Bill Kerr: These days, technology is dazzling. Robots and their fellow machines can do back flips, paralegal work, and read X-rays better than humans. Automation is flooding into our offices and even our restaurants. McDonald’s has new, automated kiosks for customers to place their orders, and pretty soon, robot security guards will be patrolling parking lots near you. Whether this is exciting or scary, just wait, as artificial intelligence and machine learning promise much more. This change will be a seismic shift for workers, potentially rivaling the transition out of an agricultural economy. A new report by McKinsey says globally 400 million people will need to find new jobs or learn new skills over the next 12 years.

Welcome to Harvard Business School’s podcast Managing the Future of Work. I’m your host, Professor Bill Kerr. Today I’m joined by senior McKinsey partner Scott Rutherford to talk about the report titled “Jobs Lost, Jobs Gained.” We’ll learn how McKinsey is helping clients to plan for the changes ahead. Is this time different? Will we have jobs? Let’s find out.

Welcome, Scott.

Scott Rutherford: Thank you, Bill. It’s great to be here and to be a part of this podcast.

Kerr: The scope of transition ahead—how many jobs might be impacted by technology and automation?

Rutherford: We think about 14 percent of the occupations that exist today could actually be gone by 2030. That said, if you also look at technology trends, you would say that in 2030, 10 percent of the jobs that [will] exist then don’t exist today. So there’s going to be both jobs lost and jobs gained.

Kerr: Are there any rules of thumb as to what type of worker will be helped or hurt by this process?

Rutherford: Predictive physical work is one of those areas that’s highly potential for automation, but also data processing and data collection. So as you start to take those segments of occupations, you’re going to get somewhere between 20 percent of what they do—to even as high as 70 percent of what they do—that could be automated.

Kerr: Is this touching all sectors aspect? Is that something new compared to historical episodes that we’ve experienced?

Rutherford: Yes, it is. You’ll see some sectors based off the types of things that they do at a company level that can adopt this a lot faster, and the real thing that we’re looking for is does it give them actually competitive advantage. Because as soon as it gives them competitive advantage, then you’ll see winners and losers. It’s where sectors like banking and insurance—where anywhere up to 40 percent of the task can actually be automated—no one has cracked the code yet on making a competitive advantage. You’re starting to see some potentially do it, and the question is, will the others be fast followers, or will there be such laggards that’ll actually not exist?

Kerr: You’ve separated in some of your work the frontier of technology and then this adoption rate. How does this adoption rate impact how many jobs we have in the future and the steps that we’ll see?

Rutherford: That’s a little bit the million dollar question. If you really think about, what exists today, so much could actually be automated today, but it hasn’t. So you ask yourself, why? When you look at why things haven’t been adopted, either it’s cost prohibitive still—I don’t have the right labor dynamics yet; I haven’t been able to see the benefits and make a business case. The other piece of this is just also the risk appetite. When you think about, I’m going to remove a human being from doing something that’s pretty core to what we do, especially when it gets to processing data that actually leads to a decision, to what degree am I actually going to allow that to happen and feel good from a risk standpoint, whether it be a mistake with our customers, a mistake with our pricing vs. the people who I actually have here today, who have been doing this for many, many years.

Kerr: Japan is a glimpse to the future. Why is Japan ahead of some other countries in thinking about these issues?

Rutherford: There’s a different framing. Even when, as we talked about this jobs lost, how many jobs will be gone? What’s going to be the unemployment rate? That’s one frame. The other frame is, what is a great opportunity? Can we get productivity gains? Can we change the way that we work and make employment get better by creating new jobs and new opportunities and new skills? So one view on Japan is that they have the frame of opportunity. They have the frame of: This is going to be advantageous for us, both in terms of how we change the way we work, but actually how we lead.

Kerr: Many of us in this podcast room, but also in many countries, are starting to get a little grayer. Do you think other countries will adopt a similar framing, or that we really need this as populations age?

