Why AI is bigger than the industrial revolution; the end of the job-market as we know it– And How Much the Presidency can Actually Do About It
Virtually all politicians promise they’ll create jobs. President Donald Trump promised he’d create 25 million jobs during the campaign. But does Trump — or any politician, for that matter — actually influence over job creation?
But there’s an emerging force poised to disrupt the job market in a way no president could prevent. In fact, this upcoming change will affect all of us, and it’s unstoppable. This change is the rise of automation and artificial intelligence.
This isn’t a new topic at all. For decades, futurists have predicted robots would one day take our jobs. But now, on the cusp of the AI revolution, the future doesn’t seem so distant. We’re actually going to be forced to deal with how the economy will change when many of us no longer have jobs.
Despite campaign promises, any elected official’s ability to create jobs will be severely restricted. The sheer magnitude of AI’s effect on the economy means any politician (even Trump) have an almost impossible task if they want to save tens of millions of jobs.
However, by planning ahead, the types of disruption can be anticipated. This means that while some job loss is unavoidable, the change might look more like a shifting of the economy rather than destruction.
AI and Robotics will massively impact the future of work. McKinsey & Co. predicts that 45 percent of jobs today will be automated out of existence in no more than 20 years.
A History of Technology Disrupting Jobs
First and foremost, It is important to understand why there is a potential intrinsic conflict between labor that is derived by machine and the one that is derived by humans. every time during history that a new method to do something was found which is say 10x better, then the old technology was dumped pretty quickly altogether. take for example the whale oil which disappeared very quickly as soon as people began to use Krosen. same happen with the steam engine which was the first form of human enerated power and replaced wind,animal and water generated power. and most likely will happen with electric vehicles that predicted to replace the gas powered vehicles within less than 40 years and cause a sharp drop in the price of oil.
The same effect is trickling within the job market. The new wage gap is between computers and humans. Every day it costs technology less and less to do the same task a person is doing. And time is quickly working against us. Rapidly advancing AI creates a huge economic incentive for businesses to replace human labor with computers.
Warren Buffett has a saying I love: “Only when the tide goes out do you discover who’s been swimming naked.”
Guess what? The tide is about to go out. and it’s going to get a lot harder for many of us. The pace of jobs being affected in each space may be different, but it’s going to change almost every single occupation and human labor as we know it.
We’ve already see how automation and AI disrupt jobs. Just this year, Apple and Samsung supplier Foxconn replaced 60,000 factory workers with robots. A fraction of these workers were replaced by robotics engineers, but most majority were laid off altogether.
Manufacturing is only one area ripe for disruption. Automation and AI technologies are posed to completely transform the economy in ways elected officials can’t control. They’ll cause unprecedented job loss and fundamentally restructure the economy.
A recent Forrester report found 7% of jobs will be replaced by AI or robots by 2025.
“By 2021 a disruptive tidal wave will begin,” said Forrester’s Brian Hopkins to the Guardian. “Solutions powered by AI/cognitive technology will displace jobs, with the biggest impact felt in transportation, logistics, customer service and consumer services.”
It’s not all bad news; these technologies will also solve large portions of our environmental challenges, prevent tens of thousands of deaths per year, save millions of hours in productivity gains, and create new industries we can’t imagine right now.
At the same time these jobs decline, productivity will increase. Morgan Stanley explains,
Productivity gains would come to $507 billion annually in the US, where Americans spend some 75 billion hours a year driving. Instead of staring at the blacktop, worrying about the right exit ramp, wondering whether the incoming call or text is important, commuters are free to catch up on work, more sleep, the show they missed last night, or the latest deals online.
For a preview of how these changes will happen, simply look to the transportation industry.
Car Companies Leading the Way
It’s no secret that car ownership is on constant decline. Marketwatch reports, “Within a generation, automobiles will be endowed with what’s known as Level 4 autonomy — full self-driving artificial intelligence for cars — which will not so much change the game as burn down the casino.”
As fleets of car sharing operators (like Zipcar users) and ride sharing companies (like Uber) grow, car ownership declines. A 2011 study showed households who participated in carsharing shed about half their cars compared to before.
This trend is likely to continue as millennials do not generally appreciate car ownership, preferring walkability instead.
