Brad Feld, a prominent venture capitalist and the co-founder of several VC firms, has posted a review of The Lights in the Tunnel on his blog.
As Brad points out in his review, the book is roughly divided into two parts. The first part argues that automation technology is ultimately going to advance to the point where most average workers will be unable to find employment within their capabilities. Brad found a lot to agree with in this first part of the book:
Ford does a good job of spending the first half of this book making the case for this. He draws nicely from the notion of a technological singularity
(which many of us are now calling simple “the singularity” for convenience), explains why mainstream economists (and the notion of econometrics in general) are basically historians rather than effective predictors of the future, does a nice job weaving the Luddite Fallacy
The second part of the book proposes some fairly radical ideas about how we might adapt capitalism to the new reality if jobs are in fact going to disappear for most people. Brad found these ideas very difficult to accept, writing “Sometime during reading this stuff my brain exploded and I had to go take the dogs for another walk. ”
I’ve found that to be a fairly common reaction to the book. Many people see the logic in my argument about where automation technology is going to ultimately lead, but very few people are ready to really think about the solutions—because there probably are not any solutions that aren’t fairly radical.
If you accept the basic premise that:
A. At some point in the future, automation technology will advance to the point where MOST people are essentially unemployable.
then,
B. Is it possible to sustain consumer spending, mass market business models, economic growth—and quite possibly democracy and civil order—without some form of radical intervention or reform?
I’ve found that most people who try to address this start by denying the premise: we’ll never have massive unemployment due to technology, so it won’t be a problem. Ok, but can you sustain capitalism without reform if you accept the premise?
Remember that technology would not stop advancing, so we could reasonably expect that over time, a smaller and smaller fraction of the population would have marketable skills. If we take things to the extreme, the advent of genuinely intelligent machines could conceivably vaporize almost the entire job market. Advanced virtual reality technology—perhaps linking directly into your brain—might someday even eliminate opportunities for human celebrities and entertainers. Who could compete with that kind of digital fantasy?
If most people don’t have jobs, where does consumer spending come from? What drives the economy? Why would automated production continue if there is no one to buy the output? Will automation make everything so cheap that it won’t matter if people have virtually no incomes? I don’t buy that argument.
One person who believes everything will work out without any major reform is Robin Hanson, a libertarian economist at George Mason University. Hanson argues that intelligent machines would eliminate nearly all jobs but would also cause productivity and economic growth to increase exponentially—driving up interest rates and returns on productive assets to incredible levels. He brushes aside the obvious reality that most people don’t own much and suggests that the returns would be so high that even people who owned only tiny slices of the pie would have investment incomes sufficient to support themselves.
I think Dr. Hanson must be smoking some really weird and potent libertarian stuff. I pointed this out in a response to his paper on the economics of intelligent machines.
Aside from that idea, is there another way to accept the premise and have a reasonably prosperous and civil society without radical reform (such as some type of guaranteed income funded by taxation)? If you have any ideas please post in the comments….
Martin Ford 
Here’s some public acknowledgement of your premise!
http://online.wsj.com/article_email/SB126325594634725459-lMyQjAxMTIwNjEzMjIxNTI1Wj.html
I don’t have the answer (yet :-)), but along with the government-driven reforms you propose in your book, it’s worth considering other possible cures like those described in the Wikipedia article on Jobless Recovery.
One not mentioned there that makes some sense is providing for the widespread ownership of capital along the lines of Kelso and Adler’s The Capitalist Manifesto and the Binary Economics of Ashford and Shakespeare.
I agree some major changes are needed, whether called a paradigm shift, radical reform, and/or something else. People will have to come to terms with new ideas about the nature of work and leisure, the role of government, etc. A tall order, but may be possible if suitably motivated.
I am from Czech Republic, and we had a “coupon privatization” here. It basically meant distribute former communist wealth to all people in form of shares. It went very badly. Few people got almost all shares, and general population got very small one-time profit (approx. $500). Although distribution was done all right, general population didn’t have knowledge and skills needed to maintain and keep their shares. It may be better in US, but still many people won’t be able to be shareholders and sell their shares right away.
Government will have to keep their shares for them, but this is basically what Mr Ford suggested. And it still implies that rich people will allow this distribution. They will always have the power to get this wealth for themselves.
