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Belmont Club

The Fearful Future

January 15th, 2014 - 3:20 pm

An advertisement for Momentum machines is likely to strike fear among those who are enrolled in the 10 most worthless college majors. Momentum has a machine designed to replace fast food workers capable of serving 360 hamburgers per hour. The sandwiches emerge fully assembled, with bun, relish, sauce and patty at “gourmet quality”. For it can grind and chop its ingredients fresh. It never forgets to wash up. Always adds the right amount of seasoning — or perhaps the customer would like to adjust it himself. It is designed to replace the armies of low paid workers, for whom a fast food job is an entry level position and — for some — a career. Founded by engineers from Berkeley, Stanford, UCSB, and USC, Momentum is looking to hire a few good people, namely: a mechatronics engineer and a machine vision specialist.

Thousands displaced. Two hired.

Some would consider Momentum’s tagline that “our technology will democratize access to high quality food making it available to the masses” a cruel irony. Combined with self-driving cars, drones which deliver to your doorstep and other innovations, some might say the future looks bleak; that the coming revolution in robotics bids fair to end lower and middle tier unemployment permanently and introduce a new era of welfare statism.

Princeton University economist Alan Blinder, a former vice chairman of the Federal Reserve predicts that in the future the economy will produce absolutely more but the cornucopia will be distributed more unevenly than before.

It may seem strange to cast technology in the role of the villain, and in a larger sense it’s not. Improving technology is the main source of higher living standards. So it is good, not bad, for a country to experience faster technological progress. But new technologies inevitably leave some people behind. … The Internet revolution gave this process new momentum and a new twist. While e-commerce eliminated many “ordinary” jobs (think Amazon instead of bookstores, or online reservation systems instead of travel agents), it also enhanced the opportunities and rewards for some “extraordinary” jobs. Think of entertainers or inventors of successful apps, for example. The result has been that the rich got richer while the poor and middle class got relatively poorer.

Slate fears humanity may be facing a jobless future, citing “a provocative new study by Carl Frey and Michael Osborne at Oxford University”:

In “The Future of Employment: How Susceptible Are Jobs to Computerisation?,” Frey and Osborne estimate that 47 percent of U.S. jobs are “at risk” of being automated in the next 20 years. This does not mean that they necessarily will be automated (despite the way the study has been portrayed in some media outlets)—rather, the authors argue, it is plausible over the next two decades that existing and foreseeable AI technologies could be used to cost-effectively automate those jobs out of existence.

The answer to the problem is of course the government. Where 90% of the income is derived from .01% of the population it seems obvious that by redistributing the wealth things can be rendered tolerable. In an article titled “The Libertarian Case for Basic Income”, Matt Zwolinski writes that we should embrace the suck. ”Current federal social welfare programs in the United States are an expensive, complicated mess. According to Michael Tanner, the federal government spent more than $668 billion on over one hundred and twenty-six anti-poverty programs in 2012. Wouldn’t it be better just to write the poor a check?”

A Basic Income Guarantee might be required on libertarian grounds as reparation for past injustice. A Basic Income Guarantee might be required to meet the basic needs of the poor. …

A Basic Income Guarantee involves something like an unconditional grant of income to every citizen. So, on most proposals, everybody gets a check each month. “Unconditional” here means mostly that the check is not conditional on one’s wealth or poverty or willingness to work. But some proposals, like Charles Murray’s, would go only to adult citizens. And almost all proposals are given only to citizens. Most proposals specify that income earned on top of the grant is subject to taxation at progressive rates, but the grant itself is not.

That’s the future. A check in the mail and nothing much to do.

In that scenario, Momentum Technologies and its handful of mega-skilled engineers would generate a cornucopia of wealth, from which the government would skim a portion to sustain the armies of would-have-been fast food workers who will forever be unemployable.  They can send us all a check so we can afford those same Momentum hamburgers. And it goes on. As online learning spreads, the teacher’s unions can just move everyone to the famous Rubber Rooms where they can sit and wait for their paychecks.

Money for nothing and our time is free.

