The Lights in the Tunnel Automation Accelerating Technology and the Economy of the Future_9 potx

The Green Light / 207

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prosperity.Thisiswhycapitalismhassucceeded,andoth-
ereconomicsystemshavefailed.
In time, I thinkit is likely that our perceptions will
shift so that we begin to truly recognize the economic
contribution that our individual marketplace decisions
make. Someday,the majority of peoplewill bevaluedin
economic terms not for what they directly produce, but
fortheirparticipationinconsumptionmarkets.Ifwecan
succeed in gradually extending that participation to the
billions ofpeoplewhoarenow trappedinpoverty—and
do so in a way that creates incentives to conserve re-
sources and minimize environmental impact—we may
findthattheresultingconsumerdemandiscapableoffu-
eling an engine that can drive us to unprecedented eco-
nomicheights.
The Green Light
The natural cycle in the tunnel is stable and reinforcing.
The vast majority of the consumers in the tunnel now
glowwithapredominantlygreenlight.Astimepasses,the
collectiveintensityofthelightscontinuestograduallyin-
crease.
Suddenly, we see that vast numbers of dim green
lights have begun to stream into the tunnel. These new
lights have barely enough intensity to make it past the
threshold,butonceinside,theyjointheriveroflightsasit
courses overthe panels onthe tunnelwalls. At first, we
sensethatthebusinessesinthetunnelarestrainingsome-
what to meet this new demand, but as time passes, the

cycleagainstrengthens.Thecollectiveintensityofthelight
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in the tunnel begins to quickly increase. We also notice
that,overtime,eachofthenewdimlightsisverygradually
becomingbrighter.
As the newlightsstream into thetunneland arein-
corporatedintoitsnaturalcycle,weseethatsomebright
white lightsbegintopulse withnewenergy.New panels
arenowappearinginmanyplacesonthetunnelwallsthat
wereoncedark.Theentrepreneursandbusinessownersin
the tunnel are responding to the rapidly increasing de-
mand.
As the number of lights continues to increase, the
speed with which panelsareupdatedand thenumber of
newpanelsappearingonthetunnelwallsseemstoaccele-
rate. Although we had perceived the tunnel as being al-
mostinfinitelyvast,itnowappearsthatthewallsarecom-
pletelycoveredwithpanels.
Evenaswesensethis,however,thetunnelitselfbe-
ginstoexpand.Asnewpanelsrapidlyfillthespacesonthe
expandingtunnelwalls,wenoticethatsomeofthebrigh-
testwhitelightsarenowradiatingwithanunprecedented
intensity.Still,astheever-increasingcycleoflightcontin-
ues to parade through the expanding tunnel, we sense
stronglythatitisthe seeminglyinfinite number ofgreen
lights thattrulyencapsulates the collective energy, enter-
priseandhopeofallhumanbeings.



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APPENDIX / FINAL
THOUGHTS



AretheideaspresentedinthisbookWRONG?

(Opposingargumentsandmyresponses)….


Page
210

TwoQuestionsWorthThinkingAbout……

Page
223

Wherearewenow?F
ourPossibleCases……

Page
224

TheNext10-20years:SomeIndicatorsto

WatchFor.……………………………………


Page
227

OutsmartingMarx……………………………

Page
237

TheTechnologyPara
dox……………………

Page
239

MachineIntelligenceandtheTuringTest…….

Page
241



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Are the ideas presented in this book WRONG?
(Opposing arguments with responses)


In this section I have listed some of the arguments that
maybemadeagainsttheideasinthisbook,togetherwith
myresponses.Theseareeitherconventionalargumentsor
thingsIhavethoughtoforseenelsewhere.

