Top Quotes: “The War on Normal People” — Andrew Yang
Introduction
“Experts and researchers project an unprecedented wave of job destruction coming with the development of AI, robotics, software, and automation. The Obama White House published a report in 2016 that predicted 83% of jobs where people make less than $20/hour will be subject to automation or replacement. Between 2.2–3.1 million car, bus, and truck driving jobs in the U.S. will be eliminated by the advent of self-driving vehicles.
We are confident that 2–3 million Americans who drive vehicles for a living will lose their jobs in the next 10–15 years. Driving a truck is the most common occupation in 29 states. Self-driving vehicles are one of the most obvious job-destroying technologies, but there are similar innovations ahead that will displace cashiers, fast food workers, customer service reps, admin assistants, lawyers, and insurance agents, all within the span of a few short years. Suddenly out of work, millions will struggle to find a new job, particularly those at the lower end of the skill ladder.
Automation has already eliminated about 4 million manufacturing jobs in the U.S. since 2000. Instead of finding new jobs, a lot of those people left the workforce and didn’t come back. The U.S. labor force participation rate is now at only 63%, a rate below that of nearly all other industrialized economies and about the same as that of El Salvador and the Ukraine. Some of this is driven by an aging population, which presents its own set of problems, but much of it is driven by automation and a lower demand for labor.
Each 1% decline in the labor participation rate equates to approximately 2.5 million Americans dropping out. The number of working-age Americans who aren’t in the workforce has surged to a record 95 million. Ten years into the nation’s recovery from the financial crisis and 95 million working-age Americans not in the workforce — I’ve taken to calling this phenomenon the Great Displacement.”
“One reason that solutions are daunting to even my most optimistic friends is that, while their part of the American economy is flourishing, little effort is being made to distribute the gains from automation and reverse the decline in opportunities. To do so would require an active, stable, invigorated, unified federal government willing to make large bets. This, unfortunately, is not what we have. We have an indebted state rife with infighting, dysfunction, and outdated ideas and bureaucracy from bygone eras, along with a populace that cannot agree on basic facts like vote totals or climate change. Our politicians offer half-hearted solutions that will at best nibble at the edges of the problem. The budget for research & development at the Department of Labor is only $4 million. We have a 1960s-era government that has few solutions to the problems of 2018.
This must change if our way of life is to continue. We need a revitalized, dynamic government to rise to the challenge posed by the largest economic transformation in the history of mankind. The future without jobs will come to resemble either the cultivated benevolence of Star Trek or the desperate scramble for resources of Mad Max. Unless there’s a dramatic course correction, I fear we are heading toward the latter.”
“Automation had eliminated millions of manufacturing jobs between 2000 and 2015, four times more than globalization.”
How Did We Get Here?
“In the 70s, when my parents worked at GE and Blue Cross in upstate New York, their companies provided generous pensions and expected them to stay for decades. Community banks were boring businesses that lent money to local companies for a modest return. Over 20% of workers were unionized. Some economic problems existed — growth was uneven and inflation periodically high. But income inequality was low, jobs provided benefits, and Main Street businesses were the drivers of the economy. There were only three TV networks, and in my house we watched them on a TV with an antenna that we fiddled with to make the picture clearer.
That all seems awfully quaint today. Pensions disappeared for private-sector employees years ago. Most community banks were gobbled up by one of the mega-banks in the 90s — today, five banks control 50% of the commercial banking industry, which itself mushroomed to the point where finance enjoys about 25% of all corporate profits. Union membership fell by 50%. 94% of the jobs created between 2005 and 2015 were temp or contractor jobs without benefits; people working multiple gigs to make ends meet is increasingly the norm. Real wages have been flat or even declining. The chances that an American born in 1990 will earn more than their parents are down to 50%; for Americans born in 1940 the same figure was 92%.
Thanks to corporate titans, the goals of large companies began to change in the 70s and early 80s. The notion they espoused — that a company exists only to maximize its share price — became gospel in business schools and boardrooms around the country. Companies were pushed to adopt shareholder value as their sole measuring stick. Hostile takeovers, shareholder lawsuits, and later activist hedge funds served as prompts to ensure that managers were committed to profitability at all costs. On the flip side, CEOs were granted stock options for the first time that wedded their individual gain to the company’s share price. The ratio of CEO to worker pay rose from 20 to 1 in 1965 to 271 to 1 in 2016. Benefits were streamlined and reduced and the relationship between company and employee weakened to become more transactional.
Simultaneously, the major banks grew and evolved as Depression-era regulations separating consumer lending and investment banking were abolished. Financial deregulation started under Reagan in 1980 and culminated in the Financial Services Modernization Act of 1999 under Clinton that really set the banks loose. The securities industry grew 500% as a share of GDP between 1980 and the 2000s while ordinary bank deposits shrank from 70% to 50%. Financial products multiplied as even Main Street companies were driven to pursue financial engineering to manage their affairs. GE, once a beacon of manufacturing, became the fifth biggest financial institution in the country by 2007.
With improved tech and access to global markets, American companies realized they could outsource manufacturing, info tech, and customer service to Chinese and Mexican factories and Indian programmers and call centers. U.S. companies outsourced and offshored 14 million jobs by 2013, many of which would have previously been filled by domestic workers at higher wages. This resulted in lower prices, higher efficiencies, and some new opportunities but also increased pressures on American workers who now had to compete with a global labor pool.
Automation started out on farms earlier in the century with tractors and then migrated to factories in the 70s. Manufacturing employment began to slip around 1978 as wage growth began to fall. Median wages used to go up in lockstep with productivity and GDP growth before diverging sharply in the 70s. Since 1973, productivity has skyrocketed relative to the hourly compensation of the average wage earner.”
“Studies have shown that everyone is less happy in an unequal society — even those at the top. The wealthy experience higher levels of depression and suspicion in unequal societies; apparently being high status is easier when you don’t feel bad about it.”
“Companies can now prosper, grow, and mint record profits without hiring many people or increasing wages. Both job creation and wage growth have been weaker than the top-line economic growth would suggest since the 70s. In each of the last several decades, the economy has created lower percentages of new jobs, including no new net jobs between 2000 and 2010 due to the Great Recession.”
“The changing role of labor can be seen in the time it has taken to recover from the past several recessions. The U.S. has suffered several major recessions since 1980. Each recession has stripped out more jobs and taken longer to recover from than the last.
When new companies do prosper and grow, they don’t tend to employ as many people as they did in the past. The major companies of today employ many fewer workers than the major enterprises of yesteryear.
Number of Employees at Major Companies: Present vs. Past
Amazon — number of employees in 2017: 341k vs. Walmart — number of employees in 2017: 1.6 million
Apple — number of employees in 2017: 80k vs. GM — number of employees in 1964: 661k
Google — number of employees in 2017: 57k vs. AT&T — number of employees in 1964: 759k
Facebook — number of employees in 2017: 21k vs. GE — number of employees in 1964: 262k
Snap — number of employees in 2017: 2k vs. Kodak — number of employees in 1989: 145k
Airbnb — number of employees in 2017: 3k vs. Hilton — number of employees in 2016: 169k
The companies of the future simply don’t need as many people as the companies of earlier eras, and more of their employees have specialized skills.”
