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Automation and the Guaranteed Minimum Income

In recent years I’ve been interested in the effects of automation on our economy and our society. Throughout history every advance in technology has brought more wealth, health, and opportunity to pretty much everyone. With every revolution people changed jobs but their lives got significantly better. When farms mechanized, workers moved into the city and got factory jobs, and Henry Ford’s assembly lines made use of this labor to great effect.

Early factories needed labor in great quantities and as industrial processes became more efficient at utilizing labor, the value of human labor rose and the demand kept increasing. So did pay. Factory workers up through the 70’s could afford a nice house to raise a family, a big car, and even a boat or nice vacations. Since the 70’s however, the purchasing power of a factory worker or even a bank teller has been pretty flat. These are two professions that have seen the most advances in automation in the last 30 years, due to industrial robots and automated tellers. If automation makes workers more productive, why aren’t we seeing that translate into purchasing power?

There are two types of technological improvements at work here. A farmer with a tractor is very productive compared to one with a horse and plow. The displaced farm workers who went to the city were given the tools of the industrial revolution: steam engines, motors, pumps, hydraulics, and so forth. These technologies amplified the value of human labor. That’s the first kind of technological improvement. The second kind is the automated teller or the welding robot. The older technology adds value even to the lowest skilled employees, but the new technology is reducing their value and the new jobs require significantly higher skill levels. There’s something about this new revolution that’s just… different. The demand for low skill labor is drying up.

The increasing divide between the “haves” and the “have-nots” has been documented extensively. Some divide is good and promotes the economy and productivity. Too much separation is a recipe for significant problems.

I’m not the only one worrying about this issue, and as I’ve followed it over the last few years I’ve been surprised by the amount of interest in a Guaranteed Minimum Income or some such plan. Basically it involves getting rid of every low-income assistance plan such as social security, welfare, minimum wage laws, etc., and creating a single universal monthly benefit that everyone is entitled to. Some people are talking about a number as high as $24,000 per year per adult. Considering that the 2015 federal poverty level in the US is just below $12,000 for a single adult, you can see that $24,000 per adult isn’t just a trifling amount.

For comparison, a little Googling tells me that the US GDP per capita is around $55,000. Think about that for a second. You’re talking about guaranteeing almost 45% of the productivity output of the country to be distributed evenly across all adults. One presumes you would also provide some extra money per child in a household, but to be fair the “per capita” figure includes kids too. It’s possible. Sure seems a bit crazy though.

Is it practical? Won’t some people choose not to work? Will productivity go down? It turns out that we’ve done some experimenting with this type of program in Canada called MINCOME. The results were generally positive. There was a small drop in hours worked by certain people, mostly new mothers and teenagers. These costs were offset in other areas: “in the period that Mincome was administered, hospital visits dropped 8.5 percent, with fewer incidents of work-related injuries, and fewer emergency room visits from car accidents and domestic abuse.” More teenagers graduated. There was less mental illness.

I’m fiscally conservative, but I’m mostly pragmatic. It’s only my years of exposure to automation, technology and working in factories that makes me ask these questions. Not only do I believe that people should contribute, I believe that people need to contribute for their own happiness and well-being. That’s why I don’t think paying people to sit at home is the ultimate solution.

The elephant in the room is this: as technology improves, a greater proportion of the population will simply be unemployable. There, I said it. I know it’s a disturbing thought. Our society is structured around the opposite of that idea. Men are particularly under pressure to work. The majority of the status afforded to men in our society comes from their earning potential. The social pressure would still be there to work, even as a supplement to a guaranteed minimum income, so we still need to find something for those people to do. Perhaps if we expand the accepted role of men in society then we can fill that need with volunteer work. Maybe.

What’s the right answer? I don’t know. For lack of a better term, the “American Dream” was accessible to anyone if you were willing to work hard and reinvest that effort into yourself. Not everyone did that, but many people created significant fortunes for themselves after starting in the stockroom and working their way up. That security gave people a willingness to take risks and be entrepreneurial. Proponents of the idea say that a minimum income would bring back that innovative edge. Entrepreneurs could try new ideas repeatedly until they found one that worked, and not worry about their family starving. With your basic necessities met, you could start to realize your potential..

