1/6/17

Automation is a very controversial topic. So controversial in fact that one of my friends got pissed off when I got under his skin about it.

Martin Ford explained Automation to me in his book Lights in the Tunnel back when I was a grad student and his recent New York Times Best Seller Rise of the Robots: Technology and the Threat of a Jobless Future dives deeper into this very topic.

I'm all for automation. It makes our lives easier, more productive, and enjoyable at the cost of jobs. While we want to believe this is frictional unemployment and leave it at that I truly believe it is structural unemployment that has no easy solution. Why?

Two things must happen to a displaced worker in order to get ahead of the Automation curve:

  1. Out learn and pivot into the next best field
  2. Hope that field doesn't get automated before they've extracted enough Capital from selling their services through employment or business venture

1 deals with a rates issue and time available to dedicate oneself to training in a new discipline. When good ole Peabody, the Coal mining company, went belly up last year a lot of the miners were interviewed as to what they would do next. Turns out they are going to grind it out intellectually and pivot to become programmers. Very awesome and this shows the true American spirit for those who've made that transition while others were left behind. Bills, your spouse, and kids don't stop though when the individual is put out of the job so time available for this retraining process is a premium the further down the road of life you've traveled. Different story if you can ramen noodle sleep on couches as a single person.

2 Deals with picking the right field that has lower likelihood of being Automated out. No one really knows how to do this because the speed and acceleration of the growth of Automation is quite alarming. Go be a Dentist or a Doctor or something, who knows!

My friend's counter-argument against Automation:

  1. The human "potential" is infinite, we will always outpace automation as we've done in the past
  2. People have been dealing with automation for centuries and we've thrived
  3. People can learn to adapt even when displaced from jobs

1 Potential doesn't get you jobs when you put that on the headline of your resume.

2 Automation has actually crushed a lot of people in the form of outsourcing. Some have drawn ties to middle-aged White American Men suicide rates to the Increased Trade with China.

3 Open-ended statement. Can but don't is also useless. It's about learning rates and deadlines. Given infinite time, most of us can figure everything out. We don't live forever.

My friend doesn't understand the difference between velocity (speed) and acceleration. This is crucial for not only understanding Physics but also Market dynamics and other things like the Peak Oil Hypothesis (can't drink fast enough of black gold on to keep up with consumption). He overcompensates by being emotional and repeating his statements many times until I sent him packing by telling him that he is a lazy student.

What threw my friend and others like him over the edge

Ask him to employ those people who've been displaced and who he would choose if he had the option of selecting an overly qualified candidate and one that is pivoting with the aptitude but not the experience for a job ceteris paribus (i.e. same pay, benefits, etc). No rational person would pick an unknown over those with heavier paper and real life credentials.

When challenged with a real life problem, these arm chair theory guys go running right back to their books, journals, and obscure publications for rebuttals.

Automation. Our best ally or most feared invention to date? WALL-E or Terminator? You decide.

Terminator

References:
Harvard Business Review: Beyond Automation
I Don't Think we can Stop the Future of Automation and Job Losses - Martin Ford
Trade Liberalization and Mortality: Evidence from U.S. Counties - Federal Reserve
Lights in the Tunnel - Martin Ford
Rise of the Robots: Technology and the Threat of a Jobless Future - Martin Ford

Comments (18)

1/5/17

Good read, what do you think abut automation?

Best Response
1/6/17

It's a delicate knife. Used well, you can make a fine meal with it, clean it up, wipe it down, and put it back into the block. Used poorly, you can turn the streets red with mass homicide or end up falling on it yourself.

This is a hot topic that Elon Musk bans from discussing during hot tube parties along with talking about if this life is a simulation or not (Neil deGrasse Tyson also thinks this whole game of life is one grand simulation).

For a full background, we have to observe how John Maynard Keynes (1883-1946) thought about the future during his times. This Forbes article summarizes this pretty well.