The economy will always create new jobs; we will
never have structural unemployment as a result of ad-
vancing technology
Thisistheideabehindthe“Ludditefallacy”whichIdis-
cussedatsomelengthinChapters2and3(seepages95
and 131). At present, I suspect that most economists
wouldprobablybelikelytoagreewiththisstatementand,
therefore, disagree with what I have suggested in this
book.Here,inanutshell,ismyargumentforwhyIthink
wewillendupwithaseriousunemploymentproblem:
Astechnologyadvancesandindustriesautomate,this
improvestheefficiencyofproductionandtendstomake
the products and services produced by those industries
more affordable. That leaves more purchasing power in
thepocketsofconsumers.Thoseconsumersthengoout
andspendthatextramoneyonallkindsofproductsand
servicesproducedbyavarietyofindustries.Someofthose
industries are relatively labor intensive, so they have to
hire more workers to meet this demand—andso overall
employmentremainsstableorincreases.Thisisthereason
Appendix / Final Thoughts / 211

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that, historically, technology has not led to sustained,
widespreadunemployment.

Myargumentisthatacceleratingautomationtechnol-
ogywillultimatelyinvademanyoftheindustriesthathave
traditionallybeenlaborintensive.Additionally,theprocess
of creative destruction will destroy old industries and
createnewones,andveryfewofthesenewindustriesare
likelytobelaborintensive.Asaresult,theoverallecono-
mywillbecomelesslaborintensiveandultimatelyreacha
“tipping point.” Beyondthis point, the economy will no
longerbeabletoabsorbtheworkerswholosejobsdueto
automation: businesses will instead invest primarily in
moremachines.Ihavealsoarguedthatthisprocesswillbe
relentless,andifitisnotaddressedbysometypeofgov-
ernmentpolicy,wemayultimatelyseeaprecipitousdrop
inconsumerspendingasasubstantialfractionofthepop-
ulation loses confidence in its future income continuity.
That,ofcourse,wouldresultinevenmoreunemployment
andadownwardspiralwouldensue.








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If technology resulted in unemployment, everyone
would already be out of a job because technological

progress has been going on for hundreds of years
Thisreallyjustamountstosaying“ithasn’thappenedyet,
so it will never happen.” History has proven time and
againthat,wheretechnologyisconcerned,somethingcan
beimpossiblesincethedawnofcivilizationandthensud-
denly, in the blink of an eye, become possible.Revolutio-
narytechnologies,suchastheairplaneandnuclearpower,
wherealldismissedas being impossible evenbypreemi-
nentscientistswhowereinvolvedintheresearchthatled
totheirdevelopment.
Today,mostofusacceptthattechnologywillcontin-
uetoadvanceandproducethingsthatwemightcurrently
viewasimpossible.However,westillthinktoonarrowly.
Weacceptthattherewillbenewtechnologies,newprod-
uctsandnewindustries,butmostofusarenotprepared
toacceptthatallthiswillchangethebasiceconomicrules
that we take for granted. But why wouldn’t that be the
case?Isthereafundamentalreasonwhyacceleratingtech-
nologyshouldimpactnearlyeveryaspectofourlives—but
notimpactthewaytheeconomyworks?AsIpointedout
inChapter2,advancinginformationtechnology—because
itenabledthecreationanddistributionoffinancialderiva-
tives—hascertainlyplayedanimportantroleintheseveri-
tyofthecurrenteconomiccrisis.Isuspectthatthisisjust
a preview of the economic impacts that technology will
haveinthefuture.
Appendix / Final Thoughts / 213

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The population is aging. Once the baby boomers re-

tire, we will have a worker shortage not unemploy-
ment
Innearlyallthedevelopednations(andalsoinChina),the
populationsarerapidlyagingandretirementplansarepro-
jected tocome under intensepressure,astoofewyoung
workers have to support too many older retired people.
Doesthisimplythatthereislikelytobeanoverallshort-
ageofworkersaslargenumbersofolderpeopleleavethe
workforce? I think it is certainly possible this may be a
counteractive force that might tend to delay the impact
fromautomationtoacertainextent.Herearesomethings
toconsider:

