Race Against…: The Dead Tree Version

Just a quick note that our book Race Against the Machine is now available in paperback from Amazon and CreateSpace (a print-on-demand company).

It’s more expensive than the ebook ($14.99 vs. $3.99). We’re not deliberately engaging in price gouging; this is near the minimum price CreateSpace will let us charge.

The content of the physical book is exactly the same, links have been replaced by endnotes, and graphs are in color. It’s an ideal complement to the ebook, and it also stands on its own. Especially when ordered in huge quantities…  ;)

Adjustably Loud and Surprisingly Free

The Mercatus Center at George Mason University has a podcast series called “Surprisingly Free” that discusses topics with “an eclectic mix of authors, academics, and entrepreneurs at the intersection of technology, policy, and economics.” Guests have included Nick Carr,  Tyler CowenKevin KellyEvgeny MorozovWilliam PowersClay ShirkyDanny SullivanTim Wu and many others.

They’ve just posted my conversation with host Jerry Brito about the ideas we lay out in Race Against the Machine. Jerry did a great job, asking excellent questions and refusing to settle for sound bites. It was a real pleasure to talk with him, and I predict you’ll find it engaging if you give it a listen.

We cover a lot of ground, including

  • The rise in US inequality and why we should care about it.
  • The upsides and downsides of fast technological progress.
  • How education needs to change.
  • The similarities and differences between Race Against the Machine and Tyler Cowen’s The Great Stagnation.
  • How people can race with machines instead of against them.

If you’re interested in these topics, the downloadable podcast is available here. And if you’d like to further the discussion, leave a comment or question on this post.

The Rebound that Stayed Flat

I’ve been working to draw a graph that compares employment trends since the end of the Great Recession with other important trends in the economy, and also with earlier periods. Here’s what I’ve come up with (click on the graph for a bigger pdf version, and click here for a spreadsheet with the graph and all its data):

Recent economic and employment trends

Using data from the invaluable online resource FRED (and with the help of an equally critical real-world resource, my RA Noam Bernstein), I’ve plotted the trends since 1995 in US GPD, total corporate investment in equipment, and total corporate profits from non-financial companies (and also for all companies, including financial ones). I set the January 1995 value for each of these equal to 100 to allow comparisons across them over the years.

I also plotted the US employment-population ratio, or percentage of working-age people who have jobs (the axis for this line is on the right-hand side of the graph).

The overall impression I get from this graph is one of divergence over time. There’s a steady, slow-growing black line in the middle. This is GDP growth, climbing along at a bit less than 3% per year. Then there are a couple volatile and quick-growing graphs that wind up well above GDP. These are profits (blue) and investment (green), both of which are about 2.5 times as high in mid-2011 as they were at the start of 1995. GDP, meanwhile, increases by only about 50% over that period.

And then there’s the employment ratio (red), which declines by almost five full percentage points over the same period, from 63% of the population to 58.1%.

When I look at this graph I see evidence of the computer age everywhere. After the recession of 2001 ended profits came roaring back and equipment investment eventually started ramping up sharply, but the employment ratio increased only between September of ’03 and December of ’06, the most frenzied time for both the construction and financial industries.

And since the Great Recession officially ended in June of 2009 GDP, equipment investment, and total corporate profits have rebounded, and are all now at their all-time highs (non-financial profits are near their historic high). The employment ratio, meanwhile, has only shrunk and is now at its lowest level since the early 1980s when women had not yet entered the workforce in significant numbers.

So current labor force woes are not because the economy isn’t growing, and they’re not because companies aren’t making money or spending money on equipment. They’re because these trends have become increasingly decoupled from hiring — from needing more human workers.

As computers race ahead, acquiring more and more skills in pattern matching, communication, perception, and so on I expect that this decoupling will continue, and maybe even accelerate. This doesn’t mean that companies are about to stop hiring altogether; there are still plenty of things that humans alone can do. But it means they’ll need to hire at an ever-lower rate, compared to how quickly they’re growing, making money, or buying equipment. Because America’s working age population will continue to grow for at least the next few decades, I predict that the employment ratio will not start to trend upward in the coming years. If anything, I think it’ll decrease.

