Accelerating Technology and the Economy of the Future_4 doc

Acceleration / 99 CopyrightedMaterial–Paperback/Kindle available @ Amazon require low and moderately skilled workers are being computerized, tomorrow it will be jobs performed by highlyskilledandeducatedworkers.Indeed,thisisalready happening among information technology professionals, where jobs that once requiredcollege degreesare simply vanishingintothecomputernetwork. Greenspan’ssuggestedsolutionisthatwedramatical- ly improve our elementary and secondary education sys- tems.WhilethatisagoalthatIcertainlysupport,theidea thatitwillsolvetheproblemissimplynotarealisticex- pectation.Even ifwe couldwavea magicwandand im- prove educationin theUnited States overnight,it would obviouslybeyearsbeforethosechildrenenterthework- force.Inthemeantime,computertechnologywillcontin- ueitsrelentlessadvance.ThesubtitleofChairmanGreen- span’sbookis“AdventuresinaNewWorld.”However,it appearsthat,likemosteconomists,hehasfailedtoperce- ivejusthownewthatworldreallyis. The reality is that the Luddite fallacy amounts to nothing more than a historical observation. Since things haveworkedoutsofar,economistsassumethattheywill always work out. For centuries, machines have conti- nuously become more sophisticated, and as a result, the productivity—and therefore the wages—of the average worker have increased. It stands to reason that if this processcontinuesindefinitely,atsomepointthemachines willbecomeautonomous, and the worker willno longer addvalue.Longbeforethatextremityisreached,however, theremustcomeatippingpointatwhichjoblossesfrom automation begin to overwhelm any positive impact on THE LIGHTS IN THE TUNNEL / 100 CopyrightedMaterial–Paperback/Kindle available @ Amazon employment from lower prices and increased consumer demand. (For more on this, please see pages 131-138 in Chapter 3). In light of unprecedented, geometrically ad- vancingcomputertechnology, theLuddite“fallacy” does notreallylookallthatfallacious. A More Ambitious View of Future Technologi- cal Progress: The Singularity Inthis book, I have been quite conservativeintermsof projectingwheretechnologymaytakeus.Ihavespokenof robotsthatmayeventuallymanagetostockstoreshelves and of other robots that might be remotely controlled fromlowwagecountries.Ihavenotspokenofarmiesof marauding, humanoid robots, orofintelligentcomputers taking control of nuclear weapons. Partly, the reason is thatIwanttocomeacrossasverydowntoearth.Iwant you to take this book seriously. A second reason is that none of thosescience fiction-like scenarios areatall ne- cessary. Technology—if we do not prepare for it—does not need to directly or physically attack us to cause us greatharm.Theonlythingitneedstodoistakeourjobs. Nonetheless,IwouldberemissifIdidn’tincludethe fact that many extremely well regarded individuals with deepexperienceinscienceandtechnologyhaveafarmore ambitious view of what is ultimately possible. World- renowned cosmologist and author of the book, A Brief History of Time, Stephen Hawking, has said, “Computers arelikelytoovertakehumansinintelligenceatsomepoint in the next hundred years.” 35  Inventor and author Ray Kurzweil,whoreceivedtheNationalMedalofTechnology Acceleration / 101 CopyrightedMaterial–Paperback/Kindle available @ Amazon fromPresidentClintonin1999,isfarmoreoptimisticand predicts that machines will achieve true intelligence by 2029. Kurzweilisalsooneoftheleadingproponentsofthe technologicalsingularity,whichheexpectstooccurbytheyear 2045. 36  This concept, which was originally introduced by the mathematician and author Vernor Vinge, 37  suggests that at some point in the future, technological progress willsimplyexplodeincomprehensibly.Basically,thingswill justgetawayfromus.Ifyoulookatthenowfamiliarchart that follows, thetechnological singularity would occurat somepointclosetowherethelinebecomesnearlyvertical. Beyondthispoint,itisjuststraightup.   The Technological Singularity           Manypeoplehavepostulatedthatthesingularitywill bebroughtonwhenmachinesfinallybecomesmarterthan us, andthen applythathigher intelligence to thetask of Technology Time Singularity THE LIGHTS IN THE TUNNEL / 102 CopyrightedMaterial–Paperback/Kindle available @ Amazon designing even better versions of themselves. After that, humanbeingswouldnolongerbeabletounderstandthe progresstakingplace. It seems obvious that if the singularity does indeed takeplace,nearlyallofuscouldpotentiallybeoutofajob. People with PhDs from top universities could well find themselves in the same boat as autoworkers in Detroit. Howcouldtheaveragepeoplewhomakeupthebulkof ourpopulationearnalivinginaworldinwhichmachines weresmarterandmorecapablethaneventhemostintelli- genthumans? Aside from the issue of providing essential support forthepopulation,thesingularityintroducesamorebasic economicparadox.Inafree