 Theimpactofautomationonaspecificjobcategoryis
reallynotrelatedtothenumberofworkersavailableto
perform that type of job. Once technology advances
tothepointwhereatypeofjobcanbeautomated,the
machinestodothiscaneasilybereplicated.Machines
donotneedtobeeducatedortrained,andsotheyare
notsubjecttothebottlenecksthatcreateshortagesof
workersinfieldssuchasnursing.Therefore,inconsi-
deringtheoverallimpactofmachineautomation,the
important criterion is not the number of workers
availablebut thetypes of jobsthat canbe automated.
Totheextentthatthereareworkershortageswithina
specific job category, that would actually tend to in-
creasetheincentiveforautomationtechnologiestobe
developedinthatarea.WealreadyseethiseffectinJa-
panwheresignificantworkisbeingtodonetodevelop
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robots capable of assisting with care of the elderly
population.
 Thecurrentconsensusviewseemstobethat,asare-
sult of the 2008-9 financial crisis (and its impact on
401k plans), many workers will remain in the work-
forcelongerthanoriginallyplanned.Thiswillgiveau-
tomationtechnologylongertocomeintoplaybefore
anyworkershortagesmaterialize.
 Eveniftheaging populationdoestendtoretardun-
employment,thiswould,ofcourse,simplybeadelay-
ingfactor—notalong-termsolutiontotheproblem.

Ithinkwecancertainlyexpecttoseeworkershortag-
esinsomeareas,butthismayverypossiblybecombined
withanoverallunemploymentproblem.Thedangeristhat
increasingstructuralunemploymentwillunfoldinparallel
withthedemographicproblem.Isuspectthatmostofthe
projectionsregardingtheimpactofagingpopulationsas-
sume reasonably full employment among younger work-
ers.Ifthisdoesnotturnouttobethecase,thesituation
willobviouslybemuchworse.AsIpointedoutinChapter
3, a payroll tax-based system for supporting retirement
programsmightbecomecompletelyunsustainable.

Appendix / Final Thoughts / 215

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Businesses will never fully automate because of the

high initial capital investment and the lack of flexibil-
ity this implies
There are somevalid pointshere, and I think thatthese
factorsmay,inmanycases,servetoretardtheprocessof
automation—butinthelongruntheywillnotpreventit.
Somebusinesseswillcertainlydelayautomationbecauseof
thehighcapitaloutlaysrequired.However,overtime,ma-
chines will become more affordable, more reliable, and
moreflexible.Atsomepoint,astechnologyadvances,ma-
chineswillbegintooutperformworkerstotheextentthat
a non-automated business will not be competitive. Con-
siderthecaseofonlinebanking:itgenerallyoffersarange
ofservices,suchasautomaticbillpaying,thatcouldnotbe
offeredbyahumanbankteller.
Keep in mind that automation offers cost benefits
beyond simply eliminating wages. There are also payroll
taxes, benefits, vacationtime, managementissues (and if
youeliminateworkers,youcaninmanycasesalsogetrid
ofthefirstlinemanagers),etc.Therearealsosafety and
liability issues; consider the safety advantages of a fully
automatedwarehouse.
Theneed for technicaland economic flexibilitymay
alsotendtoholdbackautomationforatime.Ifabusiness
investsheavilyinspecificmachinestoproduceaparticular
productandthenthatproductdoesnotsellwell,itmaybe
stuckwith equipment itdoes notwant.The obviousan-
swertothatis that,inthefuture,automationtechnology
willbemoreflexibleandeasytoadapttodifferentprod-
ucts.Ithinkthemanufacturersofautomationequipment
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arefullyawareofthisissueandwillbuildincreasinglyflex-
ibleproducts.
Thereisalsotheissueofeconomicflexibility:abusi-
nessthatemploysworkerscanlaythemoffinslowtimes,
while a more automated business will be stuck with its
machines.Again,Ithinkthat,inthelongrun,astechnolo-
gy advances, businesses that don’t automate will simply
not be able to compete: and that reality will overwhelm
otherconsiderations.
Anotherpointisthatbothofthesefactors(highcapi-
talcostsandtheneedforflexibility)maytendtopushthe
next wave of automation toward software applications
geared toward eliminating knowledge worker jobs. Soft-
ware is typically more flexible and has a lower up front
costthanexpensivemechanicalautomation.AsInotedin
Chapter 2, automation of these jobs, together with off-
shoring, may mean diminishing prospectsfor knowledge
worksandcollegegraduatesingeneral.