But the notion of a future where we live idly on the largesse of our robot overlords is probably wrong. Humanity — including aspiring fast food workers — are much more likely to be on the verge of a new era in personal productivity. Gary Kasparov writing on the subject of artificial intelligence in the New York Review of Books explains why, using the metaphor of chess. Kasparov was the greatest chess player in the world until a computer beat him. But something strange happened. Now anybody can beat IBM’s super chess program Deep Blue, provided he has other computers to help him.

Today supercomputers can defeat even the best unassisted human players simply because it can look down a shallow path of combinations more comprehensively than a human. It can look up a database of won games and apply the appropriate solution. Kasparov writes that “today, for $50 you can buy a home PC program that will crush most grandmasters. In 2003, I played serious matches against two of these programs running on commercially available multiprocessor servers—and, of course, I was playing just one game at a time—and in both cases the score ended in a tie with a win apiece and several draws.”

What was not anticipated was how the equation changed once humans had some machine help. Kasparov writes about the counterintuitive result. With cheap computers to help him even a mediocre chess player can beat the best that programming can buy:

Lured by the substantial prize money, several groups of strong grandmasters working with several computers at the same time entered the competition. At first, the results seemed predictable. The teams of human plus machine dominated even the strongest computers. The chess machine Hydra, which is a chess-specific supercomputer like Deep Blue, was no match for a strong human player using a relatively weak laptop. Human strategic guidance combined with the tactical acuity of a computer was overwhelming.

The surprise came at the conclusion of the event. The winner was revealed to be not a grandmaster with a state-of-the-art PC but a pair of amateur American chess players using three computers at the same time. Their skill at manipulating and “coaching” their computers to look very deeply into positions effectively counteracted the superior chess understanding of their grandmaster opponents and the greater computational power of other participants. Weak human + machine + better process was superior to a strong computer alone and, more remarkably, superior to a strong human + machine + inferior process.

This synergy is known as “Moravec’s Paradox, in chess, as in so many things, what computers are good at is where humans are weak, and vice versa,” says Kasparov. So when human and machine get together the result is greater than the two separately. Kasparov notes that the world consists of complex problems, few of which can be analytically solved in polynomial time. Chess is a toy example of a complex system, and yet: “the number of legal chess positions is 10^40, the number of different possible games, 10^120 … Diego Rasskin-Gutman points out that a player looking eight moves ahead is already presented with as many possible games as there are stars in the galaxy.”

Solving these problems is beyond a machine. It is beyond unaided human capability. But put the two together and …  So for most worthwhile problems human beings extended by machines is the way to go.  Maybe we should be glad that Momentum machines has invented a burger-flipping machine. People are capable of doing much, much more than positioning pickles on a patty. They can, with some organization be finding a cure for cancer.

At conversation I had with a highly regarded tech leader, I learned that the problem of gene sequencing had an unexpected similarity to certain classes of astronomical puzzles. And by harnessing the computing power and algorithms in astronomy, advances in medicine were forthcoming.  Why not turn the burger flippers into something better? Make it simple and they can. Innovation, left to itself, will create those opportunities. It doesn’t mean there is no need for transfer payments to cushion the transition. But it means there is a something else to which we will transition to.

Man working with smart machines is not so very different as man working with a lathe or power hammer. Even the UAW has no problem with that. Tim Wu wrote recently in the New Yorker that man is already technologically extended in unnoticed ways.

A well-educated time traveller from 1914 enters a room divided in half by a curtain. A scientist tells him that his task is to ascertain the intelligence of whoever is on the other side of the curtain by asking whatever questions he pleases.

The traveller’s queries are answered by a voice with an accent that he does not recognize (twenty-first-century American English). The woman on the other side of the curtain has an extraordinary memory. She can, without much delay, recite any passage from the Bible or Shakespeare. Her arithmetic skills are astonishing—difficult problems are solved in seconds. She is also able to speak many foreign languages, though her pronunciation is odd. Most impressive, perhaps, is her ability to describe almost any part of the Earth in great detail, as though she is viewing it from the sky. She is also proficient at connecting seemingly random concepts, and when the traveller asks her a question like “How can God be both good and omnipotent?” she can provide complex theoretical answers.