Rutherford: The aging population has a little bit of a double-edged sword. In one sense, as a population ages, then other jobs start to open up and get created. We actually may need more healthcare workers, which are occupations that are less likely to be automated, that an aging workforce actually creates jobs. Part of when you think about AI and machine learning is moving the business aspect and the business acumen into the machine. When you have people who have been doing things for 20 or 30 years, especially around data processing and actually teaching a machine how to learn, having people who have pattern recognition, who have experience, who are going to teach the machine to learn, it’s only going to do well by its business rules as it then collects more data and learns over time. So as you think about the aging population, there is also a theory that, if I take advantage of these folks before we potentially lose them to unemployment, to actually help create the next wave of technology advances, it could be a huge opportunity.

Kerr: Most of your clients are private sector firms. Tell us some of the things that they’re trying to put in place to be adaptable to the changes that are coming.

Rutherford: What’s been very interesting—in a lot of the conversations and in so many of the surveys that we’ve done with our clients—is there is a broad awareness that this is a major issue. And there is a broad awareness that it’s not just around adopting technology, but how do I think about my workforce? And how do I think about either reskilling? Or how do I think about this transition with my workforce? Also, the very interesting piece of this is how many of them feel unprepared.

Kerr: Companies like AT&T have tried to map out this process of how people could move from one job to another job. Is AT&T a typical company? Is it ahead of the game? How do you see others kind of coming into this space?

Rutherford: It’s very inspiring, what they’ve done, both in terms of when they started to do this, which is more on the earlier end, and the thoughtfulness in terms of the transparency, where they think jobs and occupations and skills are going. The other thing that they’ve done is the incentives that they’ve created and the environment for people to learn and their support of that. The things that I do know, based on our client work, is that a lot of major organizations are also working on this. What I find, listening to them, is again the thoughtfulness of this. So back to the adoption. It’s the sense of not only what’s the risk of doing this, but what’s the risk of not doing this?

Kerr: So we’ve had a long standing trend toward less on-the-job training. This is a new phase. Companies are going to become more responsible toward providing the tools in order to keep a workforce skilled.

Rutherford: This is the most critical piece of it, because when people talk about adult learning techniques—how people learn, and reimagining how training is done—is where I think the folks that are forward-leaning are starting to go: How do I think about the types of skills I need to reskill them to? And they’re not necessarily all technical hard skills. As technology takes over the mundane, the ability to manage people, the ability to make good business decisions, the problem-solving aspects, some of those more-critical skills, but then the soft skills of interacting with people, translating what’s coming out of the data, there’s all these new pieces that are coming together. We’re finding that some of these companies are actually focusing as much on the soft skills as they are on the hard skills of retraining.

Kerr: The things that can complement the new technologies are where they’re placing their efforts.

Rutherford: Exactly.

Kerr: Your report describes how the work week declined by 50 percent, from 1900 to today, so can I project forward that I have a 20-hour work week in a few years?

Rutherford: Wouldn’t that be nice! Let’s play with that for a second. If that happened, or if anything like half of that happened, what does that mean? That means that we’re able to do what with that time? In a world of shared economy, where you see teachers as Uber drivers, does that mean that we’re going to have people who are going to have multiple occupations? Does it mean that it’s going to allow for more innovation, because now we have space and time? So it’s a question around, if that does happen, again is it an opportunity or do you actually just go home?

Kerr: It may even be something that individual companies will start changing the work week for their employees as an incentive to come join them or as a way to attain some higher productivity gains, beyond just society as a whole deciding that we’re going to have a lower work week and reduce the standard amount.

Rutherford: As I was talking to a luminary in this space who looks over a lot of things that are happening in Europe, in and around reskilling, he said something that was pretty profound. His greatest fear in this transition is that we don’t take advantage of changing the way we work. If it’s just around getting rid of these jobs and adding these jobs, vs. what an incredible opportunity to change the way we work, how we innovate, what you do with the time that you’re there. Do you have more space to actually exercise? Do you have more space to actually innovate? Do you have more space to actually collaborate? How do we rethink this in a way that actually can have huge business outcomes, but at the same time, huge advances in mindfulness?

