It’s Not China; It’s Efficiency That Is Killing Our Jobs

E-gads man, this is terrible.

This reminds me of when you first watch the Matrix. If you're young, you spend a while thinking "But it could all just be a simulation!" Until you finally realize that yes, it could all just be a simulation, but it doesn't matter. You grasp the really cool part of the concept -- we all live on computers -- and forget that details and practical implications -- simulated people living in a simulation and real people living in reality aren't really different. So it doesn't matter.

Likewise, this author has realized the great revelation that strikes everybody who looks around: jobs are going away! There are no more buggy-whip manufacturers, chimney sweeps, blacksmiths, coopers, automobile welders, and so on. In fact, it's only getting worse! Technology accumulates on itself. Pretty soon we'll be able to make anything!

Okay fine, but here's the details that are very important to remember: economies don't run on jobs, they run on the creation and distribution of scarcities. Being able to build your own B-1 bomber in your basement isn't going to make everybody's job go away. Jobs are not about building tangible things. They are about providing something people want. Yes, you might only need a few chefs for each cuisine worldwide in order to manufacture food, but eating is about much more than simply consuming things that have been manufactured. So while the eating experience may evolve, there's no guarantees one way or the other about how chefs fit into the picture. We simply don't know.

I could go on, but you get the gist: those things that involve simple, robotic, manufacturing of goods will commodotize. But that doesn't matter. Making movies cost a millionth as much as it did 100 years ago; it's mostly free. But we still make and distribute movies even though the manufacturing cost is negligible.

Visit a retirement community for rich people. They have most every physical need they could want -- food, goods, services. Yet the economy flourishes. There are social events, artistic events, clubs, contests, etc. People without any physical needs still create and distribute things that are scarce. The economy isn't going anywhere.

Worse yet, the author takes his limited understanding of the world, extrapolates it, then calls for a war on efficiency! Good grief, it's so lame it's almost trolling.

People ask me what I worry about most? It's that we never leave this planet. It's that the millions of people like this who want to war on efficiency, capitalism, science, and technology, finally win. We stagnate. The Great Fizzle.

I absolutely loathe these arguments.

The economy is not a zero sum game! When I gain a dollar another person doesn't inherently lose one. We build wealth, and while efficiency eliminates certain jobs, it just shifts employments to other sectors as long as people continue to innovate. For this argument to hold any sort of water we would still be fretting over what to do with all the unemployed candle makers after the advent of electricity. The answer isn't to move backwards, or as the author suggest to promote inefficiency, but to use our creativity to move forward. The world has plenty of problems that need fixing, and as long as there are problems with the world, and there always will be, and as long as we as a society and a planet continue to strive to make tomorrow better than the day before it, we will continue to innovate and create jobs.

This reminds of wonderful book - "Economics in One Lesson". Written half a century ago it describes most economy fallacies, that are dominating even among intelligent people. If you didn't know, you would think it was written today.

There is a chapter on "The curse of machinery" (read online - http://www.fee.org/library/books/economics-in-one-lesson/#0....), that explains why this whole post is thousand years long delusion, that keeps coming back every decade or so.

Highly recommended to anyone who wants to understand true fundamentals of the sound economies.

The problems that the author describes are real, but IMHO he attributes them to the wrong cause. They are not caused by efficiency per se; they are caused by the enormous increase in the productivity of Capital relative to Labour.

There has been a 'cold war' between Capital and Labour for almost 200 years now, and it seems clear to me that we are currently witnessing the final victory of Capital. As the author describes, it is now possible for one person to create an idea, build a widget (particularly if it is a software widget) and distribute that widget to the whole world, because of the vast amount of productive Capital that has been created and is available for his/her use.

As hackernews readers who work in great startups know, the power of a small group of talented and committed people is astonishing in the modern world - because of the 'force multiplier' effect of Capital.

