Because this question has come up quite a bit lately, I’ve been researching the impact innovation and new technology has had on the financial services industry. Industry analysts often look to the financial services industry as an analog for the media business, given many of their similarities.
Today, the TV industry is going through an evolution similar to what the financial services industry experienced in the ‘90s. Deregulation of financial services in the ‘80s unlocked a wealth of innovation in the decades to come. Innovation brought about the era of electronic trading, new financial instruments and methods of credit scoring. Automation, big data and advanced analytics redefined the industry. And these changes brought substantial value to the financial services ecosystem. The industry grew, from generating 20% of U.S. corporate profits in 1990 to over a third today.
But was all this innovation a job creator or a job killer? In their comprehensive paper, “Wages and Human Capital in the U.S. Financial Industry: 1909-2006,” Thomas Philippon and Ariell Reshef (from New York University and the University of Virginia, respectively) determined that innovation had a major positive effect on financial jobs, particularly in the securities industry.
First, salaries rose significantly as jobs became more complex. The stock broker of the early ‘90s who had spent most of the day executing basic trades became a highly compensated financial services advisor who specialized in balancing complex portfolio risk.
Second, the industry created substantial new opportunities for higher skilled employees. Physicists and real rocket scientists entered the industry to build advanced financial instruments using the new technology and data.
The innovation of the era created a virtuous cycle of higher skilled workers developing more complex products that drove higher salaries. Most important, this cycle created jobs at three times the rate of other industries. According to the Bureau of Labor Statistics, the number of jobs in the U.S. securities industry grew nearly 3% per year from 1990-2013, while average annual job growth across all sectors was 1% per year.
While innovation likely reduced the number of routine task jobs, it fueled a high-skilled job creation machine that ran for decades. Of course, it can be successfully argued that this machine did ultimately run amok but we’ll leave that debate to the political economists. However, the fundamental relationship holds true: Innovation drives demand for more highly skilled, highly paid employees.
TV advertising is at the dawn of its technological and data innovation virtuous cycle. The nascent conversations held today on managing cross-platform campaigns or interpreting multi-touch attribution models speak to the future types of jobs that will become the norm in TV advertising. The jobs will indeed become more complex and analytical. Many more will be created out of the bed of innovation. But one central premise will not change. This will remain a relationship-driven industry, even with all of the technology and data innovation on the horizon.