Thursday, June 9, 2016

It is not automation that is the source of our problems

Every day we hear about job losses due to automation. You’d think humans are on the brink of extinction. How can human traders outdo the banks high frequency trading programs?  How can any human keep his/her job against the machines that automate jobs to near perfection?  In China, people lose their jobs in spite of low wages due to automated manufacturing. When is your ticket coming up, with AI medical diagnostic programs?
Like always the world is changing; the thing that humans do best is coming up with new creative ideas about making live better. We may live in a world where manufacturing is mostly in the hands of machines and a couple of programmers to take care of unforeseen glitches. However, one should never forget that the whole raison d’etre of our economy is to distribute as efficiently as possible the goods and services that we humans need for survival and comfort. So there will be no economy without humans.  The hole conundrum about how humans will earn wages to buy products will evolve in a new societal structure and that is not necessarily a moneyless society as in Gene Roddenberry’s Star Trek world. There is room for only so many vineyards where the Jean Lucs reside when back on earth or farms for Captain James T. Kirks to ride around on horseback. Where would de rest of mankind live? I still think a capitalist system with rich and less rich people and people that want to live off the grid will prevail. In the end, expansion into space and possible a whole new ‘wild west’ will evolve in a galaxy near you.
But let’s get down to earth. Right now we’re afraid of high frequency trading. But this is a bit like technical trading. When everybody becomes familiar with ‘head-and-shoulder' patterns, what is the competitive advantage of technical trading? At best, everyone will recognize the same trading trends and react exactly the same to developments in the market; at worst technical trading becomes entirely useless as a predictive tool. With high frequency trading, institutions like banks would take advantage of tiny trading differences such as, say, the share price of Microsoft in Hong Kong versus that in New York. Well if numerous trading programs are aiming for the same trading discrepancies, these discrepancies will be taken care of in the shortest possible time and the profits from those trades will diminish all the way to an extreme of 0. Of course, that would kill the economics of high frequency trading. So a balance will be achieved between minimal trading discrepancies and the cost of running the machines. In the end the individual investor will win in that he can invest anywhere in the world at the best available price (of the moment).

Commissions at on-line brokerages are still falling and full service brokerages may decline further. But, your full service broker from the last 10 or 20 years will recognize you as soon as you call. There is a unique personal relation that is not based on hackable passwords and copies of iris scans that will protect you from unauthorized trades and money withdrawals. So there is a limit to automation and yes there is a lot of efficiency to on-line retail but ultimately people want to check, touch and feel the products they buy – especially luxury products; they want to interact with each other and real sales people rather than locking themselves up in the isolation of their smart homes.
What more likely will happen, rather than making us humans expendable obsolete parts of a machine economy, is that machines will take care of the daily drudgery and we will focus on doing things that will gratify us and/or our fellow human beings. Yes, the days that we can make a living from doing mindless jobs will go the way of the dodo bird. You could see us all as retired (independent of hated drudgery jobs): we would do things we feel are worthwhile doing and we will keep on collecting financial rewards that reflect how the rest of mankind values your contribution(s) to society. Original paintings or invention of a more efficient way of space travel or an exciting theatrical performance they all will be rewarded in monetary, and other ways, to ensure that we will survive and hopefully thrive. Not much different from today but maybe with a different perception as to what is important and worthwhile for you and society as a whole.
Today many are concerned about the environment, it is one of those topics the importance of which most of humanity agrees upon. Reality is not that our technology poisons the earth and that mankind is evil. It is a matter of how many people can be sustainably live on this planet. One car or steam engine won’t destroy earth, but 6 billion or 10 billion people living on this planet will destroy this planet no matter how good our technology. In many western economies, the cost of having children is becoming inhibitive and households have less than 2 children to keep the number of people on this planet in equilibrium. A real tragedy tough is developing in Africa and other poor countries where having a lot of children, especially when mortality is high, is considered an economic necessity. In those countries your children are basically your old age security.

But the net result is that Africa is becoming an explosive cauldron of misery. People there want the ‘good’ life as well and try, at any costs, to flee the continent forming the desperate refugee streams that currently floods Europe and the more prosperous areas of the world. This is one of the big problems of the near future: how to get Africa and other developing overpopulated nations in-line with our overall world resources.  To ‘nuke the continent’ is not the solution no matter how extreme and outrageous our elected leaders may think. We do need real vision not ‘nice popular visions’ or cute looking prime ministers who live in a dream world. Do I know the solution?  No it takes more than one person typing on a computer for one hour to solve this. It will be nice to develop other sources of energy and reduce emissions from our cars; but that only kicks the problem down the road. When, last century, London suffered of acid rain and fogs during the coal energy age, a switch to oil and gas led to reduced emissions and made the city more livable. But today the city is clogged with cars and new forms of pollution while its population is still growing. In China it is not necessary the use of coal to generate energy that is the problem, but the fact that we have more than a billion and half people that need energy and cars and the ‘good life’.

Can a fully automated manufacturing system sustain 6 or 10 billion people? I don’t know, but it is not the technology or automation that is the problem, it is the number of people that live on this planet that lies at the true core of these problems.

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