Rise of the Robots: Technology and the Threat of a Jobless Future (13 page)

The main idea behind comparative advantage is that you should always be able to find a job, provided you specialize in the thing at which you are “least bad” relative to other people. By doing so, you offer others the chance to also specialize and thereby earn a higher income. In Tom’s case, least bad meant cooking. Jane is luckier (and a lot richer) because her least bad gig is something she is truly great at, and that talent happens to have a very high market value. Throughout economic history, comparative advantage has been the primary driver of ever more specialization and trade between individuals and nations.

Now let’s change the story. Imagine that Jane has the ability to easily and inexpensively clone herself. If you like science fiction movies, think in terms of
Matrix Reloaded,
where Neo battles
dozens of copies of the agent, Smith. In that particular struggle, Neo ultimately prevails, but I think you can see that Tom might not be so lucky when it comes to keeping his job working for Jane. Comparative advantage works because of opportunity cost: if a person chooses to do one thing, she must necessarily give up the opportunity to do something else. Time and space are limited; she can’t be in two places doing two things at once.

Machines, and particularly software applications, can be easily replicated. In many cases they can be cloned at a cost that is small compared with employing a person. When intelligence can be replicated, the concept of opportunity cost is upended. Jane can now perform brain surgery and cook simultaneously. So why does she need Tom at all? It’s a good bet that pretty soon Jane’s clones will also start putting less talented brain surgeons out of work. Comparative advantage in the age of smart machines might require something of a rethink.

Imagine the impact of a large corporation being able to train a single employee and then clone him into an army of workers, all of whom instantly possess his knowledge and experience but, from that point on, are also capable of continuing to learn and adapt to new situations. When the intelligence encapsulated in information technology is replicated and scaled across organizations, it has the potential to fundamentally redefine the relationship between people and machines. From the perspective of a great many workers, computers will cease to be tools that enhance their productivity and instead become viable substitutes. This outcome will, of course, dramatically increase the productivity of many businesses and industries—but it will also make them far less labor-intensive.

The Tyranny of the Long Tail

The influence of this distributed machine intelligence is most evident in the information technology industry itself. The Internet has
spawned enormously profitable and influential corporations with startlingly diminutive workforces. In 2012, Google, for example, generated a profit of nearly $14 billion while employing fewer than 38,000 people.
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Contrast that with the automotive industry. At peak employment in 1979, General Motors alone had nearly 840,000 workers but earned only about $11 billion—20 percent less than what Google raked in. And, yes, that’s after adjusting for inflation.
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Ford, Chrysler, and American Motors employed hundreds of thousands more people. Beyond that core workforce, the industry also created millions of peripheral middle-class jobs in areas like driving, repairing, insuring, and renting cars.

Of course, the Internet sector also offers peripheral opportunities. The new information economy is often touted as the great equalizer. After all, anyone can write a blog and run ads on it, publish an ebook, sell stuff on eBay, or develop an iPhone app. While these opportunities do indeed exist, they are dramatically different from all those solid middle-class jobs created by the automotive industry. The evidence shows pretty clearly that the income realized from online activities nearly always tends to follow a winner-take-all distribution. While the Internet may, in theory, equalize opportunity and demolish entry barriers, the actual outcomes it produces are almost invariably highly unequal.

If you graph the traffic coming to websites, advertising revenue generated online, music downloads from the iTunes store, books sold on Amazon, apps downloaded from Apple’s AppStore or Google Play, or just about anything else online, you will nearly always end up with something that looks like
Figure 3.3
. This ubiquitous long-tail distribution is central to the business models of the corporations that dominate the Internet sector. Companies like Google, eBay, and Amazon are able to generate revenue from
every point
on the distribution. If a company controls a large market, then aggregating even tiny sums along the entire curve results in total revenues that can easily reach into the billions.

Figure 3.3. A Winner-Take-All/Long-Tail Distribution

Markets in goods and services that are susceptible to digitalization inevitably evolve into this winner-take-all distribution. Sales of books and music, classified advertising, and movie rentals, for example, are increasingly dominated by a tiny number of online distribution hubs, and one obvious result has been the elimination of vast numbers of jobs for people like journalists and retail store clerks.

The long tail is great if you own it. When, however, you occupy only a single point on the distribution, the story is quite different. Out on the long tail, incomes from most online activities rapidly drop to the pocket-change level. That can work out fine if you have an alternate source of income, or if you happen to be living in your parents’ basement. The problem is that as digital technology continues to transform industries, more and more of the jobs that provide that primary-income source are likely to disappear.

As more people lose the dependable income stream that anchors them into the middle class, they are likely to increasingly turn to these long-tail opportunities in the digital economy. A lucky few will provide the anecdotal success stories we will hear about, but the vast majority will struggle to maintain anything approaching a middle-class lifestyle. As techno-visionary Jaron Lanier has pointed out, a great many people are likely to be forced into the type of informal economy that is found in third-world nations.
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Young adults who find the
freedom of the informal economy alluring will quickly discover its drawbacks when they begin to think in terms of maintaining a home, raising children, or planning for retirement. Of course, there have always been people living at the fringes in the United States and other developed economies, but to some extent they free-ride on the wealth generated by a critical mass of middle-class households. The presence of that solid middle is one of the primary factors that differentiates an advanced nation from an impoverished one—and its erosion is becoming increasingly evident, especially in the United States.

