Robots and Riots

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You do not see union workers holding benefits for robots. — Stephen Colbert

There’s a Doomsday scenario where machines take over all jobs and everyone becomes unemployed. Evictions, hunger, and illness ensue. Riots in the streets. Calls for a guaranteed national income. Legislation to prevent robots from being built at all. Political calamities. A real mess.

French police unleashed tear gas and water cannons on demonstrators Tuesday as tens of thousands packed the streets of Paris in an outpouring of opposition to the government’s anti-labor agenda. news item

If workers will riot over incremental changes to employment, imagine how berserk they’ll go if all the jobs disappear.

“But robots will never take every job!” Oh, yes they will. We humans are clever — we’ve invented countless labor-saving gadgets over the centuries, devices stronger or faster or more precise than people can be. We’re also clever enough to invent mechanical brainpower that’s stronger, faster, and more precise than our own. In fact, we’re developing this Superior Artificial Intelligence as we speak. Such an intellect will eclipse our own poor powers and take charge. Soon.

(Which would you rather buy, something dirt cheap but excellent from a machine, or something flawed and unreliable and expensive from a human? Hmm.)

This could easily become a bad thing, since people thrown out of work generally don’t have money for food, rent, gasoline, and doctor visits. Also, most of us derive meaning from our labors, and without a job — a way to contribute — people might find themselves existentially adrift. Combine a lack of purpose with a lack of cash, and you get street riots and the other disasters.

And it also could be a good thing … if the automata serve us faithfully and make us all wealthy. We’d have endless free time to pursue our interests, with no need to convert hobbies into jobs. In that world to come, what matters would no longer be how rich you are, but how interesting you are. I call it The Star Trek Future.

(Yes, I’m well aware that this very blog could be replaced by automation. I’d have to find some other way to amuse myself. Tennis, anyone?)

A solution that lately has gotten traction is a guaranteed national income — a stipend for every adult citizen. If all people were unemployed, only those who owned investments would have regular income. The corporations would need to donate money to the unemployed, or none of them would buy any products.

The problem with this plays out as follows: I own a store, and you come in to get a candy bar but don’t have any money. I give you a dollar, and you hand it back to me for the candy bar. Essentially, I’m performing a short ceremony with you, at the end of which I give you a free candy bar. At this rate, I’ll go broke.

Another idea involves a kind of fiscal land reform: the government confiscates corporate stock and hands it out to everyone. We’d all become owners of the robots that took our jobs. Automated production would go to our bottom line, and everything turns out fine.

Except this would basically destroy the market economy. Nobody would invest in companies anymore, lest their hard-won gains be taken from them abruptly in some similar, future upheaval.

But what people aren’t talking about and what’s getting my attention, is a forthcoming rapid demonetization of the cost of living. — Peter Diamandis

What to do, then? It turns out there’s a solution that will likely unfold as a natural consequence of total automation of jobs. It’s called demonetization, and it will cause most prices to plummet. After all, robots don’t take vacations; they don’t need healthcare for their kids; they don’t go on strike; and they perform their tasks vastly more efficiently than can humans. They work much better and much cheaper.

Thus, though we may all one day find ourselves unemployed, our expenses could decline by as much as 90 percent. A meal at a fast-food restaurant would cost 50 cents, and a ride in a driverless taxi would set us back about 30 cents per mile, less than half the cost of car ownership. Dirt-cheap housing will be built using 3-D printing. Meanwhile, online education already is basically free, and the smartphone in your pocket comes with a slew of products and services that 30 years ago would have cost hundreds of thousands of dollars.

Given a small stipend from the government and/or a small stake in the big corporations, people would have more than enough cash to pay for basic necessities even if they were out of work.

It’s also important to bear in mind that non-human employment will likely emerge over time and not all at once. Economic downturns in recent decades have tended to resolve themselves with “jobless recoveries” as businesses bought new software first and then hired real people. This hints at workforce automation building momentum slowly over several decades.

Instead of being eliminated, your job might merely get cut back, bit by bit: they’d offer to keep you on at reduced hours that drop even further over the coming months and years. Of course, your pay would decline, but meanwhile your personal expenses will have plummeted due to all that cheap automation everywhere in the economy. So who cares? You just got a bunch of extra hours away from work while retaining essentially the same lifestyle.

(If you’re worried this optimistic scenario won’t play out according to plan, there are a number of ways to adapt your work life to reduce or delay your risk of being replaced by a machine.)