Financial Insecurity
“A Bankrate survey in 2017 found that 59% of Americans don’t have the savings to pay an unexpected expense of $500 and would need to put it on a credit card, ask for help, or cut back for several months to manage it. A similar Federal Reserve report in 2015 said that 75% of Americans couldn’t pay a $400 emergency expense out of their checking or savings accounts.
For average Americans with high school diplomas or some college, the median net worth hovers around $36k, including home equity — 64% of Americans own their home, down from a high of 69% in 2004. However, their net worth goes down to only $9k-$12k if you don’t include home equity.”
“What’s normal? The normal American didn’t graduate from college and doesn’t have an associate’s degree. They perhaps attended college for one year or graduated from high school. They have a net worth of approximately $36k — about $6k excluding home and vehicle equity — and lives paycheck to paycheck. They have less than $500 in flexible savings and minimal assets invested in the stock market. These are median stats, with about 50% of Americans below these levels. When jobs start to disappear in large numbers due to tech advances, the normal American won’t have much to fall back on.”
Admin Jobs
“Clerical and admin staff is the most common occupational group. Between 64–69% of data collecting and processing tasks common in admin settings are automatable. Google, Apple, and Amazon are investing billions in AI admin assistants that can replace these jobs. Many of the settings for these jobs are large corporations that, during the next downturn, will replace headcount with a combo of software, bots, and AI.
Consider that 2.5 million of the jobs in the clerical and admin category are customer service reps. They’re typically high school grads making $16 an hour or $32k a year in call centers.
The AI experience is about to improve to a point where we’re not going to be able to tell the difference between AI and a human. Several companies right now employ a hybrid approach where voice recordings are combined with a human in the Philippines tapping buttons so that a Filipino can ‘call’ you but you think you’re talking to a native speaker because you’re hearing a prerecorded voice. This is called accent-erasing software. Soon, it’ll be an AI hitting the buttons and our ability to distinguish between a bot and a person will disappear.”
“Some argue that it’ll be possible to automate only a portion of each person’s job. But if you have a department of 100 clerical workers and you find that 50% of their work can be automated, you fire half of them and tell the remaining workers to adjust. And then you do it again the next year. Clerical tasks are almost always cost centers, not growth drivers. Office and admin support jobs are going to disappear by the tens of thousands into the cloud as offices become increasingly more automated and efficient.”
Retail
“We’ve all gone to our local CVS to be greeted by a self-service scanner at the end. There’s only one employee, the troubleshooter, where there used to be 2–3 cashiers. This is the case where local stores still exist — a lot of them are closing outright.
About 1 in 10 Americans work in retail and sales, with 9 million working as retail sales workers. They have an average income of $11/hour or $23/year. Many haven’t graduated from high school, yet their median age is 39. 60% of department store workers are female.
The year 2017 marked the beginning of what’s being called the ‘Retail Apocalypse.’ 100,000 department store workers were laid off between October 2016 and May 2017 — more than all of the people employed in the coal industry. Said the New York Times in 2017, ‘The job losses in retail could have unexpected social and political consequences, as huge numbers of low-wage retail employees became economically unhinged, just as manufacturing workers did in recent decades.’”
“Credit Suisse estimated that as many as 147 million square feet of retail space will close in 2017, another all-time high. For reference, the Mall of America is the biggest mall in the country at 3 million square feet. The equivalent of 52 Malls of America are closing in 2017, or one per week.
A commercial real estate firm estimated in 2017 that roughly 310 of the nation’s 1,300 shopping malls are at high risk of losing an anchor store, which typically begins a mall’s steep decline. Another retail analyst predicted that 400 malls will fall in the next few years and that 650 of the remaining 900 malls will struggle to stay open.”
“The local mall is one of the pillars of the regional budget. The sales tax goes straight to the county and the state. And so does the property tax. When the property gets written down, the community loses a big chunk of tax revenue. This means shrunken municipal budgets, cuts to school budgets, and job reductions in local government offices. On average, a single Macy’s generates about $36 million/year. At current sales and property tax rates, that store, if closed, would leave a budget hole of several million dollars for the state and county to deal with.”
“Jeff Bezos is dedicating $1 billion of his personal wealth to his space exploration company, Blue Origin, each year. A friend of his joked to me that ‘we’ll get Jeff to care about what happens on this planet one of these days.’
Amazon is known for its competitive — ruthless — practices. In 2009, they were trying to push Diapers.com to the negotiating table, so they discounted diapers to a point where no one was making money. It worked and they bought Diapers.com for $545 million a little while later.”
Food Service
“Some workers will be easier to replace than others. For instance, we all like fast food drive-thrus for their efficiency and don’t mind the limited human interaction. In fact, 50–70% of fast food sales take place at drive-thrus. There’s 1–2 workers per location who take the order through the speaker. These workers will be replaced by software in many locations in the next five years. Publicly traded fast food chains will be among the most aggressive adopters of increased efficiencies because they have the scale, resources, and quarterly earnings pressures to maximize shareholder returns. McDonalds just announced an ‘Experience of the Future’ initiative that will replace cashiers in 2,500 locations to start. The former CEO of McDonalds suggested that large-scale automation is around the corner. ‘It’s cheaper to buy a $35k robotic arm than it is to hire an employee who’s inefficient making $15 an hour bagging French fries,’ he said while defending the current prevailing fast food wage of $9. The robot arm is only going to get cheaper and more efficient, while the fast food wage has no place to go but up. Approximately 4 million workers work in fast food.”
“If you’ve been through an airport recently, you might have noticed restaurants that have replaced servers with iPads. Eatsa, a recently opened chain, has a whole row of iPads for you to enter the order, and then a series of lockers where your food appears. They’ve gotten rid of all of the front-of-house workers. Eatsa was recently named one of the most influential brands in the restaurant industry, and it’s here to stay. All it takes is a few chains to bite the bullet and enjoy labor-free efficiencies and the others will follow quickly. McKinsey estimates that 73% of food prep and service activities are automatable.”
“On the production end, you can now use a 3D printer to make hot pizza in five minutes that can be customized to particular orders. BeeHex’s bot, called the Chef 3D, will appear at select theme parks and sports arenas starting this year. Just like the robot barista, Chef 3D is faster, cleaner, and more reliable than human workers. Only one person is needed to work the machine, which can mix the composition and lay down the sauce and toppings in one machine. Apparently it tastes great. No more person in the back making pizzas by the oven. There are companies launching that are essentially pizzerias on wheels, where they make the pizzas in special trucks on their way to you in anticipation of your order.”
“For the last mile, there’s now food delivery robots being used in DC and SF. They’re essentially coolers on wheels that deliver food to your door for around a dollar. One company called Starship has 20 or so robots that are already learning their local terrain in DC, which has officially made self-driving robots legal on its sidewalks. These robots will eliminate the need for many deliverypeople.”
