I Just finished another great book. This one is titled A World Without Work authored by Economist Daniel Susskind. The author explores a phenomenon that we have discussed many times over the centuries: Technological Unemployment. Drawing on almost a decade of research in the field, Susskind argues that machines no longer need to think like us in order to outperform us, as was once widely believed. The book describes a world where more and more tasks that used to be far beyond the capability of computers – from diagnosing illnesses to drafting legal contracts, from writing news reports to composing music – are coming within their reach. Mr. Susskind tells a compelling story to support his conclusion: the threat of technological unemployment is now real.
At the heart of this story is the belief that automation will encroach on tasks in the manual, cognitive and creative domains. Mr. Susskind provides several examples of creative machines. He stresses that researchers who work in the field of “computational creativity” are taking the project of building machines that perform tasks like these very seriously. Beyond these domains, machines are now encroaching on affective capabilities: our capacity for feelings and emotions. In fact, an entire field of computer science, known as “affective computing,” is dedicated to building systems that do exactly this. So, we have fields of automation focused on creativity, feelings, and emotions.
Mr. Susskind effectively uses history to inform our thinking of the future. Technological progression advanced our human development so significantly, that we tend to ignore the human misery that it also enabled. But here, history is used to combat the feeling that technological unemployment on a large scale has always been feared, but never been realized. Our author does a great job in describing the three reasons that society has been spared so far. He describes the substituting and complementing aspects of technology, and posits that to date, the complementing variety has been able to outpace the substituting kind. He attributes this to three dynamics:
The Productivity Effect: The first way that the complementing force has worked so far is through the productivity effect. Machines displaced people from certain tasks, but they also made workers more productive at other activities, ones that were not being automated. When these improvements in worker productivity were passed on to consumers (through lower prices or higher-quality offerings), they helped to raise the demand for those workers’ efforts.
The Bigger-Pie Effect: The second way that the complementing force has helped human beings is through the bigger-pie effect. If we think of a country’s economy as a pie, technological progress around the world has made virtually all of those pies much bigger. As a result, tasks emerged that allowed displaced workers to shift to other places in the economy: think agriculture to manufacturing, and manufacturing to the services economy.
The Changing-Pie Effect: the final way that the complementing force has helped human beings in the past is through the changing-pie effect: technological progress not only made economic pies bigger, but it added entirely new ingredients to them. The example he uses here is the British economy. Its output is now more than a hundred times what it was three centuries ago. But that output, and the way it is produced, has also completely transformed. Five hundred years ago, the economy was largely made up of farms; three hundred years ago, of factories; today, of offices.
The book – which I highly recommend – is filled with evidence to support his claim that this time is really different. Take for example the changes in the success of a company – and the number of employees required to drive that success. In 1964, the most valuable company in the United States was AT&T, which had 758,611 employees. But in 2018 it was Apple, with only 132,000 employees; in 2019 it was overtaken by Microsoft, with 131,000. In a new industry like social media, companies are worth a great deal but employ comparatively few people. YouTube had only sixty-five employees when it was bought by Google for $1.65 billion in 2006; Instagram had just thirteen employees when it was bought by Facebook for $1 billion in 2012; and WhatsApp had fifty-five employees when it was bought by Facebook for $19 billion in 2014. I found this fact stunning: research shows that in 2010, new industries that were created in the twenty-first century accounted for just 0.5 percent of all US employment.
Mr. Susskind brings up all the arguments made on the other side of this debate. One such argument states that when human beings are displaced by machines, human labor becomes cheaper: there are more workers looking for jobs, which pushes down their wages. That, in turn, creates an incentive for companies to invent new tasks for humans to do, to take advantage of these falling labor costs. And that is why human beings will in fact be best placed to perform new tasks: those tasks might be created precisely with them in mind. The counter argument? As machines become more capable, in many areas of economic activity, future human beings will look as feeble compared to machines as horses do today. More of the new tasks will be performed by machines instead.
So, Mr. Susskind concludes that the Age of Labor is likely to end. In his words: “As time goes on, machines continue to become more capable, taking on tasks that once fell to human beings. The harmful substituting force displaces workers in the familiar way. For a time, the helpful complementing force continues to raise the demand for those displaced workers elsewhere. But as task encroachment goes on, and more and more tasks fall to machines, that helpful force is weakened as well”.
What about timing? He beliefs, as do I, that this is impossible to predict. In his words, the accumulated actions of an unimaginably large number of individuals and institutions, will dictate the path and the timing. In my words, Convergence across multiple domains (or a lack thereof) makes prediction impossible. What he does present is a view into a possible future, which I believe he captures correctly: a world that is and will be confronted by frictional technological unemployment, leading to a structural unemployment that challenges our notion of work.
He acknowledges that in the short-term, there will be enough work for human beings to do. The challenge will be avoiding frictional technological unemployment: an inability to support the new tasks driven by the complementing force. He states three distinct reasons representing three different types of friction at work: a mismatch of skills, a mismatch of identity, and a mismatch of place. The skills bias is already here, as people in the middle have a choice of moving down the skills ladder or obtaining the skills to move up it. This “leap to the top” as Susskind puts it, is increasingly difficult to make.
But the retreat to the lower skilled jobs brings its own friction: the job does not line up with their identity. Our author states that many people have rejected this movement into lower-paid or lower-skilled roles, choosing to fall into unemployment instead. People might not only lack the skills to do available work, but they might also be unwilling to do lower-skilled work. The third cause of frictional technological unemployment is that the existing work may simply be in the wrong geographical area. People may have the skills to take it on and the appetite to do it—yet they still cannot relocate to take it up.
When taking the longer-term view, Mr. Susskind believes we need to take the threat of structural technological unemployment seriously, where there is simply not enough demand for the work of human beings. In this world of less work, income for labor may slow considerably, but income to the owners of traditional capital – those who own the latest systems and machines – is likely to be considerable. Since many people own little besides the various skills they have acquired during their lives (their human capital), this is a serious challenge for society. In many countries salaries and wages make up about three-quarters of the total income in the economy. This traditional capital versus human capital struggle is not a new phenomenon. Here again Mr. Susskind provides examples:
Forty years ago, the CEOs of America’s largest firms earned about 28 times more than an average worker; by 2000, that ratio stood at an astounding 376. In the two decades since 1995, across twenty-four countries, productivity rose on average by 30 percent, but pay by only 16 percent. Until the early 1970s, productivity and pay in the United States were almost perfect twins, growing at a similar rate. But as time went on, the former continued upward while the latter stalled, causing them to diverge.
From here, the book explores the role of education in addressing inequality, the distribution problem, and how we derive meaning in life. I’ll focus on those in a different post. In the meantime, I believe our author is spot on when he says: our instinct should not be to tinker and tweak the institutions we have inherited. Instead, we have to free ourselves from old ideas, and be far bolder.