Kerr: This takes us to thinking about the several forms of technology, and there’s automation that is in the assembly lines for cars. Then there’s the call center automation that drives us all insane. The current bogeyman is artificial intelligence. What is artificial intelligence?

Rutherford: Take the word “artificial,” and compare it to “natural.” Natural intelligence is displayed by humans. Artificial intelligence is displayed by machines. So it’s basically, when you think about a machine that uses whatever context it’s given, it’s trying to achieve a goal, whether to put something on a shelf or to come out with an actual output of a yes or a no. To have machines actually display a goal they’re trying to achieve is how we think about AI.

Kerr: Why is it getting so many headlines right now? Every magazine in the world, when you look at it at the newsstand, has something either positive or scary about AI.

Rutherford: Just because of the potential. When you really think about those that get there first, and they get there faster, how much time does that give them to have a competitive advantage vs. their competitors? When it comes to making better decisions, delighting customers better, creating a better experience; when you look at what a machine that’s learned, and has AI capability, the accuracy with which they actually come back with an answer; the ability to actually go through troves and troves of data and policies and come back with a more robust answer, it’s hard not (sic) to ignore that, on the impact it could have on your business.

Kerr: In the skills space, AI has some particular skills. How are clients thinking about accessing those skills for this bleeding edge of technology?

Rutherford: There’s the obvious ones: I need programmers. I need designers. I need folks that can do hardware and software. There’s the obvious ones that you need. What I find interesting is, we’re talking to our clients about this, you still have now a rise of “How do I think about the people who can know, not only the technology and its limitations, but understand the business?” Because there’s still a tremendous bar for being able to translate. I think about the movie Hidden Figures when they brought in all of the computers and they started actually displacing some of the workers, the mathematicians. But still, when John Glenn was about to launch, he didn’t remember Katherine Johnson’s name, he remembered the woman that ran the numbers: “I’d like her to verify that.” We’re going to see a lot still in AI. We’re going to see CEOs saying, “I hear what the computers are saying. I see what the machines are doing. I see all to this.” But they’re still going to look at their team. They’re still going to need people to say, “I understand the limitations of what this computer or what this machine just asked.” Those limitations are, what data does it have? How accurate is it? What are the degrees of freedom we’ve given it? All of those things. Who understands that? And that’s a skill, but also who understands how to translate that into, then, the business decisions. Because right now it’s no different than what you do with your team. I look at their experiences. I judge what their limitations may or may not be, so then when they give me input, I can then make a decision. How do you do that when they’re machines? Because this machine’s telling you this; this machine’s telling you that. Who’s helping you do... those are new skills that need to be developed. You need to understand technology. You also need to understand the business.

Kerr: So Scott, an important question for many companies is the middle management. Can you tell us what leading companies are doing in this space, with reskilling middle management?

Rutherford: One of the things to really understand the challenge is that, the middle management, if they don’t have the technology kind of acumen and they don’t have the skills that you need, when you’re trying to look at these senior executive positions and they’re hiring from the outside, because you don’t see it in your middle management, there’s really a call to action of “What are we doing there?” Because to get those skills to a level, you have to really invest. One of the things that they’re really looking at right and now is, “How do I not only reskill, but upskill, my middle management?” So they understand technology and how it’s used, they understand how to think about the underlying business principles and its relation to that, so they can be executives in the future. Those that are actually seeing more of the folks that they’re hiring from leading-edge companies that already know how to do this, they’re finding that they can’t just give up on their middle management, but they have to do it in conjunction with hiring from the outside, but really investing in that group in a way that they haven’t in the past.

Kerr: So we’ve seen a number of companies that, they’re trying to remove the middle management. You’re highlighting that for a number of your organizations that you work with, middle management may take on a more important role in the future.

