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The Zero Economic Value Citizen
I have an article today in the Harvard Business Review, co-authored with legendary Silicon Valley marketer and venture capitalist Bill Davidow. It’s the first piece Bill and I have co-bylined since we wrote The Virtual Corporation twenty years ago. I don’t know if it will have the same impact as that book did, but it should.
In the article, Bill and I note that the current pace of technological change (though few people noticed, Moore’s Law basically went vertical in 2005), combined with the rise of artificial intelligence, robotics, and the Internet of Things, means that our machines are rapidly assuming an ever-greater role in our economic life. Henry Adams despaired in the 19th century that the rate of progress — about 2 percent — was almost too much for mankind to keep up with. We’re now running at 40 percent.
You’ve read the warnings from Elon Musk, Stephen Hawking and other forward-thinkers that AI poses a potential long-term existential threat to humanity. In fact, we don’t have to look that far. As a growing number of jobs — mostly manual labor, but increasingly blue-collar and soon white-collar— disappear to automation we are already creating what Bill and I call the Zero Economic Value Citizen: people for whom artificial intelligence has rendered their skills or jobs without value. We suspect that many of those millions who have already dropped out of the workforce are just such ‘ZEV’ citizens.
What is the solution? We’re not sure there is one. Government is too slow and stupid. Education, even if the unions weren’t resisting change, probably can’t keep up either. And as our machines get smarter they will continue capturing jobs ever further up the IQ scale.
Are we all destined to become ZEVs? A good question. And what do we do then? I’d like to hear your thoughts.
Published in General
Isn’t this post needlessly materialistic? People have known for centuries that relying on the production of material goods to maintain a mass middle class is unsustainable. That’s why industrializing economies always transition to service ones as productivity rises.
Labor productivity is the ratio of hours worked to market value produced, not physical quantity. If people cannot be productive working on an assembly line, that doesn’t mean they can’t be productive working other endeavors. Even a menial servant can live a middle-class life if the cost of living has plummeted.
The problems certainly existed for those killed by ebola and ISIS.
I’m sorry, but you have no idea what you’re talking about.
I actually did that job, but not for Walmart. That job has existed for a good long time, decades before Walmart existed, certainly going all the way back to the chain stores like A&P that engendered Depression-era plaints that they bankrupted mom & pop stores. Food gets to the store in boxes and someone has to take it out of the box and put it on the shelf. Computers don’t change that.
What has changed is that once upon a time stocking shelves was regarded as a good, middle class job. In my experience the pay for a union job went from $12-something down to $8-something in the contracts that went through while I was employed there, while inflation was significantly higher than that reported today.
So no, I don’t think the people stocking shelves at Walmart can afford much more than middle-class people 50 years ago. I lived it. Those grocery clerks from long ago could afford houses and families and whatnot, merely because they put food upon a shelf when it arrived at the store, working at that job. I waited for a semi-annual sale to stock up on food, and I recall saving up once to order pizza.
Plus, having worked at a grocery store and having seen what I put upon the shelf night after night and having shopped at Walmart- nope, the variety isn’t better.
Sorry, again, but I was there. And, yes, I know that it’s awesome that people can’t make a living merely by working because economics, and stuff. We’re all supposed to go back to school and learn more skills, etc, and I did that too. Twice.
As I understand the point made by Mr. Malone, eventually that just isn’t going to be good enough. What then? I don’t want to be like the Roman emperor Vespasian, who supposedly declined the offer of what we’d call tempered glass because he feared unemployment.
But painting smiley happy faces everywhere isn’t going to solve the problem, either.
Speaking off…I don’t think you understood at all what I said. Lets try it again.
1) THAT job…i.e. that particular position the hypothetical person in my example is working at. Not “shelving” jobs as a profession.
2) Walmart is an “example” of a big store with lots of variety. I didn’t imply Walmart has more variety that other similar stores. But they all exist due to…technology.
3) The “good paying middle class” stuff is rubbish of the highest order (sorry, it is). How many “shelving clerks” 50 years ago were…ordering pizza? Ordering pizza was something you did 3 times a year, on a special occasion. Now the shelving clerk at Walmart does it on a daily basis (which is why he’s overweight)
So, once we’ve cleared that, let me re-iterate the point I am making in simpler terms.
1) If all technology does is allow 1 worker to be more productive than before, then logic would indeed dictate that the shelving clerk, combined with an automatic barcode reader, would displace 5 previous clerks. He/she can do the job more efficiently than 5 could before.
