The Robot Revolution Arrives, and the World Changes

Summary: The first signs of the robot revolution have appeared, a trend that will reshape our world — automation moving from manufacturing into the service industries. Economists see the evidence but are blinded by their biases. This post provides excerpts from a new book about the revolution, and some interesting observations.  This post is the fifth in a series; links to other chapters appear at the end.

A new book about one of the major trends of the early 21st century:

Race Against The Machine – How the digital revolution is accelerating innovation, driving productivity, and irreversibly transforming employment and the economy
By Erik Brynjolfsson and Andrew McAfee.  Director and principal research scientist, respectively, of the Center for Digital Business at MIT’s Sloan School of Management.

Contents

  1. Excerpt from the introduction
  2. What’s next in the revolution?
  3. Simple economics explains the challenge to our society
  4. Reviews of the book
  5. For more information about the robot revolution

(1)  Excerpt from the introduction

From the authors’ website, which also contains their blog:

We wrote this book because we believe that digital technologies are one of the most important driving forces in the economy today. They’re transforming the world of work and are key drivers of productivity and growth. Yet their impact on employment is not well understood, and definitely not fully appreciated. When people talk about jobs in America today, they talk about cyclicality, outsourcing and off-shoring, taxes and regulation, and the wisdom and efficacy of different kinds of stimulus. We don’t doubt the importance of all these factors. The economy is a complex, multifaceted entity.

But there has been relatively little talk about role of acceleration of technology. It may seem paradoxical that faster progress can hurt wages and jobs for millions of people, but we argue that’s what’s been happening. As we’ll show, computers are now doing many things that used to be the domain of people only. The pace and scale of this encroachment into human skills is relatively recent and has profound economic implications. Perhaps the most important of these is that while digital progress grows the overall economic pie, it can do so while leaving some people, or even a lot of them, worse off.

And computers (hardware, software, and networks) are only going to get more powerful and capable in the future, and have an ever-bigger impact on jobs, skills, and the economy. The root of our problems is not that we’re in a Great Recession, or a Great Stagnation, but rather that we are in the early throes of a Great Restructuring. Our technologies are racing ahead but many of our skills and organizations are lagging behind. So it’s urgent that we understand these phenomena, discuss their implications, and come up with strategies that allow human workers to race ahead with machines instead of racing against them.

 

Humanity and Technology on the Second Half of the Chessboard

Why are computers racing ahead of workers now? And what, if anything, can be done about it? Chapter 2 discusses digital technology, giving examples of just how astonishing recent developments have been and showing how they have upset well-established ideas about what computers are and aren’t good at. What’s more, the progress we’ve experienced augurs even larger advances in coming years. We explain the sources of this progress, and also its limitations.

Creative Destruction: The Economics of Accelerating Technology and Disappearing Jobs

Chapter 3 explores the economic implications of these rapid technological advances and the growing mismatches that create both economic winners and losers. It concentrates on three theories that explain how such progress can leave some people behind, even as it benefits society as a whole. There are divergences between higher-skilled and lower-skilled workers, between superstars and everyone else, and between capital and labor. We present evidence that all three divergences are taking place.

What Is to Be Done? Prescriptions and Recommendations

Once technical trends and economic principles are clear, Chapter 4 considers what we can and should do to meet the challenges of high unemployment and other negative consequences of our current race against the machine. We can’t win that race, especially as computers continue to become more powerful and capable. But we can learn to better race with machines, using them as allies rather than adversaries. We discuss ways to put this principle into practice, concentrating on ways to accelerate organizational innovation and enhance human capital.

Conclusion: The Digital Frontier

We conclude in Chapter 5 on an upbeat note. This might seem odd in a book about jobs and the economy written during a time of high unemployment, stagnant wages, and anemic GDP growth. But this is fundamentally a book about digital technology, and when we look at the full impact of computers and networks, now and in the future, we are very optimistic indeed. These tools are greatly improving our world and our lives, and will continue to do so. We are strong digital optimists, and we want to convince you to be one, too.

(2)  What’s next in the revolution?

(a)  Conclusions from “Seeing Robots Everywhere“, Julia Kirby, Harvard Business Review, 4 November 2011 (red emphasis added):

I heard about other applications — the use of robots to inspect sewers for damage, to automate warehouse operations, to harvest crops in fields. The list goes on. In response to one would-be entrepreneur’s question, “How do you come up with a good idea to turn into a business?” a panel of CEOs had no end of answers.

Charles Grinnell, who leads Harvest Automation, said simply: look at places where there is still a lot of manual labor. When his team did that, he says they narrowed things down to 15 very viable product ideas. Deborah Theobald, CEO of Vecna Technologies, put it this way: “In whatever field you work in—ours is healthcare—you see what the issues are. If as you look around, robots are on your mind, you see the applications everywhere.”

She’s hot but not real

(b)  Perhaps no job is safe from automation.  Even fashion models.

Excerpt from “Clothing Giant H&M Defends ‘Perfect’ Virtual Models“, ABC News, 6 December 2011:

Visiting the H&M website is not the only virtual experience to be had by H&M customers who choose to order the company’s clothes online instead of inside one of their 2,300 global retail stores.

