AI/Automation Just How Much Benefit?

Investment Analysis Clubs Macro Economic Trends and Risks
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AI/Automation will be a big plus for corporations as they will eliminate much labor cost to a business.

But what about the displaced workers? Will a nation have any obligation to the displaced worker?
Some federal program were instituted to help displaced workers from globalization. They proved ineffective:https://www.wilsonquarterly.com/quarterly/_/no-help-for-disp…
Many sections Within the US never recovered from globalization.
https://economics.mit.edu/faculty/dautor/papers/inequality
Many small businesses closed for good from Covid lockdowns.
Many businesses took money from the Paycheck Protection Program but still laid off workers.

One would think the AI/automation would provide much improvement to a nation’s GDP growth as did globalization. But globalization increased income inequality within the country also. Methinks the same will occur as AI/automation takes more control of the economy.
Any government help toward displaced workers in the past was ineffective. Unless that changes the size of disaffected USians will grow. That result in serious electoral, societal national changes. Just how much of the improved GDP should be diverted toward population pacification? Just how much of that improved GDP will be diverted to the every increasing military budget that provides power projection for US interventionist foreign policy? When will the ever increasing number of non-productive USians be considered the number #1 problem of the nation?
Is there any planning for the future occurring in Washington DC?

Hm this situation seems familiar. Rome’s economy turned into deficit spending feeding every increasing number of non-producing plebs, world-wide fighting uprisings & barbarian incursions which did not add to the national treasury, every increasing corrupt emperors. Rome did not reform itself and thus collapsed.

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Unfortunately, GDP is a macroeconomic dimension, so increases there are not necessarily in synch with the number of employed workers (or what each of them makes per hour).

Being “unemployed” has always carried a social stigma as it meant you were dependent on others to carry your financial weight on their shoulders.

We are approaching an inflection point where it is predicable that large numbers of workers are vulnerable to be replaced by AI automation of one sort or another.

Our society will be forced to decide how to accommodate an ever-increasing number of the “previously employed” who are ill-prepared for those jobs which are in growth industries. We can continue to call them “unemployed” or can call them people of extra leisure time (to let them save face), but ether way, we will have to come up with a way to help them financially. As less people who are working will be supporting more who aren’t, the obvious place to get money is to charge AI’s thee equivalent of income tax based on the number of people the AI replaces. This will not be a popular tax for the JC’s, but otherwise, the hoi polloi will be lighting torches and sharpening pitchforks to an extent that the last few years of political chaos will seem like a walk in the park.

Jeff

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"Being “unemployed” has always carried a social stigma as it meant you were dependent on others to carry your financial weight on their shoulders.

We are approaching an inflection point where it is predicable that large numbers of workers are vulnerable to be replaced by AI automation of one sort or another."

I’m not so sure of that.

For decades, the US auto industry has been downsizing and downsizing. Used to take dozens of people to make a car. Now it’s tons of robots and handfuls of people. Yet, industry still employs more than ever making and selling widgets. More cars are made. More folks repair them, sell car parts, etc.

The electronics industry went from tens of thousands of building TV sets by hand, soldering parts in, to PC boards, to robot assembly. Tens of thousands of jobs were replaced.

A long time ago, there were a million telephone operators - simply replaced by automation and machines. Yet, the ‘communications industry’ still employs millions - putting in and servicing fiber optic cables, cell systems/towers, etc. No one makes old fashioned phones but tens of thousands are involved in sales of cellphones and electronic products. Same for the cable TV and satellite industry.

So…just what is AI going to replace? Wall street stock brokers? Taxi drivers? Delivery drivers? and in what quantities? 7-11 stores? Fast food? plumbers and electricians? A/C repair folks? road repair crews? Snow plow operators? School bus drivers? Teachers? Police and firemen and EMTs. Politicians? storm troopers, tank drivers, airplane pilots? Ferry operators? Sewer repair crews? Water system operators?

And just who is going to build all this AI stuff and service it?

IBM predicted the world would need about 12 mainframe computers…well, we keep building billions of chips for cloud servers and just about everything else in our lives. Every car has ten thousand chips and at least a dozen computers built in…NOW…ten billion ‘transistors’…that were a novelty in 1948. So they replaced tube manufacturers and all those jobs - except vacuum tubes are still being made by the hundreds of thousands…

t.