Interesting post. I’ll have to read that book, seems right up my alley. Have you considered the possibility of a different kind of exchange system? Really interesting topic, I’ll be sure to keep an eye on this blog now. You might want to check out mine too 😉
Hmm. I suppose that hopefully (yes that is all we have really) the scientists will be able to make all food in a laboratory from scratch, and if this biotechnology could be automated, then you only need the machines to be solar powered (or whatever). I think that covers food, but as for your other points (mortgages etc), I don’t know. I’ve not read your book so I don’t know what your solutions are, but right now all I can think of is that society is going to have to go through a major restructuring to deal with it.
The best I can do is that the mortgages will default, recession comes, and then….
I was glad to see the following in the review, because in your Fast Forward Radio interview, I kept wondering how taxing business, which always pays it’s taxes from a cut of the gross income, could avoid an apparent economic downward spiral. The following quote from the interview helps a little with this question, but is there a blog post where you explain this tax on business in more depth? Thanks.
“He then spends the balance of the book explaining a government-driven taxation and incentive approach that taxes companies based on their permanently lost wages (based on automation, which he asserts will increase gross margins) while incenting the unemployed to act in ways that benefit themselves and societies by paying them based on how they act and contribute in this “non-traditional job” way. Ford suggests several simple categories, including Education (self and others), Community and Civic Activities, Journalism, and the Environment.”
I think that this recession taught us alot about what would happen. Naturally, the people (voters) would get angry, Congress would get scared and extend unemployment another six months, then they will extend unemployment again, and again, and again, etc. The unemployed and unemployable voters could eventually become the vast majority and they would be calling the shots. The wealthy will have to be taxed to pay for this and wouldn’t have a leg to stand on if they argue. Recently one lone congressman voted against, and blocked extending unemployment to over a million people and the public crucified him. Then they quickly passed the bill.
I think that this recession taught us alot about what would happen. Naturally, the people (voters) would get angry, Congress would get scared and extend unemployment benefits another six months, then they will extend unemployment benefits again, and again, and again, etc. The unemployed and unemployable voters could eventually become the vast majority and they would be calling the shots. The wealthy will have to be taxed to pay for this and wouldn’t have a leg to stand on if they argue. Recently one lone congressman voted against, and blocked extending unemployment benefits to over a million people and the public crucified him. Then they quickly passed the bill.
The most logical solution to technological unemployment is a resource based economy proposed by social engineer and industrial designer Jacque Fresco of The Venus Project. If we at all have to think radically ,then why not think most radically? if you want to learn golf, why not learn to play like Tiger Woods?
Visit http://www.thevenusproject.com for more
Atlas Shrugged.
I think having extreamly well made and well programed robots that can automate everything boaring and mundane would be HUGE for the usa or w/e country can seal the deal on this technology. China is the closest at the moment, because of its cheap labor, and we all know how they are doing as an ecconomy. If the united states could make stuff (aka almost everything) for cheaper, then you factor in the shipping costs, we could feed our demand for buying crappy toys our selfs, then of course being an exporter. If I got something hugely wrong, please dont fuss im only a kid.
While reading the book, my brain kept screaming about one massive factor that was largely absent… bio and nano tech. By the time we have super intelligent machines that can do our jobs we may start integrating with machines and form a new species that Juan Enriquez likes to refer to as “homo evolutis”. As a result, this may not be an “us vs. them” scenario with people and machines, or at least to the extent that you put forward due to the fact that our own “individual human” productive capabilities will by manifold what they are today. Those Luddites who don’t embrace integration with machines will no doubt find themselves absent jobs and would likely have to rely on something like the upgraded welfare system you put forward, but much of the system could stay the same.
The idea that technology will put people out of work is ridiculous. It implies that somehow there isn’t much work left to do – when in reality there is an *infinite* amount of work to do. Literally.
Given this infinite amount of work, it is mathematically impossible to put everyone out of work. The only reason we have unemployment is because either A. the speed at which people can find opportunities is finite, or because B. people are rich enough and value their time enough that they reject opportunities they don’t find desirable enough.
The Luddite fallacy, as Brad Feld correctly labels it, also ignores the development of technologies that do one of the following:
1. make it easier for people to find existing opportunities to make money for themselves
2. make it easier for people to learn skills that open up new opportunities for them
3. make it easier for people to travel to farther areas which have opportunities that closer areas do not
Those 3 factors mean that it will become easier and easier for people to find one of the infinite number of opportunities to improve our world
Read the book, Ford takes your points head on.