So what to do? (and the answer is not to 'reduce efficiency' or eliminate public corporations, heavens)

The answer is that in order to prosper, you must become a master of Capital. You must be able to use all the wondrous force-multiplier tools at your disposal. If you cannot, if you are rather dependent on your Labour to earn your crust, then in today's world you are going to be a peasant. This might be hard to hear (although probably not for HN readers) but it is true.

Of course, being able to use all this Capital requires education, and so at society's level, the solution lies in massive boosts to education funding. It seems blindingly self-evident to me that in our Capital-dependent world, tertiary education (university or vocational) should be provided free for all, paid for by the state. In fact, education is becoming more expensive globally; this trend is extremely pernicious, is causing massive problems and should be remedied as fast as possible.

The cost of this education provision is irrelevant - it is an investment that will repay itself many, many times over - and in any case it is well within the developed world's grasp. The total cost to the US of the Iraq war is at least $2 trillion. How many college educations would that have paid for?

Efficiency kills jobs. But what people want is not jobs: they want revenue, then something giving them a sense of self-worth. The latter can be provided by better means than through artificially wasteful jobs.

Moreover, as he notices, the balance of power is between the owners of the means of productions, and "normal people" who can decide to riot. This balance can be altered by changing people's willingness to riot, and/or by making their riotous actions more efficient.

Don't forget that value is created through the enjoyment of useful things: if you produce useful stuff, but for some reason nobody enjoys them, you have not created any wealth. So if you produce stuff to be enjoyed by the plebe, this plebe have as much power on it as you do, although they have a harder time organizing and exploiting their share of power.

I'd like to insist on the legitimacy of people's ability to revolt, or at least on why it's no less legitimate than shareholders' "property rights". Our social definition of property rights is arbitrary; according to "natural law", you're only the owner of what you can defend, by force if necessary. If your ownership is defended by the state's police, i.e. by the people, it is ultimately the people's property, and you have rights on it only because the people decided to grant you these rights.

The author confuses money for wealth when they are two very different things. Look at the teleporting chef example - if food production could be done so efficiently that only a few chefs around the world were needed, then social wealth has increased. There would be a massive pool of surplus labour that the now redundant chefs could put to use elsewhere.

As others have noted, the newly redundant chefs would be out of work temporarily and if that is the only skill they had, then they would be at a disadvantage relative to everyone else. Yet that disadvantage would be many more times offset by the benefit us non-chefs would accrue (from cheaper meals for example) and still allow the redundant chefs to do something else.

That's the nature of capitalism - creative destruction. The process is beneficial collectively, but some individuals benefit or loose more than others. And that's why (most) countries provide some sort of redistribution mechanism to smooth out those individual inequalities. The solution to any dehumanizing effects of the capitalist system is not to limit the market's ability to drive innovation and efficiency, but rather to ensure everyone enjoys those benefits more equality.

I write software that makes people more efficient. I look at their process, write an application to help them, and next thing you know they are doing 100 tasks where before they did 10. My company can then take on more work, or let people go. Turns out it is easier to let people go.

So these people are pounding the pavement looking for work. Great you say, information economy! Learn to program. Well most of them can't. Do something a computer can't do! That means the service industry, and stuff I haven't figured out how to get a computer to do. Turns out I can hire someone in India to do most of the latter, and most people resent going from white collar professionals to working at The Gap.

Probably the best thing for them to do is learn how to make gourmet jams and sell it to rich people.

In short, no nothing is destroyed, but jobs get shifted outside of the geographical location where the person lives. And jobs tied to the location the person does live are usually unsuitable.

In some ways, the author has got this point right.

There is an inflexion point where the level of specialisation required exceeds the cost of acquiring the said skills. A couple of generations ago, basic literacy was all that was required to be able to operate machinery, read some instructions, etc. However, with machines providing leverage, it requires a prolonged (and expensive) period of study, followed by industry experience, before someone can be hire-able.

One example is Chinese construction workers in Africa. You'd think that construction is a labourer's work. But even so, it requires skills such as welding, and some level of expertise. An enterprise in Africa, especially a Chinese enterprise would find it expedient to import relatively more expensive workers from China rather than hiring locally.