It’s not just car manufacturers that will be affected by declining car sales. THe effects will trickle down to car dealers, mechanics, retailers, car washes, and more. This represents a lot of jobs that aren’t going to be replaced by anything apparent, at least not yet.
That doesn’t even take into consider the changes soon-to-be-caused by fully-autonomous cars. The multi-billion dollar weight of companies like Google, Tesla, Uber, and others are pushing for a 2020 street date for level-4 autonomous driving.
There’s a clear economic incentive for companies to follow this path. The lion’s-share of Uber’s revenue (about 75%) goes towards paying their drivers. Cutting labor out of this equation could bring the average cost-per-mile in some cities down to $0.50 (from $1.15–$3.75 per mile in cities like San Francisco).
Which brings us to the largest disruption in the transportation industry: driverless trucks.
Why the Biggest Job is About to Disappear
We were surprised to learn one of the most commons jobs is truck driver.
Truck driving is the highest paying and most common job for non-colleague educated employees and employees without a college degree.
Truck, bus, delivery, and taxi drivers account for nearly 6 million professional driving jobs.
But that’s all about to change in a big way.
In less than 10 years, the number of truck drivers declined by more than 20%, though it’s still the most common job in 29 states.
That’s before the changes vehicle automation will bring.
With labor representing between 35% and 60% of the transportation costs (depending on whether one takes last-mile delivery into account), removing drivers from the equation results in major savings. that number declined by more than 20% as by 2014, driving truck is the most common job in 29 states.
Labor isn’t the only cost savings when humans are replaced by autonomous vehicles. AI is better at managing fuel economy, doesn’t need to take bathroom breaks, and doesn’t need to frequently start and stop the vehicle for meals. All of this results in less wear-and-tear maintenance.
As Ryan Peterson writes for Techcrunch, “Where drivers are restricted by law from driving more than 11 hours per day without taking an 8-hour break, a driverless truck can drive nearly 24 hours per day. That means the technology would effectively double the output of the U.S. transportation network at 25 percent of the cost.”
Some estimates place the job loss due to self-driving trucks at around 10 million jobs over 10 to 15 years. However, ancillary industries such as the $198 billion automobile insurance market, $98 billion automotive finance market, $100 billion parking industry, and $300 billion automotive aftermarket will collapse as demand for their services evaporates.
These potential 8 to 10 million total jobs lost would create the most severe impact on the US economy in the next couple decades.
The Real “Trickle Down” Effect of AI and Automation
Let’s take a look into the peripheral change evoked by the shifts in the transportation industry and how that affects other industries.
What started with the rise of the driverless cars (which is valued as a $87 billion opportunity) will quickly lead to the decline of adjacent industries:
- Fully automated transportation means less policing as there are no human beings to be given speeding tickets
- Less gas stations, moving towards automated electric charging instead
- Gas station convenience stores will also decline, as will other roadside services like diners, motels and related businesses (No more long lines at the famous Lambert’s Cafe on route 66)
- Auto shops and car part retailers will decline as repairs will be done by corporate vehicle owners rather than individuals
- Insurance companies and medical facilities will (thankfully, in many ways) see decreases in their use, as the automated vehicles are going to save thousands of lives in the long run once implemented in all road vehicles; this will result in lower insurance premiums or not needing auto insurance and related medical treatment at all
While that last one is terrific news to the consumer, it’s still going to cause a labor shrinkage effect in those industries.
Those changes only represent how vehicular AI will affect the economy. Machine automation’s changes will be even more far reaching:
- Automated banking (a bank without bankers)
- Automated HR
- Automated accounting and book-keeping
- Bots that automated analytics jobs (that we see being crowd sourced: crowd-sourced innovation)
- Automated medical care (co-chair of the World Economic Forum’s council Melanie Walker wrote advances in personalized medicine, health monitoring, and nanotechnology could make hospitals obsolete by 2030)
- Automated office admin- companies like Fin are building the next gen of office manager.
- Automated cashiers at grocery chains (Walmart, Target, and Safeway are already experimenting with this) and Amazon is leading the way.
Let’s take a closer look at grocery store automation. While self-checkouts have already decreased the need for cashiers, they aren’t as efficient as humans. (If you’ve ever waited in a self-checkout line at IKEA, you’ve seen this in action.) That’s why many stores are moving back to cashier checkout. In 2013, Costco ended its self-checkout experiment and moved back to using exclusively human cashiers.