marketeconomy,nothingis producedunlessthereisdemand—and“demand”ineco- nomic terms means desire combined with the ability to pay.Thereisnoincentivetoproduceproductsifthereare noconsumerswithsufficientdiscretionaryincometopur- chase those products. This istrueevenif intelligent ma- chinessomedaybecomesuper-efficientproducers.Ifaver- age—or even exceptional—human beings are unable to find employment within their capabilities, then how will they acquire the income necessary to create the demand thatinturndrivesproduction?Ifweconsiderthesingular- ityinthiscontext,thenisitreallysomethingthatwillnec- essarilypushusforwardexponentially?Orcoulditinac- tualityleadtorapideconomicdecline? *    * Thetechnologistswhospeculateaboutthesingularitydon’tseemtoo concerned about this problem. Perhaps they assume that the super- intelligentmachinesofthefuturewillfigureallthisoutforus.How- Acceleration / 103 CopyrightedMaterial–Paperback/Kindle available @ Amazon Inthisbook,wewon’tagainstrayintothismorespe- culativearena(exceptinthelastsectionsoftheAppendix). Theideaspresentedinthisbookdonotdependontheoc- currenceofthetechnologicalsingularity.Thestandardwe have set is much lower: we areconcerned only withthe possibilitythatmachineswillbecomecapableofperform- ingmostaverage,routinejobs.Thesingularityrepresentsa far more extreme case. It’s fair to say, however, that if something along the lines ofthetechnologicalsingularity istooccur,wemayfirstneedaparadigmshiftintheway oureconomyworks—oratleastsomechangesinoureco- nomic architecture. Otherwise, we will be in for quite a shock. A War on Technology Inthischapterwehaveseenthatcomputersareincreasing in both power and number at a simply astonishing rate. We’velookedatclearevidencethatshowswehaveessen- tiallyhittheceilingintermsofwhatwecanexpectfrom futureincreasesinthecapabilityofaveragehumanbeings. We’ve also looked at a variety of specific job types and technologiesandshownhowautomationislikelytohavea much broader impact than many of us might imagine— andalsohowthejobsofmanyhighlypaidandhighlyedu-   ever, if something other than consumer demand drives production, then we no longer have a market economy; we will then have a plannedeconomy.TheSovietUnion,ofcourse,didn’thaveintelligent machines—but they did have lots ofvery intelligent mathematicians staffinganagencycalledGosplan,whichattemptedtofigurethingsout. Let’shopethemachineswilldoabetterjob.(Pleasesee“TheTech- nologyParadox”intheAppendixformoreonthis.) THE LIGHTS IN THE TUNNEL / 104 CopyrightedMaterial–Paperback/Kindle available @ Amazon cated workers may be among the most vulnerable. Let’s lookagainattheassumptionwesetouttotestatthebe- ginningofthischapter: Technologywillnotadvancetothepointwherethebulkofjobsper- formed by typical people will be automated before the year 2089. Priortothatyear,theeconomywillalwayscreatejobsthatarewithin thecapabilitiesofthevastmajorityofthehumanpopulation. Atthispoint,itseemsverydifficulttosupportthisas- sumption. Most of the trends we have reviewed in this chapter are likelyto come into play long before ourcutoff dateof2089.Itisverypossiblethatevenadvancednano- technologywouldbeavailablewithinthattimeframe.We therefore cannot escapethe conclusion that we will very likelyhavetodealwiththeimpactofacross-the-boardau- tomationinour lifetimes, orat theveryleast, within the lifetimesofourchildren. Ifwedonothaveastrategy—andspecificpolicies— in place to deal with this issue before its full impact ar- rives,theoutcomewillbedecidedlynegative.Asthetrend towardsystemicjoblossincreases,itisquiteeasytofore- see a number of possible ramifications. I have already mentionedthelikelihood ofadropincollegeenrollment and a migration toward safer trade jobs. Another trend thatwillsurelyoccurasrecognitionsetsinwillbeagener- al“warontechnology.”Workersinvirtuallyeveryoccupa- tion—evenmanyofthosewhothemselvesworkintech- nical fields—will desperately, and quite understandably, attempttoprotecttheirlivelihoods. Acceleration / 105 CopyrightedMaterial–Paperback/Kindle available @ Amazon Wecanexpectsubstantialpressureongovernmentto somehowrestricttechnologicalprogressandjobautoma- tion.Itispossiblethattherewillbeasignificant,last-ditch resurgence in the power of organized labor. Workers in jobs and industries that are not now organized will very possiblyturntounionsinanattempttoexertsomepower overtheirownfutures.Theresultislikelytobesomewhat slowedtechnicalprogress,workstoppages,andsignificant economicandsocialdisruptions. The economists who believe in the premise of the Ludditefallacyarenotwrongaboutonething:technologi- cal advancement is the only thing thatcan, over the long term,driveustowardcontinuingeconomicgrowth.Con- tinuingtechnicalprogressisouronlyhopeforawealthier societyinthefuture. We know that in the coming decades, we will face