In an article that recently resurfaced on Reddit, Famed Astrophysicists Stephen Hawking argues that we should fear capitalism more than robots. I think the timing of this is somewhat interesting, being an election cycle and the two populist candidates are opposites in many regards especially in terms of Democratic Socialism vs. Crony Capitalism (Sanders v Trump). In the broader context of emerging technology this is important as well though, as many other technology leaders have expressed fear of AI, such as Elon Musk, while other leaders are running full steam ahead towards more and more automation.
Hawking isn’t the only person thinking about the economy and technology though. Warren Buffet just released Berkshire Hathaway’s annual report with some pretty stark warnings about the future of capitalism in action at the corporate level. Indicating that innovation does have a darkside. While he’s speaking as a manager, there are economists looking into this and in the book Second Machine age, the authors argue that the best is still to come, because man and machine work best together, not separately.
Unfortunately, this will only push the ceiling up on skills required for jobs, rather than expanding opportunities. A perfect example of this will be Uber. Being an Uber driver isn’t a difficult job because of skill requirements, but because it’s a boring job that is relatively tiring. Uber has been pushing down their prices over a multi-month/year process which will continue through the introduction of “Autonomous” Cars, or RobotCars. At this time a large number of low skilled workers will find themselves out of a job, including people I know and probably people you know. This has been Uber’s plan for a long time as they understand that people are the biggest costs and risk for the company. Especially in light of the mass shooting in Michigan.
Uber isn’t the only major company looking to replace workers like this. In fact, it’s likely that a lot of White Collar jobs are going to go this route as well, including in industries that notoriously relied on people that then made unethical decisions, such as the financial industry. We’ve heard of High Frequency Trading, which is basically a set of algorithms to make decisions on buying and selling stocks based on microtrends. However, this is going to continue to expand into newer areas. It’s been well remarked that most brokers are no better than a coin flip (Black Swan; Drunkards Walk; Thinking, Fast and Slow; all reference this) so it is highly likely that algorithms will do better than people in picking winners and losers on the stock market. It’s also likely that those algorithms will have access to more data faster than any person could eve analyze and act upon.
This interaction between capitalism and automation creates huge risks for the economy. A few years ago, there was a “flash crash” which was basically caused by those HFT I mentioned above. As more and more portions of the financial industry come under the purview of robo-traders, these sorts of events are going to be more likely. These institutions still have pushed most of the risk to the public, while retaining the bulk of the profits from these robots.
As these trends continue across industries, the local optimization of companies to automate and create more robots is going to gradually push people out of jobs at a more and more rapid pace than new categories of jobs can be opened. I think it likely that will be likely that we’ll see more companies going the route of Uber. Using tools like Amazon’s Mechanical Turk to get processes started before they invest effort and energy into automating processes. Once they are shown to be successful, the effort to remove the human element will continually increase until those workers are out of a job. What we will eventually see is a white collar migratory worker going from one type of tech job to another only to be replaced by automation in the long run.
The impact to the economy in the long run and the human condition in the short term will be catastrophic as our current institutions are not designed to handle this sort of change in labor type. The incentives for this behavior has been in place for decades and have been pushing bad actors to be worse, such as the Turing Pharmaceuticals’ CEO price gouging dying patients, because the market could support it.