2009 TheLightsInTheTunnel

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Subject Headings: Technological Unemployment.


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Book Overview

What will the economy of the future look like? Where will advancing technology, job automation, outsourcing and globalization lead? This groundbreaking book by a Silicon Valley computer engineer explores these questions and shows how accelerating technology is likely to have a highly disruptive influence on our economy in the near future -- and may well already be a significant factor in the current global crisis. THE LIGHTS IN THE TUNNEL employs a powerful thought experiment to explore the economy of the future. An imaginary "tunnel of lights" is used to visualize the economic implications of the new technologies that are likely to appear in the coming years and decades. The book directly challenges conventional views of the future and illuminates the danger that lies ahead if we do not plan for the impact of rapidly advancing technology. It also shows how the economic realities of the future might offer solutions to issues such as poverty and climate change.

Table of Contents

Chapter 1. The Tunnel p.7
   The Mass Market  10
   Visualizing the Mass Market   12
   Automation Comes to the Tunnel   18
   A Reality Check    21
   Summarizing    25
Chapter 2. Acceleration p.27
   The Rich Get Richer   28
   World Computational Capability   39
   Grid and Cloud Computing    41
   Meltdown    44
   Diminishing Returns    47
   Offshoring and Drive-Through Banking    55
   Short Lived Jobs    57
   Traditional Jobs: The “Average” Lights in the Tunnel   58
   A Tale of Two Jobs    63
   “Software” Jobs and Artificial Intelligence    67
   Automation, Offshoring and Small Business    74
   “Hardware” Jobs and Robotics    75
   “Interface” Jobs    80
   The Next “Killer App”    81
   Military Robotics    85
   Robotics and Offshoring    86
   Nanotechnology and its Impact on Employment   87
   The Future of College Education    90
   Econometrics: Looking Backward    93
   The Luddite Fallacy    95
   A More Ambitious View of Future Technological Progress: The Singularity     100
   A War on Technology     103
Chapter 3. Danger p.107
   The Predictive Nature of Markets   107
   The 2008-2009 Recession    110
   Offshoring and Factory Migration   113
   Reconsidering Conventional Views About the Future    115
   The China Fallacy    117
   The Future of Manufacturing    124
   India and Offshoring    127
   Economic and National Security Implications for the United States     128
   Solutions     131
   Labor and Capital Intensive Industries: The Tipping Point    131
   The Average Worker and the Average Machine     135
   Capital Intensive Industries are “Free Riders”    138
   The Problem with Payroll Taxes    140
   The “Workerless” Payroll Tax    142
   “Progressive” Wage Deductions    144
   Defeating the Lobbyists    146
   A More Conventional View of the Future    148
   The Risk of Inaction    152
Chapter 4. Transition p.156
   The Basis of the Free Market Economy: Incentives    158
   Preserving the Market   159
   Recapturing Wages   162
   Positive Aspects of Jobs    168
   The Power of Inequality    169
   Where the Free Market Fails: Externalities   170
   Creating a Virtual Job    172
   Smoothing the Business Cycle and Reducing Economic Risk  178
   The Market Economy of the Future    179
   An International View   182
   Transitioning to the New Model    184
   Keynesian Grandchildren   188
   Transition in the Tunnel   191
Chapter 5. The Green Light p.194
   Attacking Poverty    195
   Fundamental Economic Constraints    200
   Removing the Constraints    201
   The Evolution Toward Consumption    203
   The Green Light   206
Appendix Final Thoughts p.208
   Are the ideas presented in this book WRONG? (Opposing arguments with responses)     209
   Two Questions Worth Thinking About   222
   Where are we now? Four Possible Cases   223
   The Next 10-20 years: Some Indicators to Watch for    226
   Outsmarting Marx   236
   The Technology Paradox   238
   Machine Intelligence and the Turing Test    240 



Like most people, I have been giving a lot of thought to the economic situation as the most serious crisis since the Great Depression has continued to unfold. Since I develop software and run a high tech business, I also spend a great deal of time thinking about computer technology, and so I began to focus on how economics and technology intertwine. The current crisis has been perceived as primarily financial in origin, but is it possible that ever advancing technology is an unseen force that has contributed significantly to the severity of the downturn? More importantly, what economic impact will technological acceleration have as we anticipate recovery from the current crisis — and in the years and decades ahead? What will the economy of the future look like?

Among people who work in the field of computer technology, it is fairly routine to speculate about the likelihood that computers will someday approach, or possibly even exceed, human beings in general capability and intelligence. Speaking at an industry conference in 2007, Google co-founder Larry Page said," We have some people at Google [who] are really trying to build artificial intelligence and to do it on a large scale. It's not as far off as people think. “Ray Kurzweil, a well-known inventor, author and futurist, states quite categorically that he expects computers to become at least as intelligent as humans by the year 2029. While other experts are far more conservative about the prospect for machines that can achieve genuine intelligence, there can be little doubt that computers and robots are going to become dramatically more capable and flexible in the coming years and decades.

