On the Mayans, the Robots, Our Fears, and Our Future

By Professor Pinch  JAN 22, 2013 10:15 AM

What do Mayans and robots have in common? Their narratives are driven by fear and distract us from the future. And if we can't overcome our fears, the future is always going to disappoint us.

 


A couple weeks ago we got our December 2012 jobs number, and it showed that there were 155,000 jobs created during that month.  Aside from some of the revisions in previous data, the report was rather boring. The jobs number came in-line with expectations and unemployment has continued to trend lower. There haven't been any precipitous drops, no gangbuster outbreaks in job creation. But the trend has been decisively lower.

Also in the month of December, the 21st came and went rather boringly. No black hole vortexes opened up in the sky above to send us to a parallel universe, nor were there any biblical plagues unleashed on us all. The world didn't end and we're still here. And that means we're still here to discuss and figure out one of the most talked-about issues we've had to deal with the past few years since the credit crunch: the moribund recovery in the jobs market, and with it, our economy.
 
The Jobs Market: Where Are We?
 
So let's take a look at the jobs market as it is today. We know that the December jobs report said 155,000 jobs were added that month. Since the end of the recession in the third quarter of '09, the economy has only created 83,000 jobs on average. But the first few months of the recovery still saw job losses, so if you wanted to look at just the past three years, the economy has averaged about 130,000 new jobs each month since the beginning of 2010.
 
The Fed has made no secret that the target unemployment rate for them to ease off from QE is 6.5%. And since we’re still at 7.8% in U-3 unemployment, that’s more than a full point away from the Fed’s target. So the easy Fed policy is bound to continue, despite the polarity of views we may be seeing at the Fed because the predominant view now is that the pace of job recovery is lackluster.
 
One of the things you hear constantly about the jobs market is that we don’t make things anymore; our economy is nothing more than a bunch of coffee baristas, retail clerks, and burger flippers. So I wanted to throw up a few charts and pose one simple question to that notion: Oh, really? This first chart goes back 60 years, and as you can see, employment in goods-producing industries as a percentage of the labor force has been in decline. Since the Korean War.
 

 
Meanwhile, industrial production has gone in one direction as well -- the opposite direction of the employment chart.
 

 
This next chart focuses on the last recession and the recovery.
 

 
You can see durable goods industrial production has resumed growth and non-durable goods didn’t fall as much as durable goods. Having said that, non-durable goods industrial production also hasn’t had the same trajectory of recovery that durable goods has had. But nevertheless, the idea that we don’t make anything anymore is just naïve and hopelessly nostalgic. It’s kind of like driving a car, listening to the radio, and wishing you were Amish and waking up at the crack of dawn to take your horse and buggy into town to stock up on provisions. Actually, it’s probably more like scrolling through your digital set-top box hooked up to a multiplex-sized HDTV with a theater-quality sound system only to watch nothing but 60-year-old black-and-white sitcoms.
 
But for now, the more important question to ask about manufacturing in this day and age is what do we make, and how? And given the changing demographics of this country, the question I want to start with is this: Is this economy really capable of creating 250,000+ jobs a month? Is this expectation realistic? Because if the population is getting older faster than our birth rate can keep up, then the number of people leaving the labor force will be rising more because of secular demographic forces than anything else.
 

 
Said differently, what if the tools being used to track this economy need to be recalibrated? Or changed completely? This question isn't as crazy as you might think. Peaks in the number of workers aged 25-34, 35-44 and 45-54 are all behind us. So with these series in decline, where are the additional 150,000 jobs each month going to come from? They're not going to come from anywhere for now. Maybe as the 16-19 and 20-24 year old cohorts age, the high-school kids and college-aged adults will add to the job rolls in a few years.
 
