Book: The Rise of the Robots
Author: Martin Ford
Key takeaways: I found the book rather banal. It’s an amalgamation of stories and theories that you might have read already, and does a lackadaisical job of thinking on an admittedly a very difficult and complex topic. You will find much more food for thought in this McKinsey article. This is such an important topic: this is the stuff revolutions are made of. First decade of the 21st century was the first one that created no new jobs in the U.S. (it needs roughly a million jobs every year to keep up with population growth). Automation, among other huge factors such as off-shoring and decimation of power of labor (through political power of the monied and ideology), is already causing skewed economies (5% of households account for 40% of spending). The continued low cost of capital (near zero interest rates) is likely to accelerate the trend, which has led to US labor’s share of national income going from 65% in 1950 to 58% now (and remember that this includes very high salaries of the top decile or two, whose income has beyond defied the gravity faced by others).
Ford asserts that the automation is the key reason for these evils. To his credit he discusses the other obvious candidates such as globalization (Alan Blinder believing that 30-40 mm U.S. jobs are offshore-able), loss of political power by labor, financialization (2.8% of GDP in 1950 to 8.7% in 2011) but sweeps them aside a little too casually. For example, he says that vast majority of labor is working in non-tradeable services and they’re not competing with labor in other countries, and given that 82% of the U.S. GDP is produced within the borders, so globalization is not the obvious factor explaining the problem the labor has faced over the last 30 or so years. What I find absurd about this logic is this: if even 5% of labor is affected by trade-able goods, what do those people do: they go and compete for other non-tradeable jobs, lowering the income in an area that this not proximately affected. How can one ignore such an obvious 2nd order effect, especially over a matter of decades, is astonishing to me.
I really wish there was a good explanation about why previous increases and improvements in automation were all benign and what’s coming next is just so terrible. This doesn’t mean that I don’t believe this to be untrue, but I don’t believe it to be unnecessarily true either. That said, a lot of smart people agree with the author and I am inclined to believe the premise. But, I need to see a proof from the first principles.
The book does have a great quote: “The problem is that the skills ladder is not really a ladder at all: it is a pyramid and there is only so much room at the top.” Another great thing that I learned was that Friedrich Hayek, who is a cause-cerebra among today’s conservatives, actually advocated for basic income–the ultimate in Laws, Legislation and Liberty.
Prasad Capital 