What is the likely economic impact of machines or computers that begin to catch up with — and maybe even surpass — the average person's capability to do a typical job? Clearly, the employment market would be one of the first areas to feel that influence. Put yourself in the position of a business owner and think of all the problems that are associated with human employees: vacation, safety rules, sick time, payroll taxes, poor performance…maternity leave. If an affordable machine can do nearly any routine job as well as a human worker, then what business manager in his or her right mind would hire a worker?

Even if computers never become truly intelligent, surely machines are likely to become far more capable in terms of their ability to perform a relatively narrow range of tasks. The reality is that a substantial fraction of the routine, specialized jobs held by average people — including many people with college degrees — simply do not really require the full intellectual breadth of a human being. This is the reason that a lot of jobs are boring. If computers can already beat the best chess players in the world, isn't it likely that they will also soon be able to perform many routine jobs? In fact, I think there are good reasons to expect that machines may begin to approach this more specialized level of " intelligence " within a decade or two.

Since many of the people who work in fields like artificial intelligence and robotics are talking about the future prospects for these technologies on a fairly regular basis, I assumed that a similar discussion must be going on among economists. Surely, the economists are thinking ahead. If machines suddenly get smarter and start doing many of our jobs, then the economists will have a plan in place. At least they will have thought about it; they'll have some good suggestions. Right?

Well, no. It turns out that while technologists are actively thinking about, and writing books about, intelligent machines, the idea that technology will ever truly replace a large fraction of the human workforce and lead to permanent, structural unemployment is, for the majority of economists, almost unthinkable. For mainstream economists, at least in the long run, technological advancement always leads to more prosperity and more jobs. This is seen almost as an economic law. Anyone who challenges this " law of economics " is called a " neo-Luddite. " This is not a compliment. ( We'll talk about Luddites and the associated "Luddite fallacy" in some detail in Chapter 2 of this book.) While most economists dismiss the question completely, the technical people seem to be entirely caught up in the excitement of the technology itself and what it might potentially promise. There is some discussion of the fact that artificial intelligence might have serious impacts on society, but much of this is focused on the threat of truly advanced or even sentient machines in some way " taking over. " There is little attention given to the more mundane and immediate threats to the job market and the overall economy. Perhaps the technologists just assume that once the technology comes along, the economic issues will somehow work themselves out.

Now that is an unsupportable assumption. It would probably be reasonable to assume that technical problems will sort themselves out. Technology usually seems to find a way. But economic policy and political issues? Think back to 1993. Bill Clinton had just been elected and had promised to reform the health care system. As we all know, that effort failed. The major issues back in 1993 were very similar to what we continue to face in 2009. As this is being written, Congress is once again taking up the issue of comprehensive health care reform. It has taken a full 16 years to get to this point, and still the outcome is by no means certain.

But what happened with technology? In 1993, hardly anyone had heard of the Internet: it was something that people in government and at universities used primarily for work-related email. Some people had primitive cell phones. Microsoft had just introduced Windows 3.1, which for the first time brought a usable graphical interface to IBM PC-compatible computers. The evidence is pretty clear: a race between technology and our ability to reform our political and economic systems is really no race at all. So if we can foresee that technology is likely to have a highly disruptive impact on our economy in the coming years and decades, then we really need to start thinking about that well in advance.

The disintegration of the Soviet Union in 1991 demonstrated quite conclusively that there is no good alternative to the free market system. Other economic systems simply cannot compete. In fact, it's probably reasonable to say that the free market economy is one of mankind's greatest inventions — ranking right up there with the wheel. The wealth and progress that we enjoy in the industrialized world would not have come into being without the underlying logic of capitalism. Historically, technology and the market economy have worked together to make us all more wealthy. Will this always be true? Is it simply a matter of leaving the system we have in place?

The reality is that the free market economy, as we understand it today, simply cannot work without a viable labor market. Jobs are the primary mechanism through which income — and, therefore, purchasing power — is distributed to the people who consume everything the economy produces. If at some point, machines are likely to permanently take over a great deal of the work now performed by human beings, then that will be a threat to the very foundation of our economic system. This is not something that will just work itself out. This is something that we need to begin thinking about — and that is the primary subject of this book.

Once you identify and begin to think about the economic ramifications of advancing technology, it becomes clear that these trends are already well established and may even underlie the current crisis to a significant extent. If you make some very logical, and even conservative, assumptions about where technology is likely to lead in the coming years, much of the conventional wisdom about what the future will look like becomes unsupportable. In particular, important trends such as globalization simply may not play out in the way we have been led to expect. If we do not recognize these issues and adapt to the changes they imply, it will be very difficult — perhaps impossible — to achieve a sustainable recovery that will lead to long term prosperity in the years and decades to come.

As we will see, technology is not just advancing gradually: it is accelerating. As a result, the impact may come long before we expect it — and long before we are ready. And yet, this issue is simply not on the radar. If after reading this book, you are concerned about the issues raised here, then I hope you will consider speaking out. Perhaps if enough people start to discuss these issues, even the economists will take notice.