Analyses should focus on the digital economy, which is doing most of the automation. Its main impact can be see in the stats: inequality. And it will keep going up.
Perhaps in the rise of the USA populists and violence we are already seeing the beginning of the implosion of society due to the rising inequality and the song of angry men.
I'm 68 and a geek grad from 3 letter school. On the DARPANET in 72. Seen all the tech evolution from mainframes to DEC to PCs to laptops to phones. Saw how PC based solid modeling like Solid Works replaced drafters in automotive as engineers did more and most of the whole design and analysis of parts and subsystems.
I love Noah Smith.
My observation as an active participant over 50s years in this topic follows.
A. Yes, automation eliminates jobs. Drafters, admin/secretaries, travel agents.
B. Totally agree that the variable cost of IT amd automation is incredibly low
C. Physical products still require component manufacturing, tooling, assembly and test.
D. Unfortunately the Apple et al determined that China wae an easier route than US labor (it's competitive here in Arizona, plus automation) would probably raise an iPhone variable cost by one dollar. Or 2. Meaningless actually
E. The long arc of allnof this is interesting to me:
Conclusion: Not enough work is very very bad. Coupled with today's lower work ethic in under 35 yr olds, it's gonna be a huge problem.
Meanwhile labor has 2 core issues.
1. Struggle forna living wage
2. Struggle for Healthcare payments
Solutions:
A. National Healthcare. Saves $2.5 Trillion annually of non value. Move from 20% GDP back to 10% GDP.
B. This allows worker mobility to optimize jobs and equally allows startups to hire a BigCorp talent afraid to not have Healthcare.
C. Mandatory lower working hours. Overtime is illegal. Minimum wage $20/hr.
Productivity to infinity is 1 person making 500 million cell phones in a Foxconn factory. With millions unable to be supported.
You seem to be framing the issue as if inequality in income earned before taxes is intrinsically a bad thing. An income or wage is a price, and prices within a market system serve the roles of a signal and an incentive. In this case, the market is broadcasting for all who are willing to listen that the big opportunities for creating value for fellow humans is in higher skilled jobs in technology and capital investment in these industries. This isn’t just a good thing, it is a necessary thing for a functioning complex adaptive learning system such as decentralized markets.
AI will usher in an era with a rate or pace of disruption that will be difficult to comprehend. On another note, Tomas, are you going to invest in Substack? I will.
So where do we go now? If we want a business that will grow, but we can't (don't want to) join the digital/automation revolution, who will be our customers?
Instinct tells me that the future lies in providing for and caring for people. That means creating a desirable environment, and enlisting carers who are focussed on the human experience (this includes cooks, nurses, masseurs,... OMG, even sex workers?). The market is the section of humanity that is excessively stressed by modern life, those who need to regain control (this includes diabetics, the obese, drug users...) but who also have enough money to pay for a "reset".
Theorists say that if AI takes over then there are 2 options: (a) It wipes us out because we are a virus and unnecessary, (b) It creates a utopia for its creators, but keeps us like pets.
For option (a) I should follow my instincts in the sure knowledge that one day nothing will matter.
For option (b) I should follow my instincts in the sure knowledge that I will be one of the providers of Utopia.
It would seem that AI is much like an iceberg to the Titanic. What we can currently perceive "above the surface" falls short of appreciating it's full impact to a system/structure designed to withstand single compartment damage but not injury across several at once. The implementation of "trickle down economics" in the 80s and its continuance to date despite its severe negative consequences to the majority of workers in this nation was possible because it was and continues to be successfully "sold" to those it damages because tax policies and Supreme Court decisions have allowed the undermining of one person one vote by allowing the windfalls accumulated by the rich to be used to market the continuance of that agenda. It seems the assumption by the author is that AI, like an iceberg, is a force/entity that cannot be managed or controlled in its implementation and therefore its impact on our society, and that, as a consequence, and like the Titanic, we can only hope for survivors. Given the inertia and indifference of Congress, populated as it is by the wealthy, such an assumption is probably only realistic. One should not ignore, however, that the government could play a role in throttling the pace of change since it would be in its interest and that of the majority of people it purportedly represents to reasonably apply controls to the implementation of this technology, allowing for the survival of the nation as a democracy and permitting a greater percentage of its citizens a means to support themselves in the face of such anticipated change. The Titanic lies on the bottom of the Atlantic in part because it was operated under the premise that it was designed not to sink. Post mortem analysis demonstrated that it did not have to happen that way. I would like to think that the significant and anticipated disruptions to society AI is expected to bring does not mean that we have to be dragged behind it helplessly but might instead temper its pace to better accommodate our needs for purpose and meaning and allow more time for transition.
