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


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.

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.
No positions in stocks mentioned.
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