Machines may take over most unskilled labor, but
they will never be able to do skilled or professional
jobs that require lots of training and education
I think this is a dangerous misconception that stems, in
part, from a certain amount of hubris on the part of
peoplewhoare welleducated.Theconventional wisdom
isthatafencehasbeenerectedwithinoursociety.Onthe
lush, garden side of the fence, are workers who have
strongeducationsandtraining.Thesepeoplearebeneficia-

riesoftheinformationage.Onthetoxicwastelandsideof
the fence, are relatively unskilled workers. These people
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havebeenheavilyimpactedbybothtechnologyandgloba-
lization.Theyoftensurvivebystringingtwoorthreepart
timejobstogetherorworkinlowwagejobswithfewben-
efits.Theobvioussolutionisforustofindawaytooffer
thesepeopleadditionaltraining—sotheycanhopoverto
thegoodsideofthefence.
Ithinkthattheproblemwiththisscenarioisthatthe
fenceisgoingtomove,anditmaymoveveryrapidly.Thegood
sideofthefenceisgoingtocontract,andincreasingnum-
bersofwell-educatedworkersaregoingtofindthemselves
suddenlyonthetoxicside.AsIpointedoutinChapter2,
we can expect fields such as artificial intelligence to ad-
vance rapidly in the coming years and decades. While
many college-educatedknowledge workers perform tasks
thatarecurrentlybeyondthecapabilityofcomputers,they
nonethelesshavejobsthatcanbebrokendownintoarela-
tively narrowset of tasks and routines. Over time, these
jobs will be increasingly subject to automation, and may
wellcomeundersignificantpressurefromoffshoringeven
sooner.Asthistrenddevelops,Ithinkthatthepsycholog-
icalimpactonconsumerswillrepresentasignificantdan-
gertotheeconomy.
EvenifIamwrongandincreasingunemploymentis
confinedprimarilytolowerskill workers, the overall im-
pact on our society and economy would be dramatically

negative.IntheUnitedStates,twothirdsofworkers—and
thereforeconsumers—donothaveacollegedegree.While
effortstoimproveeducationandtrainingarelaudable,the
realityisthatthisisnotlikelytooffsettheimpactofgeo-
metricallyacceleratingtechnology.Infact,Ithinkthatthe
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argumentsI have put forthinthis book remainrelevant
even in the (I think unlikely) event that more educated
workersaresparedtheimpactofautomation.

A great many jobs require people skills and, there-
fore, could not be performed by machines
Ithinktherearedefinitelysomejobsthatmeetthisstan-
dard,butprobablynotanywherenearenoughtoavoidthe
overallproblemthatwouldresultfromautomation.Ialso
thinkthatpeopleoftentendtounderestimatetheextentto
whichtheirjobmightbesusceptibletoautomation.Bank
tellershave“people”jobs,butthathasnotstoppedpeople
fromusingATMsoronlinebanking.Ingeneral,consum-
ers seem quite receptive to automation and self-service
technologiesiftheyprovideconvenience.
Many workers whose interactions with other people
areprimarilyinternaltotheirorganizationmightfeelthat
they have jobs in which people skills are critical. If you
think about it, however, that is true only if most of the
otherjobsarealsobeingdonebypeople.Onceautomation
takesholdwithinanorganization,suchpeopleskillsmight
eventuallybefarlessimportant.

Finally, it is important to note that automation will
havebothadirectandanindirectimpactonjobs.Evena
personwhoholdsa job thatis completelysafe fromau-
tomation might still be impacted by declining consumer
demandresultingfromjobselsewhereintheeconomybe-
ingautomated.