Factory Workers and Truck Drivers
“In 2000 there were still 17.5 million manufacturing workers in the U.S. Then, the numbers fell off a cliff, plummeting to fewer than 12 million before rebounding slightly starting in 2011. More than 5 million manufacturing workers lost their jobs after 2000. More than 80% of the jobs lost — 4 million — were due to automation. Men make up 73% of manufacturing workers, so this hit working-class men particularly hard. About 1 in 6 working-age men in America is now out of the workforce, one of the highest rates among developed countries.
What happened to these 5 million workers? A rosy economist might imagine that they found new manufacturing jobs, or were retrained and reskilled for different jobs, or maybe they moved to another state for greener pastures.
In reality, many of them left the workforce. One Department of Labor survey in 2012 found that 41% of displaced manufacturing workers between 2009 and 2011 were either still unemployed or dropped out of the labor market within three years of losing their jobs. Another Indiana University study found that 44% of 200,000 displaced transportation equipment and primary metals manufacturing workers in Indiana between 2003 and 2014 had no payroll record at all by 2014, and only 3% graduated from a public college or university in Indiana during that time period. The study noted, ‘Very few went back to school, and relatively few seemed to avail themselves of a lot of the government programs available to assist displaced workers.’”
“How do the 40% of displaced manufacturing workers who don’t find new jobs survive? The short answer is that many become destitute and applied for disability benefits. Disability rolls shot up starting in 2000, rising by 3.5 million, with the numbers increasing dramatically in Ohio, Michigan, Pennsylvania, and other manufacturing-heavy states. In Michigan, about half of the 310k residents who left the workforce between 2003 and 2013 went on disability. Many displaced manufacturing workers essentially entered a new underclass of government dependents who have been left behind.
This is a good indicator of what will occur when truck drivers lose their jobs. The average age of truck drivers is 49, 94% are male, and they’re typically high school grads. Driving a truck is the most popular job in 29 states — there’s 3.5 million truck drivers nationwide.
Trucks that drive themselves are already rolling out around the world. Self-driving trucks successfully made deliveries in Nevada and Colorado in 2017.”
“A venture capitalist who’s backed startups in both autonomous trucks and cars says that self-driving trucks will arrive significantly before cars because highway driving is much easier. Highways, the domain of semi trucks, are much less complex than urban areas, with fewer intersections and clearer road markings. And the economic incentives around freight are much higher than with passenger cars.
Morgan Stanley estimated the savings of automated freight delivery to be a staggering $168 billion/year in saved fuel ($35b), reduced labor costs ($70b), fewer accidents ($36b), and increased productivity and equipment utilization ($27b). That’s an enormously high incentive to show drivers to the door — it would actually be enough to pay the drivers their $40k/year salary to stay home and still save tens of billions per year.
Switching to automated drivers would not only save billions, but it also has the potential to save thousands of lives. Crashes involving large trucks killed 4k people in the U.S. in 2014, and a further 110k people were injured. More than 90% of the crashes were caused at least in part by driver fatigue. Driver fatigue is a factor in roughly one of seven fatal crashes.”
“The incentives to adopt automated truck driving are so large that one could argue it’s important for national competitiveness and human welfare that this happen as quickly as possible. Adding to the incentives is that many freight companies report labor shortages because they can’t find enough people willing to take on the physically demanding and punishing job of spending hundreds of hours sitting in a confined space. Truck drivers spend 240 nights/year away from home staying in truck stops and motels and 11 hours per day on the road. Obesity, diabetes, smoking, inactivity, and high blood pressure are common, with one study saying 88% of drivers had at least one risk factor for chronic disease.
Many, however, will argue for the preservation of truck driving because they recognize just how problematic it would be for such a large number of uneducated male workers to be displaced quickly.
Taking even a fraction of the 3.5 million truckers off the road will have ripple effects far and wide. It’s impossible to overstate the importance of truck drivers to regional economies around the country. As many as 7 million workers serve the needs of truck drivers at truck stops, diners, motels, and other businesses around the country. Over 2,000 truck stops around the country serve as dedicated hotels, restaurants, grocery stores, and entertainment hubs for truckers every day. If one assumes that each trucker spends only $5k a year on consumption on the road (about $100/week), that’s an $18 billion economic hit in communities across the country. Beyond the hundreds of thousands of additional job losses, many communities may risk losing a sense of purpose without thousands of truckers coming through each day. For example, in Nebraska 1 out of every 12 workers — 63k — works in or supports the trucking industry.”
“Truck drivers don’t see it coming. Indeed, when Bloomberg’s Shift Commission in 2017 asked truck drivers about how concerned they were about their jobs being replaced by automation, they almost uniformly weren’t concerned at all. Let me assure you it’s coming. Elon Musk recently announced that Tesla will be offering a freight truck as of November 2017. He also proclaimed that by 2019, all new Teslas will be self-driving. ‘Your car will drop you off at work, and then it will pick other people up and make you money all day until it’s time to pick you up again,’ Musk proclaimed. ‘This will 100% happen.’ It’s obvious that Tesla trucks will eventually have the same self-driving capabilities as their cars. Other autonomous vehicle companies report similar timelines, with 2020 being the first year of mass adoption. And it’s not just those driving trucks who are at risk. A senior official at a major ride-sharing company told me that their internal projections are that half of their rides will be given by autonomous vehicles by 2022. This has the potential to affect about 300k Uber and Lyft drivers in the U.S.
The replacement of drivers will be one of the most dramatic, visible battlegrounds between automation and the human worker. Companies can eliminate the jobs of call center workers, retail clerks, fast food workers, and the like with minimal violence and fuss. Truck drivers will be different.
Right now, the federal government has said that it’ll allow autonomous vehicles in any states that permit them. One industry report noted that ‘the U.S. Department of Transportation is throwing its full support behind development of autonomous vehicles as a way to improve safety on our roadways.’”
“Will truckers and the industry fight back? Back in the 50s, truckers were highly unionized, with the Teamsters being legendary in their aggressiveness. Today, only about 13% of U.S. truckers are unionized, and 90% of the trucking industry is made up of small businesses with ten or fewer trucks. About 10% of truck drivers are solo owner operators who own their own trucks; the trucking companies have been pushing drivers to buy or lease their own trucks to reduce overhead.
It will happen in stages. First, there’ll be automated trucks with a human driver as a fallsafe. The tech will allow truckers to go beyond their current 11 hours/day on the road as the driver will be able to rest and do other things during long stretches. This will increase the productivity of trucks and equipment, and likely reduce the wages of truckers as the pay scale changes. The next stage will have convoys of trucks with the lead truck being a driver and the others following automatically, which lowers wind resistance and fuel costs. There’ll be docking stations outside urban areas where drivers will enter the trucks for the last ten miles.
At some point, as the industry becomes more and more automated, truck drivers will realize that the combination of much more efficient trips and lower need for labor will dramatically shrink their total employment. Those who have other options will flee the field. But for many, their opportunities outside of truck driving will be minimal, and they know it.”