I do know that as we continue down this road of increasing automation, we can’t be leaving a greater and greater proportion of the populace without the basic resources they need to survive. Do we expect them to grow their own food? On what land? Do we expect them to do a job that I could program a robot to do, if the robot’s average cost is only $10,000/year? Do you have some valuable job we can retrain them to do? One that pays enough to support a family?

Look, I don’t like the alternatives either, but it’s better than an armed revolt.

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Are you old enough to remember the early 90’s? Almost nobody was “online” then. It’s hard to believe how much the internet has changed modern life since then. I just went through my bookshelf and got rid of all the reference books (which I could have done years ago) because the internet makes them obsolete.

Do you remember having to look up some arcane technical detail in a book? Do you remember how painful that was? Do you remember connecting to a BBS using a phone line and a 2400 baud modem? I do.

Back then when we tried to imagine the future, we (as geeks) really got it wrong, and surprisingly so. We were the ones who were supposed to see the possibilities, yet we consistently imagined the things we wanted to do with the technology instead of the things the average person wants to do with it. You see, geeks aren’t average people, so we’re sometimes blind to the obvious.

As geeks, we imagined having our own robot to do our bidding, or some kind of virtual reality headset for driving cars around on Mars. In reality, the killer app for the masses was the ability to take a picture of something, write a short note about it, and send it to all your “friends”. The funny thing is, if you asked a geek in the early 90’s if that feature could be the basis of a company valued in the billions of dollars, they’d have laughed you out of the room. The idea just wasn’t that revolutionary. After all, we’d had fax machines for several years, and email/usenet were already out there. Geeks already had access to this technology, and thought nothing of it.

Average people, if they even saw this technology, didn’t see what was under their noses either, simply because it wasn’t sexy yet. Let me be clear, when I say “sexy” I mean it literally. The average young person isn’t like a geek. They don’t have robots and virtual reality sets on their mind, they want to know who’s going to be at the party on Saturday, who said what about who, and if so and so is available. Modern social media succeeds because it helps people satisfy the most basic of “normal” wants.

Where am I going with this? When you look at the bleeding edge of technological progress today it’s easy to spot the trends. Open source hardware has really taken off, specifically 3D printing and other “home” fabrication technologies. We’re also seeing an explosion of sensors, not just in your phone, but also plugged into consumer devices, with most of them uploading their data to central servers (e.g. the popular Nest Home Thermostat).

We all want to know what the next big thing will be, and we’re hopelessly bad at predicting it, but we still like to play the game. If we want to know where this new hardware renaissance is leading, we need to look at the space where these new technologies intersect the wants of average people. Only about 1% of users are the kind that participate by actually creating new content, so I definitely don’t see a future where everyone is designing new things in Google Sketchup and printing them out on their 3D printer they bought at Wal-mart. The thing about 3D printers is that they print things we can buy much more cheaply (little plastic trinkets), especially if it’s the type of thing that a lot of people want, so there’s an economy of scale to support manufacturing it.

There is something that everybody wants to create at home, and can’t be mass produced in a factory on the other side of the world: freshly prepared food. Gourmet food, even. People pay big bucks for fancy coffee makers that make fancy coffee from packets with barcodes containing individualized brewing instructions. It’s not a big stretch to imagine a machine that can whip up fancy cocktails, or dozens of fancy hors d’oeuvres for a party, or even print out your kids’ drawings on their Christmas cookies with icing from a 3D printer. Maybe a gizmo that carves an apple into the shape of their favorite cartoon character? (Of course, you know these will be re-purposed to make snacks for bachelorette parties, right?)

That’s the easy stuff. Honestly, Eggs Benedict seems like it’s well within the range of possibilities, and who wouldn’t want to wake up on Sunday to the sizzle of eggs and bacon, along with the usual coffee brewing?