If business and government can coordinate properly (and that’s a BIG “if”), automation might supplant us gradually, so we retain a declining level of employment while prices also decline. We could actually achieve a soft landing into a life of prosperous leisure.

That’s not Doomsday. That’s more like Paradise.

* * * *

UPDATE: Will we control AI?

UPDATE: Jobs are already disappearing as robots take over

UPDATE: Automation begins to clean out white-collar jobs

UPDATE: The rise of the useless class

UPDATE: How to get paid in the Age of Layoffs


Why U3 Is Useful


Let’s say you’re having an evening out with friends, and the topic of unemployment comes up. Everyone has an opinion on how bad it is, or what the government should do about it, or if it’ll go up or down.

You’re sitting there, thinking, “I have a job, so how does the unemployment situation affect me?” You take a quick mental inventory, just to get your brain in gear (and avoid blurting out something stupid):

1. The higher the unemployment rate, the cheaper labor gets (because people are begging for jobs).

2. The higher the rate, the less pressure for minimum-wage hikes (because see #1).

3. The higher the rate, the lower the prevailing interest rates (because the government fears things will get worse unless it makes money cheaper to borrow).

4. The lower the rate, the more likely they’ll raise interest rates (because full employment leads to higher wages — labor gets hard to find and owners must offer more to attract it — which puts more money in workers’ pockets, which heats up prices, which can cause customers to cut back on purchases, which can lead to a recession, which can lead to you getting laid off).

Then you remember reading somewhere that, when the unemployment rate gets below 5%, that’s when the Fed will step in and raise interest rates. But how do they know unemployment has dropped to that number? You pull out your smartphone and Google it: the official rate used by the Fed is called “U3”, whatever that is.

Okay, “U” must mean “unemployment”, and the “3” hints at other unemployment estimates. A further search reveals that the U.S. government produces six measures of unemployment, U1 through U6, with U1 being the narrowest estimate and U6 the widest. And ooh, lookee, here’s a nice chart that shows how the various unemployment rates rise and fall in lockstep.

At this point you’re thinking, I’m gonna own this conversation.

You butt in: “Hey, it all means nothing until U-3 gets below five percent.” Heads turn. Puzzled looks. You resist the temptation to gloat. Instead you exercise regal patience: “You know, U-3, the standard unemployment rate used by the Fed to determine interest rates.” You lean back, a faint smile on your face.

Someone shakes his head. “Nah, those rates are faked up by Washington to make things look better. The real number is much higher.”

Evenly, you reply, “Yes, of course, but they also have U-6, which is a much wider estimate of unemployment.”

Someone else pipes in: “If they fake the — what did you call it?”


“If they fake U-3, why won’t they fake U-6?” Heads nod.

Someone says loudly, “I never believe anything out of D.C. They’re all liars!” Cheers, high fives, glasses clinking.

This isn’t turning out the way you planned.

So next time you find yourself in this situation, here’s what to say:

“It doesn’t matter if they’re fudged numbers! They’re still useful. And the Fed relies on U-3 to make decisions whether we like it or not. So when you see the U-3 number creeping down below five percent, get ready for a change in the economy.”

If they ask, “What change?” grandly tell them:

“At that point, the Fed will raise interest rates to cool down the overheated marketplace. And this, in turn, will make it slightly harder for businesses to raise money. Which could toss a monkey wrench into the stock market.”

If they ask, “Okay, then what?” inform them:

First, if you’re thinking of taking out a business loan, do it sooner rather than later, to keep your rate down.

Second, if you’re holding stocks, you might want to move some of that to cash. You can shift into short-term bonds because their rates will likely rise. But long-term bonds will be stuck paying low rates, so their value will drop.”

“And third, keep an eye on U-3, because usually it gets down to the low four-percent area before the good times end and we dive into another recession.”

If they insist, “But those unemployment figures are fake!” just remind them:

“U-3 and the other U’s behave very consistently over the decades. U-6 is generally twice as high as U-3, for example, which means a U-3 of five percent translates to a U-6 of ten percent. Anyway, it’s not the number itself but how it goes up and down that counts. So don’t let your political beliefs prevent you from using the unemployment figures as bellwethers.”

(Cool word, “bellwethers”.)

Finally you declare, “Washington and the banks and big corporations pay close attention to U-3. They don’t give a damn if it’s fudged downward. They’ve heard all the theories. What matters to them is where the number is headed. So take a tip from the big boys and keep an eye on U-3.”

Then collect your well-earned applause, handshakes, thank-you’s, and offers of free drinks.

…Or not.