2) BUT…technology doesn’t just impact that: i.e. increases or decreases in the quantity of workers demand.
3) Technology allows “Walmart” (I’ll put in quotes so that next time you don’t say that it’s not just Walmart, but everyone else too)…to open more stores, in more remote locations, and to offer a greater variety of cheaper goods.
4) That means, technology shifts the demand for workers.
So yes, without technological advances that particular person’s job wouldn’t exist.
Without technological advances, Walmart couldn’t open a store in…Miles City Montana (one of the crappier places I’ve been to). Those Walmart jobs in Miles City Montana, wouldn’t exist. Those people who live there, would have access to virtually the same goods as anyone else in the country, at such prices, as they now do.
This applies to virtually everything in the modern world today. Virtually everything is due to…increased automation. Yet, has the modern world today created more poverty and misery and lower standards of living? Maybe, if you’re a Leftist, it has.
The creation of automated loading and unloading of cargo ships led to…what? Lots of unemployed longshoreman who now are unemployed because no one has a use for their ability to carry sacks on their back? No. It did lead to fewer people needed to load a given quantity of goods. But it also led to a massive increase in the quantity of goods that could be loaded, hence cheaper shipping costs, hence a huge increase in the amount of shipping.
Result? An incalculable increase in the number of jobs, throughout the economy.
Because of reality and stuff…
Making up problems that don’t even remotely correspond to the observed reality, apparently, isn’t an issue confined to the Left.
The Left thinks “capitalism” has created more poverty and lower standards of living.
Some “conservatives” think that “automation and technology” has created more poverty and lower standards of living.
The two statements are synonymous…even if each side makes them for different reasons (the Left says it because their def. of poverty is how well you are compared to someone else…the “Right” says it because their definition of poverty is “jobs”).
The “Right’s” problem could easily be solved by giving everyone a spoon to dig a trench with. “Jobs” created! ;)
The “Left’s” problem could be solved by paying those trench diggers as much as a doctor. “Inequality” solved! ;)
PS: Oh and BTW, you’re not the only “working class hero” to have had that job. When my family moved to the US many years ago, thats the job my dad did as well.
So yeah, “I was there too”. ;)
3) The “good paying middle class” stuff is rubbish of the highest order (sorry, it is). How many “shelving clerks” 50 years ago were…ordering pizza? Ordering pizza was something you did 3 times a year, on a special occasion. Now the shelving clerk at Walmart does it on a daily basis (which is why he’s overweight)
Maybe the clerk wasn’t ordering pizza, but up until about 1969 he could qualify for a mortgage and buy his own home, with a stay-at-home wife and two kids. I know because the folks that owned their own home across the street from us was a milkman and his family. What 7-11 clerk could qualify for a mortgage today?
Okay, I’ve tried to simplify this a bit. Basically: Service sector gets bigger, more unskilled workers get hired.
Why is this any different from manufacturing (of which this is also true)? There are two answers: first, services are not resource-constrained to the extent manufacturing is. Second, manufacturing is in a much later phase of a two-centuries-long process of productivity improvement.
The service sector still has a lot of room for growth, and the demand for services is only going to increase as Western populations age.
By the way, I think it’s absurd to say technology is increasing at a rate of 40% a year. That would imply a productivity growth much larger than, what is it now, 1-1.5%?
Keep in mind that Moore’s law is only true because semiconductor manufacturers make it true by increasing the number of processor cores on a single chip. Not only are individual cores not getting faster, but neither is the rest of your computer’s hardware. Being able to calculate billions of operations per second in parallel isn’t helpful if the memory that supplies said operations (and the data they operate on) is hideously slow, which DRAM is.
Exactly Nick! The power goes off and we’re twenty-seven meals from chaos and starvation. Our prosperity hangs from a very thin thread.
There’s a good novel about that topic: One Second Later by William R. Forstchen.
So to you the fact that being a “7-11” clerk in 1969 was the epitome of a “well paying middle class job”, but today is a basic entry level job for teenagers…is evidence of a “bad thing”?
Seems to me it’s evidence that things have gotten so much better that what in 1969 was considered “good enough” today is considered “barely enough”.
If you want to live in 1969 standards, today, a 7-11 job would be more that sufficient. If you want to buy the sort of house you bought in 1969, a 7-11 job would be sufficient today too. If you want to buy a car of the same level of technology as in 1969, heck a 7-11 job would allow you to buy 2. If you want to buy the same TV as you did in 1969…etc etc.
