with state support—are designed to do.

But here, too, the dispute with the U.S. is potentially wreaking havoc. The Trump administration has been taking steps to keep vital U.S. technology out of Chinese hands—most dramatically, by banning American firms from selling critical components such as microchips to several important Chinese tech companies, including the telecom giant Huawei. Such measures, combined with Beijing's obsession with controlling homegrown technology, could separate the U.S. and China digitally, with consumers in each using different software and gadgets. Beijing has already started that process by erecting the Great Firewall to block many American internet firms from operating in the Chinese market. That's one reason why Chinese netizens live in a distinct online universe, microblogging on Sina Weibo rather than Twitter; and searching on Baidu, not Google.

The growing distrust between the U.S. and China is starting to pull apart their citizens in the real world as well as the digital one. Legislation has been introduced in Congress that would bar any Chinese scientists associated with its military from studying or researching in the United States. This month, Beijing's Ministry of Education issued a warning to Chinese students "of the need to strengthen risk assessment before studying abroad" in the U.S. Huawei, meanwhile, recently booted Americans from its R&D operations at its Shenzhen headquarters. A Huawei spokesman said the company is reviewing its responses to Washington's actions.

This realignment of business, technology and people is also taking place among nations. As China and the U.S. drift apart, a new pattern of global relations may be emerging. For instance, China and Russia are probably friendlier today than they were for most of the period when both were Communist. Russian President Vladimir Putin showed up at Xi's hotel with ice cream to celebrate the Chinese leader's birthday while the two attended a conference in Tajikistan this month. Italy boldly broke ranks with the U.S. and some of its European allies earlier this year to become the first G7 country to sign on to Xi's controversial infrastructure-building program, the Belt and Road Initiative. For many countries with economic ties to China but strategic alliances with the United States, straddling the fence between the two will becoming more and more difficult.

[Read: The U.S. can't make allies take sides]

The U.S.-China conflict "puts Australia and a lot of the countries in Asia in a precarious position," Merriden Varrall, a nonresident fellow at the Lowy Institute, a Sydney-based policy think tank, told me. "We are not responding with the sophistication the issue deserves. I don't think we fully realize the challenge we are up against."

Just as the meshing of the U.S. and China was representative of the greater trend toward global cooperation, their new frostiness may be equally symbolic of rising nationalism and anti-globalization fervor, present from the United Kingdom to India. How far will this redesign of global business and diplomacy progress?

Lamar of the American Apparel & Footwear Association thinks that if a trade pact is reached and tariffs are removed, some business may try to return to normal—moving supply chains out of an efficient China is not so easy. But the uncertainty will remain. "There is a lot of feeling that we are in a long-term struggle as to who is going to be the leader of the 21st century," he said. "Even in a post-Trump Washington, we're still going to see a focus on China—is the country truly a partner of our country?"


 -- via my feedly newsfeed

At Work, Expertise Is Falling Out of Favor [feedly]

INteresting take on the decline of traditional expertise as AI and automation assume many decision making routines.

At Work, Expertise Is Falling Out of Favor
https://www.theatlantic.com/magazine/archive/2019/07/future-of-work-expertise-navy/590647/?utm_source=feed

In the faint predawn light, the ship doesn't look unusual. It is one more silhouette looming pier-side at Naval Base San Diego, a home port of the U.S. Pacific Fleet. And the scene playing out in its forward compartment, as the crew members ready themselves for departure, is as old as the Navy itself. Three sailors in blue coveralls heave on a massive rope. "Avast!" a fourth shouts. A percussive thwack announces the pull of a tugboat—and 3,000 tons of warship are under way.

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But now the sun is up, and the differences start to show.

Most obvious is the ship's lower contour. Built in 2014 from 30 million cans' worth of Alcoa aluminum, Littoral Combat Ship 10, the USS Gabrielle Giffords, rides high in the water on three separate hulls and is powered like a jet ski—that is, by water-breathing jets instead of propellers. This lets it move swiftly in the coastal shallows (or "littorals," in seagoing parlance), where it's meant to dominate. Unlike the older ships now gliding past—guided-missile cruisers, destroyers, amphibious transports—the littoral combat ship was built on the concept of "modularity." There's a voluminous hollow in the ship's belly, and its insides can be swapped out in port, allowing it to set sail as a submarine hunter, minesweeper, or surface combatant, depending on the mission.