But is it all just demographics? Is our destiny to be found in a bunch of actuarial tables? Did Malthus foretell our future a couple of hundred years ago? Hardly. There are plenty of other forces at work. One issue that has gotten a lot of attention since the holidays is the idea of technology replacing people in the labor market. And to try and understand that dynamic, we need to take a closer look at what the disruptive nature of technology is doing. Robotz: Comin’ fer Yer Jobz
 
Yes, yes -- this is the part of the program where we step into meme land. Why? Because it's interesting to take a look at in the context of a society that has been fueled on societal acrimony for the past five years or so. Everything is either a threat or someone/something to criticize or blame. "The robots are coming for our jobs! And our lives!" That's the primal fear, anyway. Because, as we all know, once the robots become self-aware, they will kill us. I mean, Steven Spielberg was going to turn Daniel Wilson's book Robopocalypse into a movie. That's the clearest sign yet that we have to fear robots. Oh wait, they're canceling production because "it's too expensive" and "the script is not ready." Maybe if they fed Wilson's book through Automated Insights' product, they'd have a script now. And if they had some algorithmically-controlled cameras to fill in the non-CG parts of the film, we could have been looking at a 2013 release date for our demise at the hands of robots. If the Mayans weren't going to get us, the robots surely would.
 
But seriously, let's take a look at what's going on here because not only is it important, but in the era of social media-culled groupthink, this is a conversation that isn't taking place nearly as often as it needs to. To me, there are several things going on at once that seem to have put us where we are now. And the most important thing is, these things would've happened regardless of the existence of a housing and credit bubble.
 
In the spring of last year, Tyler Cowen wrote an article about the export boom we have seen here in the US and talked about the "insourcing" phenomenon. Late last year, Apple (NASDAQ:AAPL) and GE (NYSE:GE) both announced they were onshoring production of some of their products back to the US. One of the reasons was that the ability to automate the manufacturing process made the relative advantage that lower wage countries had over the US much less meaningful. "Factory floors these days are nearly empty of people because software-driven machines are doing most of the work. The factory has been reinvented as a quiet place," Cowen wrote. Cheaper processors aren't just made for cheaper, more powerful phones for us to play games, tweet, and send Facebook (NASDAQ:FB) messages to our friends with.
 
New Technologies, Alternative Markets, and Economies
 
Something else that has been going on that gets surprisingly little discussion is the effect that all of this computing and networking technology is having on the economy. I’m not talking about trading Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) on a pairs here -- that story is rapidly becoming old as dirt. No, I’m talking about something that W. Brian Arthur wrote about at the McKinsley Quarterly called “the second economy.”
 
What is this “second economy?” Well, it’s one where transactions take place in an automated manner. Arthur points out two examples. Here’s the first:
 
Twenty years ago, if you went into an airport you would walk up to a counter and present paper tickets to a human being. That person would register you on a computer, notify the flight you’d arrived, and check your luggage in. All this was done by humans. Today, you walk into an airport and look for a machine. You put in a frequent-flier card or credit card, and it takes just three or four seconds to get back a boarding pass, receipt, and luggage tag. What interests me is what happens in those three or four seconds. The moment the card goes in, you are starting a huge conversation conducted entirely among machines. Once your name is recognized, computers are checking your flight status with the airlines, your past travel history, your name with the TSA1 (and possibly also with the National Security Agency). They are checking your seat choice, your frequent-flier status, and your access to lounges. This unseen, underground conversation is happening among multiple servers talking to other servers, talking to satellites that are talking to computers (possibly in London, where you’re going), and checking with passport control, with foreign immigration, with ongoing connecting flights. And to make sure the aircraft’s weight distribution is fine, the machines are also starting to adjust the passenger count and seating according to whether the fuselage is loaded more heavily at the front or back.
 
