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.


  1. an interesting truth of bifurcution. In the original use of the term bifurcation is believed to occur as the result of increase rate of flow through a system. This occurs in biology and in constructal theory of systems. Socio-economically the trick is making sure the bifurcation in roles and specializations doesn't induce too great a gini co-efficient which is surprisingly socially detrimental.

    Here is surprising cross cultural study highlighted in a TED video on Gini co-efficients and social well being.

  2. Great line: "we are meeting the computers halfway by increasing our demand for the very things that they do best."

    The obvious rebuttal to the NYT claim of "lower workforce mobility," which you almost make here and have made explicitly in the past, is that we are enjoying higher "consumption mobility." I.e., maybe the average worker doesn't see nominal income growth like in previous generations, but he will still see real income growth over his life because the things the average person wants to consume are becoming increasingly cheap and ubiquitous.

    On another note: you may want to ask your wife, or other women of means, whether conspicuous consumption is truly on the way out for the fairer sex. (Or just look in their wardrobes.)

  3. Where is there any semblance of respect for labor (actually, touches essence) and what it means for the human populace?

    It is too bad that numeracy has become so favored as to push a whole set of folks into uselessness. Granted, the smaller set has become irreplaceable (in fact, being robot-fluent is almost a guarantee of a job). At the same time, infrastructure has eroded to dangerous levels.

    By the way, managers (evil empire, indeed) are not of the numeracy set as they squash the beauty of mathematics, et al, into the role of an enforcer for their mischief. The question is how to bring this reality into the light of day to be properly discussed and handled.

    Per usual, Rick is right on.

  4. the myth of marginal productivity theory lives on.... get real, rick, CEOs make 300X the median household income now because they belong to a club, a class of interlocking directorates and executives who are looting american corporations just like wall street is looting the american economy, not because they are better computer programmers. during the great age of the middle class post-wwii income was more equally divided even as great technological leaps occurred because labor had power and managements had ethics. the mythology of economics fails utterly when you look at wilkinson's work. it's not how much we have but how it is distributed that creates welfare. period. growth has not made people happier or better off while inequality has increased. just the opposite.

  5. Computers displaced the middle because that was where the cost of automation was more than paid for by the savings. On the dexterity front if humans can do it cheaply enough at acceptable quality, why invest in the capital? In the exceptional cases machines do just fine-- perhaps computers can't "drive a truck" but show me a human who can fly a stealth fighter. I'll bet when I reach the point of needing a hip replacement in a few decades, it won't be performed by human hands. On the experience and judgment front, I'm looking forward to the day when a typical automatic voice response system can understand and execute orders faster than a well-trained human operator.

    My sense is that conspicuous consumption has been transitioning to conspicuous philanthropy, perhaps as a consequence of the bifurcation in incomes. Eventually this too will become socially unacceptable. Someday we will learn how to decouple the value of a human from what he is able to produce for other humans.

  6. Consumption sure as heck lives on. It's just a little less conspicuous. The super rich have super yachts and live in Architect designed palaces in remote coastal locations. The rich drive SUV's with a porche badge rather than the less practical sports car. Privacy has always had a large premium and in the age 7 billion people and the internet the premium has gone way up.

  7. Google's autonomous vehicles will be replacing taxi and truck drivers before the decade is out.

    The day we decouple the value of a human from production is the day 90% of the population become redundant to their masters. Serfs have always been left to starve.

  8. Sorry, Rick, I don't buy the proposition that we are entering the twilight of conspicuous consumption.

    This proposition may be true for an enlightened few who recognize the diminishing utility of wealth. It may be true for an enlightened few whose ascent in life has conformed nicely with an ascent up Maslow's pyramidal hierarchy of needs.

    It is certainly not true for Donald Trump and the legions of American and global citizens who believe that he represents an ideal moral role model, not to mention an ideal presidential candidate. It is certainly not true for Sheldon Adelson, who is buying his own presidential candidate. What greater trophy of conspicuous consumption can there be than the acquisition of one's own personal U.S. president?

    You live in a wonderful, well-deserved world, Rick, but it's not our world. We live in a world where Maslow's pyramid has been decapitated by "self-made" men whose making has been rooted in exploitation and moral corruption. Your vision may be correct for a far distant time and a far distant global culture, but not the near future, and certainly not the here and now, computers and virtual goods notwithstanding.

  9. Bear with me, I feel a Gingrich coming on.

    The class business has changed considerably from the historical periods you mention. Today, we have nominal mobility between classes - all it takes is money. Of course, many books have been written to show money does not make the man, but, economically speaking, and in today's society, it does.
    Conspicuous consumption has taken a new form in my opinion. America now prefers cheap goods of lower physical utility made cheaply overseas. Try using a wal-mart screwdriver for more than a couple of jobs. Preferring cheap capital goods (throwing away the results of expended resources and energy) to minimize short-term expenses is conspicuous consumption in my book. The short-term view pervades all of our thinking today, not just in financial markets and corporate behavior.
    Virtual lives need fewer non-virtual goods.
    When executive management discovered that their own "productivity" could have different dynamics (i.e. means and ends) from standard worker "productivity", financial capitalism was born. Corporate power has only increased since then, and will continue to increase until some reins are put on the form of corporate governance; yes, regulation will probably be required.
    The concept of Corporate Feudalism is becoming a reality with multi-national corporations finding the cheapest, least politically powerful, source of labor available across the globe. America is losing, because of its higher cost structure. Unemployment will remain high until it goes higher yet, most likely.
    One's daily use of robots promotes personal productivity if one's product is finding entertainment, or if overloading one's input enhances creativity. Remaining in touch anywhere, and being able to handle problems that arise, regardless of the current time or your physical location are increasing productive to firms, not so much empowering individuals.

    Some short takes on reactions to your article and the comments... Anyone care to expand or expound on any of these aspects?


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