A Coke is a Coke

For the following, substitute rapidly rising tide of products and services for “Coke”:

What’s great about this country is that America started the tradition where the richest consumers buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola, and you know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke than the one the bum on the corner is drinking. All the Cokes are the same and all the Cokes are good. Liz Taylor knows it, the President knows it, the bum knows it, and you know it.

Andy Warhol on Coca Cola

Source: Tweets – 1,2,3,4,5,6


Why Robots Won’t Eat All the Jobs

This is probably a good time to say that I don’t believe “robots will eat all the jobs.” The preceding tweetstream was to extrapolate the idea out all the way, not to make the case that it’s what’s going to happen.

First, robots and AI are not nearly as powerful and sophisticated as I think people are starting to fear. Really. With my VC/tech hat on I wish they were, but they’re not. There are enormous gaps between what we want them to do and what they can do. So there is still an enormous gap between what many people do in jobs today and what robots and AI can replace, and will be for decades.

Second, even when robots and AI are far more powerful, there will still be many things that people can do that robots and AI can’t. Creativity, innovation, exploration, art, science, entertainment, caring for others… we have no idea how to make machines do these.

Third, when automation is abundant and cheap, human experiences become rare and valuable. It flows from our nature as human beings. Examples: Price of recorded music goes to zero; live touring business explodes. Price of drip coffee drops; handmade gourmet coffee grows. You see this effect throughout luxury goods markets, e.g. handmade high-end clothes. This will extend out to far more consumers in future.

Fourth, just as most of us today have jobs that weren’t even invented 100 years ago, the same will be true 100 years from now. We have no idea what the fields/industries/businesses/jobs of the future will be; we just know we will create an enormous # of them. If robots/AI replace people for many of the things we do today, the new fields we create will build on a huge number of people then available. People 50, 100, 150, 200 years ago would marvel at the jobs that exist today; the same will be true 50-100-150-200 years from now. To argue huge numbers of people will be available but we will find nothing for them (us) to do is to dramatically short human creativity.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15


If Robots Eat Jobs, Then Products Get Cheaper

 photo credit: Mark Strozier - cc

photo credit: Mark Stroziercc

The necessary consequence of “robots eat all the jobs” is “everything gets really cheap.” The main reason to use robots instead of people to make something is when the robot can make it less expensively. When people can make something that costs less than what robots can make, then it makes economic sense to use people instead of robots. This is basic economic arbitrage at work.

It sounds like it must be a controversial claim but it’s simply following the economic logic. So “robots eat jobs in field X” = “products get cheaper in field X” = “consumer standard of living increase in field X” — necessarily. So arguing against “robots eat jobs” is equivalent to arguing “punish consumers with unnecessarily higher prices.”

Indeed, had robots/machines not eaten many jobs in agriculture and industry already, we would have a far lower standard of living today. Just as increases in consumer goods prices disproportionately hurt the poor, holding back on robots eating jobs would more hurt the poor.

The same logic applies to trade barriers (import tariffs): disproportionately hurt poor consumers by inflicting higher consumer goods prices. Here’s the arbitrage logic: Suppose humans make widget X profitably at $10 price to consumer. Robots can make X at $5 price to consumer. Economics drive X to be made entirely by robots; consumers win.

But then imagine the owner of the robots cranks X price to consumer to $20. Suddenly it’s profitable for humans to make X again; entrepreneurs immediately start companies to make X with humans for price $10 again. Therefore, with rare exceptions, there won’t be states where “robots eat jobs” and “products get more expensive.” They will almost always be cheaper.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13


Refuting the “Robots Eat All the Jobs” Theory

One of the most interesting topics in modern times is the “robots eat all the jobs” thesis; best book on topic: The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. The thesis is that computers can more and more substitute for human labor, thus displacing jobs and creating unemployment. At core, this is Luddism  — “lump of labor” fallacy, that there is a fixed amount of work to be done.

The counterargument is Milton Friedman: Human wants and needs are infinite; there is always more to do. 200 years of history confirms. To avoid the Luddite mistake, you must believe “this time is different”, that either (a) there won’t be new wants and needs (vs human nature), Or (b) It won’t matter that there are new wants and needs, most people won’t be able to adapt to contribute and have jobs in new fields.

While it is certainly true that technological change displaces current work and jobs, and that is a serious issue that must be addressed, it is equally true, and important, that the other result of each such change is a step function increase in consumer standards of living.