Is it possible that men are dropping out of salaried jobs just because they can? In decades past, the man had to work. But if social benefits and incomes are now sufficient to allow an "adequate" lifestyle without working, then why not choose an easier option?
I live in Vietnam, and as an investor I am effectively off-grid. I have disappeared from the economy where I worked for 40 years.
This covers lots of the details of the automation issue, but I don’t agree that the main worry should be preserving existing jobs. Labor is not a thing to be cherished, but a means to an end which should be eliminated as much as possible. I believe LLMs like ChatGPT will reduce the time knowledge workers spend working on the products they make, so they should get more pay and/or the products will get less expensive.
Very cool Tomas. The detail of the data does give a different picture that seems to be more coherent with general public opinion about automation.
Would be curious if we can assign different shares of the inequality growth in advanced economies to automation vs globalisation, lower top marginal tax rate, near-end of organised labour... There are several contenders there that seem to all act starting in the mid-70s. And they would require different policy response.
I find the statistics on males dropping out of the workforce very interesting.
Have you cross-checked this with the numbers of stay-at-home fathers? It may be nothing given declining fertility rates.
With more women entering the workforce, we'd obviously expect an increase in child care workers (low productivity, low pay) though most seem to be female.
Another possibility is increase in incarceration rates. This would disproportionately affect young males. Plus criminals on the outside don't earn wages.
Blimey. Possibly the record for the longest (and thought-provoking) comment thread/most comments on your articles Tomas?!
And that sentence where you linked to a dozen different articles in each word (bravo) - it overwhelmed me and thus cured my weakness for link rabbit holes. :D
My take aways - inequality, speed of change (related) and universal healthcare... (thinking emoticon)
And I'm sure you and most others have seen the Boston Dynamics robots - be afraid, be very afraid (I thought of it when looking at the graph in your previous articles (cognitive, non-routine, physical etc).
STOP - DO NOT INVEST IN SUBSTACK'S BROKEN MODEL!!!
Seriously if they are begging for money and VC bailed it means its a broken model. Think about it, how many regular people are paying per writer $5 to $10 per month? Not enough apparently and the next thing they will introduce is advertising which is 1million times worse. This monetization model is for elites, elite writers and elite readers who can afford to pay to "benefit" from their writing. Its not Twitter but its just as elitist as Twitter and will devolve into the same mess and control mechanism.
Go check out web3. Go check out crypto. Go check out the MVP of my solo hobbiest project "dplatform.me" The next platforms will be web3, crypto, micro-transactions, and governed by decentralized autonomous organizations (DAOs) or no one
If there is only one optimal solution for each problem and A I can find it. Like the traveling salesman The what does that mean for the end of competition for a better product and capitalism.
An excellent economics article without needing to use the word wealth. Attention is given not just to the creation of valuable things, but also to the loss of value that is caused in other areas. So instead of mentioning the somewhat magical concept of “wealth creation” that techno-fools and capitalist-fools like to highlight, there is also the implied mention of “wealth destruction” and the clear LINK between the two is made. I would argue that this link is consistent with a flow model of wealth where the total amount of wealth is in fact conserved. Using the concept of wealth inequality as you do in the comments section is still useful and consistent with the flow model.
You also highlight one of the biggest problems with GDP statistics: they only measure things by the amount that people PAY for them (legally!). This means that many valuable activities are underweighted or just ignored entirely. The generally accepted economic model of reality is bedevilled by definitional problems, measurement issues and an elastic measuring stick. If societies make decisions based solely on this model the margin for error is very large.
Tech is indeed highly deflationary as is offshoring production to low income countries. So why haven’t we been experiencing a deflationary boom? The answer to that question goes to the heart of any discussion about reshaping our economic system.
Perhaps in the rise of the USA populists and violence we are already seeing the beginning of the implosion of society due to the rising inequality and the song of angry men.