The ship's most futuristic aspect, though, is its crew. The LCS was the first class of Navy ship that, because of technological change and the high cost of personnel, turned away from specialists in favor of "hybrid sailors" who have the ability to acquire skills rapidly. It was designed to operate with a mere 40 souls on board—one-fifth the number aboard comparably sized "legacy" ships and a far cry from the 350 aboard a World War II destroyer. The small size of the crew means that each sailor must be like the ship itself: a jack of many trades and not, as 240 years of tradition have prescribed, a master of just one.

On most Navy ships, only a boatswain's mate—the oldest of the Navy's 60-odd occupations—would handle the ropes, which can quickly remove a finger or foot. But none of the three sailors heaving on the Giffords's ropes is a line-handling professional. One is an information-systems technician. The second is a gunner's mate. And the third is a chef. "We wear a lot of hats here," Culinary Specialist 2nd Class Damontrae Butler says. After the ropes are put away, he reports to the ship's galley, picks up a basting brush, and starts readying a tray of garlic bread for the oven.

Two boatswain's mates are on hand, but only to instruct and oversee—and they too wear lots of hats, between them: fire-team leader, search-and-rescue swimmer, crane operator, deck patroller, helicopter-salvage coordinator. The operative concept is "minimal manning." On the bridge, five crew members do the jobs usually done by 12, thanks to high-tech display screens and the ship's several thousand remote sensors. And belowdecks, once-distinct engineering roles—electrician's mate, engine man, machinist, gas-turbine technician—fall to the same handful of sailors.

The USS Gabrielle Giffords at dock in San Diego (Peter Bohler)

Minimal manning—and with it, the replacement of specialized workers with problem-solving generalists—isn't a particularly nautical concept. Indeed, it will sound familiar to anyone in an organization who's been asked to "do more with less"—which, these days, seems to be just about everyone. Ten years from now, the Deloitte consultant Erica Volini projects, 70 to 90 percent of workers will be in so-called hybrid jobs or superjobs—that is, positions combining tasks once performed by people in two or more traditional roles. Visit SkyWest Airlines' careers site, and you'll see that the company is looking for "cross utilized agents" capable of ticketing, marshaling and servicing aircraft, and handling luggage. At the online shoe company Zappos, which famously did away with job titles a few years back, employees are encouraged to take on multiple roles by joining "circles" that tackle different responsibilities. If you ask Laszlo Bock, Google's former culture chief and now the head of the HR start-up Humu, what he looks for in a new hire, he'll tell you "mental agility." "What companies are looking for," says Mary Jo King, the president of the National Résumé Writers' Association, "is someone who can be all, do all, and pivot on a dime to solve any problem."

The phenomenon is sped by automation, which usurps routine tasks, leaving employees to handle the nonroutine and unanticipated—and the continued advance of which throws the skills employers value into flux. It would be supremely ironic if the advance of the knowledge economy had the effect of devaluing knowledge. But that's what I heard, recurrently, while reporting this story. "The half-life of skills is getting shorter," I was told by IBM's Joanna Daly, who oversaw an apprenticeship program that trained tech employees for new jobs within the company in as few as six months. By 2020, a 2016 World Economic Forum report predicted, "more than one-third of the desired core skill sets of most occupations" will not have been seen as crucial to the job when the report was published. If that's the case, I asked John Sullivan, a prominent Silicon Valley talent adviser, why should anyone take the time to master anything at all? "You shouldn't!" he replied.

As a rule of thumb, statements out of Silicon Valley should be deflated by half to control for hyperbole. Still, the ramifications of Sullivan's comment unfurl quickly. Minimal manning—and the evolution of the economy more generally—requires a different kind of worker, with not only different acquired skills but different inherent abilities. It has implications for the nature and utility of a college education, for the path of careers, for inequality and employability—even for the generational divide. And that's to say nothing of its potential impact on product quality and worker safety, or on the nature of the satisfactions one might derive from work. Or, for that matter, on the relevance of the question What do you want to be when you grow up?