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Perhaps machines will ultimately take over most of
the work done by people, but this wont happen until
far into the future (hundreds of years, etc.)
Ingeneral,if myargumenthereturnsouttonot becor-
rect,thentherearereallytwobasicwaysinwhichitcanbe
wrong:

 The argument could be fundamentally wrong. This
implies that the economy is capable of growing and
advancing technologically basically forever, without
creating an unemployment problem. In other words,
even 500 years from now, when society presumably
has technologythat is incomprehensible to us today,
theeconomywillstillprovideemploymentforthevast
majorityofpeopleinthepopulation.
 The argument could be premature. Maybe the ideas
here are basically correct, but they won’t come into
play until far into the future. However, once we ac-
knowledgethatatsomepointinthefuture,theecon-
omy may become nearly fully automated, then as a

matter of mathematics, we cannot get to that point
withoutfirstpassingthroughatippingpoint—beyond
which structural unemployment will begin to be a
problem. The tipping point could occur long before
weexpectit.

IwouldguessthatifthetrendsIhavepresentedhere
donotdevelop,thenitwillmostlikelybebecauseIhave
gotten the timing wrong. However, I do think there is
someprettycompellingevidencethatwearefairlycloseto
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thepointwhereacceleratingmachinecapabilityisgoingto
haveadramaticeconomicimpact(ifwehavenotalready
passed thatpoint).Pleaseseethe section“Wherearewe
now?FourPossibleCases”laterintheAppendixformore
onthis.

In the future, wages/income may be very low be-
cause of job automation, but technology will also
make everything plentiful and cheap so low income
wont matter
Thisisanideathatisoftenexpressedinconjunctionwith
adiscussionofadvancednanotechnology.Nanotechnolo-
gymayonedayofferthepromiseofmaterialobjectscon-
structed molecule-by-molecule, perhaps using self-
replicatingtechnologies.Somepeoplearguethat,takento
the extreme, thismightmean thatphysicalobjects could
beconstructedinawaythatisanalogoustothecreationof

virtual objects displayed on a computer screen (think of
the“replicator”inStarTrek).Thereare,ofcourse,afew
problemswiththis:
 Expendituresonmanufacturedgoodsrepresentafair-
lysmallpercentage oftheaverageconsumer’sspend-
ing. Expenses like housing
*
 and health care are far


*
Itisperhapsconceivablethatjobautomationmaysomedayleadto
somewhatlowerhousingcostsbecauseitcouldresultinalotofempty
officetowers andcommercial buildings.Thosebuildings might then
beconvertedtootheruses—includingperhapshousing.Ifknowledge
workerandofficejobsmigrateintothecomputernetwork,thereally
hot commercial real estate in the future might be in the locations
where companies likeGoogleand Microsoft are now building huge
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more important. So even if the price of most goods
fell dramatically, consumers would still need an ade-
quateincome.
 Today, we already have digital products that have a
zeromarginalcostofproduction.Theseproductsare,
forthemostpart,notfreebecausetheyhaveintellec-
tual propertyrights attached tothem.Wecan expect
thesameifadvancednanotechnologyarrivessomeday.
If there isn’t a way to protect and profit from these

propertyrights,itis veryunlikelythatinvestorswould
provide the enormous sums necessary to realize the
technology.
 Advancednanotechnologyalmostcertainlyliesfurther
in the future than the automation technology that is
likely to threaten routine jobs. So it won’t arrive in
timetosolvetheprobleminanycase.