“What might happen when the 350k American truckers who bought or leased their own trucks are unemployed and angry? All it takes is one out of 350k to lead the others. It doesn’t take a big leap of the imagination to imagine mass protests that could block highways, seize up the economy, and wreck havoc.
The best estimates for when this will unfold are between 2020 and 2030.”
Other Jobs
“We tend to think of automation as displacing blue-collar workers with jobs that involve basic, repetitive skills. The truth is a little bit more complicated than that. The important categories are not white vs. blue collar or even cognitive skills vs. manual skills. The real distinction is routine vs. nonroutine. Routine jobs of all stripes are those most under threat from AI and automation, and in time more categories of jobs will be affected. Doctors, lawyers, accountants, wealth advisors, traders, journalists, and even artists and psychologists who perform routine activities will be threatened by automation tech. Some of the jobs requiring the most education are actually among the most likely to be become obsolete. Some of these threatened workers, like investment advisors, may find themselves surprised to be on the chopping block after supporting the profit-growing potential of automation tech.
“GE invited radiologists with decades of experience, the tops in their field, to see whether the doctors could more effectively diagnose tumors based on radiology films than a computer.
Guess who won? The computer won quite easily. It turns out that a software program can ‘see’ a shade of grey on a film that’s invisible to the human eye. The computer can also draw on millions of films to compare it with, a much larger reference set than even the most experienced doctor.
We’re entering an age of super-intelligent computers that can take any complex data set — every legal precedent, radiology film, asset price, financial transaction, actuarial table, Facebook like, customer review, resume bullet, facial expression, and so on — synthesize it, and then perform tasks and make decisions in ways that are as good as or better than the smartest human in the vast majority of cases. To think that this will not dramatically change the way orgs perform work and the employment of people is to ignore the way companies operate. Companies are paid to perform certain tasks, not employ lots of people. Increasingly, employing lots of people will mean that you’re behind the times.
When I was assigned a deal as a corporate lawyer, the first thing I would do is look for whatever deal precedent we had in the system that was most similar. We used to joke about how much of what we did was ‘finding and replacing’ terms in a contract. There’s a lot of repetitive functioning in what we consider high-end professional jobs — what I call intellectual manual labor. A doctor, lawyer, accountant, dentist, or pharmacist will go through years of training and then do the same thing over and over again in slightly different variations. Much of the training is to socialize us into people who can sit still for long periods and behave and operate consistently and reliably. We wear uniforms — white coats or suits. We’re highly rewarded by the market — paid a lot — and treated with respect and deference for accruing our expertise and practice. Basically, we’re trained and prepped to become more like machines. But we’ll never be as good as the real thing.
The Federal Reserve categorizes about 62 million jobs as routine — or approximately 44% of total jobs. The Fed calls the disappearance of these middle-skill jobs ‘job polarization,’ meaning we’ll be left with low-end service jobs and high-end cognitive jobs, and very little in between. This trend goes hand-in-hand with the disappearance of the American middle class and the startlingly high income inequality in the U.S.
The vanishing jobs are due in part to the incredible development of both computing power and AI. You might have heard of Moore’s Law, which states that computing power grows exponentially doubling every 18 months. It’s hard to understand what exponential growth means over time. Take the example of a ’71 Beetle’s efficiency. If it had advanced according to this law, the vehicle, in 2015, would be able to go 300,000 miles per hour and get two million miles per gallon of gas. That’s what’s happening with computers. People didn’t think Moore’s Law could hold for the past 50 years, but it has, and computers continue to get smarter. Intel, Microsoft, Google, and IBM are investing in quantum computers — computers that store info on subatomic particles — that would extend Moore’s Law for years to come.”
“New kinds of AI are emerging that can do much of what we now consider intelligent and creative. You might’ve heard the term ‘machine learning,’ which is an application of AI in which you give machines access to data and let them learn for themselves what the best methods are. Machine learning is particularly powerful because you don’t have to prescribe the exact actions and routes. You set guidelines, and then AI starts synthesizing data and making choices and recommendations. Some of the early applications of machine learning include tagging images, spam filtering, finding keywords in documents, detecting outliers for credit card fraud, recommending stock trades, and other rules-based tasks.”
“5,500 hundred floor traders once roamed the trading floor of the New York Stock Exchange. Now there are fewer than 400, as most trading jobs have been taken over by servers running trading algorithms. Those scenes you see on CNBC are not of the New York Stock Exchange but of the Chicago Mercantile Exchange, where they still have enough humans to make a good backdrop. Goldman Sachs went from 600 NYSE traders in 2000 to just two in 2017 supported by 200 computer engineers.”
“I asked a doctor friend how much of the medical practice he thought could be performed via automation. He said, ‘At least 80% of it is ‘cookbook.’ You just do what you know you’re supposed to do. There’s not much imagination or creativity to most of medicine.
I asked a technologist to project which aspects of medicine were most ripe for automation. His responses were radiology, pathology, family medicine (a nurse practitioner or even layperson could handle most issues with the assistance of AI), dermatology, and a couple other specialties. He also talked about how surgeons he knows enjoy the robot-assisted operating theatre, because it greatly enhances their vision and ability to see things and the robot tools automatically accounted for unwanted movements and motions like a trembling hand. Also, students who were meant to train could see everything without being in the room, and the surgeon could review his procedure after the fact.
I asked if doctors could potentially perform surgeries from remote location. He responded, ‘Eventually. Right now doctors want to be nearby, and the latency of long-distance data transmission could cause lags.’ Still, he agreed that robo-assisted surgery will soon open up the ability for a top surgeon to perform surgeries around the world. It also means you can record surgeries and all of the micro decisions that surgeons make. With that data, AI could analyze thousands of surgeries and know what to do in every situation. The first robot dental implantation — with no human intervention — just took place in China in 2017. The robot went in and installed two new implants that had been printed by a 3D printer. Robot super surgeons might be one generation away.”
“Some jobs might not go away the instant new tech arrives that could replace them. Much of how automation unfolds in medicine is dependent upon regulations and licensing. It’s presently illegal to do many things without a doctor or pharmacists’ license. This is very likely to be a field where technical innovation far outstrips implementation because doctors will fight the steps, and they have a very powerful lobby. They will argue that no one is as good for a patient as a highly trained human doctor, even in the face of dramatic evidence to the contrary as AI improves. Some patients also might prefer seeing a human doctor, though I suspect this preference will fade over time.”
“There’s many obstacles to AI becoming broadly intelligent — one neuroscientist described most systems today as doing better than a human could ever be at one specific task and dumber than a two-year-old at anything else. Still, our conception of what’s beyond the capacity of a computer is about to change. There’s a lot of white-collar and creative work that can be automated. In startups, we ‘throw money at the problem.’ Soon, the answer to everything will be ‘Throw AI at the problem.’ If you think your job is safe from computers, you’ll probably be wrong eventually.”