How deep these implications go depends, ultimately, on how closely employers embrace the concepts behind minimal manning. The Navy, curiously, has pushed the idea forward with an abandon unseen anywhere on land. Within a few years, 35 littoral combat ships will be afloat, along with three minimally manned destroyers of the new Zumwalt class. The effort seemed to me a good test case for the broader questions bedeviling the economy: Can a few brilliant, quick-thinking generalists really replace a fleet of specialists? Is the value of true expertise in serious decline?

[Read: The case against specialists]

I wanted to try to answer these questions—which is why, that morning in San Diego, I joined the crew of the Giffords as it prepared to set sail.

A warship is, in the words of one Navy analysis, a highly complicated "socio-technical system." It operates in an environment that is often hostile, even outside of war; its crew—isolated by vast waters—must be ready for every eventuality. Traditionally, navies handled this by staffing their ships amply. Spain's wood-and-sail Santísima Trinidad carried upwards of 1,000 men at the Battle of Trafalgar in 1805, providing redundancy in the face of any contingency. If one system failed, there was a backup. This may not have been efficient, but it was effective. The U.S. Navy adopted that model long ago—and has not lost a ship in combat since the Korean War.

But the end of the draft, in 1973, brought rising labor costs and, with them, a shift in thinking. "For my entire 39-year career," the late Admiral Jeremy Boorda said in the early '90s, "we always talked about buying ships and manning them with people … I think we need to think about things differently now. We need to figure out how to have the fewest number of people possible, and then build [ships] to make them as effective as they need to be."

In 1995, Boorda converted an aging cruiser, the USS Yorktown, into an experimental "smart ship" on which watches were combined, engine rooms were unmanned, and sailors communicated by handheld radio instead of stationary telephones. The result was promising but modest: a 4 percent reduction in crew size. A series of naval reports concluded that "big dollar savings" could be achieved only with more significant changes, including greater automation and the selection and training of "generalists rather than specialists."

Then, in 2001, Donald Rumsfeld arrived at the Pentagon. The new secretary of defense carried with him a briefcase full of ideas from the corporate world: downsizing, reengineering, "transformational" technologies. Almost immediately, what had been an experimental concept became an article of faith. In what Ronald O'Rourke of the Congressional Research Service has called "an analytical virgin birth," the Navy committed itself to developing the littoral combat ship and the Zumwalt-class destroyer, using the principles of minimal manning. The LCS came first, partly because it borrowed an Australian design for a passenger ferry and could therefore boost the fleet size quickly.

"I think when the Navy started off, they had a really good plan," Paul Francis, of the Government Accountability Office, told the Senate in 2016. "They were going to build two ships, experimental ships." But in 2005, having assured itself that "optimal manning works," the Navy decided to skip the experimentation and move straight to construction. From this point on, whenever the Navy tried to study the feasibility of minimal manning, its analysis was colored by the fact that—on these ships, at least—it had to work. Dozens of littoral combat ships were on their way. The Giffords was the 10th to deploy.

As the skyline of downtown San Diego receded in the distance, we found ourselves approaching a pier that lay along the final extremity of land before the open Pacific. Shimmering far off to the left was Coronado Beach, the legendary training site for Navy SEALs. To the right was the tower of a nuclear submarine. Our mission for the day was to unload ammunition from the ship to an onshore supply base.

On deck I spotted a man holding a pair of high-tech binoculars and calling out distances: "Three hundred yards. Two hundred yards." Turns out it was Butler, who, in addition to his other jobs, was working to become a certified lookout. "You have to be adaptable, very adaptable to the circumstances, or things can really take a turn in a different direction," he told me, while estimating the distance and bearing of an approaching yacht under the tutelage of another sailor. "For me, that means thinking about the task you're doing, not the task you'll have to do." That is: not dwelling on the garlic bread in the oven. "And asking the right questions. Uh, 500 yards?" He checked his eyeball estimate with the range finder. "Five hundred yards."

What other jobs did he have? Should a fire break out, Butler said, he would become a "boundaryman" and work to stop the spread of smoke to other compartments—a job that, on another ship, would be supervised by a full-time damage-control specialist. The LCS has only two of these—which is one reason it has a "survivability" rating of 1, the lowest score possible. If the ship is critically struck, crew members are expected to simply abandon ship and escape. Traditionalists hate the idea.