I'm 68 and a geek grad from 3 letter school. On the DARPANET in 72. Seen all the tech evolution from mainframes to DEC to PCs to laptops to phones. Saw how PC based solid modeling like Solid Works replaced drafters in automotive as engineers did more and most of the whole design and analysis of parts and subsystems.
I love Noah Smith.
My observation as an active participant over 50s years in this topic follows.
A. Yes, automation eliminates jobs. Drafters, admin/secretaries, travel agents.
B. Totally agree that the variable cost of IT amd automation is incredibly low
C. Physical products still require component manufacturing, tooling, assembly and test.
D. Unfortunately the Apple et al determined that China wae an easier route than US labor (it's competitive here in Arizona, plus automation) would probably raise an iPhone variable cost by one dollar. Or 2. Meaningless actually
E. The long arc of allnof this is interesting to me:
Conclusion: Not enough work is very very bad. Coupled with today's lower work ethic in under 35 yr olds, it's gonna be a huge problem.
Meanwhile labor has 2 core issues.
1. Struggle forna living wage
2. Struggle for Healthcare payments
Solutions:
A. National Healthcare. Saves $2.5 Trillion annually of non value. Move from 20% GDP back to 10% GDP.
B. This allows worker mobility to optimize jobs and equally allows startups to hire a BigCorp talent afraid to not have Healthcare.
C. Mandatory lower working hours. Overtime is illegal. Minimum wage $20/hr.
Productivity to infinity is 1 person making 500 million cell phones in a Foxconn factory. With millions unable to be supported.
Sustainability requires deliberate UN-Productivity.
You seem to be framing the issue as if inequality in income earned before taxes is intrinsically a bad thing. An income or wage is a price, and prices within a market system serve the roles of a signal and an incentive. In this case, the market is broadcasting for all who are willing to listen that the big opportunities for creating value for fellow humans is in higher skilled jobs in technology and capital investment in these industries. This isn’t just a good thing, it is a necessary thing for a functioning complex adaptive learning system such as decentralized markets.
AI will usher in an era with a rate or pace of disruption that will be difficult to comprehend. On another note, Tomas, are you going to invest in Substack? I will.
So where do we go now? If we want a business that will grow, but we can't (don't want to) join the digital/automation revolution, who will be our customers?
Instinct tells me that the future lies in providing for and caring for people. That means creating a desirable environment, and enlisting carers who are focussed on the human experience (this includes cooks, nurses, masseurs,... OMG, even sex workers?). The market is the section of humanity that is excessively stressed by modern life, those who need to regain control (this includes diabetics, the obese, drug users...) but who also have enough money to pay for a "reset".
Theorists say that if AI takes over then there are 2 options: (a) It wipes us out because we are a virus and unnecessary, (b) It creates a utopia for its creators, but keeps us like pets.
For option (a) I should follow my instincts in the sure knowledge that one day nothing will matter.
For option (b) I should follow my instincts in the sure knowledge that I will be one of the providers of Utopia.
It would seem that AI is much like an iceberg to the Titanic. What we can currently perceive "above the surface" falls short of appreciating it's full impact to a system/structure designed to withstand single compartment damage but not injury across several at once. The implementation of "trickle down economics" in the 80s and its continuance to date despite its severe negative consequences to the majority of workers in this nation was possible because it was and continues to be successfully "sold" to those it damages because tax policies and Supreme Court decisions have allowed the undermining of one person one vote by allowing the windfalls accumulated by the rich to be used to market the continuance of that agenda. It seems the assumption by the author is that AI, like an iceberg, is a force/entity that cannot be managed or controlled in its implementation and therefore its impact on our society, and that, as a consequence, and like the Titanic, we can only hope for survivors. Given the inertia and indifference of Congress, populated as it is by the wealthy, such an assumption is probably only realistic. One should not ignore, however, that the government could play a role in throttling the pace of change since it would be in its interest and that of the majority of people it purportedly represents to reasonably apply controls to the implementation of this technology, allowing for the survival of the nation as a democracy and permitting a greater percentage of its citizens a means to support themselves in the face of such anticipated change. The Titanic lies on the bottom of the Atlantic in part because it was operated under the premise that it was designed not to sink. Post mortem analysis demonstrated that it did not have to happen that way. I would like to think that the significant and anticipated disruptions to society AI is expected to bring does not mean that we have to be dragged behind it helplessly but might instead temper its pace to better accommodate our needs for purpose and meaning and allow more time for transition.
