This Is the End


Markets, Risk and Human Interaction

January 11, 2012

The Bifurcated Society

Unless there are slaves to do the ugly, horrible, uninteresting work, culture and contemplation become almost impossible. Human slavery is wrong, insecure, and demoralizing. On mechanical slavery, on the slavery of the machine, the future of the world depends. – Oscar Wilde

An article in the New York Times last week made note of the lower mobility in the work force: “Americans enjoy less economic mobility than their peers in Canada and much of Western Europe. The mobility gap has been widely discussed in academic circles, but a sour season of mass unemployment and street protests has moved the discussion toward center stage”. So add another to the economic woes; not only unemployment, but less mobility if you are employed.

There is less mobility in the work force because the computers are not simply displacing jobs, they are taking out the middle. Computers are good at routine cognitive tasks in the middling white-collar range, the desk jobs, the jobs that require keeping track of things, making arithmetic calculations. They are not so good at motor tasks, the blue collar jobs that require coordination, manual dexterity and sense-of-the-world adjustments. Computers can crunch numbers but they can't drive a truck or make up a hotel room. When it comes to computers taking on human tasks, as Steven Parker notes, the hard problems are easy and the easy problems are hard.

Because they take out the middle, it is a lot harder to pursue the American dream by working your way up the ladder. Climbing up rung by rung, you will find a machine staring down. And it won't retire or move up the ladder to make room for you. Once in place, a retirement or promotion is not going to happen, it isn't going to be opening up a spot.

Futurists have seen this coming for along time, sort of. As automation got started, they saw robots taking over the manufacturing tasks and our day-to-day activities (serving us our dinner and the like), leaving people to do other things – leisure activities or getting jobs making the robots. Futurists always get it wrong because they take the present and multiply it by some number to get the future, and they have the essence of the issue wrong here as well. Although there are robots in industry, the biggest effect of computer technology is in an the area no futurist imagined. It is not improving the production of industrial goods, it is supplying the increasing demand for virtual goods. So the picture is not one of producing what we have always produced, but doing it with less labor, it is that we now want things produced that have not been produced in the past, and those things by their nature require less labor. That is, we are meeting the computers halfway by increasing our demand for the very things that they do best.

When God closes one door, He opens another
Ironically, even as they effect a widening of economic classes, robots, computers and automation are answering the bane of the industrial revolution, freeing many from the mind-numbing, routine jobs of the specialized factory floor that Marx reviled against as the source of worker subjugation and alienation. (Along with many of the modern-day clerical equivalents). The problem is that we are not seeing enough new, more productive and satisfying jobs rolling down the pike. So we might be seeing an end to worker alienation, but we also are seeing an end to work.

We have had an axiomatic view that when technology uproots us from jobs it opens up new ones, and the new ones are even better in pay and in job satisfaction. After all, somebody has to make all those robots. It is a comforting thought, but it is not really an axiom, perhaps just a lucky result that has obtained over the course of the industrial age. There was always a West where the workers could go, an expanding population, undeveloped countries, and new products and demand. The same may continue, but it doesn't look like it is.

Which sort of makes sense if we are moving toward living in a virtual world with virtual industry taking on increasing prominence, and with those industries not particularly labor intensive (or for that matter capital intensive – at least nothing like the era of steel and railroads), or not labor intensive for those with motor as opposed to cognitive skills. We aren't thinking too much about this right now. We focus on running out of resources, not on running out of new markets, more specifically new markets – both of new consumers and new products – that bring as many new jobs with them as are being displaced by machines. (Though this is all starting to get attention, for example in recent books by Erik Brynjolfsson and Andrew McAfee and by Tyler Cowen).

The Outsourcing Masses
Though we are not as unemployed as we might think. We just are not being paid for our work. Much of what we enjoy from our technological progress is a new sort of outsourcing. How much time do you spend on things that are made easier and that you now do for yourself with the help of computers? You do them now because computers have made it possible for you to do them. You take care of your appointments and a lot of the service issues, you get yourself directed via various phone prompts. You don't  employ anyone when you do these things.The book “The 4-Hour Workweek” suggested, among other things, outsourcing day-to-day tasks to people in India. But the largest area of outsourcing is not to India, Sri Lanka or China. Our jobs are being outsourced to us. The jobs are moving from the producer to the consumer side of the ledger. And some of that work comes as the guise of entertainment. How much of your work is being done as you do your e-mails and surf the web, keep yourselves busy with your apps as you commute to work? So it is not only that computers are replacing workers, they are turning consumers into unpaid workers.

Bifurcation and classes
In the earlier epochs of history, we find almost everywhere a complicated arrangement of society into various orders, a manifold gradation of social rank. In ancient Rome we have patricians, knights, plebeians, slaves; in the Middle Ages, feudal lords, vassals, guild-masters, journeymen, apprentices, serfs; in almost all of these classes, again, subordinate gradations. The modern bourgeois society that has sprouted from the ruins of feudal society has not done away with class antagonisms. It has but established new classes, new conditions of oppression, new forms of struggle in place of the old ones. Our epoch, the epoch of the bourgeoisie, possesses, however, this distinctive feature: it has simplified the class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes, directly facing each other: Bourgeoisie and Proletariat. – Karl Marx

Slave and Master for the Romans, Lord and Vassal in Feudal times, Bourgeoisie and Proletariat for the industrial capitalists. What is emerging now? Because computers allow us to lever our creativity and cognitive work in the same way that capital plant allowed those in the industrial revolution to lever their production of real goods, perhaps , as Murray and Herrnstein hypothesized when they proclaimed the emergence of a new “cognitive elite”, class division will increasingly be based on education and intelligence.

But although a bifurcation is occurring in jobs, the opposite is occurring in consumption. Granted those on the lower rungs spend more of their income on the consumption of real goods than do those on the top rungs. And the share of income on goods that by nature are in limited supply, like land, wine and art, even social status, is obviously greater for the top rungs than for the lower. But for both, consumption is increasingly oriented toward virtual goods – consuming YouTube videos, tweets and social networks, games and reality TV shows. These take little in terms of labor – or for that matter, capital – to produce. And the labor that is required is largely supplied by us as the consumers. Another instance of outsourcing.

And one notable area of consumption that by definition differentiates the classes, that of conspicuous consumption, is going by the wayside. Yes, I believe we are seeing the twilight of the era of conspicuous consumption. Not that Gucci and Chanel are going to go out of business, but for most people that sort of status statement is increasingly becoming irrelevant. No matter what you are wearing and driving, a far better picture of you and your status is just a few clicks away. You don't have to drive a Ferrari to let everyone know you are rich and successful. If you are driving a Ferrari, what it will convey is that you – who as everyone who cares to Google you knows is running a hedge fund and is worth tons of money – must like a Ferrari.