However, new tech just unveiled by Amazon shows us a remarkable — and potentially frightening — future of shopping.
Amazon Go is a grocery store located near Amazon’s corporate headquarters in Seattle. Using motion-tracking cameras and other tech (which Amazon is declining to explain), shoppers are tracked throughout the shopping experience.
The most novel experience for customers is the lack of a checkout. The store’s AI knows which items end up in their carts (or, presumably, pockets), which are then charged to the customer’s account upon leaving the store. This would eliminate both shoplifting and the need for checkout — or, in terms of jobs, cashiers and security guards.
Other versions of this technology are being used in enterprise. RFID track-and-trace enable real-time shipments to be monitored wirelessly. This tech could feasibly be applied to shopping easily. In fact, Costco claims it’s had this tech for decades, yet declined to roll it out to its stores. It’s not only emerging tech that indicates jobs will change. The recent decade had showed us a glimpse of what the future holds for the jobs market.
Now post Amazon’s latest acquisition of Wholefoods, a combo of : AmazonGo + physical stores, will be another step towards creating a cashier-free environment. The $15 minimum wage may stick around, but it doesn’t matter anymore if store won’t hire cashiers anymore and cut their entire workforce to a fraction of what it is today.
The recent decade had showed us a glimpse of what the future holds for the jobs market: During the last few years, the USPS cut thousands of jobs. The number of word processor and typist jobs fell 54% between 2002 and 2012, totaling more than 100,000 jobs lost. Textile worker numbers has declined by 57% during same period, and the advertising and promotions managers jobs suffered a 65% decline.
Doctors use computers diagnoses and surgeries. Wall Street bankers used to assemble financial instruments and to trade. Architects use them to design buildings. Attorneys use them during the process of discovery of documents. Adding AI into these existing professional services could transform the workforce just like the assembly line. It’s reasonable to think we might find 10 medical engineers in place of 100 doctors very soon.
What do Gates, Musk and Cuban have in common?
Many tech leaders are already discussing the challenge and most acknowledge that this is a question of ‘when’ rather than ‘if’. Bill Gates calls for taxing robots. Mark Cuban warns that “automation is going to cause unemployment and we need to prepare for it”. Elon Musk strongly supports a universal basic income (UBI) approach. Progressive politicians like Bernie Sanders seem sympathetic towards these approaches. Members of the European Parliament also suggest UBI deserves consideration due to expectations of mass unemployment.
Today, 250 years after the Industrial Revolution, we are on the verge of another dramatic shift that may become the “industrial revolution of our time”.
Soon, the change will be commonplace and widespread. Handler robots will carry equipment. Personal assistants powered by machine-learning will perform administrative tasks. We will see robotic delivery for meals and groceries. Drones will replace $127 billion worth of human labor and services across several industries, and insurance companies will replace analysts with IBM’s Watson Explore — technology that can digest tens of thousands of medical records and estimate the length of hospital stays, medical histories and any surgical procedures before calculating payouts. Doctors will use computers for diagnoses and surgeries. Wall Street banks will automate even further the assembly of financial instruments. Architects are already relying on AI to design buildings and attorneys use AI during the process of discovery by sifting through documents. AI will transform these industries just as automation transformed the manufacturing assembly line. It’s reasonable to think we might see 10 medical engineers in place of 100 doctors very soon. And, of course, the “holy grail” is AI software that learns how to create and enhance AI software itself. Once the machines learn how to build better versions of themselves, the changes will happen faster still. AI is growing exponentially. Although the tipping point may be many years in the future, it is difficult to envision and economy where job creation advances faster than job elimination.
Still, this is not a one-way street. Training the workforce for the future labor market has advanced, as well. For instance, automakers in Indiana are retraining long-term unemployed workers to learn new advanced skills. But is it enough or just a drop in the bucket?
Furthermore, experts like Jamie Condliffe, editor of the MIT Technology Review, believe that an automated workforce is inevitable, but the process will take longer and robots will “devour” jobs at a slower pace than anticipated. This suggests that we ought to find equilibrium and a way for humans to work alongside machines. Still, there are economists like David Autor who believe that, despite a century of creating machines to do our work for us, the proportion of adults in the US with a job has risen over the past 125 years.