Most techno-optimists would likely object to this characterization. They tend to view information technology as universally empowering. It is perhaps not coincidental that they also tend to have been very successful in the new economy. The most prominent digital optimists typically live at the extreme left of the long tail—or, even better, they’ve perhaps founded a company that owns the entire distribution. In a PBS television special that aired in 2012, inventor and futurist Ray Kurzweil was asked about the possibility of a “digital divide”—meaning that only a small percentage of the population will be able to thrive in the new information economy. Kurzweil dismissed the idea of such a divide and instead pointed to empowering technologies like mobile phones. Anybody with a smart phone, he said, “is carrying around billions of dollars of capability circa 20 or 30 years ago.”
¹²
Left unsaid was how the average person is supposed to leverage that technology into a livable income.

Mobile phones have indeed been shown to improve living standards, but this has been documented primarily in developing countries that lack other communications infrastructure. By far the most celebrated success story involves sardine fishermen in Kerala, a region along the southwest coast of India. In a 2007 research paper, economist Robert Jensen described how mobile phones allowed the fishermen to determine which villages offered the best markets for their fish.
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Before the advent of wireless technology, targeting a particular village was a guess that often resulted in a mismatch between
supply and demand. However, with their new phones, the fishermen knew exactly where the buyers were, and this has resulted in a better functioning market with more stable prices and far less waste.

The sardine fishermen of Kerala have become a kind of standard-bearer for techno-optimism as it relates to developing countries, and their story has been told in numerous books and magazine articles.
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While mobile phones are unquestionably of great value to third-world fishermen, there is little evidence to suggest that average citizens in developed countries—or, for that matter, even in poor countries—will succeed in deriving a meaningful income from their smart phones. Even skilled software developers find it extremely challenging to generate significant revenue from mobile apps, and the primary reason, needless to say, is that ubiquitous long-tail distribution. Visit almost any online forum populated by Android or iPhone developers and you’re likely to find discussions lamenting the winner-take-all nature of the mobile ecosystem and the difficulty in monetizing apps. As a practical matter, for the majority of people who lose middle-class jobs, access to a smart phone may offer little beyond the ability to play Angry Birds while waiting in the unemployment line.

A Moral Question

If we think again in terms of doubling a penny as a proxy for the exponential advance of digital technology, it’s clear that today’s enormous technological account balance results from the efforts of countless individuals and organizations over the course of decades. Indeed, the arc of progress can be traced back in time at least as far as Charles Babbage’s mechanical difference engine in the early seventeenth century.

The innovations that have resulted in fantastic wealth and influence in today’s information economy, while certainly significant, do not really compare in importance to the groundbreaking work done
by pioneers like Alan Turing or John von Neumann. The difference is that even incremental advances are now able to leverage that extraordinary accumulated account balance. In a sense, the successful innovators of today are a bit like the Boston Marathon runner who in 1980 famously snuck into the race only half a mile from the finish line.

Of course, all innovators stand on the shoulders of those who came before them. This was certainly true when Henry Ford introduced the Model T. However, as we have seen, information technology is fundamentally different. IT’s unique ability to scale machine intelligence across organizations in ways that will substitute for workers and its propensity to everywhere create winner-take-all scenarios will have dramatic implications for both the economy and society.

At some point, we may need to ask a fundamental moral question: Should the population at large have some sort of claim on that accumulated technological account balance? The public does, of course, benefit greatly from accelerating digital technology in terms of lower costs, convenience, and free access to information and entertainment. But that brings us back to the problem with Kurzweil’s argument about mobile phones: those things won’t pay the rent.

It should be kept in mind, as well, that much of the basic research that enabled progress in the IT sector was funded by American taxpayers. The Defense Advanced Research Projects Agency (DARPA) created and funded the computer network that ultimately evolved into the Internet.
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Moore’s Law has come about, in part, because of university-led research funded by the National Science Foundation. The Semiconductor Industry Association, the industry’s political action committee, actively lobbies for increased federal research dollars. Today’s computer technology exists in some measure because millions of middle-class taxpayers supported federal funding
for basic research in the decades following World War II. We can be reasonably certain that those taxpayers offered their support in the expectation that the fruits of that research would create a more prosperous future for their children and grandchildren. Yet, the trends we looked at in the last chapter suggest we are headed toward a very different outcome.

B
EYOND THE BASIC MORAL QUESTION
of whether a tiny elite should be able to, in effect, capture ownership of society’s accumulated technological capital, there are also practical issues regarding the overall health of an economy in which income inequality becomes too extreme. Continued progress depends on a vibrant market for future innovations—and that, in turn, requires a reasonable distribution of purchasing power.