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Sometimes I wonder why so many futuristic sci-fi movies have lots of robots, with people living in what would appear to be rather poor conditions. Then you have Star Trek, where the quality of life would appear to be rather good. A friend of mine openly wonders if our future will be one of Star Trek, or one of Elysium. I hope for the former, but the jury is out.

I think there is little doubt that globalization hurt much of the American middle class. Peter Zeihan in “The End of the World is Just the Beginning” argues that Bretton Woods did that on purpose. I hope he’s wrong. I hope it was a consequence not fully realized at first, or a consequence they believed an answer would be found for. I have to hope that, but I digress. The point is, globalization hurt a segment of America that has not recovered, for various reasons.

The question now becomes will increased automation do the same, or will we learn from that lesson? This is why many tech moguls talk about universal basic income. Implementing this, however, would require taxation to levels that is usually frowned upon in 'Merica. In particular you would have to tax those that are benefiting from the automation (corporations and the very wealthy, in general terms).

The other question becomes how quickly will these jobs be displaced, and will it happen too fast for people to retrain? And worse, will they be willing to retrain for new careers? I am reminded of Kentucky coal miners offered free training for renewable industry jobs in Ohio (think windmill installation and repair, solar installation), but they did not want to move.

As per the fact that people used to manually patch telephone calls from one phone to another, and now we have automatic dialing, but we still employ tons of people in telecom, I might ask you what the relative inflation-adjusted wages are for these people over the last 7 decades? I think you will find middle class wages being pushed down and down and down, even though these industries are still employing people… And that is a problem for society that we, mostly, refuse to fix.

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We are approaching an inflection point where it is predicable that large numbers of workers are vulnerable to be replaced by AI automation of one sort or another.

In a more general sense, this is nothing new. There was a time when 90% of the population worked on the farm. They have since been ‘tractored off’, to use Steinbeck’s phrase. Longshoremen jobs were decimated when container shipping was introduced.

How is AI different?

DB2

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While it has been true that automation has removed many jobs and that new jobs have arisen to take care of the new environment, in many cases a large percentage of the new jobs have not been of the same quality as the old jobs. Hence the huge number of jobs now at minimum wage in the service sector. Even without current news of automation in the fast food sector, it should seem obvious that those service sector jobs are low skill and often easily automated. So, then what?

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We are approaching an inflection point where it is predicable that large numbers of workers are vulnerable to be replaced by AI automation of one sort or another.

In a more general sense, this is nothing new. There was a time when 90% of the population worked on the farm. They have since been ‘tractored off’, to use Steinbeck’s phrase. Longshoremen jobs were decimated when container shipping was introduced.

How is AI different?

And in Dickens’ day, the beginning of industrialization, small farmers in England were being pushed off the land because they were no longer needed - their landlords were converting the land to raise sheep for wool to feed the new mills.

Life was rough for those farmers and their families, who had no idea how to live in the cities (which were also not so great sanitation-wise).

Few of their descendants would willingly go back to the old days.

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How is AI different?

The fear is how quickly this might happen compared to past disruptions. The Industrial Revolution took a LONG time to displace a lot of workers. They had ample time to adapt. The fear is this time is different, that this time will be too quick for people to adapt to. It is not an unreasonable fear.

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A friend of mine openly wonders if our future will be one of Star Trek, or one of Elysium. I hope for the former, but the jury is out.

Elysium
noun
a place or state of perfect happiness.

The Dictionary

???

Robots are the ultimate labor saving devices which does not mean it saves laborers, quite the contrary, it obsoletes them.

The unintended consequence is the elimination of ‘good’ stress and the advent of ‘bad’ stress, i.e. idleness, hopelessness, no goals to conquer.

A lack of goals is worse than death.

The Captain

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Elysium
noun
a place or state of perfect happiness.

The Dictionary

???

No. Not that one. This one.

https://www.imdb.com/title/tt1535108/?ref_=nv_sr_srsg_0

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How is AI different?

It’s not, which is why the adoption of AI is going to require more “socialism”.

The industrial revolution had two major impacts (well, a lot more of course but only two relevant here). First, it created a lot of new jobs to replace agricultural manual labor, but these generally required a higher level of education (like literacy). Hence, massive government expenditures to create a public education system and mandatory schooling. Second, wealth began to concentrate to the folks who owned the factories benefitting from cheap labor. Extreme wealth inequality creates civil unrest. Hence the formation of labor unions and laws to protect labor.