Of course, if we automate the food preparation and we’re collecting all this data with sensors, it won’t be long until we’re automating the control of our caloric intake.

That’s my guess anyway: all this new technology’s going to end up in your kitchen. Which is cool with me (that doesn’t mean I can’t still have my 3D printer…)

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I was paging through the Amazon store on my Kindle when I came across a book that caught my eye: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (Volume 1)

It’s not every day you come across a book about Automation, and for $6, I figured, “what the heck?”

The author, Martin Ford, is a Computer Engineer from California. To summarize, he’s basically saying the following:

  • Within 80 years, we will have created machines that will displace significantly more than half of the current workforce

This is a topic that interests me. Not only do I have a career in automation, but I’ve previously wondered about exactly the same question that Ford poses. What happens if we create machines advanced enough that a certain segment of the population will become permanently unemployed?

The title of the book comes from Ford’s “Tunnel Analogy”. He tries to model the economy as a tunnel of lights, with each light representing a person, its brightness indicating its wealth, and the tunnel is lined with other patches of light: businesses. The lights float around interacting with the businesses. Some businesses grow larger and stronger while others shrink and die off, but ultimately the brightness of the tunnel (the sum of the lights) appears to be increasing.

I found the analogy to be a bit odd myself. Actually, I wasn’t quite sure why an analogy was necessary. We’re all pretty familiar with how the free market works. If you don’t get it, I don’t think the tunnel analogy is going to help you. In fact, one excerpt from his description of the tunnel makes me wonder if Ford himself even “gets” the concept of how the economy works:

As we continue to watch the lights, we can now see that they are attracted to the various panels. We watch as thousands of lights steam toward a large automaker’s panels, softly make contact and then bounce back toward the center of the tunnel. As the lights touch the panel, we notice that they dim slightly while the panel itself pulses with new energy. New cars have been purchased, and a transfer of wealth has taken place.

That particular statement irked me during the rest of the book. That’s not a good illustration of a free market; that’s an illustration of a feudal system. In a free market, we take part in mutually beneficial transactions. The automaker has a surplus of cars and wants to exchange them for other goods that it values more, and the consumer needs a car and wants to exchange his/her goods (or promise of debt) in exchange for the car. When the transaction takes place, presumably the automaker has converted a car into something they wanted more than the car, and the consumer has converted monetary instruments into something they wanted more: a car. Both the automaker and the consumer should shine brighter as a result of the transaction.

Ford has confused money with wealth, and that’s pretty dangerous. As Paul Graham points out in his excellent essay on wealth:

Money Is Not Wealth

If you want to create wealth, it will help to understand what it is. Wealth is not the same thing as money. Wealth is as old as human history. Far older, in fact; ants have wealth. Money is a comparatively recent invention.

Wealth is the fundamental thing. Wealth is stuff we want: food, clothes, houses, cars, gadgets, travel to interesting places, and so on. You can have wealth without having money. If you had a magic machine that could on command make you a car or cook you dinner or do your laundry, or do anything else you wanted, you wouldn’t need money. Whereas if you were in the middle of Antarctica, where there is nothing to buy, it wouldn’t matter how much money you had.

There are actually two ways to create wealth. First, you can make it yourself (grow your own food, fix your house, paint a picture, etc.), or secondly you can trade something you value less for something you value more. In fact, most of us combine these two methods: we go to work and create something that someone else wants so we can trade it for stuff that we want (food, cars, houses, etc.).

Later in the book, Ford makes a distinction between labor-intensive and capital-intensive industries. He uses YouTube as an example of a capital-intensive business because they were purchased (by Google) for $1.65B and they don’t have very many employees. I can’t believe he’s using YouTube as an example of a capital-intensive industry. The new crop of online companies are extremely low-overhead endeavors. Facebook was started in a dorm room. Again, Ford seems to miss the fact that money is not equal to wealth. Google didn’t buy YouTube for the capital, they bought their audience. Google’s bread and butter is online advertising, so they purchased YouTube because users are worth more to Google than they are to the shareholders of YouTube that sold out. Wealth was created during the transaction because all parties feel they have something more than they had to start.