The Heads in the Sand Objection
IfotherargumentsagainsttheideasIhavepresentedhere
proveinsufficient,thenIsuspectthatmanypeoplewillbe
temptedtoturntothisone:
Somepeoplewillrejecttheideathatmachinesmight
begintoexhibitsomedegreeof intelligence—and,there-
fore,achievethecapabilitytoperformagreatmanyjobs—
simply because the implicationsare very difficult to deal
with. This irrational, but perhaps understandable, objec-


“serverfarms.”Theseareusuallyrelativelyisolatedlocationsfarfrom
naturaldisastersandotherthreatsandclosetoclean,reliable energy
(whichtodaymostlymeanshydroelectricpower).
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tion to the idea that machines might someday begin to
think and reason was first articulated by the founder of
computerscience,AlanTuring(Pleaseseethelastsection
ofthisAppendix).
Turinginitiatedthefieldofartificialintelligencewith

his1950paper“ComputingMachineryandIntelligence.”
Here’showTuringexpressedwhathecalledthe“Headsin
theSand”Objection(which,ofcourse,herejected):

“Theconsequencesofmachinesthinkingwouldbetoodreadful.Let
ushopeandbelievethattheycannotdoso.”
55


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Two Questions Worth Thinking About

One
Whileyoumightnotagreethatitwilleverbeareality,itis
easytoimagineaneconomywithnohumanworkers.Ob-
viously if autonomous machines could do everything,
peoplecouldspendtheirtimedoingwhatevertheyliked.

Canyouimagineamarketeconomywithnoconsumers?


Two
Most economists would probably agree that long-term
economicgrowthandprosperity(perhapsasmeasuredby
growth in per capitaGDP)istiedprettycloselyto tech-
nologicalprogress.Thisisthesameassayingthatsociety
becomes more wealthy largely because the machines we
use to produce goods and services get better over time.

Weallassumethateconomicgrowthcancontinueindefi-
nitely. This implies that machines will have to continue
gettingbetterbasicallyforever.

Canamachinekeepgettingbetterforeverwithoutsomeday
becomingautonomous?

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Where are we now? Four Possible Cases
On the next page, I’ve reproduced the scarygraphfrom
Chapter3,whichshowsthepotentialimpactofmachines
throughout the economy becoming more autonomous.
Remember that this graph shows average income for a
“median range” ofpeople in theeconomy; it’s basedon
whatstatisticianswouldcalla “truncatedmean”withthe
poorestandwealthiestpeopleremovedbeforecalculating
theaverage.Thereasonfordoingthisisthatweknowau-
tomation will tend to concentrate income and perhaps
dragupoverallaverageincome—atleastforawhile.Ulti-
matelyhowever,thecollectiveimpactonthebulkofcon-
sumerswillbecomeoverwhelming,andagraphofperca-
pitaGDPshouldhaveasimilarshape.
If the basic shape of this graph is correct, then the
realquestionis:whereareweonthegraphnow?Ithink
there are four possible cases, as shown on the diagram.
KeepinmindthatwhilethegraphIhavedrawnissmooth
toshowthegeneraltrend,inrealitythegraphwouldlikely
have many short-term ups and downs. Thiswill makeit

verydifficulttofigureoutwhereweare.







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Value Added (Wage) of Average Worker Operating Average Machine
Also: Overall Wealth of Society (GDP per capita will look similar)















1. IftheideasI’vepresentedinthisbookarewrong,then
the conventional wisdom is correct, and the current

crisis is just an aberration. We should eventually get
backontrackandcontinueclimbingthegraph.
2. If the shapeofthegraph is basicallycorrect,but we
arestillfarawayfromthepointwhereautomationis
goingtobecomeimportant,thenweshould,likewise,
getbackontrackandcontinueclimbing.
3. Ifwearesomewhereclosetothepointwherethedot-
tedandsolidlinesdiverge,thenwearegoingtoseein-
creasingeconomicimpacts,andwewillhavedifficulty
in achieving sustained, long-term growth. If I had to
bet,Iwouldchoosethiscase.