Do you agree? If not, what trends do you see that will cause the employment ratio to increase? What force(s), in other words, will be more powerful than the technology improvements we’re going to see? Leave a comment, please, and let us know.

How Should Companies Deal With Accelerating Technologies?

We have an article in the winter 2012 issue of Sloan Management Review titled “Winning the Race With Ever-Smarter Machine.” It excerpts heavily from Race Against the Machine (and benefits greatly from the editorial work of SMR head Martha Manglesdorf), but also contains some new content, including sidebars on “Technologies to Watch” (e.g. simple industrial robots) and “Skills that Will Remain in Demand.” (such as management and sales).

We hope you like it and find it valuable. Leave a comment and let us know what you think…

Tech Review Reviews Tech Review

Long-time geek bible Technology Review (the oldest tech magazine in the world — founded at MIT in 1899) has a review of Race Against the Machine in its current issue. David Talbot writes:

The United States faces a protracted unemployment crisis: 6.3 million fewer Americans have jobs than was true at the end of 2007. And yet the country’s economic output is higher today than it was before the financial crisis. Where did the jobs go? Several factors, including outsourcing, help explain the state of the labor market, but fast-advancing, IT-driven automation might be playing the biggest role.

In addition to talking to us, Talbot also includes quotes from extremely smart guys David Autor and Peter Diamond.

The article is first-rate; check it out.

RAtM Holiday Special

Because we know your holiday shopping isn’t done and you’re struggling to find the perfect gift for that economics / technology / policy geek on your list, we’ve marked down “Race Against the Machine” to the absurdly low price of $2.99 . You’ll never forgive yourself if you pass this opportunity up…

Awkward, Indeed…

There are a lot fewer secretaries than there used to be. As this Dilbert cartoon indicates, there could be even fewer of them in the near future thanks to technologies like Siri…



Cheap Labor is No Defense Against Digitization

@jameswilsdon pointed me to a story at the Singularity Hub site saying that Hon Hai, the huge Asian contract electronics manufacturer —  corporate parent of iPad assembler Foxconn —  plans to replace 500,000 of its workers with robots over the next three years, and to build a robot-making factory. Since its workforce is currently somewhere around 900,000 people, this represents a huge commitment to automation.

If this kind of move makes financial sense in China, is there anyplace where it doesn’t make financial sense?

Looks are no Defense Against Digitization

H&M no longer uses human models to generate the images it uses for its online catalogs. According to a spokesperson, “This is done for all garments, not just underwear. It applies to both women’s and men’s clothing.”

These are not real people

I doubt that virtual models will engender unrealistic body images any more than current real-world ones do, especially after pictures of models been photoshopped to the point that they have only tenuous links with actual human anatomy.

But I do think this will reduce employment opportunities for human models. Image manipulation software is now good enough to start putting catalog models out of a job.

Labor’s Declining Share in the Computer Age

It’s very hard for me to look at this graph of labor’s share of value added in the US economy and not see evidence of the computer age.

Ever since the PC was introduced and started changing companies and the world of work in the early 1980s, labor has experienced a pretty steadily decreasing share of total US value added. Workers, in short, are taking home less and less of the overall economic pie.

This trend exists despite the fact that CEO and other executive pay is included in labor’s share, and has been increasing handsomely. I think this graph would be declining much more quickly in recent years if it only included the pay of rank-and-file workers.

As computers have become more powerful and plentiful, they’ve been adopted instead of people in more and more settings. This cuts total payroll costs, and can also decrease the bargaining power of the remaining workers. Both of these factors tend to make the line in the graph above head south.

I can’t see what’s going to make this graph change direction, especially since labor’s share tends to fall during an economic expansion. Can you see anything that will realistically cause labor’s share to rise in the coming months and years?