The unemployed in the previous case would represent the throng of unskilled, who lack sufficient capacity to even bootstrap themselves into construction jobs.

Similarly in the US where basic education is already provided, increasingly, a university degree is the minimum level required for even a basic job. If a person's parents couldn't save enough, then we have a situation not too different from Africa where people are in no position to bootstrap themselves into a job, at a time when employers are declaiming skills shortages.

What author suggests at the end (abolishing private corporation) is pretty absurd. But he makes a pretty good argument that the economy might be a zero-sum game if technologies can take us zero cost of production, distribution or providing of service. We're closer than ever, but still very far from that point.

If cost of replication and distribution of every product globally can be driven (close) to zero, only a few best products in each category can have economic existence. Therefore as distribution gets more efficient it's winner-takes-all market. In winner-takes-all markets wealth distribution is extremely skewed by definition.

So if technology takes us so much further that a lot of people won't be able to add more value to the economy than they will be 'taking away', the governments will have to find a way to keep balance before social unrest takes the main stage.

Some more thought should be put in this direction. Here's a milder possibility of controlling for winners-take-all phenomenon - limiting the maximum market cap of companies and then splitting them up after they reach it. This wouldn't shock the economy as much and would provide sort of balancing and competition at the top. Also stock owners wouldn't be too much worse off.

This reminds me of the observation that a perfect (i.e. zero-drag) kite would rocket straight to the top of its flight envelope and then dive-bomb the person holding the strings.

I can see two very clear trends when it comes to where new jobs are created.

One is the shift from industry jobs to service jobs.

Did you know that globally, farming has been the most common profession since basically the dawn of civilization up until about a decade ago? [1] Now it's service jobs.

Humans helping other humans, this is a type of jobs that will never go away because humans have qualities that machines can never possess regardless of if they pass Turing tests or not.

The second is the bleeding edge of innovation and super-brands that have shorter and shorter lifespans. The share of the economy belonging to the mega-corps is decreasing. Smaller and faster is the way of the future. This is the era of the startup economy.

So there you have it: services, super-brands and startups.

That's what the economy will look like the next 50 years. Heck, it's what it looks like today! At least the part that's working.

[1] http://johnhawks.net/weblog/topics/social/farming_bypassed_a...

Efficiency DOES NOT purely kill jobs, it transfers them. When robotic arms replace factor workers:

- Factor worker jobs are destroyed.

- Robotic arms designing, manufacturing, shipping, etc. are created.

There may be temporary unemployment because factor workers may not know how to design, manufacture, ship, etc.

EDIT: Found an article "Technology and Automation Create, Not Destroy, Jobs" that is relevant. http://www.innovationpolicy.org/technology-and-automation-cr....

PS: Don't understand why someone down voted me. Never realized down votes are for disagreement.

The only thing that would be more soul destroying than having a dull job would be having a dull job that you knew was just easily automated busywork that you were allowed to keep as a favor.

Doing a major intervention in the economy to protect jobs by injecting inefficiency seems rather misguided. If you are going to mess around that much, why not do it by creaming off a bit of the surplus and use it to encourage people to have more leisure time instead? Play beats work most of time, and with creative people, play can create more work.

"We need to protect our jobs."

That's all I've been hearing in the past few years, and it's exactly the kind of thing that, although counter-intuitive, leads to the loss of jobs in the long-term, and a slower economy.

Let companies compete fair and square among themselves, and it will lead to better products, lower prices, and more jobs. Otherwise, most of those companies will just move to some other country, and then you'll have fewer companies to provide jobs, and their products will gradually lose competitiveness. It's what happened to GM.