Machines Getting
Better



Machines Fully
Autonomous
Time
Machines Becoming
Autonomous
Conventional Wisdom
(Most economists
believe this)
Value
THE LIGHTS IN THE TUNNEL / 226

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4. Ifthingshavegottenawayfromus,thenwecould,in
fact, be much further along than we imagine. This
could perhaps be explained by suggesting that con-
sumer borrowing masked the reality of the situation
overthelastfewyearsandthatthecurrentcrisisisthe
beginning of the reckoning.This is anugly scenario,
butIdon’tthinkitcanbedismissedcompletely.Ob-
viously,ifthisisthecase,weneedtoadoptnewpoli-
ciesrapidly.

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The Next 10-20 years: Some Indicators to
Watch For
TheideasthatIhavepresentedinthisbookmightbesaid
toconstituteahypothesis,orperhapsatheorythatisstill
lacking in substantial supporting evidence. This book is
obviouslynotbasedonananalysisofhistoricaleconomic
data,butratheronarational,andIthinksomewhatcon-
servative, projection of existing trends in information
technology.Nonetheless,Ibelievethatthereisalreadyat
leastsomeempiricalevidencetosupportthishypothesis.
I cannot reasonably expect anyone to accept these
ideasonthebasisofwhatispresentedherealone.Myin-
tentinwritingthisbookhasbeentotrytoraisethegener-
allevelofawarenessregardingthisissue.Myhopeisthat
economistsandothersmaybegintolookforevidenceof

the trend toward an automated economy with an open
mind,sothatwewillhaveareasonablechanceofaddress-
ingtheriskswemayfaceinthefuture.Towardthatend,
herearesomegeneralindicatorsthatIthinkmayconsti-
tute reasonable evidence that we are moving along the
pathIhavesketchedouthere.

Weak consumer spending pushes investment toward
cost cutting and labor saving technologies
Nearlyeveryoneseemstobeprojectingthatwhenrecov-
eryfromthecurrentdownturncomes,itwillberelatively
weak. Economists are once again anticipating a “jobless
recovery.”(Whenisthelast timewehadarecoverythat
wasn’tjobless?)Inthefaceoflingeringunemploymentand
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tightcredit,consumerdemandinthe United Statesisal-
mostcertaintobeunimpressiveforsometime.Thewind
has been knocked out of the world economy’s primary
consumptionengine,anditremainsunclearwheresustain-
able futuredemandwillcomefrom. I’veseen severalar-
ticlesinthefinancialpressthatpoint outthatourfuture
prosperitywilllikelydependonusconsuminglessandex-
porting more. Yes, but who is going to buy all those ex-
ports?
Ifprojectionsforconsumerspendingremainunopti-
mistic,manybusinessesarelikelytoholdbackongeneral
technologyinvestmentastheywaitforamoresustainable
recovery.Asaresult,wemaycontinuetoseerelativelylow

levels of venture capital flowing into start-up firms for
some time. In the midst of this, it may become evident
that one of the few bright spots is the market for new
technologyproductsthatresultinimmediatecostsavings.
Wemightseeventurecapitalincreasinglybegintoflowto
start-upcompaniesthatarefocusedonlaborsavingtech-
nologiessuchasroboticsandartificialintelligence.
*
Some
ofthesenewventuresmightfocusonembeddingintelli-
genceintotheenterprisesoftwareusedbylargecorpora-
tions,while others createtoolsthat canbeusedinsmall
businessesviaInternetinterfaces.Significanteffortislikely
tobeputintomachinelearningtechnology,sothatauto-
mationalgorithmscanbeeasilytaughttoperformavariety


*
 Obviously, even if thecurrentconsensusiswrongand weendup
withasurprisinglystrongrebound,wearestilllikelytoseesignificant
investmentintheseareas,aswellasamuchhigherleveloftechnology
investmentingeneral.
Appendix / Final Thoughts / 229

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ofjobs.Becauseautomatingthejobsofrelativelyunskilled
workersoftenrequireshighcapitalinvestmentinmechan-
icallycomplexmachines,itmaywellbeofficeandknow-
ledgeworkerswhoaretheprimaryinitialtargetsofthese
newtechnologies.