The impact of AI will be similar. AI eliminates many low skilled jobs (e.g., driving taxies) and replaces them with many high skilled jobs (robot maintenance/repair). This will again require increased government expenditures to raise the mean level of worker education. AI will also cause wealth to concentrate in the hands of the people who own the AI. Money that now goes to human workers as salary will instead go to the owner. This will require some means of redistributing wealth to avoid civil unrest.

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This is why many tech moguls talk about universal basic income. Implementing this, however, would require taxation to levels that is usually frowned upon in 'Merica. In particular you would have to tax those that are benefiting from the automation (corporations and the very wealthy, in general terms).

Bill Gates proposes a robot tax. “In a recent interview with Quartz, Gates said that a robot tax could finance jobs taking care of elderly people or working with kids in schools, for which needs are unmet and to which humans are particularly well suited. He argues that governments must oversee such programs rather than relying on businesses, in order to redirect the jobs to help people with lower incomes.”
https://qz.com/911968/bill-gates-the-robot-that-takes-your-j…

In other words, there needs to be a mechanism to fairly distribute the wealth produced by new technology. We have seen empirically with the industrial revolution and the US in the 1920’s that the free market cannot do this effectively. Technology tends to create monopolies and concentrations of wealth that can only be restrained by government intervention.

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“As per the fact that people used to manually patch telephone calls from one phone to another, and now we have automatic dialing, but we still employ tons of people in telecom, I might ask you what the relative inflation-adjusted wages are for these people over the last 7 decades? I think you will find middle class wages being pushed down and down and down, even though these industries are still employing people… And that is a problem for society that we, mostly, refuse to fix.”

My grandparents had a family (5 kids) right through the depression. 75% of people were employed and didn’t argue too much about wages. Most lived in small houses and ‘row houses’ and apartments of small size - maybe half or a third of what is ‘normal’ today.

My parents bought an 800 sq foot house in 1948 - dad had a job with NY Tel that he started in 1932 at age 16. That’s what he could ‘afford’. One car for the family. Of course, black and white small TV set (about 11 inches at the time in the early 50s. We went on vacation ‘tent camping’. He finished off half the basement in the house and part of the attic with another bedroom himself. Did he or any other siblings get to go to college? Nope. 4 brothers served in WW2.

Me? and many families? 2000-3000-4000 sq foot houses ‘normal’. For a family at least two cars, some 3 or 4. A few percent go into the military voluntarily. No draft anymore. 40% go to college.

Yes, the era of millions working on the auto assembly line building cars and refrigerators ended eras ago. I’m not sure AI is going to replace many more of those left. Companies have been adding robots for decades now, but entirely new industries have sprung up. Pay? Be good with electronics or fiber technology , IT, and a thousand other professions and you’ll have a good living. Plumbing , electricians, HVAC, telecom, aviation, plane mechanic, trained auto repair, etc.

The problem is getting the lower 20% of folks an education that gets them a job that pays more than minimum wage. If you can’t keep them in school, can’t solve the inner city gangs and gun violence and DRUGS and drug wars, you can’t educate them enough to hold a modern job.

Seems back 7 decades ago, drugs were a minor problem. Now drug overdoses are one of the top 3 killers of youth. There are dozens of drugs on the street. Teens seem to think it’s a lark using them.

Modern problems but ‘guaranteed income’ is no way to address and solve the real problems. Just a cover up. And vote buying.

t

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The fear is how quickly this might happen compared to past disruptions. The Industrial Revolution took a LONG time to displace a lot of workers

I don’t think that is accurate. 40% of all jobs were farming in 1900. Twenty years later, that has dropped to 25%. 30 years later, it had dropped t0 20% - all while our population was booming.

https://www.nber.org/system/files/chapters/c1567/c1567.pdf

Contrast that manufacturing where latest estimates are about 8.5% of all jobs are manufacturing (2019).

https://www.nam.org/state-manufacturing-data/2019-united-sta….

In real numbers, there were slightly more people employed in farming in 1900 than there are currently people employed in manufacturing. Add to this the more dynamic ability for an employee to change jobs, move, re-skill/train, (heck, even simply retire on SS or SSDI), I think AI/robots will be less of a disruption to those employees than automation was to farming 100 years ago.