I read several comments made about those who lost their jobs can now re-train themselves and apply their productivity elsewhere. But would there really be such opportunities in today's hyper-efficient economy? Think about iPhone apps. Only a small percentage of developers at the top make money. In a sense, the rest of the developers are out of work. Now, if they were to apply their productivity elsewhere, they would need to find a different market. So, they might try the Android market but there too, there are only small percentage of people making any money. Do you think there would be enough markets in the world for everyone to be in the top percentile that makes money?

Furthermore, the efficiency is an effect of the entire market. It is the market collectively that identifies the best products/ideas and rewords them disproportionately. We humans have limits in how quickly we can become efficient. At the rate the world is becoming efficient, we humans cannot humanly catch up with that speed. It is dehumanizing to expect people to do so. So, I don't think it is fair to blame those who failed to adapt quickly enough.

This post is a total flaw. It mistakenly confuses wealth distribution with wealth creation.

Let's say that, given the same inputs (raw materials, labour, capital, etc.), in 2011 an economy produces 100 with technology A and that in 2015 it produces 120 with technology B. Then this is a wealth creation of 20.

Now, how that 20 is distributed becomes the question. That is totally and completely detached from the efficiency gain passing from technology A to B. It has much more to do with how the State works and how society works. For example, in the Nordic countries, they somehow manage to redistribute wealth creation between the population (unskilled workers included). But I repete, that is a tottally different discussion.

And also, please use data. This post uses none. If it did, it would have seen the GDP per capita on a rasing trend everywhere from the start of the 20th century. Which basically means that efficiency has already improved a lot the life of everybody, rich and poor.

It seems natural to me that in a modernized, relatively free state, the mega-rich would edge even further ahead of the pack. Throughout history and even today we have examples of groslly unjust states, basically dictatorships, where the wealthy ruling classes are basically parasites, stealing and hoarding their wealth from a population of victims/subjects.There is however a limit on how much they can actually take.

In contrast, todays rich, who have (increasingly) built up businesses, actually know how to genearte value/wealth in the first place, so they can keep getting rich indefinitely.

Is there a flaw in my logic somewhere?

I think what will need to happen, is that we will need to subsidize other means of acquiring and distributing wealth. America is the wealthiest nation on earth, and we have ample resources to feed and tend to the basic needs of all our people—however, what we lack is a system for fairly (and note how I did not say equally—there's a huge difference) distributing this wealth.

In a way, what we need is to shift our culture to start flowing money into creative and artisanal sectors. We need to shift our efforts into circulating wealth by moving it to sectors that are artificially unscalable, like paying more for small-business service-industry and other luxury goods. Goods that are not mass-produced, and therefore will employ people in their creation. Efficiency in most industries is a good thing, but the dark side is that margins rise instead of prices going down, when production costs sink.

That is, unless we can come up with a completely new way to distribute wealth. Perhaps through some kind of artificial game, as an alternative to performing real work. As a species, we will reach a point where work is no longer a necessity. But when that happens, we must make sure we do not become complacent. We still need a challenge, a goal, something to strive towards, and some way to move wealth and earn it.

It's the replicator, not the transporter, that instantly creates any meal on Star Trek.

Why do people need jobs?

They don't. They need water, food, shelter, security, health-care and something to believe in.

The problem is that we're at a stage where people need jobs to survive.

Since my jobs consist mostly of doing whatever I please, I'm perfectly content to let other people not work, as long as we can find a way to do it sustainably, and as long as they don't prevent me from doing what I want.

We then move to work in areas that aren't efficient. That can't be duplicated. Work that can't be done by a computer, at least yet.

Technology replacing jobs has been happening for a long time, it's just that it happened much more slowly in the past. Now, as it's happening at a rapid pace, some people are finding themselves fit to work in a world that no longer exists.

My Dad said to me once that at school his tutors said that everyone should prepare for a future in which they wouldn't be working.

I believe there was even some classes on how people might possibly entertain themselves in the future since computers would be doing everyone's work for them.

Have we really seen this? I think not. What happened was the computers just enabled people to do their jobs faster and those whose jobs were genuinely removed by technology have simply found work elsewhere.