Offshoring and automation begin to penetrate small
business and possibly combine to capture higher val-
ue jobs
Isuspectthatmosteconomistsdiscountthepotentialfor
outsourcing to invade the small business arena because
theyassumethatthecostsandinconveniencesassociated
withsettingupoffshorerelationshipsconstituteabarrier.
Myconcernisthattheoffshoringindustry,especiallyifit
facesdiminisheddemandinotherareas,willmovetomi-
nimize this barrier by adopting Internet-based interfaces
thatmakeiteasyforsmallerbusinessestooffshorespecif-
icjobsandtasks—withoutanyneedtotravelorengagein
complex negotiations. I think it is likely that exactly the
samethingwillhappenwithincreasinglysophisticatedau-
tomation software. If thiswere to occur, it would even-
tually undercut the U.S. economy’s primary job creation
enginetoasignificantdegree.
Asecondpossibilityisthatasincreasedinvestmentin
artificial intelligence-driven productivity tools begins to
bearfruit,thesetoolsmaybe combinedwithhighlyedu-
cated, but young and inexpensive, offshore workers to
capturejobswhicharecurrentlyheldbyhighlypaidknow-
ledge workers with deep experience. As AI software ad-
vances, it will increasingly begin to encapsulate what we
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think of as “experience” and “judgment” within specific
fields of knowledge. An intelligent and educated young

worker wielding such toolsmighteventuallybecompeti-
tive with professionals and workers who currently com-
mandveryhighsalaries.

Labor intensive areas of the economy begin to see
increased automation
AsIhavepointedoutseveraltimesinthisbook,thepri-
mary danger to the U.S. economy will be when labor-
intensive industries, especially in the service sector, be-
comesusceptibletoautomation.Inareassuchasretailand
fastfoodwherewagesarelow,automationmaybeheldat
bay for a time by the high capital costs of automation
equipment. However, as technology advances and costs
fall,Ithinkitisinevitablethatatsomepoint,thetradeoff
will begin to make sense and competitive pressures will
pushbusinessesandindustriestowardautomation.

New technology industries fail to create significant
numbers of jobs
Wecanexpectthattechnologicaladvancewillgiveriseto
entirelynewindustriesinthefuture.However,thereality
isthatfewifanyofthesearelikelytobelaborintensive.
Bytheirverynature,thesenewindustrieswilltendtorely
on information technology and will offer relatively few
opportunitiesforaverageworkers.Thereisalsoariskthat
these newindustries maydirectlycompete withand ulti-
matelydestroyexisting,morelaborintensiveindustries.
Appendix / Final Thoughts / 231

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One exception to this may be the so called “green
collar” jobsthatinvolveinstallingsolar panels, windtur-
bines, and so forth. These, however, are really one-time
infrastructure jobs. Alone, they will not be sufficient to
providesustainableemploymentgrowth.

Diminishing prospects for college graduates
Unfortunately,as I suggested inChapter2, I thinkthere
are reasons to expect that the assumption that a college
degreeisatickettosuccessmayultimatelybechallenged.
Thereareacoupleoftrendsthatmaydevelop:
 Unemployment,underemploymentandlowwagesfor
recentgraduatesmaydevelopasautomation,andpos-
sibly offshoring, have a disproportionate impact on
entry-levelpositions.Thiswillbeanespeciallysignifi-
cant problem inlight of theenormous debt burdens
carriedbymanygraduates.
 Older, highly paid knowledge workers, professionals
andmiddlemanagersmayfindthattheirjobspresent
plump targets for both offshoring and automation.
Manyofthesepeoplearelikelytobemiddleagedwith
substantialfamilyobligations,andwillhavefewgood
prospects. Age discrimination lawsuits may well clog
thecourtsofthefuture.
As I pointed out in Chapters 2and3, the long-term
impact of a diminishing economic incentive for average
peopletopursuefurthereducationwouldbedisastrous.In
myopinion,thisrealityprobablyconstitutesthesinglebest