The Internet Is Killing the Middle Class

What you need to do, now, if you hope to survive in the world of Watson, long tails, and Giacomo Pirozzi/Panos Pictures

The growing U.S. income gap has little to do with policy or politics and everything to do with technology.

Over an end-of-day beer at Amsterdam Tavern in New York City, tech entrepreneur Justin Kitch laid out the plan for his new company, Build an online space where people who excel at giving lessons—guitar, surfing, poodle-trimming—can make money selling those lessons on video.

Great concept. So, if takes off, it could create a class of teaching superstars. As students flock to the Curious guitar teacher, he gets famous, appears on Charlie Rose and has himself a lucrative business.

Now take the Curious idea to its eventual conclusion: A few global guitar teachers become fabulously wealthy by vacuuming up mid-level demand. Serious students still go to the best teachers in person, but mediocre teachers watch their incomes dry up as amateurs find better lessons for less money online. Guitar teaching in the 21st century would become a two-tiered world: the best, who make a lot of dough—either online or live—from top-tier students; and the rest, who have to live on the scraps.

In other words, the rich get richer while the poor get poorer, a classic refrain that's playing more often these days than "Blurred lines/ I know you want it!"

Widening economic disparity is a hot political topic. In New York, Democrat Bill de Blasio is campaigning for mayor on promises to fix it. Barack Obama recently told ABC's This Week, "I think the president can stop it."

But the president can't stop it. Nobody can. Technology is driving the trend. Policies and tax schemes seem ever more frivolous—even decorative—compared to the two main engines of disparity: networks and automation.

This is not to say networks and automation are bad. Most people love them. (Just try to take away my new dishwasher!) But we need to have a little talk about their impact and what to do about it.

Networks give everyone access to the best. The rest is marginalized. It's the dark side of the "long tail" concept we've been talking about for more than a decade: Very few people get to be the dog, and almost everyone else is the tail.

You can see how this works in every corner of society. Take the National Basketball Association. Can you name a minor-league basketball player? TV networks allow everyone to focus on the NBA's 30 teams, which employ the best players in the world. That's who we want to watch, not the players on the Fort Wayne Mad Ants (average salary: $18,000 a year). There is no middle class in basketball.

The same thing is happening to newspapers. A few decades ago, before the Internet, it was hard to get an out-of-town daily paper, so you read the local one. It was the best you could get. But once the best news organizations became available online, readers and advertisers gravitated to them. While journalists can only dream of getting paid on a par with NBA players, the Internet is dividing that business just as neatly: The leading publications get most of the money and the rest next to nothing. (or something like it) will do the same to music teachers. Online courses will do it to colleges. Radio, MTV, all the other networks and iTunes have in turn done it to pop musicians. More and better networks mean fewer dogs and a whole lot of tails.

Now factor in automation. The first computers got rid of roomfuls of calculating folks who were, back then, called computers. With the advent of Expedia, online travel arrangements became available to everyone, and the profession of travel agent virtually disappeared.

Networks and automation are relentless. It's what technology does. You know the family doctor whose job is to diagnose what's wrong with you? In another 10 or 15 years, she'll be on a par with most travel agents. And it will keep going. Software, artificial intelligence, new kinds of computers—like IBM's Jeopardy-winning Watson, which thumped the show's human champions—will automate more and more complex, information-based professions.

There are two viable courses of action for the U.S., or any other nation.

One is to pass laws that redistribute wealth from the top tier down. But then you end up with Sweden or France, which are pleasant places to visit but whose socialist policies hamper their global competitiveness.

The second option is to do everything possible to shift large segments of the population into a new kind of job.

Some smart companies and educators contend that the next middle class will be made up of this new kind of worker: one who deals in creativity, philosophy, and idea synthesis, thinking that can't be easily networked or automated.

While such "knowledge workers" have been the mainstay of the middle class for the last few decades, the next wave won't be based so much on what you know as on how well you use it.

Retailers will want to hire analysts to examine existing data to better understand why people buy certain things. Health care companies will value employees familiar with fields as disparate as medicine and fashion, who can gather vital data from the very clothing patients wear.

Many such jobs are on the frontier. At the moment they barely exist or haven't yet been conceived.

The opportunity to create them lies in changing our thinking: not in terms of stopping what can't be stopped, but in embracing what's about to be.