Why AI and Automation Have 10x the Influence on the Economy Than the U.S. President Ever Could
The loss of jobs will lead inevitably to loss of government and state income tax and increase in social security tax. That means a national deficit that would grow even bigger, providing less government funds for investment in infrastructure, services, and other government functions.
Although the government was able to stabilize the recent 2009 recession with 10.7 million more jobs added since president Obama took office (unemployment went from 10% to 5%), the number of added workforce seems slowing down. For comparison, Bill Clinton created the most jobs as president (2.8 million), followed by Jimmy Carter (2.6 million), Ronald Reagan (2 million), President Obama (1.4 million as of September), George H.W. Bush (659,000), and George W. Bush (160,000).
Unemployment, which peaked at 10 percent in October 2009, has fallen to 5 percent.
In terms of the impact on the national debt, the Congressional Budget Office projects that the national debt will rise to 86 percent of GDP in a decade and then hit an all-time record of 141 percent of GDP in 2046, as the previous historical peak of 106% came at the end of World War II.
Many forecasters agree on the same basics: both democratic and republican long-term policies would end up to the inevitable results of increasing national debt, as Trump’s proposed tax cuts would sharply reduce federal revenue.
Some of that might be offset by economic growth or spending cuts, but the net result would still be an increase in the federal debt.
The Democrats’ policy proposed tax increases would increase federal revenues. Much of that extra revenue would be used to finance additional spending, and some might be offset by slower economic growth. The net result could range from neutral to a small increase in the federal debt.
Thus, regardless of whether Democrats or Republicans run the government, there would be no likely significant impact on the national debt and unemployment rates over the next several decades. Government simply can’t create enough jobs to replace jobs lost and match population growth.
It’s time to look at reality of the situation: in an AI and automation economy, there won’t be enough jobs for everybody.
In World with AI, the U.S. Presidency Will Have Less Power Than Ever
Back to our opening question: when any president or elected politician says, “I will create jobs and stimulate the economy”, does that person actually posses that power?
How much will the U.S. President matter in a world with widespread AI and automation?
If one were to examine how presidents spends their days, and then translate each of their actions to an economy impact, one could argue they don’t have much of an effect at all. As Cornell University constitutional law professor Bernadette Meyler explains for Freakonomics,
I really believe that the President isn’t as significant as we imagine him or her to be. We think of the President as having great power to fix the economy for example, or fix international conflicts, and to some extent the President has persuasive authority to do things like that. But the President really can’t just turn around and fix the economy within two years for example.
In a short timeframe, the Presidency really does have an effect on the economy. But if we take a step back, it’s clear presidents haven’t used fiscal policy aggressively. If one were to examine how presidents spends their days, and then translate each of their actions to an economy impact, one could argue they don’t have much of an effect at all.
Yes, there are some conjectures that that Trump and the Republican Congress may be less likely to provide tax incentives for clean energy. His administration would also be more likely to favor car manufacturers over tech companies when it comes to self-driving cars. This would mark a shift for the tech industry, which spent years cultivating relationships with the Obama administration.
Under Obama, the government took steps to advance much of the industry’s wish list, including self-driving cars, commercial drones and net neutrality. Yet, according to economic data, these activities — whether done by Republicans or Democrats — don’t inflict much change over the long run; rather, they only create artificial pauses on job loss.
But it’s not just doom and gloom. Natural economic forces could help us collectively push ourselves to new limits and re-invest ourselves into the job market.
The future is clear. As massive technological innovation radically reshapes our world, our government needs to develop new policies that would allow new business models (such taxation per mile, taxation per carbon footprint, and others) for us to stay economically viable. Though it would be unpopular right now, imposing taxes on automated services should also be reviewed. Both tangible goods and digital products and services are expected to have their price reduced, making it difficult to maintain tax revenues under current schemes.
Over the next 30 years the earth is predicted to add another 3.5 billion people- equivalent to the entire earth population in 1970 . Having nearly exhausted nature’s ability to feed the planet, we now need to discover a new food system. The global climate will continue to change. To save our modern job market, and maintain acceptable living conditions for more than a billion people, we need to discover new science, engineering, design, and architectural methods, and pioneer economic models that sustain their implementation and maintenance.