Like most people in the West, we are prone to look at segments of things, the components of an issue, or a single category of focus. This worldview often prevents us from seeing the big picture; the overarching direction of trends seems out of our times remain out of focus or nonexistent. We can’t see the forest for the trees. This article is a case-in-point.
The focus on jobs losses, money, the contrived debate over guns, the disillusionment of natural human relationships(man/women, old/young, face-to-face friendships/facebook, etc…) are but branches of a bigger context; the powers that be are hell-bent on changing what it means to be human. They are, in effect, testing the esoteric idea that basic human nature is flexible, that it can be changed to whatever manageable bio-product or bio-resource needed to serve their interest in global power and human evolution.
The game is over and we, the people, have lost in every way one can think of. No part of our lives are natural; things that give meaning to life, the food we eat, the relationships we have, even the water and air we breath are all used to break down the human-being into a processed commodity, like so much fast food. To those without power, being a special human individual is rapidly becoming an obsolete notion, and our children will never learn their own true nature. We wanted progress, we got it.
As a psychiatrist I now use voice recognition software and standardized templates for work that, 20 years ago, supported a transcription staff. Those transcription workers are gone, and they are not coming back. I can’t afford them. My billing is increasingly submitted electronically, reducing my staff needs, and the testing used in my field has become machine scored, and self administered by patients, which replaces, in part, a psychologist’s visit, or, at the least, reduces the psychologist’s time needed. I use Dynamed, a collaborative network of peer-reviewed opinions on more than 3000 medical topics, and PDR.net, for a real time capacity to research any medical issue, such as a drug interactions or best practices of medication management, online. I can EASILY envision a time, in the not too distant future, when an AI program will engage a patient in conversation, ask questions, understand responses and conversation, administer standardized questionnaires, such as the Mood Disorder Questionnaire, Beck Depression Inventory, Health Dynamics Inventory and the MMPI, and generate a partially completed report, allowing me to trim 30% to 50% off of the time that I see patients in a visit. The quality of that examination, standing alone, would be, on average, better than the bottom 1/3 of psychiatric talent currently in the market, and would cost only a FRACTION of the cost of sending someone through four years of college, four years of medical school, and four years of psychiatric residency. That AI program would, at once, translate into 30% less employment for psychiatrists. Nothing will stop this progress, and, quite frankly, we are almost there. A recent article in Wired Magazine described a kiosk at the Mexican/U.S. border which questioned entrants, analyzed speech stress and tone, and speech pattern, and was BETTER at picking out illegal U.S. entrants than any human. You think that won’t happen in MY field? Think again.
I did find one flaw in the book, an emphasis on software and electronic technological advancement. The authors could have done a better job researching exponential growth in biological and chemical systems, and physical science. There are references, for example, to elevated energy costs and food costs. Exponential growth in those fields, driven by the market, will, very likely, lead to an elimination of agriculture. There is nothing in hard science which prevents us from mimicking photosynthesis on the laboratory bench, and little to prevent us from scaling up that process. Factory food will be produced at a fraction of the cost, both capital and energy, of agriculture based food, and will taste no different. Add all of the ranchers and farmers to your unemployment lines. Progress in chemical and physical systems will, undoubtedly lead to energy storage breakthroughs, perhaps along the lines of the large scale, dirt cheap (actually MADE from dirt materials) liquid metal storage batteries, currently being developed at MIT, spread out over acres of land. Exponential growth make actually produce energy that’s too cheap to meter, as the wind energy in the Dakotas, combined with solar power in the southwest, and ocean current power, when stored, could power the nation at no environmental cost. Advances in AI and nanotechnology could lead to self-assembly of very inexpensive, if basic, housing, at a FRACTION of the cost of today’s stick built homes. We are already seeing a hint of that. Park model mobile homes are now being sold for $19,000, and are rather pleasant to live in, and certainly have more room than the average NYC apartment.
I am already seeing a change in the zeitgeist of my younger, unemployed patients. Many are simply NOT blaming themselves for a lack of work, and are focusing their lives on individual hobbies. They simply see the system as moving too fast for a political system that was developed a century ago. They no longer view unemployment as a source of shame. They might be right.