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“The impact of AI will be similar. AI eliminates many low skilled jobs (e.g., driving taxies) and replaces them with many high skilled jobs (robot maintenance/repair). This will again require increased government expenditures to raise the mean level of worker education. AI will also cause wealth to concentrate in the hands of the people who own the AI. Money that now goes to human workers as salary will instead go to the owner. This will require some means of redistributing wealth to avoid civil unrest.”

No. Companies using AI will benefit. Most Americans own stock through retirement plans, 401Ks, etc and will benefit - as will consumers with lower prices - or prices not rising as fast.

AI is only a tool…just like ‘software’ on a PC is only a tool - if you know how to use it. Lots play with it, but only some know how to use it to make more money. As someone said, computers are devices that let you make mistakes even faster.

Just like hammers and saws, farm plows and cultivators are tools, you still have to know how to use them. The problem with AI is knowing how and where to use them to make profit.

As in the past with 90% of the population moving off the farm to the rest of economy, and with manufacturing shifting to ‘automated production’ , there will be jobs and entirely new industries created.

Robotaxis will probably only operate in city centers at low speeds. Take part of the market maybe, but millions of rides will go outside the city center, or operate in suburbia.

you ever take a taxi in NYC or drive there in Manhattan? It’s kamakazi taxi/truck drivers who have their own code of driving. It’s not passive rule based. It’s who can squeeze 2 feet ahead and gets in. It’s bumper to bumper traffic, horn honking, congesting, and it would take a heck of a computer to run a robo-taxi. A passive little vehicle will simply stall unable to fight the traffic most of the day.

Suburbia? Heck, you better do 40-45 MPH here on the main roads in Dallas suburbia or you’ll get run over - no 25 mph robotaxis.

So far I haven’t seen much other ‘immediate application’ of AI - other than mining and more mining of ‘data’.

t.

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No. Not that one. This one.

Those apocalyptic end of civilization movies used to be quite popular. Soylent Green – running out of food. Nuclear holocaust. The dinosaurs were wiped out by out of this world aliens – meteors.

What the real world does is ‘muddle through.’

If the Climate Alarmists are right then the most practical solution is to cull the human race.

The Captain

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AI computing has a “class” problem it can not get past. In the artworld the use of AI is all over the place. That makes sense as fantasy lands are created.

But it is a problem in the business world.

Yes there are functions that are labeled AI.

As one high end coder told me last money, “you know there is no such thing as AI”. My response, “I know, and there is no such thing as the cloud. It is just machines offsite for economic efficiencies”.

AI just combines computer programs. So if you have a program and make a subprogram anyone can sell it as AI. It is not like you will get honest answer that the code was added to in a new way.

The IRR of AI is the worst of any computer industry wave. I have documented that in full about two to three months ago. If you are not sure of the idea that AI has very low payoffs Google is your friend.

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Being “unemployed” has always carried a social stigma as it meant you were dependent on others to carry your financial weight on their shoulders.

Until relatively recently, this was largely true. Although I haven’t seen statistics, there is a great number of anecdotal tales of 35 year olds living in the basement of their parents’ homes and not minding at all at being taken care of by them.

Then there is the “Quiet Quitting” and “Quiet Firing” memes of late that push back on doing anything extra at work, doing the bare minimum and with that the job creators’ pullback on raises and praises.

https://www.thequint.com/fit/mind-it/quiet-quitting-firing-b…

All of this may just be transitory and, at some point, we may come back to honoring jobs and initiative for a newly hale middle class, but then again…

Pete

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Second, wealth began to concentrate to the folks who owned the factories benefitting from cheap labor.

No different than land owners benefitting from cheap labor – serfs and tenant farmers.

No different than citizens and slaves in antiquity.

The Pareto Distribution doesn’t care what system you use, it’s going to be 80/20.

AI? The Keepers of the Realm and the rest.

The Captain

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I don’t think that is accurate. 40% of all jobs were farming in 1900. Twenty years later, that has dropped to 25%. 30 years later, it had dropped t0 20% - all while our population was booming.

That is for America and is likely correct. I was thinking “the industrial revolution from its start in the UK throughout the world”. In the UK the revolution happened rather slowly. They were creating the trail after all. Making mistakes along the way. Each new country that industrialized, having a blueprint on what works, got through their revolution more quickly. So what I stated, while technically true, does not necessarily apply to the USA (or many other countries).

Since we are the ones blazing the AI trail, perhaps it will play out the same here as well. We are blazing the trail. Will make mistakes. Will change course. In other words, will not happen as quickly as some fear.

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