enormousnewchallenges.Mostnotablewillbetherelated issuesofincreasingenergyscarcityandclimatechange.We arelikelytofaceawide-rangingimpactonclimate,agricul- tureandevengeography—includingthepossibilityofris- ingoceanlevelsthatcouldresultinhumanitariandisasters ofunimaginableproportions.Asweareallaware,current- lytheeffortstomitigateglobalwarmingandtheotherim- portant environmental impacts from burning fossil fuels areenjoying verylimitedsuccess.Theunfortunatereality isthatwemayultimatelybeforcedtoacceptthefactthat wewillfail—atleasttosomedegree—inourquesttostop climate change. But the costs associated with somehow adapting to those changes will be astronomical. At the same time, reservesofoil,natural gas, and in the longer THE LIGHTS IN THE TUNNEL / 106 CopyrightedMaterial–Paperback/Kindle available @ Amazon runevencoal,aregoingtobedepleted.Howcanwehope toface thesechallengesifoureconomyisindecline and the bulk of our population is focused almost exclusively onthecontinuityofindividualincomes? Asimilarpointcanbemaderegardingtheglobalwar onpoverty.Howcanwehopetowinthiswar,ifweour- selvesarenotprosperous?Weknowthatpovertyisoneof the primary drivers of war, conflict and terrorism. In a long-term stagnant or declining economic environment, theseproblemswillonlygrow. Theanswercannotbetoattempttohalttechnological progress. The problem is not with technology; it is with our economic system, and it lies specifically in that sys- tem’sinabilitytocontinuethrivinginthenewrealitythatis being created. It will be extraordinarily difficult to make materialchangestothatsystembecauseithasservedusso well,forsolong.Nonetheless,inthefinalchaptersofthis book,IwillsuggestsomechangesthatIbelievewillallow us to move from fearing technology to leveraging it as neverbeforeandthendeployingitagainstthechallenges wewill face. Before then, however,we must move from ourtunnelsimulationback intotherealworld.Therewe willseethatthesituationisprobablyfarmoredangerous andperhapsmoreimmediatethanwehaveyetimagined.  CopyrightedMaterial– Paperback/Kindle available @ Amazon Chapter 3 DANGER   In the first chapter of this book, our tunnel simulation showedthat,aslargenumbersofworkerswereautomated out of their jobs, theeconomy would eventuallygo into declinebecauseeachworkerisalsoaconsumer(andmay supportotherconsumers)inthemassmarket.Inthereal world, it seems very likely that the automation process wouldbea fairlygradualone.Can weassume,therefore, thattheeconomicimpactofthistransitionwouldalsobe gradual in nature and might not be apparent until some pointinthedistantfuture?Toanswerthisquestion,let’s lookathowmarketsworkintherealworld. The Predictive Nature of Markets Oneofthemoreinterestingdevelopmentstoariseoutof theInternethasbeentheappearanceofonlineprediction markets. A predictionmarket is really just another name forabettingmarket,anditoperatesinasimilarfashionto thefuturesmarketsthatallowtraderstoplacebetsonthe futuredirectionofthingslikeoilpricesandstockmarket indexes.Prediction markets, such as theIowa Electronic Markets(IEM) andIntrade,allowparticipantstobetreal THE LIGHTS IN THE TUNNEL / 108 CopyrightedMaterial–Paperback/Kindle available @ Amazon money on things like elections, economic developments (suchasrecessions),orspecificeventsin thebusinessor entertainmentworlds. While prediction markets are specifically set up to predict future events, we know that we can expand this ideaandsaythatallfreemarketsare,inessence,prediction markets.Ifyoubuyaparticularcompany’sstock,thenyou areplacingabetthat,inthefuture,thatstockwilltradeat ahighervalue.Collectively,themillionsofparticipantsin theworld’sstockmarketsoftenactasasortofpredictive barometer for the economy as a whole. Historically, the U.S.stockmarkethasoftenanticipatedrecessions bysix monthsorso.Likewise,recoveryfromarecessionisvery oftenprecededbyariseinthestockmarket. This predictive feature also applies to all the other various markets with which we interact, including the housingmarket,thejobmarket,andthemassmarketfor goods and services. The reason is quite obvious. People arerational beingsand every individual, to some degree, incorporateshisorherexpectationsforthefutureintohis orhercurrentactions.Ifyouexpectthatyouwillreceivea largesumofmoneyatsomepointinthenearfuture,you areverylikelytobeginspendingsomeofthatmoneyeven beforeyouactuallyreceiveit. Nowwecanbegintoseeapotentialproblem.Asau- tomationbeginstoeliminatejobsinanincreasinglywide rangeofindustriesandoccupations,itsimpactsareclearly notgoingtobekeptasecret.Peoplewillbecomeawareof what is happening—even ifit is notofficially recognized bygovernments—andtheywillbegintomodifytheircur- [...]