Culinary Specialist 2nd Class Damontrae Butler works on deck and in the kitchen. (Peter Bohler)

Butler wasn't the only character to reappear in different form. During an all-hands meeting—the smallness of the group exaggerated by the large size of the flight deck they stood on—someone pointed to the figure strolling in from stage right. It was one of the two boatswain's mates who had been overseeing the line-handlers that morning. He had swapped his blue coveralls for head-to-toe green camo, and was walking back and forth, appearing to survey the upper deck of the ship. Such costume changes gave the whole ship the feel of a small theater troupe in which the actor playing the prince's cousin also plays the apothecary, the friar, and Messenger No. 2.

The Navy knew early on that not just anyone could handle this kind of multitasking. By the early 2000s, the Office of Naval Research was commissioning studies on how to select and prepare a crew for the new ships. One of the academics brought in was Zachary Hambrick, a psychology professor at Michigan State University. Instead of trying to understand how well naval candidates might master fixed skills, Hambrick began to examine how they performed in what are known as fluid-task environments. "We wanted to identify characteristics of people who could flexibly shift," he told me. To that end, in 2010 he administered a test to sailors at Naval Station Great Lakes—and when I traveled to Michigan State to find out more about his work, he invited me to give it a try.

In Hambrick's Expertise Lab, I sat before a screen divided into quadrants: One showed me a fuel gauge that I had to monitor; another displayed a set of letters I had to memorize; another gave me a set of numbers to add together; and the final one presented me with a red button to push whenever a high-pitched tone sounded. All four tasks contributed equally to my total score, which appeared at the center of the screen. Because there really is no such thing as multitasking—just a rapid switching of attention—I began to feel overstrained, put upon, and finally irked by the impossible set of concurrent demands. Shouldn't someone be giving me a hand here? This, Hambrick explained, meant I was hitting the limits of working memory—basically, raw processing power—which is an important aspect of "fluid intelligence" and peaks in your early 20s. This is distinct from "crystallized intelligence"—the accumulated facts and know-how on your hard drive—which peaks in your 50s. In a setting where the possession of know-how is trumped by the ability to acquire it quickly, as in Hambrick's game, fluid intelligence is paramount. (For more on fluid and crystallized intelligence, see "Your Professional Decline Is Coming (Much) Sooner Than You Think," by Arthur C. Brooks, on page 66.)

When the sailors at Naval Station Great Lakes took the test, they were thrown a curveball that I was not: In the middle of the test, the scoring system suddenly changed, so that one quadrant now accounted for 75 percent of the score. Some sailors, Hambrick told me, were quick to spot the change and refocus their attention accordingly. They tended to test high in fluid intelligence. Others noticed the change but continued to devote equal attention to all four tasks. Their scores fell. This group, Hambrick found, was high in "conscientiousness"—a trait that's normally an overwhelming predictor of positive job performance. We like conscientious people because they can be trusted to show up early, double-check the math, fill the gap in the presentation, and return your car gassed up even though the tank was nowhere near empty to begin with. What struck Hambrick as counterintuitive and interesting was that conscientiousness here seemed to correlate with poor performance.

Sailors on the Navy's new littoral combat ships must be able to carry out multiple jobs; the operative concept is "minimal manning." (Peter Bohler)

Hambrick wasn't the only one to observe this correlation. While Jeffery LePine, an Arizona State management professor and former Air Force officer, was doing Navy-funded research on decision making in the late 1990s, he used a computer game a lot like the one Hambrick administered. The tasks were explicitly military (for instance, assessing the "threat level" of 75 aircraft based on speed, altitude, range, etc.) but the curveball was similar: Unbeknownst to the participants, the scoring rules changed partway through the game. When this happened, he noticed that players who scored high on conscientiousness did worse. Instead of adapting to the new rules, they kept doing what they were doing, only more intently, and this impeded their performance. They were the victims of their own dogged persistence. "I think of it as the person literally going down with a sinking ship," LePine told me.

And he discovered another correlation in his test: The people who did best tended to score high on "openness to new experience"—a personality trait that is normally not a major job-performance predictor and that, in certain contexts, roughly translates to "distractibility." To borrow the management expert Peter Drucker's formulation, people with this trait are less focused on doing things right, and more likely to wonder whether they're doing the right things.

High in fluid intelligence, low in experience, not terribly conscientious, open to potential distraction—this is not the classic profile of a winning job candidate. But what if it is the profile of the winning job candidate of the future? If that's the case, some important implications would arise.