“4 in 10 Americans reported working more than 50 hours per week in a recent Gallup survey. This wasn’t always the case. John Keynes famously predicted in 1930 that, given the continued growth in productivity and progress, by 2030 the Western standard of living would be four times higher and we’d only be working 15 hours per week. He was right on the standard of living and very wrong on our work hours. Meanwhile, numerous studies have shown that a lot of the work we’re doing isn’t really adding value, and that we could cut our hours and maintain most of our productivity.”
“It’s true that agriculture went from 40% of the workforce in 1900 to 2% in 2017 and we nonetheless managed to both grow food and create many wondrous new jobs during that time. It’s also true that service-sector jobs multiplied in many unforeseen ways and absorbed most of the workforce after the Industrial Revolution. People sounded the alarm of automation destroying jobs in the 19th century as well as in the 1920s and the 1960s, and they’ve always been wildly off the mark. Betting against new jobs has been completely ill-founded at every point in the past. So why is this time different?
Essentially, the tech in question is more diverse and being implemented more broadly over a larger number of economic sectors at a faster pace than during any previous time. The advent of big farms, tractors, factories, assembly lines, and personal computers, while each a very big deal for the labor market, were orders of magnitude less revolutionary than advancements like AI, machine learning, self-driving vehicles, advanced robotics, smartphones, drones, 3D printing, virtual and augmented reality, the Internet of things, genomics, digital currencies, and nanotech. These changes affect a multitude of industries that each employ millions of people. The speed, breadth, impact, and nature of the changes are considerably more dramatic than anything that has come before.
It’s true that this would be the first time that the labor market did not meaningfully adapt and adjust But Ben Bernanke, the former head of the Federal Reserve, said in 2017, ‘You have to recognize realistically that AI is qualitatively different from an internal combustion engine in that it was always the case that human imagination, creativity, social interaction, those thins were unique to humans and couldn’t be replicated by machines. We’re coming close to the point where not only cashiers but surgeons might be at least partially replaced by AI.’ 58% of cross-sector experts polled by Bloomberg in 2017 agreed with the statement ‘It is in fact different this time’ and that the labor market disruptions will be severe and unprecedented.
Economists in particular seem predisposed to suggest that all will be well. There’s an almost magical embracing of ignorance cloaked in humility: ‘It’s unknowable what the new jobs will be. It is beyond human wisdom. It would be arrogant to guess. I just know that they will be there.’ Oftentimes, the person who thinks all will be okay is guilty of constructive institutionalism — operating from a default stance that things will work themselves out.
This is, to my mind, a disavowal of judgment and reality. History repeats itself until it doesn’t. No one has an incentive to sound the alarm. To do so could make you seem uneducated and ignorant of history, and perhaps even negative and shrill. It also would make you right in this case.
There’s never been a computer smarter than humans until now. Self-driving cars are a different type of leap forward than the invention of cars themselves. Data is about to supplant human judgment. And on and on.
It’s important also to remember that things got quite rough during the Industrial Revolution; in America this is the period between 1870 and 1914 when factories and assembly lines absorbed millions of workers before WWI. There was considerable upheaval, and the role of the state evolved in response to unrest. Labor unions rose up in 1886 and pushed for increased worker rights, 40-hour work weeks, and defined pensions. Labor Day was inaugurated as a holiday in 1894 in response to a railway strike that killed 30 people and caused today’s equivalent of $2 billion in damages. The U.S. instituted universal high school; in 1910 only 19% of American teens were in high school, and barely 9% of 18-year-olds graduated. By 1940, 73% of teens were in high school and the median American graduated. The women’s suffrage movement culminated in success in 1920. Socialism, communism, and anarchism were all vital political movements. There was a constant whiff of revolution. Even if you rely solely on history, you’d expect a lot of conflict and change ahead as the labor pool shifts due to tech advances.”
Unemployment
“The test is not ‘Will there be new jobs we haven’t predicted yet that will appear?’ Of course there will be. The real test is ‘Will there be millions of new jobs for middle-aged people with low skills and levels of education near the places they currently reside?’”
“Successfully retraining large numbers of displaced workers would require a heroic number of assumptions to prove true. The government needs to be able to identify displaced workers over a range of industries and have both the resources to pay for mass retraining and the flexibility to accommodate individual situations. Each person needs to have the capacity and will to be retrained in an in-demand field. The government needs to be an effective disseminator of info to thousands of individuals in real time. The worker needs to actually learn new marketable skills from the course or school in question. Last, there need to be new employers in the region that want to hire large numbers of newly trained middle-aged workers as opposed to, say, younger workers.
All of the above will be true for some proportion of the displaced, but not for most of them. The reality is more often displaced workers spending government funds or racking up debt at the University of Phoenix or another for-profit institution in desperate bids to stay relevant and marketable.
We should 100% invest in successful retraining of employees. But we should also know that we’re historically very bad at it even in situations where we know displacement is happening. Expecting this to be effective over a large population over a range of industries is more wishful thinking than policy recommendation.”
“The unemployment rate is defined as how many people in the labor force are looking for a job but cannot find one. It doesn’t consider people who drop out of the workforce for any reason, including disability or simply giving up trying to find a job. If you get discouraged and stop looking for any reason, you’re no longer considered ‘unemployed.’ The unemployment rate also doesn’t take into account people who are underemployed — that is, if a college grad takes a job as a barista. The unemployment rate no longer serves as a reliable predictor of the numbers or proportion of people who aren’t working — or for that matter, for those who are working.
The proportion of Americans who are no longer in the workforce and have stopped looking for work is at a multi-decade high. There are presently a record 95 million working-age Americans, a full 37% of adults, who are out of the workforce. In 2000, there were only 70 million. The change can be explained in part by demographics — higher numbers of students and retirees — but there are still 5 million Americans out of the workforce who would like a job right now that aren’t considered in the unemployment rate. Both the historically low labor participation rate and broader measures like the ‘U-6’ rate that include underemployment show high levels of dislocation and a less healthy labor market, particularly for younger workers. The NY Federal Reserve recently measured the underemployment rate of recent college grads and came up with 44%.”
“If you look at the histories of layoffs, they maintain a fairly normal pace until a recession hits. Then employers go wild look for inefficiencies and throwing people overboard.
The real test of the impact of automation will come in the next downturn. Companies will look to replace their call centers with AI and hybrid bot-worker arrangements. Fast food CEOs will experiment with robot burger flippers. Freight companies will embrace cost savings. Large companies will question why their accounting and legal bills are so high. And on and on. Cost-cutting knives will come out, turbocharged by new automated tools. Productivity will then shoot up in the worst way possible as companies accomplish the same tasks with many fewer workers. Our public sector will also be faced with dramatic new needs even as tax revenues decrease.”
The Normal American
“The average Americans’ paychecks are not only modest but highly variable due to unpredictable shifts and being paid cash fees for hourly work like manual labor and babysitting. A study of tens of thousands of Chase customers saw average monthly income volatility of 30–40%/month for customers with annual incomes of $35k and even higher swings for people making less than that. They might make $2k one month, $3 the next, $1,800 the one after that, and so on. ‘Since the ’70s, steady work that pays a predictable and living wage has become increasingly difficult to find.’”