According to Keynes, we are supposed to be doing the following:

"For many ages to come the old Adam will be so strong in us that everybody
will need to do some work if he is to be contented. We shall do more things for
ourselves than is usual with the rich to-day, only too glad to have small duties
and tasks and routines. But beyond this, we shall endeavour to spread the bread
thin on the butter-to make what work there is still to be done to be as widely
shared as possible. Three-hour shifts or a fifteen-hour week may put off the
problem for a great while. For three hours a day is quite enough to satisfy the
old Adam in most of us!
"

Interested individuals can read his entire essay Economic Possibilities for our Grandchildren listed in the reference below.

TL;DR: We're supposed to be chilling on a 15-hour work week because we still need to be amused and challenged. Why the extra 25 hours (40hr week) or 85 hours (WSO typical) remains is a modern day mystery. The markets are brutally efficient that's why and consumption kept pace with every incremental gain we received by our extra production. If consumption were stifled and our production exceeded this consumption rate, it wouldn't be surprising that we receive days off from the office and factories.

School of Life's How to Make a Country Rich explains our present situation pretty well:

What do I think?: We need automation to keep our prices low so that we can be fat, dumb, and happy glued to our phones or VR headsets. I'm leaning towards a WALL-E end game.

Reference:
Economic Possibilities for our Grandchildren (1930) - John M. Keynes

1/5/17

Well put, one of my favourite videos - I sent it to all my friends. Also you write very logically and clearly. Keep up the good work

1/6/17

Shameless BizInsider/TED Talk/Harvard Business Review-like plug alert

Thanks man! Wrote a thesis in grad school that was well read and I now actively blog.

Glad to keep contributing to the forum and seems this forum can handle my writing just fine.

1/6/17

very interesting post

1/6/17

Since you probably researched this topic well enough I'm going to ask.

If you look on US unemployment history chart (1) you can observe that it oscillates around 7.5%, with peaks during panics and recessions. During this time (1890 - 2010) there has been a lot of scientific discoveries, industrial revolution, PC was invented, internet etc. Yet all this failed to create structural unemployment, maybe some short term local lay offs, since replacing a bunch of guy's at a factory with robots is not structural unemployment it's technological modernization. So! Why do you think that automation (and I guess here you refer to AI which is faaaaar from being even close if even possible to conscious human mind) will create massive unemployment? I'm curious. Thank you.

1) https://www.economicshelp.org/blog/wp-content/uplo...

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

1/6/17

Great question! Here's what I think:

Humans creating machines vs. humans creating machines that create themselves.

A hundred years ago, machines haven't yet started to create or learn for themselves and we were still the architects. Now, that's changing and that's the biggest difference. Machines and machine learning or AI is surprising us with their solutions. First by DeepBlue and Kasparov's defeat and now AlphaGo conquering in a much more sophisticated game. We didn't have powers like this back then and tools that challenged the intellect of its creators.

Speed of information didn't used to double at the current rate back then and information not so readily available. Retraining with less total collective human knowledge was easier relative to the history lesson of today plus getting to the current frontiers of each industry. Check Physics articles and how many authors are required now to publish the next best big discovery vs. Einstein/Feynman/von Neumann era. It's alarming that schools before college haven't really adequately adopted to prepare students to face this "drink from a fire-hose" experience of the real world.

The population game (human capital market) is about to experience a shift as well as baby boomers retire in USA and other countries experience negative population growth.

Lastly, unemployment vs underemployment. HBS grad serving Ben and Jerry's is hardly considered employment to us but to BLS it is perfectly fine! I stopped trusting the BLS number a while ago knowing how job "creation" is defined for statistics reporting purposes. Let's say you are an internal hire, deal is done, you got the job (congratulations). We still have HR float the ad online and then give it the minimum amount of time to stay up. That counts as a job created even though you just changed desks or upgrade your name plate and remain in place.

1/6/17

Alpha go is simply using probabilistic approach and reinforcement learning to maximize it's evaluation function during the play. This is very far from consciousness. Regarding the "powers we didn't had", we did had these algorithms for more than 50 years. Neural nets were created in 1940, Monte Carlo method in 1930 and Markov chains are more than 100 years old. What we didn't have was computation power to leverage these methods, we have that now (Applause for Nvidia!). Yet again all this is very far from creating a true AI. Current AI applications are good at predefined tasks, yet they cannot think, feel or reason.