One concerns "grit"—a mind-set, much vaunted these days in educational and professional circles, that allows people to commit tenaciously to doing one thing well. Angela Duckworth, a University of Pennsylvania psychology professor, has written powerfully about the value of grit—putting your head down, blocking out distractions, committing over a course of many years to a chosen path. Her writing traces an intellectual lineage that can also be found in Malcolm Gladwell's Outliers, which explains extraordinary success as a function of endless, dedicated practice—10,000 hours or more. These ideas are inherently appealing; they suggest that dedication can be more important than raw talent, that the dogged and conscientious will be rewarded in the end.

In the stable environments Duckworth and Gladwell draw from (chess, tennis, piano, higher education), a rigid adherence to routine can no doubt serve you well. But in situations with rapidly changing rules and roles, a small but growing body of evidence now suggests that it can leave you ill-equipped.

Paul Bartone, a retired Army colonel, seemed to find as much when he studied West Point students and graduates. Traditional measures such as SAT scores and high-school class rank "predicted leader performance in the stable, highly regulated environment of West Point" itself. But once cadets got into actual command environments, which tend to be fluid and full of surprises, a different picture emerged. "Psychological hardiness"—a construct that includes, among other things, a willingness to explore "multiple possible response alternatives," a tendency to "see all experience as interesting and meaningful," and a strong sense of self-confidence—was a better predictor of leadership ability in officers after three years in the field. Thus, Bartone and his co-authors wrote, "traditional predictors [of performance] appear not to hold in the fast-paced and unpredictable operational environment in which military officers are working today."

The world of work is full of such surprises. And as the rules change, so do ideas about what makes a good worker. "Fluid, learning-intensive environments are going to require different traits than classical business environments," I was told by Frida Polli, a co-founder of an AI-powered hiring platform called Pymetrics. "And they're going to be things like ability to learn quickly from mistakes, use of trial and error, and comfort with ambiguity."

"We're starting to see a big shift," says Guy Halfteck, a people-analytics expert. "Employers are looking less at what you know and more and more at your hidden potential" to learn new things. His advice to employers? Stop hiring people based on their work experience. Because in these environments, expertise can become an obstacle. That was the finding of a 2015 study carried out by the Yale researchers Matthew Fisher and Frank Keil, titled "The Curse of Expertise." The more we invest in building and embellishing a system of knowledge, they found, the more averse we become to unbuilding it.

Jeffery LePine has observed this phenomenon in another part of his life. For years, he devoted himself to understanding cars, and amassed a collection of Pontiacs that he maintained himself. But new developments—fuel injection and the like—convinced him that at times he needed expert help. When one of his cars developed a leaky engine, he called in a mechanic whose first attempt to fix the problem was to replace the rear oil seal. The leak persisted, so the mechanic replaced the engine and gave it a new oil seal. Still no luck, so he replaced the whole thing again. Finally, the mechanic read the instructions that came with the oil seal—something a novice would have done at the outset—and learned that newer engines required an extra step. By not doing it, he'd been puncturing the seals and causing new leaks himself.

The Yale study nicely summed up the dynamic at play here: All too often experts, like the mechanic in LePine's garage, fail to inspect their knowledge structure for signs of decay. "It just didn't occur to him," LePine said, "that he was repeating the same mistake over and over."

Yet the limitations of curious, fluidly intelligent groups of generalists quickly become apparent in the real world. The devaluation of expertise opens up ample room for different sorts of mistakes—and sometimes creates a kind of helplessness.

Aboard littoral combat ships, the crew lacks the expertise to carry out some important tasks, and instead has to rely on civilian help. A malfunctioning crane on board one LCS, for example, meant that the crew had to summon an expert to solve the problem, and then had to wait four days for him to arrive.

There have been other incidents. Because of a design flaw, the LCS engines started to corrode not long after the fleet's launch, but for a long time nobody on board noticed, which led to costly delays and repairs. When a congressional oversight committee found out about the problem in 2011, it called the ships' crews to task. Who was in charge of checking the engines? The answer was … nobody. The engine rooms were unmanned by design. Meanwhile, the modular "plug and fight" configuration was not panning out as hoped. Converting a ship from sub-hunter to minesweeper or minesweeper to surface combatant, it turned out, was a logistical nightmare. Variants of all three "mission packages" had to be stocked at far-flung ports; an extra detachment of 20-plus sailors had to stand ready to embark with each. More to the point, in order to enable quick mastery by generalists, the technologies on each had to be user-friendly—which they were not. So in 2016 the concept of interchangeability was scuttled for a "one ship, one mission" approach, in which the extra 20-plus sailors became permanent crew members.

