This is Probably a Good Time to Say That I Don’t Believe Robots Will Eat All the Jobs …

THE ROBOT TWEETSTORMS by @PMARCA

One of the most interesting topics in modern times is the “robots eat all the jobs” thesis. It boils down to this: Computers can increasingly substitute for human labor, thus displacing jobs and creating unemployment. Your job, and every job, goes to a machine.

This sort of thinking is textbook Luddism, relying on a “lump-of-labor” fallacy – the idea that there is a fixed amount of work to be done. The counterargument to a finite supply of work comes from economist Milton Friedman — Human wants and needs are infinite, which means there is always more to do. I would argue that 200 years of recent history confirms Friedman’s point of view.

If the Luddites had it wrong in the early 19th century, the only way their line of reasoning works today is if you believe this time is different from those Industrial Revolution days. That either (a) There won’t be new wants and needs (which runs counter to human nature); or (b) It won’t matter that there are new wants and needs, most people won’t be able to adapt to, or contribute/have jobs in the new fields where those new wants and needs are being created.

While it is certainly true that technological change displaces current work and jobs (and that is a serious issue that must be addressed), it is equally true, and important, that the other result of each such change is a step-function increase in consumer standards of living.

As consumers, we virtually never resist technology change that provides us with better products and services even when it costs jobs. Nor should we. This is how we build a better world, improve our quality of life, better provide for our kids, and solve fundamental problems. Make no mistake, advocating for slowing technological change to preserve jobs equals advocating for the punishment of consumers, and stalling the march of quality of life improvements.

So how then to best help individuals who are buffeted by producer-side technology change and lose jobs they wish they could keep?

First: Focus on increasing access to education and skill development, which itself will increasingly be delivered via technology.

Second: Let markets work ( this means voluntary contracts and free trade) so that capital and labor can rapidly reallocate to create new fields and jobs.

Third: Create and sustain a vigorous social safety net so that people are not stranded and unable to provide for their families. The loop closes as rapid technological productivity improvement and resulting economic growth make it easy to pay for the safety net.

With these three things in place, humans will do what they always do: create things that address and/or create new wants and needs.

The flip side of robots eating jobs.

What never gets discussed in all of this robot fear-mongering is that the current technology revolution has put the means of production within everyone’s grasp. It comes in the form of the smartphone (and tablet and PC) with a mobile broadband connection to the Internet. Practically everyone on the planet will be equipped with that minimum spec by 2020.

What that means is that everyone gets access to unlimited information, communication, and education. At the same time, everyone has access to markets, and everyone has the tools to participate in the global market economy. This is not a world we have ever lived in.

Historically, most people — in most places – have been cut off from all these things, and usually to a high degree. But with that access, with those tools in the hands of billions, it is hard to believe that the result will not be a widespread global unleashing of creativity, productivity, and human potential. It is hard to believe that people will get these capabilities and then come up with … absolutely nothing useful to do with them?

And yet that is the subtext to the “this time is different” argument that there won’t be new ideas, fields, industries, businesses, and jobs. In arguing this with an economist friend, his response was, “But most people are like horses; they have only their manual labor to offer…” I don’t believe that, and I don’t want to live in a world in which that’s the case. I think people everywhere have far more potential.

There is a consequence to a growing robot workforce. Everything gets really cheap.

The main reason to use robots instead of people to make something is when the robot can make it less expensively. The converse is also true. When people can make something that costs less than what robots can make, then it makes economic sense to use people instead of robots. This is basic economic arbitrage at work. It sounds like it must be a controversial claim, but it’s simply following the economic logic.

Suppose humans make widget X profitably at a $10 price to consumer. Robots can make X at a $5 price to consumer.

Economics drive X to be made entirely by robots, and consumers win. But then imagine the owner of the robots cranks X price to the consumer to $20.

Suddenly it’s profitable for humans to make X again; entrepreneurs immediately start companies to make X with humans for price $10 again

Robots eat jobs in field X. What follows is that products get cheaper in field X, and the consumer standard of living increases in field X — necessarily. Based on that logic, arguing against robots eating jobs is equivalent to arguing that we punish consumers with unnecessarily higher prices. Indeed, had robots/machines not eaten many jobs in agriculture and industry already, we would have a far lower standard of living today.

Just as increases in consumer goods prices disproportionately hurt the poor, holding back on robots eating jobs would also disproportionately hurt the poor. The same logic applies to trade barriers (import tariffs): These disproportionately hurt poor consumers by inflicting higher consumer goods prices.

