When Robots eat jobs

Comments on correspondence, via Dave Farber's IP list, about jobs.

In correspondence entitled "Stop Saying Robots Are Destroying Jobs—They Aren't", Robert Atkinson (president of the Information Technology & Innovation Foundation, a think tank based in Washington, D.C.) asserts that Erik Brynjolfsson and Andrew Macafee are in error in seeing economic disruption from computers. Brynjolfsson and Macafee see the erosion of employment accelerating as a consequence of Moore''s law - computers are becoming more powerful, more rapidly and thus more able to take over the functions previously reserved for humans in gainful employ.

But Atkinson sees this as in error because "when a machine replaces a worker, there is a second order effect: the organization using the machine saves money and that money it flows back into to the economy either through lower prices, higher wages for the remaining workers, or higher profits. In all three cases that money gets spent which stimulates demand that other companies respond to by hiring more workers."

Restructuring the car industry

The global auto industry seems headed for change on its enormous scale. The changes will be wrenching and difficult and will devastate some players and create major opportunities for others. 

In the 1990s, telecom moved headlong into a decade of transformation that rewrote the rules forever: competition, a change in the underlying technologies, and the migration from narrowband voice to broadband data and from wireline to wireless, and the diffusion from expensive services for the world’s middle class and wealthiest to absolute global ubiquity were the ingredients to this recipe for change.

And now, the auto industry faces challenges on a similar scale, driven by similar forces.

Not even wrong

Economics today is a respected (for the most part) field of work, which has its own Nobel prizes, professors and specialized departments in every major university, learned journals and lengthy tomes in bookstores, pundits on the television and web, and so on. And much of the area of economics is sensible and necessary, and we have no better tool for analyzing and predicting economic outcomes. But some, perhaps much of this is but a house of cards and we’ll see the end of at least some of the discipline, soon. Or, at very least, we will see swept away the false constructs of a self-infatuated theoretical belief system, to be replaced only with analytics of the biggest of “big data”.

There can be few more important challenges to the standing of economics as a respected discipline than these, which I’ll touch on here:

1. The increasing apparent weakness (some would say complete falsehood) of some of the founding precepts of economics
2.  The reactions of a core group of leading academics to the revelation that their analyses and theses were wrong, completely wrong, and based on inadequate data, incompletely analyzed.
3.  Nonsensical data being used – if only because there’s no substitute
4.  The increasing power of “big data” analytic tools - but I'll leave that for another time.

The title of this piece cites a saying ascribed to 1930s-era German theoretical physicist Wolfgang Pauli, whom upon reviewing a naïve, neophyte paper is said to have remarked: "Das ist nicht nur nicht richtig, es ist nicht einmal falsch!": this is not only not right, it is not even wrong[1]. Meaning – there was nothing in the paper that could be considered to be verifiable, and thus the paper was utterly useless – or that its ideas were unconnected to any known reality. The saying seems particularly appropriate for the current state of some of orthodox economics, Nobel prizes and munificently-endowed university chairs notwithstanding.

What is a car?

Some years ago, I was on a modern bus (an Airporter bus from San Francisco airport to Marin County). As the bus cruised at about 30 miles per hour on a San Francisco city boulevard, the engine suddenly cut out, the lights went out. The driver steered the suddenly powerless bus to the side of the road, and brought the bus to a halt. He pushed open the door and walked around, to the back of the bus. Returning to his seat, he restarted the bus, the lights came on. What had happened? The bus had crashed, he explained, not into another vehicle, but its operating system had failed. He’d gone to the back of the bus to, quite literally, reboot it. (Windows CE, I believe.)

A week ago, on literally the same road, I passed a Google driverless car. This is how far the merging of information and automotive technologies have come. How far, that is, to this point.

We have reached the point where the definition of a car is changed.

You will buy a(nother) iPhone

Another iPhone is on its way, or perhaps even two models[1]. And this much we already know: you will buy a(nother) iPhone. This matters, both because of the simple statements about this vast market, and because of what it says about innovation and growth in years to come.

Really, and the theme of this piece, there are four basic reasons why most people will end up buying a(nother) iPhone; its Star effect; the learning curve benefits of the iPhone’s position; the virtuous cycle of learning how users interact with their smart phones; and the business model strength. We’ll discuss each of these. Another post will deal with the opportunities to challenge Apple’s market dominance.

Trading nations, fighting firms (first notes)

Exxon Mobil, the US oil giant, had recent annual revenues of $438 Billion. It’s Samsung’s apparent goal to become the world’s first company to have an annual revenue topping $1 Trillion. In this context, Exxon Mobil’s annual revenues already exceed the GDP of Nigeria and Belgium (both about $414 Billion). Samsung’s target revenue would exceed the current GDP of all but 16 of the world’s largest economies, and today would fit in between Turkey (16^th largest at about $1.1 Trillion) and Iran (17^th, $991 Billion).

Today, I can go and buy shares in Exxon Mobil (NYSE: XOM) and thereby both participate in that firm’s fortunes and in the governance of the firm (albeit, at my scale, that’s a faint voice). Samsung, in contrast, is more difficult for me to invest in, since its shares (005930.KS, Seoul) aren’t traded as much outside Korea, and the combine’s common stock shareholders have a much weaker voice in governance. It’s the largest part of the Korean economy – by far, creating considerable sensitivity about broad international trading of this national asset and the potential implications for the nation’s economic health should it be broadly traded elsewhere.

In these notes, I’m going to explore a few threads:

• That the roles generally ascribed to firms and to nations will evolve
• The potential for firms, as opposed to nations, to initiate hostilities – including wars.
• The implication for firms, instead of countries, setting the standards for social compacts
• The idea that shares in countries, and not just their bonds, could be traded on stock exchanges.

NOTE: Source data on national GDPs from Wikipedia, http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29 current as of February 2^nd, 2013; data on company gross revenues from Forbes’ annual ranking of the 2,000 largest public companies, http://www.forbes.com/global2000/

An index for carrots

Carrots, we all know, are bright orange, conical or cylindrical root vegetables. Great in salads, stews, the eponymous cake and divine in the Indian dessert Halva. 

They are also produced in the USA in a market structure that, if it were something people really cared about, would provoke federal government anti-trust action.

80% of all carrots sold in America are produced by two companies. And this provides a nice opportunity to think about market concentration.