And here’s the second:
 
Now consider a second example, from supply chain management. Twenty years ago, if you were shipping freight through Rotterdam into the center of Europe, people with clipboards would be registering arrival, checking manifests, filling out paperwork, and telephoning forward destinations to let other people know. Now such shipments go through an RFID2 portal where they are scanned, digitally captured, and automatically dispatched. The RFID portal is in conversation digitally with the originating shipper, other depots, other suppliers, and destinations along the route, all keeping track, keeping control, and reconfiguring routing if necessary to optimize things along the way. What used to be done by humans is now executed as a series of conversations among remotely located servers.
 
Note the dichotomy here between the old way and new way these relatively simple workflows get done. Where you used to have at least one person involved in each transaction, as well as the additional time it took to get a hold of a human facilitator, you now have none. Plus, you probably get better, faster, and more consistent execution now in each instance. Replicate these examples across thousands or millions of other transactions just like this and what do you get? More with less.
 
And it’s not just these back-office processes that are being automated. Consider the areas of photography and design. This excerpt from a post by Dominique Turcq (here’s the English translation of the original article in Les Echos) posits the following (ironically, I got this translation from Stanislaus Jourdan because it was easier to understand than Google’s algorithmically created one):
 
Paid jobs are being replaced by work achieved by unpaid amateurs, or by low-paid jobs. Some jobs whose added value used to be recognized with a salary are being replaced by other Internet services which supply a similar value at first sight. For instance, sharing photo Web services are used by lots of amateur photographers, but don’t always provide an optimal quality. Quality is less professional but still high enough for lots of people.
 
This is exactly what’s happening. Because as much as some folks bemoan smartphone cameras not being as good as DSLRs, a large majority of people out there won’t be able to tell the difference. And just like that, freelance photographers and photojournalists have been disrupted. A new startup, Rawporter, is basing its entire business model on this very premise. Blogs, YouTube (NASDAQ:GOOG) channels, and other related websites provide content that can either supplement – or in some cases supplant – content from traditional news and media platforms. Other resources, like Wikipedia, have value to many people and the site is maintained by a virtual army of editors who don’t get paid anything. As Jourdan points out, there is “a shift from jobs towards unpaid labor from a crowd of volunteers.”
 
So what do we do now? We need to rethink how the economy distributes what is produced and how. Because the changes the economy is experiencing have big implications for us individually as well as collectively. To see what I mean, take a look at this chart of employee compensation relative to GDP:
 

 
As you can see, employee compensation as a percentage of GDP has been in decline for the better part of the last 30 years. Why is that important? Simple. Ask yourself this question: If there are fewer jobs being created because of shifts in demographics at the same time automation and disruptive networks are taking away the need for “workers,” where will taxes come from? Because in a really extreme scenario, all the value in our economy will be captured by capital owners. There won’t be any personal income to tax. And if there’s no income, consumption-based flat taxes won’t make any sense either. Is that a good prospect or a bad one? I don’t know, but Douglas Rushkoff seemed to say it best: “We want food, shelter, clothing, and all the things that money buys us. But do we all really want jobs?”
 
So, we need to rethink what the purpose of work is. We also need to rethink the idea of trying to allocate abundant goods with a paradigm that was designed to work under conditions of scarcity. Consider this from the OECD:
 
Food production has not only kept pace with population growth, it has outstripped it. The world now produces more food than ever, and even countries that were once practically synonymous with famine have achieved self-sufficiency in staple foods. As we argued in this post, hunger is a problem of poverty, not scarcity.
 
The Concise Encyclopedia defines economics as the following (emphasis mine):
 
Social science that analyzes and describes the consequences of choices made concerning scarce productive resources. Economics is the study of how individuals and societies choose to employ those resources: what goods and services will be produced, how they will be produced, and how they will be distributed among the members of society.
 