“Scarcity has a profound impact on one’s worldview. A psychologist and economist conducted a series of studies on the effects of various forms of scarcity on the poor. They found that poor and well-off people perform very similarly on tests of fluid intelligence, a generalized measurement that corresponds to IQ. But if each group was forced to consider how to pay an unexpected car repair bill of $3k just before taking the test, the poor group would underperform by the equivalent of 13 IQ points, almost one full standard deviation. Just having to think about how to pay a hypothetical expense was enough to derail their performance on a general IQ test and send them from ‘superior’ to ‘average’ or from ‘average’ to ‘borderline deficient.’ Activating scarcity through a hypothetical expense was also found to reduce correct responses on a self-control test from 83% to 63% among the less well-off participants, with no effect on the well-off.
A mindset of scarcity is more than just ‘stress’ — it actually makes one less rational and more impulsive by consuming bandwidth. In another study, two groups were asked to memorize either a two- or eight-digit number. They then presented the groups with both cake and fruit. The people who were preoccupied with trying to memorize the eight-digit number ate cake much more often. When an ethnic person served the study participants a repulsive traditional dish, the preoccupied group was more likely to be rude or make a racially insensitive comment. The group with the easy mental task had the bandwidth to restrain their reaction and maintain decorum.”
“Imagine a particularly busy day when you’re forced to skip lunch. By the afternoon you’re fiending for something to eat, but you’re in back-to-back meetings. Pretty soon you’re distracted and just thinking about whether anyone has a granola bar or if there’s a vending machine nearby instead of listening to what people are saying. Studies show that people on a diet are continuously distracted and fare worse on various mental tasks. The same goes for sleep-deprived people, lonely people, people with their phone on the table in front of them, and poor people who are asked to think about money.
Different forms of scarcity are often tied together. For example, if someone lacks the ability to pay for their car repair, they may have to figure out how to get to work via public transit, and then figure out if they will make it back in time to pick up their child from school, and whether that means they’ll need to arrange childcare, and so forth. When you’re poor, these many choices define your waking hours and become almost existential and all-consuming. Any money you choose to spend means that you’ll have less money to spend elsewhere, making every decision and calculation both important and taxing.”
“It’s one of the great perversions of automation that just when advancing tech should be creating more of a feeling of abundance for us all, it’s instead activating economic insecurity in most of the population. It’s quite plausible that as steady and predictable work and income become more and more rare, our culture is becoming dumber, more impulsive, and even more racist and misogynist due to an increased bandwidth tax as people jump from island to island trying to stay one step ahead of the economic tide. One could argue that it’s essential for any democracy to do all it can to keep its population free of a mindset of scarcity in order to make better decisions.”
“A culture of scarcity is a culture of negativity. People think about what can go wrong. They attack each other. Tribalism and divisiveness go way up. Reason starts to lose ground. Decision-making gets systematically worse. Acts of sustained optimism — getting married, starting a business, moving for a new job — all go down. If this seems familiar, this is exactly what we’re seeing by the numbers here in America. We’re quickly transitioning from the land of plenty to the land of ‘you get yours, I get mine.’”
When Jobs Disappear
“When jobs leave a region, things go downhill pretty fast. Youngstown, Ohio, is a poster child for postindustrial cities hit by job loss. The city rose to prominence as a hub of steel manufacturing in the early-to-mid 20th century, with two major steel mills in the city that supported thousands of workers. The population grew from 33k in 1890 to 170k in 1930 as the industry boomed. Good jobs were so abundant that Youngstown had one of the highest median incomes in the country and was fifth in the nation in homeownership — it was known as the ‘city of homes.’ The city’s steel industry was considered pivotal to national security; when union workers threatened to strike during the Korean War in 1952, President Truman ordered the mills seized by the government to keep production high.
For most of the 20th century, Youngstown’s culture was proud and vibrant. Two major department stores occupied downtown, as did four upscale movie theatres. The city organized an annual ‘community chest’ to help the needy. Steelwork was central to the city’s identity — a local church featured an image of a mill worker with the quote ‘The voice of the Lord is mighty in operation.’
The steel industry began to face global competition throughout the 60s and 70s. The mills merged with a steamship company based in New Orleans in 1969. The mills were not reinvested in as corporate ownership left the city — the workers knew that their mills were not state-of-the-art and continuously agitated for more investment. Then, on ‘Black Monday,’ September 19, 1977, Youngstown Sheet and Tube announced that it was closing its large local mill. The other major mill followed suit. Within five years, the city lost 50,000 jobs and $1 billion in manufacturing wages. Economists coined the term ‘regional depression’ to describe what occurred in the Youngstown area.
Local church and union leaders organized in response to the mill closings, forming a coalition that included national outreach, a legislative agenda, and occupying corporate HQs in protest. They succeeded in prompting Congress to pass a law saying that plant shutdowns should have more notice. They tried to engineer a worker takeover of one of the mills. Government loan programs made it possible for some ex-steelworkers to attend Youngstown State to retrain.
These efforts were largely futile at preserving residents’ way of life. The mills stayed closed and local unemployment surged to Depression-era levels of 25% by 1983. A record number of bankruptcies and foreclosures followed, as property values plummeted. Arson became commonplace, with an average of two houses per day lit on fire through the early 80s, in part by homeowners trying to collect on insurance policies. The city was transformed by a psychological and cultural breakdown. Depression, child and spousal abuse, drug and alcohol abuse, divorces, and suicide all became much more prevalent; the caseload of the area’s mental health center tripled within a decade. During the 90s, Youngstown’s murder rate was eight times the national average, six times higher than New York’s.
Through the 90s, local leaders kept seeking new opportunities for economic development. First it was warehouses. Then telemarketing. Then minor league sports.Then prisons — four were built in the region, which added 1,600 jobs but brought other issues. Many residents were considered about the perception of Youngstown as a ‘penal colony.’ One prison run by a private corporation was so lax that six prisoners, including five convicted murderers, escaped at midday in 1998 and officers didn’t notice until notified by other inmates. The prison company apologized and paid the city $1 million to account for police overtime capturing the escapees. Another prison run by the county was forced to release several hundred prisoners early in 1999 because of inadequate staffing and budget shortfalls. In 1999, a 20-year investigation convicted over 70 local officials of corruption, including the chief of police, the sheriff, the county engineer, and a congressman.
In 2011, the Brookings Institution found that Youngstown had the highest percentage of its citizens living in concentrated poverty out of the top 100 metro areas in the country. In 2002, the city unveiled the ‘Youngstown 2010’ plan, an attempt at ‘smart shrinkage’ through targeted investment and relocating people from low-occupancy areas to more viable neighborhoods. The media touted the plan as a blueprint for postindustrial areas. Yet, it proved to be hard to execute — the city didn’t succeed in meaningfully relocating citizens and failed to complete its demolition plan.
Youngstown has been the fastest shrinking city in the U.S. since 1980. The population was down to 82k in 2000; today it’s about 64k. ‘Youngstown’s story is America’s story, because it shows that when jobs go away, the cultural cohesion of a place is destroyed. The cultural breakdown matters more than the economic breakdown,’ said a professor of labor studies.