... potential problem with the general value of assets As people work throughout their careers they save for retirement The majority of this goes into stocks and bonds, often via 401(k) plans When these people then reach retirement age, they begin to sell those assets in order to maintain their standard of living The problem is that, for the first time, we will have a very large number of older people actively... on simple, and inescapable, demographic analysis and, in particular, on counting workers What will be most important in the future? The conventional answer is: first, the number of workers as compared with the number of retired persons in most countries, and second the number of workers (and the wages they are willing to accept) in developing nations like China as compared with the number of workers... in job creation Offshoring and Factory Migration In Chapter 2 we saw that offshoring is often really just the leading edge of automation When a job is offshored, a new consumer is created in a developing nation—at least temporarily However, from the point of view of consumers in the United States or Western Europe, offshoring looks exactly the same as automation The same can be said of relocating a... that technology will be put back into its box It will behave Technology s role will be to continue pushing the existing trends forward so that the projection lines all the analysts have drawn will remain nice and straight Friedman’s book, The World is Flat, offers a longer list of ten forces that have “flattened” the world, and he does include some facets of technology in that list.39 However, the focus... that is resulting from the 2008-9 recession As of early 2009, thousands of Chinese factories have shut down and millions of workers have lost their jobs The Xinhua news tuting low cost labor for automation BYD, a manufacturer of batteries and automobiles is one example The question is whether that business model is sustainable I would argue that, especially in the automotive market, the company will ultimately... question the overall wisdom of this practice This is true even for the developing nations that are currently benefiting from offshoring because, as we will see later, the consequences of such a severe and long lasting economic downturn in the West would almost certainly wipe out and reverse any temporary gains these countries may have obtained from offshoring Of course, the overall wisdom of a practice... manufacturing in poor countries will also remain unchanged The dynamics of these sectors are very different—poor farmers are subject to many factors which keep mechanization at bay, including lack of education and access to capital, small plots with poor economy of scale, trade barriers, and often outright exploitation at the hands of governments and corrupt officials Manufacturing in China is very different... workers in the U.S it looks exactly the same as simply building a fully automated factory In other words, service offshoring and factory relocations accelerate the job loss as well as the psychological impact on workers (consumers) and make it likely that the dangerous scenario described above could occur even earlier in the developed nations And it is these developed economies that remain the primary... the future To do this, analysts Copyrighted Material – Paperback/Kindle available @ Amazon THE LIGHTS IN THE TUNNEL / 118 take a per-capita income that is somewhat comparable to that of developed nations and then multiply it by some huge fraction of the Chinese population In other words, they assume that a very significant percentage of the 1.3 billion people in China are going to be dragged into the. .. in the Western countries and fear of structural unemployment there grows, consumer demand will fall The reality is that China does not have an integrated, self-sustaining economy A substantial fraction of its factories are geared toward exports, and these exports are largely responsible for the phenomenal economic growth that China has enjoyed in recent years Evidence of this is clearly seen in the . be mostimportantin the future? The conventionalansweris: first, the number of workersascomparedwith the number of retiredpersonsinmostcountries, and second the num- ber of workers (and the wagestheyarewillingtoaccept)in developingnationslikeChinaascomparedwith the num- ber of workersinadvancedcountries. Two of the mostnotablebooksthathavefleshedout these. some pointin the distant future? Toanswerthisquestion,let’s lookathowmarketsworkin the realworld. The Predictive Nature of Markets One of the moreinterestingdevelopmentstoariseout of the Internethasbeen the appearance of onlineprediction markets.. Ameri- canmanufacturerstocompeteagainstlowcostproducers inChina,hasforcedjobcuts and accelerated the driveto- wardautomation.Thishasbeenreflectedin the substantial productivityincreases of the U.S. economy inrecentyears. While the impact of globalizationon the job markethas received most of the attention,