Based on this modified Turing test, our time traveller would conclude that, in the past century, the human race achieved a new level of superintelligence. Using lingo unavailable in 1914, (it was coined later by John von Neumann) he might conclude that the human race had reached a “singularity”—a point where it had gained an intelligence beyond the understanding of the 1914 mind.

Actually the lady behind the curtain just has a smartphone, of the sort you can buy for $150 down at the mall. Through the magic of Bing, Google Maps, the built-in calculator and Wikipedia she can appear to be a genius to the holder of an Oxford First from 1914. In the Chinese Room sense, she is objectively a 1914 standard genius.

So Blinder is only only half right. Technology will destroy jobs, but it will create new jobs in categories that haven’t even been invented yet. And by cutting the unit cost of production of say, hamburgers, the real cost of living, medical treatment, air travel, entertainment or housing will drop to the point where even poor Africans can live at late 20th century western standards before too long. “So it is good, not bad, for a country to experience faster technological progress.”

What can stop it is the temptation to let government manage the world or pick winners and losers. This tendency is already in evidence. Recently, Barack Obama announced his intention to create jobs using the mechanism of public-private partnership. He plans to create “manufacturing hubs” in North Carolina.

What he will probably do is destroy jobs with subsidies and “investments” in his notion of the future. Government is, by definition, controlled by the lobbies representing the status quo  and administered by the very graduates of the 10 most worthless college majors who would be otherwise unemployable. As such they will create a world in their image in very nearly every case.

The Left is and has always been a regressive ideology which relies in “progressive taxation” to pursue a 19th century dream. Marx couldn’t even imagine that dream. He lived a world where have two or three suits of clothes was a big deal. If you look about your home and consider which of the plethora of consumer items was invented under socialism it would be a very short list. In product innovation, America produced Bill Gates and Steve Jobs and thousands of others. Socialism brought forth Mikhail Kalashnikov.

In the coming years the political call will go out to stop the world and return to some imaginary New Deal Paradise. But can we ever return to the past?  Yes of course we can the Left will say. And they will say it on their Tablets without realizing the irony. But to those who wish to return to the garden and are without innovative sin, let him cast the first smartphone.

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The War of the Words for $3.99, Understanding the crisis of the early 21st century in terms of information corruption in the financial, security and political spheres
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Top Rated Comments   
It is that we are used to the level of competence, poetic and otherwise, that many people bring to this comment section. There are many good sites on the web, but altogether too many whose level is duh!

Yes, Walt deserves more likes.
1 year ago
1 year ago Link To Comment
Folks, if you're not hitting the "like" button on Walt's frequent, poetic posts, you're not properly appreciating the talent he blesses us with. Trying writing the above post on a few minutes notice. Nice work, Walt.

This post should have a "Like (95)" below it.
1 year ago
1 year ago Link To Comment
Back in the Fifties, when I was a mere lad, an after work bull session developed the proposition that in the twenty-first century robots would be doing all the work, while a man would earn a year’s pay for a week’s make-work, flying off to somewhere in the world to sit in a room and watch a display board full of dazzling lights, ready to push a button he didn’t know was not connected to anything. Little did we know that Mauchly and Eckert’s 20,000 vacuum tube ENIAC humming away at the University of Pennsylvania just a few blocks away was going to change the world.

Oh Eniac, thou of the tubes
What thinkest thou of we the rubes
Did baby steps come into mind
Did you dream thoughts that your own kind
Would replace man in Heaven’s eyes
Or was it all a big surprise
Sitting there in that big room
Vacuum tubes dispelling gloom
Did you perceive that you would be
The parent of my Dell PC

1 year ago
1 year ago Link To Comment
All Comments   (93)
All Comments   (93)
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"A Basic Income Guarantee might be required on libertarian grounds as reparation for past injustice.”

The only more anti-Libertarian statement than this would be taken from “The Quotations of Chairman Mao."
1 year ago
1 year ago Link To Comment
Couple of things here but the most important is:

"“The Libertarian Case for Basic Income”,"

There is no Libertarian case of basic income aka welfare. There is only a socialist one. Let's see Libertarians have the same foreign policy goals as Progressives. Libertarians have the same social policy as the Progressives. Now it seems that Libertarians have the same economic policy as the Progressives. Libertarians aren't conservatives. They are leftwing extremists.

