The Future Doesn't Need You

In April 2000, Bill Joy, co-founder of Sun Microsystems, wrote a fascinating yet disturbing article in Wired.com about the future of technological advancement and the dangers posed by robotics, AI, and genetic engineering. The general thesis of his article was that technology is advancing at such a rapid rate that it would (or could) eventually render humans obsolete. He predicted that by 2030 robot mental power will surpass the human brain. At this point, robots would likely be trusted with making many of the critical decisions  in society. In essence, the world would be planned and controlled by machines without human involvement. Bill Joy warned:

 If the machines are permitted to make all their own decisions, we can't make any conjectures as to the results, because it is impossible to guess how such machines might behave. We only point out that the fate of the human race would be at the mercy of the machines. It might be argued that the human race would never be foolish enough to hand over all the power to the machines. But we are suggesting neither that the human race would voluntarily turn power over to the machines nor that the machines would willfully seize power. What we do suggest is that the human race might easily permit itself to drift into a position of such dependence on the machines that it would have no practical choice but to accept all of the machines' decisions. As society and the problems that face it become more and more complex and machines become more and more intelligent, people will let machines make more of their decisions for them, simply because machine-made decisions will bring better results than man-made ones. Eventually, a stage may be reached at which the decisions necessary to keep the system running will be so complex that human beings will be incapable of making them intelligently. At that stage the machines will be in effective control. People won't be able to just turn the machines off, because they will be so dependent on them that turning them off would amount to suicide.
My question is: Have we already reached the point where machines can do the majority of tasks which used to be done by humans? I think the answer is increasingly yes. This would explain why the unemployment rate has remained egregiously high, despite a recovery in corporate earnings. The general consensus from economists is that corporations were forced to cut labor during the recession, which means that when the economy recovers and demand rebounds, corporations would be forced to rehire many of these unemployed workers. However, this thesis has not panned out. Despite being 3 years into an "economic recovery," the unemployment rate has remained stubbornly high with the official unemployment rate at 8.3%. The real number, referred to as U6, even when adjusted for seasonality is at a shocking 15.2%. Obviously, corporations have not had to hire new workers despite record S&P 500 earnings. Why?

Simply stated, during the Great Recession corporations realized that they could replace many workers with advanced technology which can automate complex human functions. The examples are all around us. Airlines used to have people check in passengers and issue boarding passes. Now, airlines have been able to completely replace people with electronic kiosks. If you walk into a Fresh and Easy market you notice that there are no more checkers; it has all been automated. I remember seeing a TV program about Campbell Soup that profiled the company's adaption of technology to increased productivity. The company bragged how they were able to run a soup manufacturing plant with 8 employees. In the past , this factory would have required 40-50 employees, but now they are no longer necessary. And the only reason there are still 8 employees is because the machines still require human support and maintenance. You can easily see a future where these machines make their own decisions and humans are reduced to only a minor support role.  These are just a few examples, but they illustrate the point that as machines advance, humans are becoming more and more redundant. The most troubling aspect of this technological shift is that these jobs will never come back despite improving economic conditions.

What all of this means is that as technology progresses, more and more people will become redundant and permanently unemployed. This is not only an issue for blue-collar workers who are  involved in manufacturing. As machines become more intelligent, they will likely replace many white-collar positions as well. We can clearly see this happening in the investment industry. It used to be a market made up of people--yes they were often irrational, greedy, and fearful--but they were human. Today, 70% of all trading is done by autonomous robots who make their own trading decisions with little or no human supervision. In essence, we have turned over the fate of the capital markets to high-frequency trading bots. Proponents will, of course, manufacture reasons why this is good for society. They claim that HFT reduces costs and increases liquidity since machines are faster and more efficient than people. All great arguments, but what are the consequences of having robots control financial markets?

We saw a terrifying example on May 6, 2010, when US markets suffered a flash crash. For no reason, the stock market fell 600 points in 5 minutes, only to partially recover minutes later. HFT bots were largely responsible for this bizarre market crash. While markets did rebound, what if they had not done so and instead had dropped another 30-40% in a matter of minutes? A fall of this magnitude could have easily cause a massive disruptions in the credit markets and precipitated a severe economic recession. All this because a few HFT bots went beserk?. With regards to the financial markets, we have now given machines complete control and voluntarily reduced humans to a subservient role..

I fear that we have reached the point where the US unemployment rate will never go down, despite a growing economy. The 2008 recession required companies to increase productivity and slash costs dramatically. They did. Now corporations can achieve higher profits with fewer people than they needed 5 years ago. This dynamic, along with outsourcing, means the US unemployment has moved into a new paradigm, which is unlikely to change anytime soon. Millions of Americans had better get used to the troubling reality: The future doesn't need you.
Black Swan Insights

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