As consumers, we virtually never resist technology change that provides us with better products/services even when it costs jobs. Nor should we. This is how we build a better world, improve quality of life, better provide for our kids, solve fundamental problems.

Make no mistake, advocating slowing tech change to preserve jobs = advocating punishing consumers, stalling quality of life improvements.

So how then to best help individuals who are buffeted by producer-side technology change and lose jobs they wish they could keep? First, focus on increasing access to education and skill development — which itself will increasingly be delivered via technology.

Second, let markets work (voluntary contracts and trade) so that capital and labor can rapidly reallocate to create new fields and jobs.

Third, a vigorous social safety net so that people are not stranded and unable to provide for their families.

The loop closes as rapid technological productivity improvement and resulting economic growth make it easy to pay for safety net.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16


Lump of Labor Fallacy

Economists call it the ”lump of labor fallacy.” It’s the idea that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs. (A famous example: those dire warnings in the 1950’s that automation would lead to mass unemployment.) As the derisive name suggests, it’s an idea economists view with contempt, yet the fallacy makes a comeback whenever the economy is sluggish.

– Paul Krugman in 2003 “Lumps of Labor

Source: Tweets – 1,2,3,4,5,6


The Possibility Of An Economic Renaissance In Japan

When I was in college (1989-1993) and starting to pay attention to the world, experts, and commentators, all of them believed two things were sure.

First, Japan was going to utterly own and control the world’s technology industry and therefore the world economy. Everyone knew they had a fundamentally better system: single party government, industrial policy, government-directed economy. Coupled with Japan’s overwhelmingly superior education system, Americans had zero chance of competing with Japan in any technology area.

Second, America’s best days were behind it and my generation (Gen X) would be the first to be worse off than our parents. America was experiencing fundamental and irrevocable cultural, societal, and economic collapse. The die was cast, the results were in.

[tweet https://twitter.com/_Brett__/status/463078443505049600 align=”center”]

In retrospect, both of these beliefs were artifacts of the (relatively mild) US recession of the late 80s/early 90s in addition to the Japan bubble. The paranoia peaked in ’92 w/Michael Crichton’s brilliant novel “Rising Sun“. By 1996, both of these theories were thoroughly refuted by reality and dropped down the memory hole by most people who held them. Today, we look back on books like Lester Thurow’s “Head to Head” and Clyde Prestowitz’s “Trading Places” with embarrassment and laughter.

[tweet https://twitter.com/dhammer/status/463078765145645056 align=”center”]

This is not to say that the US doesn’t have plenty of challenges; but bottom-of-cycle paranoia is a real phenomenon. Japan 20 years later remains an amazing nation with enormous opportunity. I think a glorious economic renaissance is quite possible.

[tweet https://twitter.com/letsgoduke/status/463081110210371584 align=”center”] [tweet https://twitter.com/dasan/status/463081166614978561 align=”center”] [tweet https://twitter.com/akirareiko/status/463081202581118976 align=”center”] [tweet https://twitter.com/akirareiko/status/463081342964473856 align=”center”]

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12

The Other Irony Regarding Piketty

He comes at a time when most pro managers of large, long-term institutional money are deeply worried about the reverse: A world in which there is a massive surplus of capital relative to opportunities to deploy it productively to compound cash.

The approximate thought process of the median professional manager of institutional financial assets today is:

Stocks suck, bonds suck, real estate sucks. Hedge funds keep blowing up. Private equity returns are reverting to mean. Venture Capital is on the fringe at best. How can I possibly generate returns sufficient enough to fund future obligations in a low-growth, low-return world? I am very, very nervous.

The developed world is slowing and aging too fast; the developing world is not developing fast enough and the price of every asset is already high.

They and Piketty cannot both be right. Ironically, Piketty is the far more optimistic one regarding the future of capitalism, growth, and innovation.

[tweet https://twitter.com/danishism/status/460220324588822528 align”center”] [tweet https://twitter.com/ramez/status/460225305668747265 align”center”] [tweet https://twitter.com/pmarca/status/460225585151623168 align”center”] [tweet https://twitter.com/ramez/status/460226454127919104 align”center”] [tweet https://twitter.com/pmarca/status/460226508649291777 align”center”] [tweet https://twitter.com/oakpassrd/status/460227181541457921 align”center”] [tweet https://twitter.com/pmarca/status/460227291558072320 align”center”]

Source Tweets: 1,2,3,4,5,6,7