[P2P-F] Automation Doesn't Just Destroy Jobs--It Destroys Profits, Too

[Eric Hunting]

This is an argument I've been making for many years myself. In the 
debate about automation and job destruction it is commonly overlooked 
that labor and capital are in the same boat when it comes to long-term 
impact because production capability itself is becoming a commodity. 
Machines aren't just getting smarter, they're getting smaller, more 
adaptive, progressively lower in minimum necessary production volumes, 
and cheaper. You can now initiate more kinds of production 'out of 
pocket' than ever before. You can now competitively manufacture more 
things in the space of a four car garage than ever before. You can now 
approach a conventional middle-class standard of living based on 
entirely local and personal production and open source designs. 
Corporations are beginning to abandon the ownership of their own means 
to production in favor of job-shops because as that production capacity 
becomes more of a commodity the cost of money and the adaptability lost 
to amortization becomes the chief drag on market competitiveness. The 
volume of consumer goods produced in job shops went past that from 
traditional factories in the year 2000, and it never went back. The 
factory--and the traditional capital creating it--is already an 
anachronism. This brings us to the core premise of Post-Industrial 
futurism; that the paradigms of the Industrial Age are being eroded by 
the evolution of the very technologies on which they depend. This is the 
ultimate crisis of Capitalism; the eventual obsolescence of capital 
itself by the automation it cultivated as value shifts away from 
material goods and the means to make them and becomes virtualized, 
integral to design. The product has no value. The real value is in the 
'spime'. Already corporations are increasingly obsessed with litigation, 
intellectual property, whittling-away at the First Sale Doctrine, and 
limiting the rights and controlling the behavior of the consumer as 
means to maintain market share.

The long-term evolution of production and distribution is a transition 
to localization, networking, production-on-demand, increasing reliance 
on management automation through quantitative analysis, increasing 
cost-transparency, and eventual integration into the infrastructure of 
the built habitat as a kind of municipal utility. The global economy 
will shift from trading in goods to trading in commodity refined 
materials and modular parts. As labor is factored out of production, 
cost of production becomes more transparent, market prices capitulate 
and fall except where they can leverage the value of exclusive design 
and designer prestige. 'Brand' manufacturers will increasingly take on 
the aspect of ateliers--design studios. The next Apple will be composed 
of a relative handful of people whose chief jobs are design, 
development, and the management of spimes with all production owned by 
someone else and local to the consumer. The next Ford or Toyota will 
assemble cars on demand at the dealership--maybe generic dealerships. 
(an overlooked impact of electric cars and the electric power train is 
their ability to radically drive the number of components in a car down. 
Tomorrow's car might have less than 100 parts and go together like a 
desktop PC!)

So Capital is running out of things to do, the paradigm or money is 
failing, and the model Westphalian state is running out of people to 
tax, while, now evolved to accommodate Industrial Age paradigms, having 
no other mechanism to define, capture, and collectivize surplus social 
productivity to do anything with. (are you going to conscript labor off 
the street to make fighter jets?) The state and the monetary system have 
been very closely wedded through the Industrial Age, premised on a 
concept of extracting and collectivizing monetary capital as societal 
debt to gift to elites to create the means of production, and now their 
common paradigms are breaking-down. To continue to exist government will 
have to devise a new basis of economics--a new paradigm by which to 
define resource collectivization and a rationalization for it--or (more 
likely) a new economy will emerge stigmergically by the logic intrinsic 
to the underlying technology and the compulsion of people to make things 
work day-to-day. This is why, when I talk about basic income myself, I 
talk about two forms of it. An 'institutional' basic income--that is 
disbursed as money and administered by some kind of bureaucratic 
institution--and an 'integral' basic income that's built into the 
'firmware' of the infrastructure of the built habitat and disbursed as 
on-demand access to goods based on a systemic quantitative analysis of 
demand. Long-term, we are likely to evolve toward that integral form as 
local communities are compelled to take on increasing responsibility for 
keeping daily life going as the state increasingly fails them and people 
discover the at-hand means/technology to do that in their now local 
production capacity.

All these things add up to a picture of a very different lifestyle in 
the future that I don't think we communicate too well right now. This is 
why I've been very interested in the notion of using the approach of 
Living Museums in a future context to illustrate future lifestyle and am 
working on projects like the Open House documentary to showcase open 
source living.


On 11/9/15 4:52 AM, p2p-foundation-request at lists.ourproject.org wrote:
>
>
> ---------- Forwarded message ----------
> From: *Chris Quigley* <cmqesquire at gmail.com <mailto: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 
> <mailto:michel at p2pfoundation.net>>
>
>
> Michel,
>
>
> Thought this might be of interest.
>
> Kind regards,
>
> Christopher
>
> ---------------------------------------------------------------------------------------------
> *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.
>
>

-- 
Eric Hunting
erichunting at gmail.com

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