Back to Ford’s premise for a moment: is it possible that we could create machines advanced enough that the average person would have no place in a future economy? I don’t find it hard to believe that we could eventually create machines capable of doing most of the work that we do right now. We’ve certainly already created machines that do most of the work that the population did only decades ago. The question is, can we get to the point where the average person has no value to add?

Let’s continue Ford’s thought experiment for a moment. You and I and half the population is now out of work and nobody will hire us. Presumably the applicable constitutional elements are in place so we’re still “free”. What do we do? Well, I don’t know about you, but if I had no job and I was surrounded by a bunch of other people with no job, I’d be out foraging for food. When I found some, I’d probably trade a bit of it to someone who could sew that might patch up my shirt. If I had a bit of surplus, I’d probably plant a few extra seeds the next spring and get a decent harvest to get me through the next winter.

I’m not trying to be sarcastic here. I’m trying to point out the obvious flaw in the idea that a large percentage of the population couldn’t participate in the economy. If that were the case, the large part of the population would, out of necessity, form their own economy. In fact, if we’re still playing in Ford’s dreamland here, where technology is so advanced that machines can think and perhaps even nanotechnology is real, I’d probably hang around the local dump and forage for a bit of technology there. The treasures I’d find there would probably put me in more luxury than I currently have in 2010.

So, if you take the thought experiment to the extreme, it breaks down. Given a free society divided into haves and have-nots, where the haves don’t have any use for the have-nots, then what you really have is two separate and distinct societies, each with its own bustling economy. Whether or not there is trade between those two economies, one thing is certain: almost everyone still has a job.

Of course, it’s not like we’re going to wake up tomorrow and technology will suddenly throw us all out of our jobs. The shift in technology will happen gradually over time. As technology improves, people will need to adapt (as we do every day). As I’ve said before, I think a major shift away from the mass consumption of identical items is already underway. As the supply of generic goods goes up, our perceived value of them goes down.

Ford doesn’t seem to participate in automation on a daily basis, so I think he lacks the experience of what automation really does. Automation drives down the cost, but it also increases the supply and reduces the novelty at the same time. Automated manufacturing makes products less valuable but the juxtaposition makes people more valuable.

There’s a company out there called Best Made Co. that sells $200 hand-made axes. There’s a three week waiting time. That’s a feature actually: it’s so valuable to people that there’s a three week lead time. It’s made by hand. It’s made by hand by people who are passionate about axes. Feature? I think so.

In Ford’s dystopia, when the robber-barons are sitting atop their mountains of widgets that they’ve produced in their lights-out factory, don’t you think one of them might want to buy a sincere story? Wouldn’t they be interested in seeing a movie, or going to church on Sunday, or reading a book? When all of your basic needs are met, these higher-level needs will all see more demand. They’re also hard to automate. Some things have value because they’re done by people. Some things would be worth less if you did automate them:

  • Relationships (with real people)
  • Religion
  • Sports
  • The Arts
  • “Home Cooked” or “Hand-Made”
  • Stories (of origins, extremes, rescues, journeys, relationships, redemption, and the future)

Do you recognize that list? That’s the list of things we do when we’re finished with the drudgery of providing for our survival. We cheer for our sports team on a Sunday afternoon, or go and see an emotional movie on Friday night. Some people buy $200 axes (or iPhones, anyone?) because they come with a fascinating story that they can re-tell to their friends. (Bonus points if it’ll get you laid.)

Ford scoffs at the idea of a transition to a service based economy. He suggests implementing heavy taxes on industry and redistributing that to people who otherwise would have been doing the job the robots are doing, just so they can buy the stuff the robots are producing. He can’t see anything but an economy based on the consumption of material goods. I say: go ahead and automate away the drudgery of daily existence, make the necessities of life so cheap they’re practically free, and let’s get on with building real wealth: strong relationships, a sense of purpose, and a society that values life-long self improvement (instead of life-long accumulation of crap). By making the unimportant stuff less valuable, automation is what will free us to focus more on what’s important.

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