Rutherford: I think it’s a great push, because you have to say, what value does this layer add to the organization? If that value is more than just a span breaker of managing folks, but they truly need to add value, they are your future executives. Understanding how you’re actually cultivating that group of middle management, both in terms of being future executives, but also they’re the ones who are going to have the biggest impact on the organization. They’re at the real leverage point. Actually investing in that group, both in terms of managing your people, inspiring your people, but understanding the underlying economics of your business, but most importantly, understanding where these trends are going and how technology can impact to only them, but also the whole organization. We are finding that, when you have that in the middle layer, you’re set up for success, because those are your future leaders and those are ones that are closer to the front line and understand what’s happening. Giving up on that layer, you have to be quite prepared for a very different way in which you’re doing decision making and interacting between executive teams and the front line.

Kerr: With the leading edge of technology, access the top talent can govern strategy. Are companies finding ways to leapfrog and build worldwide bases of talent?

Rutherford: That’s that leap that people are starting to make. Once I have my strategy, do I have the talent and the skills that can actually execute against that strategy? And if I don’t, how do I think about that? Do I have to actually move my headquarters location or build a new location to access that talent? Do I have to create new jobs that augment what I currently have? Do I reskill the people who I have, because I have time to that, because that’s not going to happen overnight. You may see more of an acquisition strategy around gaining talent, as much as it is around gaining technology.

Kerr: We’ve talked about the business side. What’s the number-one thing that governments need to be keeping in mind?

Rutherford: Part of it is incentives. Different governments are going to have very different regulations on employers, on what they can and can’t do. There is one employer that we know is massively digitizing the way that they work, which is freeing up all sorts of potential jobs to either be displaced or to be reskilled. But they have to figure out either how to get them employed somewhere else or they have to reskill them and keep them, because that’s the government regulation. So you have that on one extreme. Then you have the other extreme, which is more laissez-faire, and it’s just there’s not any kind of safety nets or any kind of incentives for either reskilling or keeping the employees or providing any kind of assistance to them as they’re transitioning. So what we’re seeing—and back to how we think about the global adoption of this—is where you see organizations in countries that can’t take advantage of technology by actually getting productivity gains from either reskilling their workforce or being able to displace some of those workers, to governments, like some in Western Europe, that have many more social programs and safety nets, in which you can actually help people transition. It’s the government that actually is funding some of that transition for workers, to then governments that do very little.

Kerr: Individuals bear increased responsibility for having the right skillset. What advice can you give them?

Rutherford: There is a will issue. Are you going to go to classes? Are you actually going to pay attention? Are you going to learn? Are you going to drive and go do this? I think even with all those incentives, there is a responsibility to the individuals to actually take advantage of this and actually go do it. And I think, if we have individuals who have that drive, that want to learn and actually get reskilled, I think it’s going to make a big difference. The old adage, you can’t teach an old dog new tricks, I think there is something around learning as an adult that is challenging. And, we have to create the right kind of training, the right kind of incentives, the right kind of environment that’s conducive for them to do it, and they have to have the right mindset, that this is something that they may not have expected, but they were going to have to do at this age and this point in their career. But that’s going to be a key part of this.

Kerr: With aging workforces, I think we’re going to need to see a lot of the old dogs being able to learn the new tricks. Scott, it’s been great to have you. Any parting thoughts or pieces to add?

Rutherford: I think that it goes back to the framing for me. Is it really jobs lost? Is it really how fast are we going to have all these folks unemployed? The framing for me is, looking at this technology, you step back and you just say, “Wow.” The things that we can do today, with phones and laptops and computers, the things that we’re seeing around us, is an incredible opportunity. So when we look forward to the next 12 years, the framing is: How do we take advantage of this to make our lives better, both at the workplace, but also in how we interact and also at home. And if we can do that with the framing and the mindset, I think we’ll get there a lot faster.

Kerr: Due to advances in automation and artificial intelligence, as much as 14 percent of the world’s workforce may need to find new jobs or learn new skills over the next decade. That’s according to a recent report from McKinsey. “Jobs Lost, Jobs Gained” has 150 pages, so we’ve just scratched the surface today. I highly recommend you take a look.

Thank you, Scott, for joining us from the McKinsey practice, and this is Bill Kerr, your host, thanking you for listening in.