On it went. The crew of one LCS failed to oil the main engine gear (forcing the ship to limp home from Singapore for a $23 million repair). The crew of another put a seal in the wrong hole, flooding its engine with seawater. "Who was responsible for the training?" the late Senator John McCain asked angrily at a hearing. "Wasn't someone?"

A chastened naval command quietly ordered all LCSs to stand down for several months in 2016, sent their engineering crews back to school for requalification, and bulked up its high-tech courseware, which lets LCS trainees practice tasks on a highly detailed virtual ship. ("I'm going to show you the stern tube-shaft seal assembly," a virtual officer announces in one training video, by way of greeting.) Onboard routines were updated to include more oversight and double-checking. The ship passed its sea trials, but not with flying colors. "As equipment breaks, [sailors] are required to fix it without any training," a Defense Department Test and Evaluation employee told Congress. "Those are not my words. Those are the words of the sailors who were doing the best they could to try to accomplish the missions we gave them in testing." The intentionally small crew size made the ship ill-suited to forward combat, because not enough people were on board to stand watch.

These results were, perhaps, predictable given the Navy's initial, full-throttle approach to minimal manning—and are an object lesson on the dangers of embracing any radical concept without thinking hard enough about the downsides. Even if minimal manning works for a given business or institution, the ramifications for society may not be entirely salubrious. Grit and 10,000 hours of training are appealing in part because they reinforce American self-conceptions that have been present since the country's founding, ideas about equality of opportunity, about the value of knowledge, about the importance of hard work. And while no one would suggest that effort itself is being devalued today—hard work is just as important in the workplace that's emerging as in the one that's receding—a world in which mental agility and raw cognitive speed eclipse hard-won expertise is a world of greater exclusion: of older workers, slower learners, and the less socially adept. "This sounds absurd," retired Vice Admiral Pete Daly (now head of the U.S. Naval Institute) told me, "but if you keep going down this road, you end up with one really expensive ship with just a few people on it who are geniuses … That's not a future we want to see, because you need a large enough crew to conduct multiple tasks in combat."

But it's a future we may need to see. As the cost of computing continues to fall and artificial intelligence usurps more and more human competencies, the collapse of old jobs into new ones seems preferable to their total disappearance. (Look at the unmanned helicopter the Giffords can accommodate, and it's distressingly easy to picture a sailorless ship. Already, the DOD worries about the vulnerability of an LCS to "swarm boats"—basically, dozens of explosive-laden speedboats, unmanned and computer-coordinated.)

And while it seems fair to say that the Navy pushed the LCS forward too hard and too heedlessly, calling its minimal-manning project a failure would be premature. The viability of the aircraft carrier was not obvious to military planners in the 1920s, but then, through an extended process of on-site trial and error, engineers added catapults and arresting wires, and reconfigured flight decks, all of which turned an interesting idea into reality. The LCS is likewise the scene of everyday trial, error, and adjustment.

When large vessels stop to dock, for example, they have to be tied up with ropes that are too heavy to throw. So sailors on board throw out smaller ropes that are attached to the big ones, which their colleagues on land can then pull over. On traditional Navy ships, this is done from a ship's top deck—a sailor tosses the small rope over the side, and the rest is easy. This is how it's taught at the Navy's equivalent of boot camp, on a mock wooden ship near Lake Michigan. But on the LCS the ropes reside in the forward compartment, where getting a good side-arm throw out the porthole is next to impossible. One early solution—sending a boatswain's mate up top to make the toss—proved both awkward and complicated. But this is where having a crew attracted to novel problems is useful. At some point, a sailor had the idea of not throwing but launching the line through the porthole. This unknown soul started fiddling with materials at hand, and lo, the "slingshot" came into being: a rubber bungee cord knotted into an X around four carabiners that clip to the inside of a porthole and, when pulled back and then released, have enough strength to send a bundle of rope to a sailor waiting for it on land. A triumph of found materials, it's an indication, however small, of what a group of open-minded generalists can achieve: namely, inventing new patterns of working that turn a lack of expertise into an asset.