I first became aware of economics around 1960. At that time people were wringing their hands over the loss jobs from automation. Somehow that didn't happen. The jobs of future will be created. We don't what they are yet but if you let the market do its magic those jobs will happen. If you follow the leftwing policy prescription offered by the faux Libertarian/Progressive alliance they will never be created.

Libertarians are people who believe in markets and republican government, not personal autonomy over everything else. The distinction between faux Libertarians and Progressives is not markets versus command. It is the autonomous individual versus the collective. They are two sides of the same coin. These faux Libertarians only support markets when it enhances personal autonomy. If a market solution constrains personal autonomy then they will toss the market solution.
1 year ago
1 year ago Link To Comment
In the industrial age, a free economy is a full employment economy, because people create jobs to use the existing resources and labor. More than ever, the solution to the millions out of work and more to become unemployed due to technology is "laissez faire" - free the economy.

If Alan Blinder, Slate, and the founder of the "Bleeding Heart Libertarians" line up to assure us that a Basic Income Guarantee is the best path to the future, you can be pretty sure it's not. Welfare by any other name will smell just as foul...
1 year ago
1 year ago Link To Comment
Appalled, the engineers asked the master sergeant why he had not just replaced the failed module when he first isolated the problem. He replied, his voice full of contempt, “Any idiot could have done that! I am a trained technician! I did it the way someone with my capabilities would do it.”

You have to have people of that caliber around, or you are dead. And as soon as they figure out how to get around the idiot-proof approach you designed, they will.
- RWE3

That's my mantra: Root cause, root cause, ROOT CAUSE!

I have plenty of anecdotes on this, i.e. about computer techs who attempt fixes without fulling analyzing or understanding the problem (though in the above case, in a mission critical system, the MSGT should have first complied with the 90 minute SLA (Service Level Agreement) and THEN taken the module in doubt to a test system and confirm root cause).

On one job I that had to finally quit, the DBA manager asked me to perform a routine "clone", i.e. a copy of a database and application. The evolution did not go well. He accused me, as a newer employee, of being incompetent, of failing to follow his documented procedures. I had followed documented procedures, i.e. Oracle's. Eventually, I "tweaked" things to get it done, but with the next clone, I started looking at the application's history as represented in the logs. It turns out, that a few months before I had arrived on site, the DBA Manager had a "near death" experience, i.e. he had applied an essential patch set that impacted core system functions, it had failed, and the production system was down for four days, i.e. the business was out of business, no orders, no shipments. He "tweaked" the system to return it to service without understanding root cause for the failure, and left the broken patch as it was. There was no "roll back" procedures for that patch set, i.e. once they opened the system for business, they were locked into that broken code (unforgivable!). I could clearly see and understand the "root cause" of the problem, and devised and tested an appropriate fix.

His reaction? No changes. No more patches, ever, until the next upgrade. We had severe performance problems daily bringing the business nearly to a halt. I analyzed those, and found that 95% of the database "commits", i.e. writes to the enterprise database, were caused by a loop of one piece of code in a district module that was NOT even implemented or used in the application. The error had existed for four years since the original implementers had installed the application. That's a 95% efficiency - FAILURE, because some inexperienced guys flipped a "switch" on and activated something they were not supposed to, and left the garbage code in place. Again, I identified and tested a fix that solved the problem, that would have returned the system to sub-second transaction performance.

I presented the facts to this DBA manager, i.e. a chance for him to be a true hero to his customers. His reaction? "Wow, this is great, but don't tell anyone!". No changes, ever, were allowed while I was there. I tried to escalate this issue to the director level, but this manager was "protected", i.e. I could get no traction whatsoever, and the relationship with my manager naturally became frosty. The business, an internationally known cosmetics company, continued on with the deeply impaired systems, after I quit, and the DBA Manager continued on for several more years.

I don't have a problem with incompetence or ignorance, as long as the person is willing to learn, identify, and fix root causes. However, in my career, while the situation I described was probably the most extreme example of willful ignorance and incompetence, the situation is similar in about 75% of the sites I support - that's 3 of 4 are run by people or maintained by technicians so risk averse, lazy, or flat out ignorant, that they'd rather the end user suffer degraded systems and businesses the negative impacts, than do the hard work required, test, and fix root cause. Yes, we DO need people like that MSGT around, to fix "root cause" in the broken technology we depend on.

