Competing with Machines

September 21, 2012 in Home, Small Business Perspective, Tech vs. Labor

In 30 years 70% of our jobs will be replaced by machines.

Everyday companies are finding ways to replace workers with machines and software. It’s a competitive business world and low skilled American workers are having a hard time keeping up with algorithms and efficient mechanical processes.  So, when one company in an industry saves money by finding ways to eliminate labor, others in the industry have to find ways to keep up. So even if your company hasn’t outsourced your job to a machine, its likely your company may need to cut labor to compete with the ones that have. We all know someone working for a company that made it through the layoffs, to find that all that extra work those other employees did just got dumped on their desk.

I often hear people blaming the poor for not working hard enough or being smart enough, but I would argue that low skilled workers work harder than anyone else and are more miserable in their jobs. Most blue collar Americans would have found a better life if they had been educated for a more skilled career, but it can be tough to get the needed education while also working in the low skilled industry to pay for education, not everyone gets a free ride or qualifies for assistance. Furthermore, the top jobs are competitive and there are already a large amount of people who get degrees, but never find jobs in their industry. There are too many college educated people working for minimum wage and living in poverty.

We saw a similar wage war in the early 20th century with the invention of the engine. Now again today we are seeing the impacts of technology displacing jobs. At first these technologies created many jobs in the tech world, but as the industry evolved they have taken on a life of their own. The stock market is being dominated by algorithms that make trades every second. Soon our local government will start offering vouchers for online home school education programs, saving thousands of dollars a year.  We are in direct competition with a new type of worker, one that doesn’t need to pay rent or buy food. My favorite book on this topic is “Race Against The Machine”, written by a couple guys at MIT.

My favorite quotes from the book:

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Ford CEO Henry Ford II and United Automobile Workers president Walter Reuther are jointly touring a modern auto plant.

Ford jokingly jabs at Reuther, ”Walter, how are you going to get these robots to pay UAW dues?”

Not missing a beat, Reuther responds, ”Henry, how are you going to get them to buy your cars?”

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“at some point in the future—it might be many years or decades from now—machines will be able to do the jobs of a large percentage of the average people in our population, and there people will not be able to find new jobs.” Martin Ford from, The Lights in the Tunnel.

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“There was a type of employee at the beginning of the industrial Revolution whose job and livelihood vanished…… the horse…… the arrival of the internal combustion engine rapidly displaced these workers. There was always a wage at which all these horses could have remained employed. But the wage was so low that it did not pay for their feed.” From a Farewell to Alms.

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“There have been trillions of dollars of wealth created in recent decades, but most of it went to a relatively small share of the population. In fact economist Ed Wolff found that over 100% of the wealth increase in America between 1983 and 2009 accrued to the top 20% of households.”
It never trickled down.

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“There has never been a worse time to be competing with machines, but there has never been a better time to be an entrepreneur.”

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“Smart entrepreneurs can, and will, invent ways to create value by employing even less skilled workers. However, the message the labor market is clearly sending is that it’s much easier to create value with highly educated workers.”

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So what do we do about this? There are many initiatives they detail in the book, that I completely agree with. One being to encouraged more young educated people to be daring enough to start business that create blue collar jobs in their community. First, we must make it easier for the smallest of businesses to start up and grow. Otherwise the successful entrepreneurs will look to work with more educated workers, as I have just done by selling my business. Or even worse, they will launch software companies that replace entire labor forces. I believe companies that build and maintain back yard greenhouses will have the potential to employ the greatest number of people, and curb out dependence on manufactured foods that have caused our healthcare epidemic. Killing two birds with one stone.

I’m a subscriber of Ray Kurzweil’s Transcendent Man on Facebook. He is not an economist nor is he worried much about the future labor markets, but he often shows how machines are capable of impressive new tasks. For instance there are companies inventing robots that can make better diagnoses than doctors. No job is safe in the coming decades.

Our entire government is unaware of this problem and have been incorrectly trying to solve the unemployment problem for decades. Their solution is to spend money on unnecessary government jobs or to give tax breaks to ”job creators”. It does help a little, but the debt it creates pushed the bill down the road to the next generation. So, what happens when there is little or no work left to do? Without change within government there will be no money left for public schools, social programs, or infrastructure. We would end up with a severally separated class system. The income and wealth statistics of the last 30 years shows we are already heading in that direction.

“No country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order.” Franklin D Roosevelt.

Some people like Jacque Fresco, head of the Venus Project, think that democratic socialism is the only sustainable future in an America without work. I can’t help but imagine a future like the one in the movie” Wall-E“, this clip always makes me laugh too.  So, if we want to stay a capitalist country forever, we will need to come up with some free market solutions. Capitalism only works if there is a large class of consumers, but that cannot exist without a large class of workers with money to spend.

“Labour was the first price, the original purchase – money  that was paid for all things. It was not by gold or by silver, but by labour,  that all wealth of the world was originally purchased. ” -Adam Smith (Father of Capitalism)

May we never forget this.

 

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