Peter Bohler

What does all this mean for those of us in the workforce, and those of us planning to enter it? It would be wrong to say that the 10,000-hours-of-deliberate-practice idea doesn't hold up at all. In some situations, it clearly does. Sports, musicianship, teaching—these are fields where the rules don't change much over time. In tennis, it pays to put in the hours mastering your serve, because you know you'll always be serving to a box 21 feet long and 13.5 feet wide, over a net strung 3.5 feet high. In medicine and law, the rules might change—but specialization will probably remain key. A spinal surgery will not be performed by a brilliant dermatologist. A criminal-defense team will not be headed by a tax attorney. And in tech, the demand for specialized skills will continue to reward expertise handsomely.

But in many fields, the path to success isn't so clear. The rules keep changing, which means that highly focused practice has a much lower return. Zachary Hambrick and his co-authors showed as much in a 2014 meta-analysis. In uncertain environments, Hambrick told me, "specialization is no longer the coin of the realm."

So where does this leave us?

It leaves us with lifelong learning, an unavoidably familiar phrase that, before I began this story, sounded tame to me—a motivational reminder that it's never too late to learn Spanish or enroll in nighttime pottery classes. But when Guillermo Miranda, IBM's former chief learning officer, used the term in describing to me how employees take advantage of the company's automated career counselor, Myca, it started to sound like something new. "You can talk to the chatbot," Miranda said, "and say, 'Hey, Myca, how do I get a promotion?' "

Myca isn't programmed to push any fixed career track. It isn't dumb enough to try to predict the future—much less plan for it. "There is no master plan," Miranda said. Myca just crunches data, notices correlations, and offers suggestions: Take a course on blockchain. Learn quantum computing. "Look, Jennifer!" it might say. "Three people like you just got promoted because they got these badges."

Even as I reported this story, I found myself the target of career suggestions. "You need to be a video guy, an audio guy!" the Silicon Valley talent adviser John Sullivan told me, alluding to the demise of print media. I found it fascinating and slightly odd that Sullivan would so readily imagine that I would abandon writing—my life's pursuit since high school—for a new line of work. More than that, though, I found the prospect of starting over just plain exhausting. Building a professional identity takes a lot of resources—money, time, energy. After it's built, we expect to reap gains from our investment, and—let's be honest—even do a bit of coasting. Are we equipped to continually return to apprentice mode? Will this burn us out? And will the collective work that results be as good as what came before?

A junior officer steers the ship back into port; on the Giffords, even a routine transit back to base is a chance to learn something new. (Peter Bohler)

Those are questions for the long haul. In 20 years, we'll know a lot more about the costs and benefits of minimal manning and lifelong learning. But nobody on the Giffords was pondering that after the crew finished its unloading job. They had to get back to base. So 26 crew members crammed into a briefing room, where they talked tides, collision avoidance, and sea lanes, which would be crawling with pleasure craft this time of day. "If action becomes necessary," said the captain, Shawn Cowan, "take action early."

The ship's bridge was quiet on the way home. As we sailed, I thought back to an encounter I'd had earlier in the day with two engineer's mates. I'd found them in a quiet corner of the cargo bay, testing water samples pulled from the ship's engines for signs of corrosion. We struck up a conversation, and they explained to me that their responsibilities also included maintaining the ship's gas turbines, diesel engines, water jets, and various pumps—for oil, fuel, drinking water. I told them that sounded like a lot. They agreed, but then one of them added that doing so many things was just the way things go in "this LCS business." Not only that, he added, but he was learning so much that he might soon earn a promotion that would put him up on the bridge, in charge of the whole propulsion system.

Everybody I met on the Giffords seemed to share that mentality. They regarded every minute on board—even during a routine transit back to port in San Diego Harbor—as a chance to learn something new. Which is why, near the end of our trip, as we approached the Coronado Bridge, Captain Cowan gave the helm to a junior officer and asked her to steer us under the bridge and into port. The officer looked intently at the nozzles of the ship's four water jets, took in the sight of the approaching bridge, and said, "Very well, Captain."

Then she adjusted her course.


This article appears in the July 2019 print edition with the headline "The End of Expertise."


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