That's about my technical career summary, i.e. the guy who identifies and fixes problems no one else will touch. You'd kind of think that someone might want me to implement their systems the right way, the first time, and implement procedures for "best practices" maintenance, but I never get those calls. On the other hand, my daddy told me when I first went to work in his retail business that "the customer is always right". I raged at him about that, but as it turns out in business, he is correct. So I fix the systems, while the other guys go around, site to site, implementing flawed solutions and breaking them. We all have our role in life.

All of which is background for my earlier comments about technology being so complex, that humans can't (or won't) understand it. You have the basic system, the util
1 year ago
1 year ago Link To Comment
Technical glitches abound. My summary in my comment has been truncated after "basic system, the util". Regrets. I said something to the effect that the basic system has layers and layers of technology piled upon it, to the point where it's impossible to understand or maintain. I also mentioned that when we used to work in assembler language, we used to work to make code small, succinct, efficient, in contract to today's technology.

In contrast, also it seems, to my verbose post, which was too long anyways.
1 year ago
1 year ago Link To Comment
Your father and mine were were correct. My dad said the same to me.

Take care of the customer, the patient in my medical field, the rest will work out.

We do not need to work to plan for forever. We are just humans with all that entails.

That is the job of the Almighty G-d or what you believe in. We do not need fame nor great riches. Most important is how we treat each other.

All of our efforts were not in vain. Look at the world around us and marvel at what has been done. No government or political persuasion could have done this. We did this anyway.

1 year ago
1 year ago Link To Comment
By the way in response to a request for a link in my earlier comment, the website with the books about tubes and older electronics is:
1 year ago
1 year ago Link To Comment
As a thought exercise, we might find it useful to play with the Hofstede models for deep drivers of cultural approaches to business...and the differences.

What we have in the US today is a hard left trying to pull the country into a cultural "reform" or "transformation" that is not inherent in the people...but IS inherent in "collectivist" (not necessarily in the political usage of the term) societies.

Obama and his cabal admire the "benevolent dictator" models. How "benevolent", of course...depends upon how obedient and in lockstep one marches.

The countries that score high on the feminine side vs masculine...tend to respond to emotional arguments. That is virtually ALL that we are fed from the Pajama Boy media.

To compare nations is to try to understand the futility of approaching Iran with a cultural bag of perspectives that they simply don't accept.

To an Italian or a approach might look bizarre, but to a Norwegian it might look reasonable.

The force feeding of hard leftist "business" ideals on a nation that scores completely opposite to them in all four primary categories and on the two newer categories, is simply a conflict that will not be resolved by "trying harder" to "explain".

Again, as a thought exercise...not a critique on the model itself.
1 year ago
1 year ago Link To Comment
So the average American understands bottom line science beyond the dreams of an actual 19th century scientist, but less about fundamentals than ever before. Soon I will be pogo-sticking my personal pogo-jet from here to Argentina and having my pet monkey button my shirts and remind me that fire burns.
1 year ago
1 year ago Link To Comment
There has been some coverage of how the Cheesecake Factory runs its kitchens, every cook/chef has a screen that pops up the recipe(s) they are working on. It still takes some skill, judgement, and movement to follow the instructions - but maybe nothing a mostly human-form robot couldn't do pretty well and in the very same kitchen space. In fact, might do better, could do more prep work on demand instead of in advance.

And such human-form robots are coming, two arms and a head robots are the hot trend in robotics exactly BECAUSE they fit into existing business processes and facilities. Still, you'd like a robochef to have some taste and smell capabilities as well, and those present a bunch more unanticipated difficulties, too.

I'd guess that within twenty years we'll be able to build a good robochef - for about a billion dollars each. Then the question is when you can get that down to say fifty thousand dollars each. No time soon, I don't think.

That's the problem with robo-cooks, no sense of the materials, no real quality control. Real ingredients have quality issues. What good is a burrito vending machine that builds to order when you can get a pre-made frozen burrito that's just heat and eat, and if you make it with good ingredients it will be pretty much identical to one made on the spot.