And that’s the point of this whole thing. What in 1969 was considered “middle class”, today is considered “starvation poor”. No one lives as they did in 1969.
PS: What is the “conservative” fascination with “owning a house”? Everyone in North Korea has a house, and a job. No one rents there. No one is unemployed there. No one has to fear technology displacing them there. “Conservative” paradise?
Exactly where do we find these houses that are affordable to gas station workers?
[Edit: I don’t understand your point about cars, either. A 7-11 worker most definitely cannot buy 2 cars from the 60s, because they don’t make cars with 60s-era technology anymore. The government doesn’t allow it].
You can buy a house in Detroit for 6,000 bucks :)
But to be serious for a moment:
1) What sort of a house was a gas station employee in 1969 buying? They were buying the sort of house that today would be considered unfit to live in. Torn down long ago and replaced with something else. The equivalent of those sort of houses today would be considered…trailer parks…which today are considered “poverty”.
2) And what does a “house” mean? A house today is twice the size it was in 1969, with central AC and heating, modern appliances, 2 car garages etc etc. What does that “house” have to do with a “house” in 1969?
3) Why is “owning a house” such a desirable thing? That’s the sort of twisted logic that led to the housing boom of the 2000s, which made them all so expensive.
I.e., the gas station owner isn’t priced out of the market for buying a house because he can’t afford the same level of house as in 1969 (which was junk, but today’s standards).
But rather because the “conservative” mentality that “owning a house” is such a great thing, that everyone ought to be incentivized to do so, which led to their prices exploding.
So the usual cycle continues: create a problem, blame something else for the problem, find a solution to non-existent cause, create more problems… on and on.
Well, at least “conservative politicians” have job security this way.
And if they did, would you buy one?
Hmm…no.
For most of the past ten years I would have, and thanked God for my good fortune.
You are basically saying that lower-middle-class people should be grateful they can afford to build houses that aren’t legal to build.
That is patently absurd.
This is like Marie Antoinette’s “let them eat cake”, only the government doesn’t allow people to bake cakes. Yes, let’s all be grateful for things we aren’t allowed to buy!
I actually have friends who live in abusive situations who would love a crappy house from the 60s, as well as 2 crappy cars. They are not allowed to purchase them.
You can buy a used early 2000s car for about $1k.
Yeah…
Where did I say that?
Nowhere. No one said anything about “legal”. Crappy houses aren’t illegal. They just aren’t what people want to buy.
What I said is that the houses a “gas station clerk” was buying 1969, today would be of the same comparable quality as a…$20k trailer.
You can go to some neighborhoods in Buffalo NY or in Houston TX or Orlando FL…where you can still buy a house comparable to what a “gas station clerk” would have bought in 1969…for about $30k.
But today, we consider those houses as “junk”, whereas in 1969, that same quality house was considered “middle class”.
You want to buy a $30k house? I’m pretty sure they’ll finance you even if you have a low salary job.
You’re fixated on this “government doesn’t allow” stuff. The government isn’t stopping you from buying a $30k house in Buffalo NY. Buffalo NY is full of $30k houses. Go for it.
If it’s cars you’re talking about, what difference does it make? A used early 2000s car, which is infinitely better than a brand new 1969 car, can be bought for about $1k these days.
1) There’s this thing called “rent”.
2) Crappy cheap houses are in abundance. They’re in the same places where crappy “middle class jobs” were in 1969. Go to Buffalo NY or Cleveland OH for them. They cost about 2 year’s salary for even the “lowest paid job”.
3) Crappy cars are in abundance. Check Craigslist. We call them crappy today, but by 1969 standards, they’re amazing cars.
Government isn’t stopping anyone from buying them.
But no one wants to…
http://www.zillow.com/homedetails/38-Navel-Ave-Buffalo-NY-14211/30191828_zpid/
Look at this. Beautiful “middle class” house in the heart of “middle class” town Buffalo NY. $30k, $110/month mortgage.
In 1969 this would have been a…great…house.
All those “wonderful” “blue collar manufacturing middle class” cities from 1969 are chocked full of these houses.
Strangely, no one would consider this an attractive deal.
Why?
So what’s this nostalgia with the past? Is it because some of you really don’t think that today’s standard of living IS just so much higher, despite (or thanks to) the massive increase in technology, automation, decrease in “manufacturing jobs” etc etc?
Or is it simply because being “conservative” equates with “not liking change”?
Well, there’s good news and bad news. The good news is that capitalism(technology) has made us infinitely richer, all of us, rich or poor. The bad news is, capitalism (technology) is all about change.
