Gig Jobs Will Be The Future, Quality Investing To Return, Says Saurabh Mukherjea

Every 30 years or so, large economies go through structural changes. So, the US today and what it was 30 years ago are radically different economies. It’s the same for China. In India’s case, we are broadly stuck to the post-1991 model, which is get into a nice job, earn salary, bonus, promotion and so on. That structure will break at some stage… it’s already breaking due to the onslaught of AI and automation.

What lies ahead? The world of gig work. Both in India and in the West, getting office jobs is now increasingly unlikely. Most companies have no need to hire. We can see that in the annual reports of large Indian companies. Yet, India continues to produce 7-8 million graduates a year. Increasingly, executives who are finding it tough to grind it out in corporate India—quitting their jobs in big cities, or being forced out of their jobs—are moving to smaller towns and taking up gig work. Say, an IT executive is coding for a Latvian hospital or for a Tanzanian restaurant chain.

Western companies are hiring Indian freelancers to clean the data, label it, and train their bot, and so on.

Whether you are 25 or 55, the way you will earn a living is through gigs. A person might have multiple gigs going at any point of time.

Even in finance, we are finding freelance advisors, who may be located in Nainital or Coorg, and could be running a flourishing financial advice consultancy, with clients spread across the world. The story of graduating from a university, joining a job, and getting a salary is increasingly fading. With technology making coordination easier, the merits of being in organised employment are fading. From the employer’s perspective, having a large, fixed cost base of X number of staff is becoming less attractive. Instead, they want to call upon expertise on a needs basis.

There are two aspects to consider. The first is that whenever there’s tech disruption, there’s a substitution effect initially. For instance, in 1880, Thomas Edison came up with the light bulb. The substitution effect was that the candle maker lost his job. That’s the immediate effect of technology. We are seeing that, as tech and call center workers are getting laid off. The second dimension tends to be the complementarity effect. So back to Edison and the light bulb. By 1900, the motor car was on the roads. By 1910, nightlife, gramophone, Hollywood was there, and new jobs were created. I think we will see complementarity effects of AI, which will be small businesses across the world saying we want customised tech, whether it’s customer relationship management, a management information system or a podcasting platform. That

might increasingly be built by freelancers and gig workers. But there is a chronology to it that is difficult to hasten. We are going through substitution and have some visibility now that complementarity isn’t far away.

Then, there’s mindset shift. In 18th century England, weaving cloth was a cottage industry. It is only in the 1850-60s that the English realised it’s going to happen in factories. That mindset shift took 50 years.

The realisation that the salaried office job is history hasn’t yet sunk in. It will take 4-5 years or maybe a decade to kick in. That’s natural as habits and mindsets change slower than technological changes.

A month after we published Breakpoint, Azim Premji University published a report called State of Working India 2026, which said that young men are pulling out of university in higher numbers than ever before. This is the first ever in India that young men are doing that because they have figured out that university education is by and large a waste of time. The report also says that out of 100 graduates In India, 4 are getting a salaried job.

What hasn’t emerged yet is coaching or online education to prepare youngsters for gig jobs. For instance, podcasting and managing social media accounts of small companies will be a huge area of work. But I don’t see vocational training emerging in India to train 18-year-olds on how to manage social media accounts or make podcasts.

I haven’t seen institutions providing vocational training for gig jobs emerge. That’s a big opportunity to tap into.

Yes, and the people who could fill the gap are these test prep providers, when they realise that sitting for mass public exams like IIT JEE, NEET and others, has no obvious utility in terms of jobs.

As the formal higher education system reshapes, the world will veer away from universities to providing vocational education.

India will be at the forefront of this because our white-collar jobs were centered disproportionately on these exams. After the liberalisation in 1991, we are a uniquely IT services dependent country. Silicon Valley’s first disruption was using AI to blow apart coding and it is being felt in Bengaluru, Hyderabad and Gurugram. Other countries will also face the same disruption.

Nevertheless, the vocational education response will also potentially come first in India, and that will lead to the creation of a whole new set of jobs. People will start earning a living from age 18 or 19 in the global gig work market of either doing social media or other tasks like data labelling and cleaning for training the bots.

One big challenge is that our household savings rate is at a 50-year low, and the rise of social media has played a role in this.

We are among the youngest countries in the world, with a median age of 28. We have 11 per cent of the world’s billionaires even though we only have 3 per cent of the world gross domestic product (GDP). And we are the only large economy with free mobile broadband. This troika of forces has meant that we as a country in the last five years have taken on enormous amounts of debt.

Thanks to social media, everybody wants to live like an IPL star or a Bollywood star because they’re being fed curated images of luxury. This high household debt is the really disturbing piece from the personal finance perspective.