Also “completely virtual” are the models at the center of H&M’s swimsuit and lingerie online campaigns, the Swedish-based retailer confirmed. “It’s not a real body; it is completely virtual and made by the computer,” H&M press officer Hacan Andersson told Swedish newspaper Aftonbladet in an article questioning the company’s picture-perfect online models.

(3)  Simple economics explains the challenge to our society

Automation increases the return to capital, and decreases the return to labor.  It will become a major driver of increased inequality.  Only slowly does this realization spread, as in the conclusion from this review in the Financial Times by James Crabtree (red emphasis added):

Yet the author’s more basic conclusion – that technological progress is sufficiently rapid that “many present-day organisations, institutions, policies, and mindsets are not keeping up” – is surely right. The result is a conundrum that shares much in common with trade policy. Technology is essential for creating value and raising productivity, but it creates losers as well as winners. These losers are recognised in theory, but too rarely compensated in practice.

This brings the argument back to a more basic problem: fair distribution. Machines work for free, but their benefits end up in someone’s pocket. If technology is indeed speeding up, more of that benefit must be returned to those it affects, especially in the form of investment in human capital. If not, the march of the machines will overtake us sooner than we think.

(4)  Reviews of the book

  1. More Jobs Predicted for Machines, Not People“, New York Times, 23 October 2011
  2. Tectonic Shifts in Employment“, David Talbot, MIT Technology Review, January/February 2012 — “Information technology is reducing the need for certain jobs faster than new ones are being created.”

(5)  For more information about the robot revolution

(a)  Economists and others grapple with these issues (this section will be updated):

  1. Is America facing an increase in structural unemployment?“, brief answers from a range of economists, 23 July 2010
  2. Identifying Cyclical vs. Structural Unemployment“, Brad DeLong (Prof Economics, Berkeley), 24 August 2010
  3. A curious unemployment picture gets more curious“, Federal Reserve Bank of Atlanta, 16 July 2010
  4. Labor Force Participation and the Future Path of Unemployment“, Joyce Kwok et al, Federal Reserve Bank of San Francisco, 13 September 2010
  5. Armies of Expensive Lawyers, Replaced by Cheaper Software“, New York Times, 4 March 2011
  6. Companies Spend on Equipment, Not Workers“, New York Times, 9 June 2011
  7. How would robotic prostitutes change the sex tourism industry?“, published by i09, 15 April 2012 — This describes the gated article “Robots Men and Sex Tourism”, Ian Yeoman and Michelle Mars (Victoria Management School, Victoria U of Wellington), Futures, May 2012
  8. Paleofuture: The Disco-Blasting Robot Waiters of 1980s Pasadena“, Smithsonian, 19 April 2012 — Premature technology, but they’re coming.

(b)  Martin Ford has some answers to these questions:

Ford wrote The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future (2009); the ebook is free.

  1. The Economic Implications of Intelligent Machines, 26 October 2009
  2. The Average Worker and the Average Machine, 1 July 2010
  3. Structural Unemployment: The Economists Just Don’t Get It, 4 August 2010
  4. Econometrics and Technological Unemployment — Some Questions, 6 August 2010
  5. Outsourcing Jobs…that Can’t be Outsourced, 27 August 2010
  6. Healthcare Robotics, 14 September 2010

(c)  Posts about the robot revolution:

  1. The coming big increase in structural unemployment, 7 August 2010
  2. The coming Robotic Nation, 28 August 2010
  3. The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
  4. Economists grapple with the first stage of the robot revolution, 23 September 2012

This post originally appeared at Fabius Maximus and is posted with permission.

3 Responses to "The Robot Revolution Arrives, and the World Changes"

  1. michalrapacki   April 24, 2012 at 12:31 pm

    Innovation and rapid evolution in the high-tech sector is important. There are companies, where innovation and new products are promoted in the business sector – that is great. Other companies works well with consumer electronics – it is necessary to keep with this model. However, some of the companies relies on the sales and marketing power, and they are pushing the innovation and products to the back in business models. Competition should handle this case, in a perfect free market. Sadly, when a company uses power to practice monopolistic strategies, all becomes more complex. The whole technological sector suffers, when monopolist block innovation and evolution. That case is complex, so not easy and fast medicine could be found. Proper regulation would have to be introduced.

  2. kirk   April 24, 2012 at 6:13 pm

    Actually this is really not a problem. If a child is born without the money to get an education then of course he will be at a disadvantage. And if he has to take out loans he will be at a disadvantage. So we have the problem right now of people who are severly disadvantaged. But what if we make education a right to eveyeone. Then people start off more evenly. But what if there profession becomes obsolete? Well then they just get retrained and have unemployment insurance in the meantime. Training insurance these are not new concepts. So in a faster changing more productive world you need more training and more insurance. But such a world needs fewer workers working and produces more which means we can afford more training and more insurance.

    As the system "degenerates" you have only a very small population working making everything and everyone else is rich living on unemployment as perpetual students.

  3. Kirk   April 24, 2012 at 6:17 pm

    Suppose someone goes to dental school for instance. Some small team invents a product which prevents tooth decay and gum disease. Now there would still be some work for dentist to do, but most of their market would be gone. They paid for their education and now they are out of luck. They can attempt to make new markets in dental care but this could take a long time. They invested in the wrong human capital. Should we punish them through the market place or retrain them and give them unemployemnt insurance.
    After all we don't think of dentist as lazy or risk takers, so why not help them.