Therefore, with rare exceptions, there won’t be states where robots eat jobs and products get more expensive. They almost always get cheaper.

A recessionary interlude.

Progressive and smart economist Jared Bernstein has explored the productivity puzzle of robots eating all the jobs (or not). He points out that productivity growth was up 1% last year, and has averaged 0.8% since 2011. But what he really focuses on is the smooth trend that tracks through the numbers.

The trend suggests that the pace of productivity growth has decelerated since the first half of the 2000s. That begs an important question that the robots-are-coming advocates need to answer: Why a phenomenon that should be associated with accelerating productivity is allegedly occurring over a fairly protracted period where the [productivity] trend in output per hour is going the other way?

My own take. We’re still coming out of a severe macroeconomic down cycle, the credit crisis, deleveraging, and the liquidity trap. The prevailing pessimistic economic theories — the death of innovation, the crisis of inequality and yes, robots eating all the jobs — will fade with recovery.

(For bonus points, identify the other tech-driven economic force that could explain low productivity at a time of great tech advancement. My nomination — tech-driven price deflation lowers prices, reduces measured GDP and productivity, while boosting consumer welfare.)

Thought experiment: Imagine a world in which all material needs are provided for free, by robots and material synthesizers.

Housing, energy, health care, food, and transportation – they’re all delivered to everyone for free by machines. Zero jobs in those fields remain.

Stick with me here. What would be the key characteristics of that world, and what would it be like to live in it? For starters, it’s a consumer utopia. Everyone enjoys a standard of living that kings and popes could have only dreamed of.

Since our basic needs are taken care of, all human time, labor, energy, ambition, and goals reorient to the intangibles: the big questions, the deep needs. Human nature expresses itself fully, for the first time in history. Without physical need constraints, we will be whoever we want to be.

The main fields of human endeavor will be culture, arts, sciences, creativity, philosophy, experimentation, exploration, and adventure.

A planet of slackers you say. Not at all. Rather than nothing to do, we would have everything to do. Curiosity, artistic and scientific creativity have full rein resulting in new forms of status-seeking (!).

Imagine 6 billion or 10 billion people doing nothing but arts and sciences, culture and exploring and learning. What a world that would be. The problem seems unlikely to be that we’ll get there too fast. The problem seems likely to be that we’ll get there too slow.

Utopian fantasy you say? OK, so then what’s your preferred long-term state? What else should we be shooting for, if not this?

Finally, note the thought experiment nature of this. Let’s be clear, this is an extrapolation of ideas, not a prediction for the next 50 years! And I am not talking about Marxism or communism, I’m talking about democratic capitalism to the nth degree. Nor am I postulating the end of money or competition or status seeking or will to power, rather the full extrapolation of each of those.

This is probably a good time to say that I don’t believe robots will eat all the jobs.

Why do I believe that?

First, robots and AI are not nearly as powerful and sophisticated as I think people are starting to fear. Really. With my venture capital and technologist hat on I wish they were, but they’re not. There are enormous gaps between what we want them to do, and what they can do.

What that means is there is still an enormous gap between what many people do in jobs today, and what robots and AI can replace. And there will be for decades.

Second, even when robots and AI are far more powerful, there will still be many things that people can do that robots and AI can’t. For example: creativity, innovation, exploration, art, science, entertainment, and caring for others. We have no idea how to make machines do these.

Third, when automation is abundant and cheap, human experiences become rare and valuable. It flows from our nature as human beings. We see it all around us. The price of recorded music goes to zero, and the live music touring business explodes. The price of run-of-the-mill drip coffee drops, and the market for handmade gourmet coffee grows. You see this effect throughout luxury goods markets — handmade high-end clothes. This will extend out to far more consumers in future.

Fourth, just as most of us today have jobs that weren’t even invented 100 years ago, the same will be true 100 years from now. People 50, 100, 150, 200 years ago would marvel at the jobs that exist today; the same will be true 50, 100, 150, 200 years from now.

We have no idea what the fields, industries, businesses, and jobs of the future will be. We just know we will create an enormous number of them. Because if robots and AI replace people for many of the things we do today, the new fields we create will be built on the huge number of people those robots and AI systems made available. To argue that huge numbers of people will be available but we will find nothing for them (us) to do is to dramatically short human creativity.

And I am way long human creativity.