The main intervention that’s required is in the university construct, which is no longer working. If the policymakers can replace universities for all, barring the 1-2 per cent of the brightest students who can make a career in research and development, and the rest can go for vocational education of six months to a year. If the authorities can hasten that and prevent youngsters from whiling away three of the best years of their lives sitting in classrooms learning things which have very little relevance in the job market today, that will be a huge step forward.

The tech disruptions are a part of this broader story as is the fading of the nation state. Otto von Bismarck who oversaw the unification of Germany and served as its first Chancellor, in 1871, created what we call the modern nation state, a tax union, a customs union, a state which enforces law and order on a disparate geography. That nation state is fading away due to three drivers.

First, the nation state is increasingly finding it difficult to collect tax revenues. Corporates, foreign investors and the middle class are pushing back, and the tax-to-GDP ratio is under relentless pressure. When the state cannot collect taxes successfully, it cannot provide public services, such as law, healthcare, etc.

Second, things like AI, social media and clean tech, all part of the modern economoy, are no longer controlled by the government or state. AI is being commanded by the US and clean tech by China. Every other country in the world is effectively subservient to the technology that these countries are now providing. If tomorrow Microsoft decided to yank Microsoft Office out of India, there is very little anybody in India can do. The stock exchange, air traffic control, banking system, national payment system, all of that will come to a grinding halt.

Third, again jobs. The easiest person for the government to tax is the white-collar or salaried worker. But as salaried jobs fade away and gigs become the default way of working, it will be tougher for the modern state to exercise taxation on individuals. I think, payments in cryptos and Stablecoins will become the norm, which will be impossible to trace.

The fading of the nation state has implications for peripheral markets such as ours and those in Europe. As the nation states fade, these profits are migrating back from the periphery to the center. So, companies would be paying the hyperscalers for AI tokens, which are basically a modern form of wealth transfer from our emerging economy to Silicon Valley.

Four years ago, we took licenses in the US and Gift City in Gujarat and set up a global fund, where we said we will invest in Silicon Valley, in manufacturing in Europe, in power, defence, as well as small- and mid-caps across east Asia, the US and Europe. Our suggestion to Indian families is that you should have a significant chunk of your wealth invested across the developed markets, rather than stick all your equities in India, which is only 2 per cent of the global market.

As the nation state diminishes, the economy becomes more and more vulnerable to the global free market process, which is injecting uncertainty, which in turn reduces stock returns. So, Indian investors should diversify globally.

In five years, people will be globally diversified, just like 10 years ago, when people had no exposure to the stock market, but which is not the case now.

We have been doing quality investing since 2017. It worked for five years which is why we set up Marcellus.

In the first year of Covid, quality stocks went through the roof, but I didn’t realise how quickly they got overvalued. Around Diwali in 2021, value stocks were cheaper and outperformed quality stocks for five consecutive years.

As the broader economic climate has darkened (excessive borrowings, difficult job situation, slowing tax collections and capex growth), quality has come back. So once again we are back to where we were in 2018-19. High quality companies are growing their profits at high teens, whereas Nifty 50 earnings growth is barely 7-8 per cent. It means quality companies are growing at least twice as fast.

I think two things will have to hold for this renaissance to sustain. First, the economic challenges we are experiencing will stay the same. In a climate of economic boom, like in 2022-23, people don’t buy quality. At that time, people think cheap will do as well as quality. My reading is the economic conditions will stay tough.

Second, we will need the foreign institutional investor (FII) to come back as they tend to be the biggest champions of buying clean, well-run classical franchises. They are likely to come back is because over the last couple of years, the currency got pounded and India underperformed other emerging markets by a massive 20-30 per cent. We looked at the last 25 years and whenever this has happened, in the subsequent year, India has done really well vis-a-vis our emerging market competitors. So that creates the background for FIIs to return.

I would request the finance ministry to reconsider the capital gains tax that we levy on foreign equity investors. In June, the government got rid of it on bond investors who come from abroad.

We are the only country to tax foreign equity investors for their capital. In a world where global capital has many choices, if you tell them they have to pay long-term capital gains tax (LTCG) of 12.50 per cent, I don’t think we are making the case easy for us. Also, given that the government collects a mere $1.50 billion capital gains tax from foreign investors, a small amount compared to $70 billion of foreign money has left the country in the last two-and-a-half years, the rupee has fallen 10 per cent in the last year, the benefits of scrapping the tax to the country can be substantial. The 10-year bond yield itself will fall by enough for the government to make up that `15,000 crore tax shortfall. If it falls by 20 basis points or 0.20 per cent, the shortfall will be covered. So valuation conditions are ripe for FIIs to return. The market environment is set. Earnings growth of quality companies is set. All we need is a catalyst from the government to scrap LTCG.

nidhi@outlookindia.com