I don't think there are any philosophical problems with it all, just that basic human activities like walking on two legs, identifying things in detail by taste and smell, identifying objects in real-world contexts, have proven much, much more difficult for machines, than anyone thought. But as with chess, slowly we're getting it done. Doesn't mean it works the same way, either, we "fly" but generally in machines that don't flap their wings like natural birds or bugs. But we fly a lot faster than birds or bugs all the same.
1 year ago
1 year ago Link To Comment
"no real quality control."

And that's where the new jobs are going to be: Checking up on automated systems. Also in trying to make things fit together properly.

In space launch that is the really hard part. Making sure you keep make it the way you did when it worked, making sure that its fits together with the other components, AND making sure that changes designed to improve performance and reduce costs fit together.

But that will take a lot more in the way of intelligence, insight, and training than the old "Inspector No. 4 examined these pants" approach, not that they even get that aspect right all the time any more.
1 year ago
1 year ago Link To Comment
Well, but the "checking up" is dynamic and built-in continuous self-checks, so it's design-time architecture and more complex manufacture. Nobody has to come out and inspect your car engine every day, or week. A little calibration once every year or two, maybe. That's the real dimension of progress in new jet fighters, much lower hourly operational costs and maintenance loads, and about time.

But that kind of design and engineering talent is very rare, there are only a few hundred people who can do it even if there are ten thousand jobs for them (and so nine thousand and some slugs filling the rest of the slots and failing) but there will never be ten million jobs doing it.
1 year ago
1 year ago Link To Comment
Seems quality of life largely tracks the distribution of power (joules) to the long-tail. The more energy costs, the more the least-of-us sweat. The less it costs the larger the market is that they can participate in (i.e. number of souls who can buy their goods/services and vice versa) - i.e. the richer they are. The first derivative of this effect is the number of people it takes to feed a person - which tracks the inverse of the number of people on the land - I suspect you can divide first-world and not by the knee that exists in this curve.

Most of the food delivery system has been automated, the last bastion is personal service - the "kitchen." Perhaps there's another knee in here - where the first world again uses automation to produce food that is not only fresher, healthier, more tasty, more customized and at a low price not achievable before compared to whatever it is the not-first world can do. With labor distributed (and "wasted") no different than building dams with shovels vice heavy equipment.

Granted, there will still be ritual food preparation (like today's ritual farming) where those with money to burn subject themselves to the risks of old - when all children were breastfed, not vaccinated, ate organic food, and most died. "ahh, the socialist ideal - egality, equality.." (how many children did Queen Victoria have? That died, given the best medical care the world could provide?)

Granted, people coming off the land caused the last great disruption. And is still causing it as other countries get a clue. Likely will happen here as well. This is part of what Tyler Cowen is talking about in "The End of Average." (he also references the man-machine partnership found in "Free Style Chess.")
1 year ago
1 year ago Link To Comment
I just want to point out that the new hamburger making machine will not:

1. Demand a "livable wage", whatever that means.
2. Demand a higher "minimum wage".
3. Strike in front of the store damaging ownerships image and reputation with customers.
4. Present itself slovenly on its way into or out of work, or while on break.
5. Invite its idiot friends to the store to slack in the parking lot or dining areas scaring off older customers and families.

Yep, crap employees with horrible attitudes helped drive this particular innovation harder and faster than any employer's desire to replace workers with robots. I promise you this.
1 year ago
1 year ago Link To Comment
Which goes to prove, again, the Second Law of Thermodynamics, Joan Kroc was not Ray Kroc. Ray Kroc made demands on his employees. If they had some time free, there was cleaning to do. Back then the advertising sang

"You deserve a break today..." while the crew cleaned up the store
1 year ago
1 year ago Link To Comment

It's interesting to me, being that I work in manufacturing. Most manufacturers (in the steel industry) aren't looking to replace workers in most cases. All internal improvements are approached with the idea that any workers displaced by an improvement will be moved to a different area, or retained when the improvement increases business and expansion.

That's why I made the statement regarding replacing workers with robots. I really don't think most business owners think about eliminating jobs with automation. In fact, at least when it comes to the steel industry, automation cannot replace humans in most cases, but it will make the existing humans far more productive and efficient.