Is it possible that men are dropping out of salaried jobs just because they can? In decades past, the man had to work. But if social benefits and incomes are now sufficient to allow an "adequate" lifestyle without working, then why not choose an easier option?
I live in Vietnam, and as an investor I am effectively off-grid. I have disappeared from the economy where I worked for 40 years.
This covers lots of the details of the automation issue, but I don’t agree that the main worry should be preserving existing jobs. Labor is not a thing to be cherished, but a means to an end which should be eliminated as much as possible. I believe LLMs like ChatGPT will reduce the time knowledge workers spend working on the products they make, so they should get more pay and/or the products will get less expensive.
Very cool Tomas. The detail of the data does give a different picture that seems to be more coherent with general public opinion about automation.
Would be curious if we can assign different shares of the inequality growth in advanced economies to automation vs globalisation, lower top marginal tax rate, near-end of organised labour... There are several contenders there that seem to all act starting in the mid-70s. And they would require different policy response.
I find the statistics on males dropping out of the workforce very interesting.
Have you cross-checked this with the numbers of stay-at-home fathers? It may be nothing given declining fertility rates.
With more women entering the workforce, we'd obviously expect an increase in child care workers (low productivity, low pay) though most seem to be female.
Another possibility is increase in incarceration rates. This would disproportionately affect young males. Plus criminals on the outside don't earn wages.
Brilliant piece btw.
Blimey. Possibly the record for the longest (and thought-provoking) comment thread/most comments on your articles Tomas?!
And that sentence where you linked to a dozen different articles in each word (bravo) - it overwhelmed me and thus cured my weakness for link rabbit holes. :D
My take aways - inequality, speed of change (related) and universal healthcare... (thinking emoticon)
And I'm sure you and most others have seen the Boston Dynamics robots - be afraid, be very afraid (I thought of it when looking at the graph in your previous articles (cognitive, non-routine, physical etc).
https://youtu.be/-e1_QhJ1EhQ - I promise I'm not a bot posting this (yet)...
really good one!! worth to read it thoroughly!! :)
it's always a good idea to align on concepts and data before starting the debate on core topics
STOP - DO NOT INVEST IN SUBSTACK'S BROKEN MODEL!!!
Seriously if they are begging for money and VC bailed it means its a broken model. Think about it, how many regular people are paying per writer $5 to $10 per month? Not enough apparently and the next thing they will introduce is advertising which is 1million times worse. This monetization model is for elites, elite writers and elite readers who can afford to pay to "benefit" from their writing. Its not Twitter but its just as elitist as Twitter and will devolve into the same mess and control mechanism.
Go check out web3. Go check out crypto. Go check out the MVP of my solo hobbiest project "dplatform.me" The next platforms will be web3, crypto, micro-transactions, and governed by decentralized autonomous organizations (DAOs) or no one
The future is decentralized!
If there is only one optimal solution for each problem and A I can find it. Like the traveling salesman The what does that mean for the end of competition for a better product and capitalism.
An excellent economics article without needing to use the word wealth. Attention is given not just to the creation of valuable things, but also to the loss of value that is caused in other areas. So instead of mentioning the somewhat magical concept of “wealth creation” that techno-fools and capitalist-fools like to highlight, there is also the implied mention of “wealth destruction” and the clear LINK between the two is made. I would argue that this link is consistent with a flow model of wealth where the total amount of wealth is in fact conserved. Using the concept of wealth inequality as you do in the comments section is still useful and consistent with the flow model.
You also highlight one of the biggest problems with GDP statistics: they only measure things by the amount that people PAY for them (legally!). This means that many valuable activities are underweighted or just ignored entirely. The generally accepted economic model of reality is bedevilled by definitional problems, measurement issues and an elastic measuring stick. If societies make decisions based solely on this model the margin for error is very large.
Tech is indeed highly deflationary as is offshoring production to low income countries. So why haven’t we been experiencing a deflationary boom? The answer to that question goes to the heart of any discussion about reshaping our economic system.
I would appreciate it if my name were not placed in front of fictitious quotes. :-)