I wrote a post about this a couple months ago. To reiterate a couple points:
Automation is on a diminishing returns curve. It costs more and more to automate less and less.
It’s cheapest to automate the worst jobs. The more automation a factory has, the better the (remaining) jobs are.
Automation competes with the price of labor. There are any number of government regulations that drive the price of labor up, never mind the minimum wage.
People are much easier to program. You can build a robot to cut lawns, and you can build a robot to clean bathrooms, but it’s much harder to get your lawn cutting robot to clean bathrooms.
Bottom line, unless there’s something really transformative, I don’t expect humanity to become obsolete in the near to medium term.
Oh, and I get a little nervous when people start talking like this in general. When you define a person’s worth based on their worth to the economy your equations start to turn up evil answers.
“Three generations of imbeciles is enough”
Isn’t this essentially my point about immigration? When I said low skilled immigrants would allow low skilled Americans to take more language based (i.e – service) jobs, you said I was being materialistic.
Well, yes, I do think that aversion to change likely has a strong correlation to being a conservative.
I’m not sure why you think anyone here is booing capitalism or booing technology or arguing that it’s more trouble than it’s worth. I really don’t see anyone doing that here. There are trade offs, though. There’s nothing wrong with acknowledging that one person now being able to do the job of five people in the past means that something has to happen with those other four people, and it’s pretty certain that not all of them are now living the dream in cushy engineering or think jobs. There’s nothing wrong with acknowledging the dismay at relative standard of living afforded by a particular job declining. There’s nothing wrong with acknowledging that, despite big screen TV’s and air conditioning, people would probably still rather be in the middle class in 1969 than lower class today if given the choice.
However, the OP is pondering something different – a future (not too distant, the experts claim) in which even the higher-skill and higher-IQ jobs can be done, and done better, by machines. We’re pondering whether that is destiny and also how we might handle that destiny. In that environment, we could conceivably get to a point where the strategy for the displaced of learning new skills might not be doable/effective for someone of average or below average intelligence while the traditional alternative of finding a job that’s more physical won’t be as readily available as it has been.
By the way, I live in a house built in 1952. I’d say it’s a tad nicer than the one you linked, but it is a great house. It is an attractive deal. I’m not sure what point you’re trying to make by linking to this house, but if it’s to say that the house is the problem rather than the neighborhood or other factors then I think you’re wrong.
Ok, but what’s wrong with discussing how to cope with that assuming that there are equally strong forces driving “us” to seek stability? Yes, pull up your roots and move to ND because there’s a boom on. Or maybe Texas. Great. My family and life is here, though. Are you so unattached that this prospect is akin to changing your toothpaste brand? Anyway, I’ll likely have to move again in 20 years when I’m 60 years old and the ND boom has since gone bust. Moving to the next hot spot won’t be for everybody.
I suppose it depends on perspective. From the perspective of a worker, then yes it’s a bad thing. They now have to do more to get the same relative standard – at every level. From the perspective of the owner of assets and employer of people, then no, it’s a great thing that they can make more from less.
No, but there’s an element of pessimism that is completely at odds with the historic experience.
We have no way of knowing today what the jobs of the future will be. The invention of the electric switch displaced thousands of telephone switchboard operators and created several industries that couldn’t exist without it. Your argument fundamentally rests on the assumption that labor will cease to be a scarce resource and never in the entire scope of history has this been true.
I’m just so sick of the nostalgia for these magical middle-class jobs from the past that people yearn for. Time marches on. Adapt or be left behind. My father was, and still is a produce manager at A&P. He does well because he’s been there for 45 years and union contracts have protected his wage. To those coming in now, pay tops out at about half of what he makes.
The job has changed though. When my father started, the department manager had some say. Every aspect of how to run a department is now communicated to the stores from corporate. The job has become brainless. It wasn’t always, but it is now. So guess what? Early on, I eliminated following in my father’s footsteps because attractive jobs in the grocery business no longer exist.
And nothing is stopping a bunch of semi-intelligent 7-11 workers from creating a partnership and securing funding to buy their own convenience store other than their own laziness.
Maybe the bathrooms in 7-11 wouldn’t be quite as disgusting as they are now.
Well yes, that’s the point of the OP. He’s not saying that it’s certain or total. He’s speculating assuming that the experts claims of AI (or close to it) are as accurate and imminent as claimed. I believe the OP is also wondering if we’re seeing this play out at all even now, before our AI overlords take the throne.