[P2P-F] Fwd: Excellent Art By Charles Smith

Mon Nov 9 12:35:15 CET 2015

---------- Forwarded message ----------
From: Chris Quigley <cmqesquire at gmail.com>
Date: Mon, Nov 9, 2015 at 6:33 PM
Subject: Fwd: Excellent Art By Charles Smith
To: Michel Bauwens <michel at p2pfoundation.net>

Michel,

Thought this might be of interest.

Kind regards,

Christopher

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*Musings <http://www.oftwominds.com/musings-sample.html>     My Books
<http://www.oftwominds.com/CHS-books.html>     Archives
<http://www.oftwominds.com/archives.html>     Books/Films
<http://www.oftwominds.com/books.html>*
------------------------------

*Automation Doesn't Just Destroy Jobs--It Destroys Profits, Too*
<http://www.oftwominds.com/blognov15/automation-profits11-15.html>

*November 9, 2015*

*The idea that taxing the owners of robots and software will fund
guaranteed incomes for all is not anchored in reality.*

*Automation is upending the global order by eliminating human labor on an
unprecedented scale--and the status quo has no reality-based solution to
this wholesale loss of jobs.*

Two recent articles highlighted the profound consequences of advances in
robotics and AI (artificial intelligence) on employment: four fundamentals
of workplace automation
<http://www.mckinsey.com//Insights/Business_Technology/Four_fundamentals_of_workplace_automation>
 and Robots may shatter the global economic order within a decade
<http://www.telegraph.co.uk/finance/economics/11978542/Robots-may-shatter-the-global-economic-order-within-a-decade.html>
as
the pace of automation innovation has gone from linear to parabolic (via
Mish).

*The status quo apologists/punditry have offered two magical-thinking
solutions to the sweeping destruction of jobs across the entire spectrum of
paid work*:

1. Tax the robots (or owners of robots) and use the revenues to pay a
guaranteed income to everyone who is unemployed or underemployed.

2. Let the price of labor fall to the point that everyone has a job of some
sort, even if the pay is minimal.

Neither one is remotely practical, for reasons I will explain today and
tomorrow.

*Today, let's examine the misguided fantasy that automation/robotics will
generate enormous profits for the owners of robots.* Here's the problem in
a nutshell:

*As automation eats jobs, it also eats profits, since automation turns
labor, goods and services into commodities.* When something is
commoditized, the price drops because the goods and services are
interchangeable and can be produced almost anywhere.

Owners must move commoditized production to low-tax regions if they want to
retain any profit at all.

*Big profits flow from scarcity, i.e. when demand exceeds supply.* If
supply exceeds demand, prices fall and profits vanish.

(Monopoly is a state-enforced scarcity. In our state-cartel economy, there
are many monopolies or quasi-monopolies. While eliminating these would
lower costs, that wouldn't reverse the wholesale destruction of jobs and
profits--it would only speed the process up.)

*The other problem the "tax the robots and everything will be funded" crowd
overlooks is the falling cost of software and robots lowers the barriers to
competition*: nothing destroys profits like wave after wave of hungry
competitors entering a field.

The cost of automation and robotics is falling dramatically. This lowers
the cost of entry for smaller, hungrier, more nimble competitors, and
lowers the cost of increasing production. When virtually any small
manufacturer can buy robots for less than the wages of a human laborer,
where's the scarcity necessary to generate profits?

The parts needed to assemble a $45 tablet are dropping in price, and the
profit margins on those parts is razor-thin because they’re commodities.
Software such as the Android operating system is free, and many of the
software libraries needed to assemble new software are also free.

*Automation increases supply and lowers costs. Both are deadly to profits.*

*Here’s the core problem with the idea that taxing the owners of robots and
software will fund guaranteed incomes for all:* the more labor, goods and
services are automated/commoditized, the lower the profits.

The current narrative assumes more wealth will be created by the digital
destruction of industries and jobs, but real-world examples suggest the
exact opposite: the music industry has seen revenues fall in half as
digital technology ate its way through the sector.

A $14 billion industry is now a $7 billion industry. Profits and payroll
taxes collected from the industry have plummeted. So much for the fantasy
that technology always creates more jobs than it destroys.

As subscription music services replace sales of songs and albums, revenues
will continue to decline even as consumers have greater access to more
products. In other words, the destruction of sales, employment and profits
is far from over.

*Examples of such radical reductions in paid labor abound in daily life.* To
take one small example, our refrigerator recently failed. The motor was
running but the compartment wasn’t being cooled. Rather than replace the
appliance for hundreds of dollars or hire a high-cost repair service, I
looked online, diagnosed the problem as a faulty sensor, watched a tutorial
on YouTube (what I call *YouTube University*), ordered a new sensor for
less than $20 online and completed the repair at no cost beyond a half-hour
of labor, which cost me nothing in terms of cash spent.

The profit earned by YouTube was minimal, as was the profit of the firms
that manufactured the sensor and shipped it. The sales and profits that
were bypassed by using nearly-free digital tools were an order of magnitude
higher.

I was recently interviewed via Skype by an online journalist with millions
of views of his YouTube channel. A decade ago when he worked in mainstream
TV journalism, an interview required costly, time-consuming travel (for the
crew or the subject), a sound engineer, a camera operator, the talent
(interviewer), editor and managerial review. These six jobs have been
rolled into one with digital tools, and travel has been eliminated entirely.

Some will argue that the quality of the video and sound isn’t as high, but
the quality of the user experience is ultimately based on the viewer’s
display, which is increasingly a phone or tablet. So in terms of utility,
value and impact, the product (i.e. output) produced by one person replaces
the conventional media product that required six people.

My own solo digital content business would have required a handful of
people (if not more) only a decade ago. With digital tools and services, it
now requires just one person. Those of us who must work with digital tools
to survive know firsthand that what once required a handful of workers must
now be produced by one person if we hope to earn even a marginally
middle-class income.

Multiply an appliance that doesn’t need to be replaced and a repair service
that doesn’t need to be hired, a half-dozen positions replaced by one
part-time job, a fully functional commodity tablet that costs 10% of the
high-profit brand and you understand why profits will plummet as software
eats the world.

*These are not starry-eyed examples based on projections; these are
real-world examples of widely available digital technologies destroying
costs, sales and profits on a massive scale.*

Some observers have suggested taxing wealth rather than profits to fund the
super welfare state of *guaranteed income for all.* But the value of assets
ultimately rests on their ability to generate a profit. As profits fall,
wealth may be more chimerical than these observers believe.

Tomorrow we'll look at the rising costs of human labor and explore why this
trend will persist even as labor becomes increasingly surplus.

-- 
Check out the Commons Transition Plan here at: http://commonstransition.org

P2P Foundation: http://p2pfoundation.net  - http://blog.p2pfoundation.net

<http://lists.ourproject.org/cgi-bin/mailman/listinfo/p2p-foundation>Updates:
http://twitter.com/mbauwens; http://www.facebook.com/mbauwens

#82 on the (En)Rich list: http://enrichlist.org/the-complete-list/
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