Many young people left Youngstown to look for better opportunities elsewhere. Those who stayed around will likely end up doing the same.”
“Gary is another steel town that lost jobs when the mills closed. It was the hometown of the Jacksons back in the ’60s and many locals describe growing up there as ideal. After its decline, it became known as a murder capital, reaching #1 in per capita homicide rate in the U.S. in 1993. In 1992, 20 local police officers were indicted on federal charges of racketeering and drug distribution. In 1996, in a bid for new jobs, the city welcomed two casino boats and legalized gaming on the shore of Lake Michigan. In 2003, the city invested $45 million in a minor league baseball stadium meant to revitalize the economy, to disappointing results. In 2014, a serial killer confessed to killing at least seven people in Gary and depositing bodies in abandoned houses. Today almost 40% of residents live in poverty, and more than 25% of the city’s 40,000 homes are abandoned. The city lacks the money to demolish derelict properties and is considering cutting off services to many neighborhoods. Its population peaked at 173k in 1960 and is down to 77k as of 2016.”
“In places where jobs disappear, society falls apart. The public sector and civic institutions are poorly equipped to do much about it. When a community truly disintegrates, knitting it back together becomes a herculean, perhaps impossible task. Virtue, task, and cohesion — the stuff of civilization — are difficult to restore. If anything, it’s striking how public corruption seems to often arrive hand-in-hand with economic hardship.
It’s the same in business. In a growing org, people are more optimistic, imaginative, courageous, and generous. In a contracting environment, people can become negative, political, self-serving, and corrupt. You see the lesser side of human nature in most startups that fail. The same is true for communities, only amplified.”
Inequality Between Cities
“Imagine living somewhere where your best people always leave, where the purpose of excelling seems to be to head off to greener pastures. Over time it would be easy to develop a negative outlook. You might double down on pride and insularity. Since 1970 the difference between the most and least educated U.S. cities has doubled in terms of average level of education — that is, more and more educated people are congregating in the same cities and leaving others.
Business dynamism is now vastly unevenly distributed. 59% of American counties saw more business close than open between 2010 and 2014. During the same period, only five metro areas — NYC, LA, Miami, Houston, and Dallas — accounted for as many new businesses as the rest of the nation combined. California, New York, and Massachusetts accounted for 75% of venture capital in 2016, leaving 47 states to compete for the remaining 25%. Historically, virtually all American cities had more businesses open than close in a given year, even during recessions. After 2008, that basic measurement of dynamism collapsed. A majority of cities had more businesses close than open, and this has continued to be the case for seven years after the financial crisis.”
“The atmosphere is quite different from Silicon Valley in mid-sized cities like Cincinnati or Baltimore, which are typically anchored by a handful of national institutions — P&G, Macy’s, and Kroger in Cincinnati, or Johns Hopkins, T. Rowe Price, and Under Armour in Baltimore. These regions are generally in a state of equilibrium, with the anchor institutions investing in community growth while orgs rise and fall around them. Costs are average. When new construction appears, everyone knows what it is because there have been tons of news stories about it. Occasionally one of the major companies in the region starts to stumble, and the locals start to freak out. People move to these cities to work at one of the big companies, but a high proportion of the residents and workers were born in the region. If you grew up in Cincinnati or Baltimore and go to college, you’ll likely think long and hard about leaving. The vibe in these cities is pleasantly gritty — a blend of normalcy, functionality, and affordability.”
Marriage & Family
“Five million manufacturing jobs were lost in the U.S. between 2000 and 2014. Almost 3/4 of manufacturing workers are male, so these changes disproportionately affect men without college degrees. The decline in opportunities for men has made working-class men less likely to marry. A study showed that when manufacturing work becomes less available, the proportion of men who get married in an affected community declines. Average male wages have declined since 1990 in real terms. A Pew research study showed that many men are foregoing or delaying marriage because they don’t feel financially secure. The same study said that, for women, having a steady job was the single biggest factor they were looking for in a spouse.
Getting married is an act of optimism, stability, and prosperity. It can also be expensive. If you don’t have a stable job all of the above becomes more difficult. Marriage has declined for all classes in the past 40 years, with the decline being most extreme among the non-college educated. The proportion of working-class adults who get married has plummeted from 70% in 1970 to only 45% today. The decline really accelerated in 2000, around the same time as manufacturing jobs started to disappear.”
There’s a host of reasons for the decline of marriage. Some cite increased labor force participation and more options for women, who are now less reliant on men. Others discuss it in light of shifting cultural norms. However, the reduction in opportunities for working-class men is doubtless contributing to fewer people getting married. The problems among men have been well documented. One in sex men in America of prime age (25–54) are either unemployed or out of the workforce — 10 million men in total.”
“Lower rates of marriage mean that the proportion of children raised by a single parent is rising dramatically; though fertility is declining, people don’t stop having children just because they don’t get married. The share of children born to unmarried mothers more than doubled between 1980 and 2015, from 18% to 40%.
Single mothers outnumber fathers more than four to one. Of the 11 million families with children under age 18 and no spouse present, 8.5 million are single mothers. If you send uneducated men to the sidelines and turn them into nonproviders, you wind up forming many difficult family situations and parents who then are hard-pressed to raise their kids.
Boys raised in single-parent households seem to suffer more than girls. A study showed that growing up with stably married parents makes one more likely to succeed at school, but that an absent father had a bigger impact on boys. Boys without fathers are more likely to get in trouble from elementary school onward, and appear to be ‘more responsive to parental inputs (or the absence thereof) than are girls.’ As the authors of one study put it, ‘As more boys grow up without their father in the home, and as women (especially in working-class communities) are viewed as the more stable achievers, boys and girls alike come to see males as having a lower achievement orientation and less aptitude for higher education…college becomes something that many girls, but only some boys, do.’ Working-class boys do much worse in school because they view schoolwork as a feminine endeavor.”
“Disability” Benefits
“Hand-in-hand with the spike in suicides and addiction has been the incredible increase in applications to Social Security disability programs. Almost nine million working-age Americans receive disability benefits. That’s more than the entire population of New Jersey or Virginia. The percentage of working-age Americans who received disability benefits was 5% in 2017, up from only 2.5% in 1980. Disability applications started surging in 2000, the same year that manufacturing employment started to plummet. The average benefit size in June 2017 was $1,200/month, at a total cost of about $143 billion/year. The age of the disabled has gone down — in 2014, 15% of men and 16% of women in their 30s or early 40s were on disability, up from 7% and 6% in the 1960s.”
Rates of disability track areas of joblessness, forming ‘disability belts’ in Appalachia, the Deep South, and other regions. In a couple of counties in Virginia, fully 20% of working adults ages 18–64 are now receiving disability benefits. West Virginia, Alabama, Arkansas, Kentucky, and Mississippi are the top five states for disability beneficiaries, with 8–9% of the workforce receiving income replacement. Disability payments received by beneficiaries in these five states exceed $1 billion/month. In these areas, disability benefits are so widespread that the day that checks arrive is like a monthly holiday. Said one West Virginian who processed disability claims, ‘They’re a vital part of our economy. A lot of people depend on them to arrive. [On the days checks arrive] you avoid the pharmacy. You avoid Wal-Mart. You avoid, you know, restaurants…Everybody’s received their benefits. Let’s go shopping.’