Lets conduct a thought experiment, suppose a factory produces bags, they have a certain demand for bags. Suppose they decide to automate production and fire some workers. Well this raises unemployment and decreases consumption, then who will buy the bags if the one who were supposed to buy them do not earn income any more? You can say that automation will decrease production cost thus attracting additional demand. Ok, then other producers follow the first one, automate their production, fire workers, add to supply market shifts to equilibrium we are back where we started only now there is more unemployment. These are only theoretical assumptions but if you look at our history nothing like this happened, because demand has remained in place to consume the products created by automation. Yes robots displace some jobs locally but many new industries emerge that require additional work force.

There might be shortage of necessary skills for a while but that will disappear in one generation time. The worst that can happen is that your grandchildren will need to learn computer science starting from grade one. Actually in my country this will happen from 2018, computer science becomes a compulsory subject in school. So keep calm and learn to code.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

1/6/17

Human language, Mandarin Chinese being compulsory soon as well?

The next frontier is the barrier of language and communicating directly via thought and not spoken/written language. We think the same thing (MRI scan) when looking at elephants crossing the road, reading it, or hearing about it. Skip the middle-man, the language processor, and go straight to the source which is thought itself. That would increase our own natural processing speed which has implications both good and bad.

Check out this Documentary called Lo and behold:

1/6/17

The reason that this is not as big of a problem as people make it out to be is simple: The population is going to decrease to the level supported by automation.

Although the disruption and loss of jobs will probably have painful mid-term effects on our generation, it will only take about 25 years for these to shake out, as old people die off, and younger people choose not to have kids which they can not vigorously support.

Income inequality will likely be exacerbated though, and continue far past this brief adjustment period. However, I do not think inequality is a real issue, rather one manufactured by politicians (like most social problems ver the last 20 years or more). Unless you can prove that the lower end of the spectrum is being actively and legally discriminated against in some way, or at least that their plight is literally and definitely worsening, not relatively worsening when compared to the most successful individuals in the world who make millions of people's lives better in dozens of ways, then I say it's total BS.

1/6/17

Universal income to balance out inequality?

1/6/17

No thanks, I like my capitalism without a side of communism.

1/6/17

Lol. And this is where my friend, the arm chair student, ran to when pushed for solutions.

Give me, give me mentality to stave off the onslaught of being structurally unemployed forever.

Sorry, Bernie can't help you on this one...

1/6/17

I really liked your point on the notion of 'Old Adam' when confronted with the idea of automation.

It is my belief that without hard work or achievement, leisure becomes mere boredom and relaxation becomes anxious idleness. It's why I think the idea of "automating away employment" is a quixotic (or perhaps dystopian) idea at best. Humans will always want to be occupied by some pursuit. It's in our nature to create, build and administrate and what separates us from other sentient life forms.

I think several hundred years from now (given humanity is around), people will look back at this era and realize we were living in the beginning of the second renaissance. Old world notions from work to marriage, to politics, to status and wealth are all being challenged and refined into an era of new perception and thinking.

Couple that with the fact the internet has given a voice to the unsophisticated and down-trodden and we see two themes broadly arising: there will be continued friction and unrest in society as the 99% can make their plight known and recognized, and because of that, a much more profound understanding of the human condition on an individual level will lead to a new sense of broad human empathy and societal reform. This is already exhibited by the millennials and Gen Z, the SJW crowd, the rise of the "lifestyle" brand, etc.

Where that will lead when combined with automation (and theoretically more leisure time) is anyone's guess. I just know that despite all the BS, it's a wonderful time to be alive with opportunity abounding for those who chase it and never give up.

1/6/17

This Renaissance - back to basics; a search for meaning in life:

Man's Search for Meaning https://www.amazon.com/dp/080701429X/ref=cm_sw_r_c...
Great sub 200 page read about a Holocaust survivor (Frankl) that can be elegantly summarized by Nietzsche when he said:

"He who has a why to live can bear almost any how."

1/6/17

I like your intellectual ventures into the abstract, Ebolamonkey. We'll get into some heated yet intriguing debates in the future, I presume

1/6/17

Debates create meaning. Differences in opinion makes markets. "I think therefore I am."

1/6/17

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