Moreover, counter to what most people assume, automation can actually increase the number of workers required to keep equipment running - not just in terms of maintenance and technical positions, but the more efficiently a production line runs, the more people you need keeping it fed with raw material, as well as people to pack/move/process the finished products coming out the other end. If you try to do everything with a single operator, you kill productivity whenever the operator must perform these other functions.

Hiring more fixed-cost labor to support the process is typically a very minor expense compared to the increased capacity and throughput that's gained. The average person almost never considers this, and you hear the exact opposite coming out of their mouths, which just goes to show how little understanding of business/manufacturing most people have.
1 year ago
1 year ago Link To Comment
The drivers of worker replacement by automation are not only matters of efficiency or quality of product. Yes, they are there, but a growing factor since the 1970's at least has been the regime risk costs. Depending on the industry, location, and job; the actual cost per hour to the employer for each employee runs from 1.4-1.8 times the nominal wage. This is all government regulatory costs, and has to include the layers upon layers of HR paperpushers, lawyers, and gatekeepers necessary to prove compliance with the ever changing regulatory environment when you can and will be punitively audited for actions outside the business environment at bureaucratic whim.

When compliance with the regulatory costs approaches and begins to exceed the wage input cost to producing and marketing the product; it makes a great deal of sense to either move to a lower cost and saner business environment or to reduce the incurrence of such costs by reducing the number of employees.

I submit that we are at or past that point. Note the flow of businesses from Blue to Red states with less intrusive governments.

Now note that while one can reduce labor costs internally by changing the business processes; one cannot have any affect on what the government decides to impose short of literally bribing the politicians and bureaucrats, or becoming functionally a subsidiary of the government as a rent seeker. And politicians and bureaucrats do not stay bought, and constantly increase their demands.

Looking at the state we have reached, looking at the increases in mandated costs of employing someone implied by the currently explosion of regulations; from Obamacare [which is a massive tax increase on businesses], to the EPA, to the growing Chicago Thug approach to governing, to the open threat of rule by Executive Order, the destruction of the rule of law, and in passing the support of the Left [and therefore the government] for doubling the minimum wage and the implied threat to keep raising the minimum wage as a "solution" to the coming economic collapse ... it makes a tremendous amount of sense for any industry to both prepare contingency plans to leave the country if possible, or to get as far out of the labor market as they can. Every employee is now a liability and a risk rather than an asset. Because no matter how much they add to the bottom line, they can cost more than they are worth based on non-business factors the employer cannot control at government whim.

Moving to automation as much as possible is now the only rational response, even if consumers do not like it at first. See "self-serve" checkstands in stores. And materials handling for feeding raw materials is something that is already highly developed.

Subotai Bahadur
1 year ago
1 year ago Link To Comment
the actual cost per hour to the employer for each employee runs from 1.4-1.8 times the nominal wage.

Oh, higher than that, I'd say, just the "burdened cost" including benefits, office space, allocated computer resources, etc averages 2x for white collar workers - or at least it did circa 1990. It might be lower now, most benefits packages are less now than then.

Add on top of that government mandates, compliance, and nuisance civil law suits, and it could be much higher. That's part of the equation that discourages me from doing my own startup these days.

The question is where do you go, where is it better? "China" has certainly been the answer, but they are not the best business partners, just try to BREATH in Beijing, for example. There's always Going Galt, but that's not an answer, really.

What the number does whether its 2x or 3x, is it becomes a barrier to entry, the overhead tends to amortize better over 1,000 or 10,000 or 100,000 employees than it does over 10 or 100.
1 year ago
1 year ago Link To Comment
Automation can also improve product quality and employee quality of life. Look at how automation has improved the quality of the steel used in automobile bodies. Less steel is used, making the amount of ore being mined drop, reducing costs. Reduce scrap and re-work and there is more money left in the pie to spread around to workers.

Want 2500 high quality gun barrels per month to top the AK-47?

Spend some money on machine tools.

Or easy to program robots?

Way back in days of old, even the Big three TV networks had correspondents who learned about technology. Walter Cronkite studied up to do the Apollo program. What network has a Jules Bergman today?
1 year ago
1 year ago Link To Comment
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