Not everything that counts can be counted and not everything that can be counted counts.
—Albert Einstein  

A prominent and provocative British intellectual and founder of Prospect Magazine, David Goodhart has written about the peaking of the western social class known as the “cognitive elite” and the societal implications of its decline. Goodhart sees the status accruing to those outside the “knowledge economy,” and their share of national income, rising in the age of artificial intelligence (AI) and a post–COVID-19 world.

The Meritocracies in Western Societies
The COVID-19 pandemic has reinforced the sense of disillusionment in western societies that is the result of rising inequality and the loss of jobs to globalization, automation, and technology. Goodhart was ahead of the curve in identifying that trend in his 2017 book The Road to Somewhere, in which  he described divisions in western society based not only on income and wealth, but on different values—and the consequent conflicts that were arising between so-called “somewheres,” who cherish their ascribed identities (family, faith, nationality, geographic location), and “anywheres,” who value their portable achievements (university degrees, careers, success).

These insights explain a lot of the political turmoil over s and throw light on the phenomenon of former President Trump’s brand of populism. In his new book, Head, Hand, Heart, Goodhart focuses on how western societies have lavished status, respect, and dignity on a highly educated cognitive elite (the Heads) while denying due regard to manual workers (the Hands) and people who care for others either in an institutional workplace or at home (the Hearts). In essence, he argues, the Heads have used their form of meritocracy to become all-powerful, favouring so-called resume virtues (the skills that people bring to the marketplace) over eulogy virtues (the ones that are mentioned at funerals such as kindness, courage, honesty, and faithfulness), allowing “the brightest” to dominate the less bright but decent and hardworking. Goodhart discusses how many jobs ranked as relatively low-skilled, and paid accordingly, require more skills and complicated judgment than is generally appreciated. He cites care workers and public vehicle drivers as examples, and notes that their jobs involve complex tasks requiring carefully calibrated actions, reactions, judgments, and human empathy, and are more useful to society and the economy than much of the work performed by university-educated members of the cognitive elite such as low or mid-level managers and administrators in industry or government, or junior account managers in financial services.

Goodhart suggests that sending more people to university—a panacea in the minds of the meritocratic elite—is not the answer. There are already far too many highly educated people with jobs that underutilize their education (i.e., university graduates with degrees in English literature and philosophy working as waiters and baristas). The advent of AI will lead to more underemployment among cognitive workers, and exacerbate the decline in the graduate pay premium. He suggests jobs in essential services, that provide creative and bespoke services and design, and which require emotional intelligence and empathy, are likely to be, increasingly and deservedly, more appreciated in the future. The COVID-19 pandemic has increased our dependence on people who keep our home deliveries coming and who look after our medical and other care needs. Due to the world’s recent discovery of just how vital those previously underappreciated service personnel are, the respect and status accorded to Hand and Heart aptitudes are likely to rise. The effects of these changes on the economy and the investment industry are just beginning to come into view.

Goodhart explains, insightfully, much of the angst in the developed world today. He tells us that, in the future, societies and economies could see a global shift in incomes, as well as in respect, towards the Hands and Hearts and moving away from the currently dominant Heads, with only the best and/or powerful top strata of the Heads continuing to thrive. Relative rates of pay may take a significant step upward in Hand and Heart sectors, with implications for costs and prices in the economy.

What does this mean for financial professionals?
Goodhart’s argument should lead those of us in the investment industry—a sub-sector of the cognitive elite—to realize that we must adapt our services in order to thrive in a world where many mainstream “Head jobs” currently held by university graduates will instead be done by AI. To adapt, Goodhart suggests, people must emphasize the bespoke aspects of the services provided and the quality of skilled crafts, and, importantly, we must all build genuine empathy and constructive care for our clients and customers. Highly profitable transactional financial services, in which clients small and large are looked upon impersonally as mere counterparties, may increasingly come under pressure.

In the post-Trump era, a new compromise between the political divisions that plague the U.S. and a new settlement of the social and economic issues between Heads, Hands, and Hearts may prove to be interdependent.

Now is a particularly apt time to consider and act upon these issues, but Goodhart acknowledges that raising the rewards and prestige attached to the Hand and Heart sectors may be gradual over generations, as policies chip away at concentrations of wealth and power among Heads, and wages are raised for Hand and Heart professions.

Head, Hand, Heart primarily offers a diagnosis, rather than a set of new policies, suggesting some directions for society to take and providing thoughts on how to get there. Some deep trends are already nudging rich countries in these directions. Technology is eliminating many middling cognitive jobs. The golden age of mass university education appears to be ending as young people weigh the rising costs against the declining benefits. The aging of society and the rising visibility of care functions of many kinds are evident. There is greater public concern for the environment, ecology, and belonging, thanks to those oddly compatible bedfellows, the green movement and the populist revolt.

Some critics suggest that the Hands may be hurt more than the Heads by AI and further automation. Goodhart maintains, however, that the Hands have taken a battering from the first three industrial revolutions—the coming of the steam engine, the age of science and mass production, and the rise of digital technology—while the fourth industrial revolution (powered by the cloud, social media, the internet, and AI) is threatening the middle and lower strata of the Heads like never before.

Goodhart’s suggestion is that Heads will no longer be able to look forward to cushy jobs just because they are well educated, but will need to become creative and provide bespoke services that are too difficult for automation and AI to replicate. He acknowledges that Hands will need to do the same, but maintains that their ranks have already been extensively thinned out by the industrial revolutions. Meanwhile, the Heads are only just starting this battle, with the greatest decline in relative status and income yet to come for them. This view is certainly debatable and no doubt will be a topic for many future books!

Although Goodhart accepts that the pace of change may be gradual, he notes that norms and expectations can shift quickly when people discover that many others share their views, particularly in the age of social media. If new norms on gender and race equality, ecology, and even smoking can be established in relatively short periods of time, then why not new assumptions about Head, Hand, and Heart?

Reading Goodhart’s book may convince you change is afoot, and may help you prepare to react—and even capitalize on—related developments when they come.