Perhaps we are at a point where efficiency (read computers) are seriously putting people out of work. But the reality is labour forces are actually flexible and over time they adapt. New jobs will and are being created and as long as our labour forces remain educated enough and can harness technology to their advantage there will no problems.

It's those who are incapable or unwilling to adapt to the new world we live in that will fall by the wayside.

I love the idea of prohibiting public corporations, but as the author says, that will never happen. If people could still negotiate to buy part of companies, but not have the rapid buy/sell cycles made very easy, then that probably would stabilize things and put more emphasis on long term productivity.

The elite do have a balancing act here: their children and grandchildren need to live in this world so they must somehow balance their greed with maintaining the world in some sort of livable state.

One thing the author left out: we need to rid ourselves of the "religion of constant growth" and concentrate more on the basic quality of life and sustainability. I met for the first time a good friend's adult children last night and we all enjoyed a good but simple meal in my friend's home - "the best things in life are free" may be a cliche, but it is still true.

> The efficiency of the kitchen equipment in the future would allow one chef to serve millions of diners a day.

This is stupid and show zero or negative understanding of cuisine. One chef cannot cook millions of diners a day. A big factory could, but this would be industrial food, not to be compared with chef's or home's.

If the rest of his arguments show the same mechanical and superficial understanding of economy mechanism, then the article is doomed, even if it's conclusion (not China's fault) still holds.

I would like to point out some counter-examples:

«Think of journalists. Many are losing their jobs. Newspapers are barely surviving. In the old days, for every news event, there were probably hundreds of journalists writing about the same story for their own local newspapers. Now, because of the efficiency of the Internet and search engines, a few journalists writing about it would suffice for the whole country. People would be able to find them. There is no reason why hundreds of newspapers should write and publish their own versions of the same story.»

And yet, you can still find incompetent people. I've read so many inaccuracies, grammar and typographic mistakes from information professionals (apparently) that makes me wonder if the price to pay for such efficiency is too high. And I'm talking as a consumer, information consumer.

«Corporations are increasingly getting bigger (in terms of market caps), more global, and more powerful, yet they are getting smaller and smaller in terms of the number of people they employ, because they have mastered the art of efficiency.»

Okay, take IKEA for example. IKEA sells furniture and other home accessories world wide, and everywhere you can find the same model. However, how many people do they employ on each store? A hundred? I don't know but I'm under the impression that is not a shrinking number. And IKEA is a particularly good example because it's expansion model is not based on a franchise like fast food restaurants.

Of course, I might not understood the intention of the author.

MAnufacturing is a major sector of US Economy and China has captured a huge share of that which cannot be disagreed looking at the past 2 decades. Thus we can blame Corporations for outsourcing to countries such as China and thereby American's loosing jobs. Technology on the other hand also indirectly kills jobs as processes become more efficient, thus there are fewer jobs for many people and it comes down to the survival of the best.

Why are we accepting this guy's premise that "equality of wealth" should be a target at all? We could get equality tomorrow if we took most of the stuff that the rich owned and just destroyed it. Does any sane person think that would be a good thing to do?

The fact is that things have gotten better for the some of the POOREST people in the world over the past 50 years. They have benefited from improved meds, better food, cheap telecom, etc. And unless there is some major screwup, things will probably get _better_ for them, not worse. Just compare the unemployed in the US today with the unemployed in the Great Depression. Do we have large herds of unemployed moving out to California to become migrant farm workers? No. Do we have them all turning into servants for the rich? No.

People will not be replaced by robots as long as human+robot is more productive than robots alone. This is true for many jobs today and it will continue to be true for many jobs in the future.

If you think of things on a super-long timescale, then we're eventually going to hit intelligence enhancements. And then things are going to get really exciting.

The beauty of the capitalistic model is that it is self-correcting without needing intervention like bans and such. E.g., say one person dominates production to the point he makes everything and has no incentive to sell anything, then as far as the rest of the world is concerned, he doesn't exist (or is of no consequence). Meaning, we just have the original situation, except with one less person, and people will have to again figure out how to survive. And new corporations will be born that will become productive themselves.