We’ve progressed technologically to the point where we don’t have to make many of the choices we do: We can have both guns and butter. In abundance. For many goods and services, scarcity is not a constraint we need to optimize our markets for nor use to help set prices.  So what’s the holdup? Why are we falsely assuming conditions of scarcity hold when there's mounting evidence that it doesn't? The answer is us. We’re afraid. Fear, the Future, and Fear of the Future
 
So what is this fear that holds us back from envisioning a new future unlike anything before? Well, I’ll let Jaimal Yogis, author of The Fear Project explain it better than I can:
 
This is because our fear centers are for the most part not under our conscious control. In order to survive in the wild, our early ancestors evolved automatic stress responses to anything associated with pain -- useful for avoiding predators like saber-toothed cats and bear-sized hyenas. Now, however, modern sources of “painful” stimulus arrive via our smart phones, TVs and Twitter feeds with alarming speed and frequency. So, as we review the events of 2012, our brains automatically feel overwhelmed with bad news, accentuating images of storm-ravaged coastlines and funeral processions for innocent 6-year-old children. By contrast, few of us will note simultaneously that violent crime in our country continued to decline for a fifth straight year, cancer deaths decreased yet again (a steady trend since 1999), and teenage drunk driving has been halved in the last decade. In fact, according to the United Nations, the entire world is on average living longer, healthier, wealthier lives than ever before.
 
By practically every statistical measure, he’s right. And if we’re living in a new era of abundance, it makes even less sense to let our subconscious stress responses govern our thoughts and emotions. Plus, we and the media are constantly replaying the real estate implosion in our heads and the market crisis and the bailouts that followed, and it creates this negative feedback loop in our heads that we can’t seem to break. Actually I should rephrase that: We haven’t allowed ourselves to break it yet.
 
And that’s probably because we don’t like the alternative right now. What alternative is that? Figuring out our future. If the Mayans were right, figuring out how we restructure fiscal outlays for an aging population won’t matter. If the robots kill us after becoming self-aware, we won’t have to rethink what we do with our time as collaborative networks and computer algorithms take over the work we used to do. Noah Brand recently wrote:
 
It’s way easier to believe there isn’t a future. That lets us off the hook. Events are out of our hands. We can relax and do what we want, because the gods or the nukes or the supercomputers are going to render everything we do moot anyway.
 
It is a blissfully liberating feeling to be moot.
 
That’s why we’ll have another apocalypse next year, and the year after that. There’ll be a prophecy or an omen or some damn thing, an asteroid or a threat or a virus… we’ll come up with something. We always have. That’s also why I can’t wholly subscribe to Singularity theory: yes, it’s got some good math backing it up, but I don’t trust anything that is so effectively serving that same emotional need, the one with the batting average of .000.
 
It’s also easier to say the future we were promised in all of those old The Jetsons cartoons failed to materialize. That somehow, some way, the future let us down and it’s OK to be disappointed in it. But the reality is, the future we saw in our minds and those TV screens never arrived because we didn’t allow it to. We held ourselves back.
 
Seriously, the technology for alternatively-fueled vehicles (natural gas, hydrogen, etc.) has been around for decades -- even centuries -- and what are we driving? Essentially the same vehicles Henry Ford and Karl Benz produced over 100 years ago. The easy response is that the other vehicles didn’t pass the test of the market, but my counter to that is easy: Who makes up the market for most of this stuff? We do. The innovation we claim to crave starts with us being more innovative and tolerant of the innovations of others. You can only go as far as the ecosystem and infrastructure allow you to.
 
So what do we do now? The first thing is to free ourselves from fear. That may be difficult to do given all the acrimony you can see and hear with a click of the TV remote or a swipe of a smartphone screen, so maybe the first thing to do is start stepping away from the computer, putting the phone down, and getting outside. The second is to realize some basic truths. The sun will rise in the east and set in the west tomorrow, just like it has since the beginning of time. We also live in a day and age where our children and grandchildren will have a much better chance of living longer, healthier lives than at any other time in history. And lastly, we need to get busy rethinking things like work, and what we think our political economy should look like and how it should function. Because the future will be there for us, regardless of what crisis or apocalypse we think is right around the corner. And it will arrive faster than we think.

Twitter: @japhychron
No positions in stocks mentioned.

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