IMO what will happen in the future (at least what I hope) is that production will become so efficient that regular goods, like food and basic amenities, will become dirt cheap so machines will be doing most of the work and people working more by choice than necessity...and for reasons that are higher up on the Maslow pyramid. E.g., imagine you're so rich that you could supply food to a million starving kids in Africa with little impact on your situation, wouldn't you do it? Different parts of human nature will play out when all our needs are met.

> We need the governments from around the world to intervene in the global economy and make things more inefficient.

What. The. Fuck? Is he seriously proposing we reduce the efficiency of human work? That would be one of the worst solution ever suggested, pure Luddism.

OK, efficiency currently is vastly misused. But at the core, efficiency mostly reduce the need for mandatory work. Even slavers wouldn't relinquish that (they would have to manage more slaves).

Now, if we drive this to the point where no work is mandatory any more, then why should we refuse "communism"? Just split the wealth and be done with it! You don't have to work for it! Want to work anyway? As you wish, but don't think it will entitle you to more wealth (or at least, to deprive others of any wealth).

This is really obvious in hindsight. Just remember that most human labour is a source of suffering that we should get rid of if we can, and that work is a moral obligation only to the extent that it is a need.

As long as we keep reaching for higher goals increasing efficiency in society is a good thing. We might need to structure society in a different way to encourage more people to pursue those higher goals and to ensure that those incapable of that will still be able to live a decent live.

Awful article. Others have discredited it well, but I wanted to comment on this plausible assertion that it makes:

"The market cannot accomodate everyone to be the best at something; in fact it is impossible by definition."

Actually, this isn't impossible by definition (think of an island with 100 people), but practically some people aren't the best at anything. That doesn't matter. Everyone has a comparative advantage in something (see Wikipedia for definition). This is because even superstars only have 24 hours in a day. The person who mows our lawns or picks up the trash doesn't do it because they are "best at it" they do it because they have the lowest opportunity cost.

Stanislaw Lem wrote a pointed satire [1] on what might happen when new technology destroys all jobs. I think it's a brilliant distillation of the issues. (Alas, deploying Strong AI to solve the problem doesn't work out so well in this story.)

[1] The Twenty-fourth Voyage: http://www.scribd.com/doc/37246256/Stanislaw-Lem-The-Star-Di... (starts at page 9)

With the cost of re-training for new jobs going up, and the value of un-skilled labor going down, there are certainly more and more folks for whom it's more expensive to get a job than any benefit that they'll receive from it.

So there can be lots and lots of stuff, but if you aren't very good at learning, and you don't own capital, the world can become quite unfriendly - even if we've gotten really good at making things and most of us own quite a few digital watches.

Or, you know, a business cycle could be killing our jobs. You never see these articles when unemployment is 5%.

Don't resist efficiency, just find a better way to distribute wealth so that people are less driven by fear, creating a more caring society without killing the incentive to innovate. I like the idea of a basic income for all paid for by resource usage fees.

it's the trade deficit that threatens the US (and other) economies. Overproduction by one country that refuses to fairly trade with another. China's weath increases should be trickling down to the masses increasing their ability to buy goods that they couldn't afford, either from China's vast supply chain, or other countries. Instead the chinese are buying american treasury notes to keep the money hidden, and keep us paying them forever creating invisible debt, as well as keeping a lid on the changes in society that come with a well fed, and powerful middle class.

>This pattern called “power law” or “80-20 rule” is found everywhere.

Is it found in China?

>If we could ban public corporations from the entire world, I would imagine that we would make the power law curve flatter.

Would it be flatter in China as well?

Author seems to suggest "our" inefficiency is caused by certain universal laws, which mysteriously does not apply to China.

What happens if the world stops all the innovators from innovating... just to protect the poor. Atlas Shrugged. right?