Some of the increasing rates of disability reflect an aging population and changing demographics. But many of them represent what one expert called ‘economic disability.’ The biggest growth categories of disability are ‘mental disorders’ and ‘MSK and connective tissue,’ which together now compromise about 50% of disability claims, nearly double what they were 20 years ago. These diagnoses are also the hardest to independently verify for a doctor.
The number of people who applied for disability benefits in 2014 was 2.5 million. On any given business day, there’s 9,500 applicants. There are 1,500 disability judges around the country who administer the decisions, often without seeing the claimants. The waiting period to get a hearing is now more than 18 months in most states. To apply for disability, applicants must gather evidence from medical professionals. They compile notes from doctors, send in the info, and wait to hear back. No lawyer representing the government cross-examines them. No government doctor examines them. About 40% of the claims are ultimately approved, either initially or on appeal. The lifetime value of a disability reward is about $300k for the average recipient.
Because the stakes are so high, representing claimants has become a big business. Law firms regularly advertise for clients on late night TV to help them navigate the process and collect a fee, typically a percentage of the award. 80% of appealing claimants are represented by counsel, up from less than 20% in the 70s. One law firm generated $70 million in revenue in one year alone from representing disability claimants.
After someone’s on disability, there’s a massive disincentive to work, because if you work and show that you’re able-bodied, you lose benefits. As a result, virtually no one recovers from disability. The churn rate nationally is less than 1%. Social Security Disability Insurance today essentially serves as an unemployment insurance around the country. It’s not designed for this, but that’s what it is for hundreds of thousands of Americans.
One judge who administers disability decisions said that ‘if the American public knew what was going on in our system, half would be outraged and the other half would apply for benefits.’”
“People in Ohio became angry that they were working hard and scraping by while others were doing nothing and living off of government checks. He cites this resentment toward government handouts as an explanation for why regions like Ohio have become more Republican.
The numbers have grown to a point where more Americans are currently on disability than work in construction. In 2013, 57% of prime-age men 25–54 who were not in the workforce reported receiving disability payments. Though the numbers have stabilized as more people in this age group have moved into Social Security retirement, they’re already way beyond what anyone intended. The fund for disability insurance recently ran out and was combined with the greater Social Security fund, which is itself scheduled to run out of money in 2034.
The fact that a program designed for a relatively small number of Americans has now become such a major lifeline for people and communities is part of the Great Displacement. We pretend that our economy is doing all right while millions of people give up and ‘get on the draw’ or ‘get on the check.’ It’s a $143 billion per year shock absorber for the unemployed or unemployable, whose ranks are growing all the time. After one gets on disability, one enters a permanent shadow class of beneficiaries. Even if you start feeling better, you’re not going to risk a lifetime of benefits for a tenuous job that could disappear at any moment. And it’s likely easier to think of yourself as genuinely disabled than as someone cheating society for a monthly draw.
Many Americans, disabled or not, have some degree of health problems. If you’ve got a good job, you might ignore your hurt back or, if you’re job offers health insurance, have access to an affordable way to treat it and continue working. If you don’t have a job and the stress starts to mount, you can easily start to feel more infirm. This is doubly true in environments where work is mostly manual and involves a lot of wear and tear. For many, the chain of circumstance is to go from former manufacturing worker to disability recipient. The other major refuge has been retail jobs. After these jobs disappear, the ranks of the disabled will swell.
Disability illustrates the challenges of mandating the government to administer such a large-scale program. It’s essentially the worst of all worlds, as the truly disabled and needy may find themselves shut out by red tape, while the process rewards those who lawyer up and the lawyers themselves. It sends a pervasive message of ‘game the system and get money’ and ‘think of yourself as incompetent and incapable of work.’ It’s subject to fraud. And once you’re on, you never leave.”
From Working to Video Games
“As of last year, 22% of men 21–30 with less than a bachelor’s degree reported not working at all in the previous year — up from only 10% in 2000. And there’s evidence that video games are a big reason why. According to a recent study based on the Census Bureau’s time-use surveys, young men without college degrees have replaced 75% of the time they used to spend working with time on the computer, mostly playing video games. From 2004 to 2007, young, unemployed men without college degrees were spending three hours per week playing video games. By 2011 to 2014, the average time spent per week had tripled to nine hours.
The economists conducting the study strained to figure out whether men who were already detached were playing video games to pass the time, or whether video games were actually causing them to drop out. Evidence pointed to the latter. Their research indicated that improved technological entertainment options, primarily video games, are responsible for 20–33% of reduced work hours. The trends are different for women, who have not seen the same increase in gaming at the expense of work hours and are more likely to return to school when out of work. For many men, however, games have gotten so good that they have made dropping out of work a more appealing option.”
“How exactly are these game-playing men getting by? They live with their parents. In 2000, just 35% of lower-skilled young men lived with family. Now, more than 50% of them live with their parents, and as many as 67% of those who are unemployed do so. More U.S. men 18–34 are now living with their parents than with romantic partners, according to Pew.
Video games function as an extremely inexpensive entertainment on a time-use basis. After one invests in a console or computer, the marginal cost is near zero. Gamers can log hundreds or thousands of hours for the cost of one game or rental subscription. Time spent gaming is what’s known in economic terms as ‘inferior good’ — the poorer you are, the more if you consume. Recent studies have found that households making $25-$35k/year spent 92 more minutes per week online than households making $100k+/year.
The image of legions of men in their parents’ basements playing video games for hours on end may seem pathetic or sad. But their satisfaction level is high. ‘Happiness has gone up for the group,’ despite the high level of unemployment.”
“Playing video games as a pseudo-job that doesn’t pay can be fun, social, and even cool in your teens and 20s. By the time you’re in your 30s, your friends may have moved on and you become the loser shut-in who lurks around the local GameStop. ‘There’s some evidence that these young, lower-skilled men who are happy in their 20s become much less happy in their 30s and 40s.’ Their work skills and prospects will be limited, and competing in the workforce will be harder and harder. To the extent they ever wanted to go out and start a family, it may seem more and more unrealistic and out of reach. They’re likely to stay detached, and may drift from video games to gambling, drugs, and alcohol. Indeed, the most recent General Social Survey showed that 31% of working-age men who are out of the workforce admitted to illegal drug use in the past year.”
A Coming Revolution?
“Even the most hard-nosed businessperson should recognize that the gains and losses from unprecedented tech advances will have dramatic sets of human winners and losers, and that the system needs to account for that in order to continue. Capitalism doesn’t work that well if people don’t have any money to buy things or if communities are degenerating into scarcity, anger, and despair. The question is, what is to be done?
If we do nothing, society will become dramatically bifurcated on levels we can scarcely imagine. There will be a shrinking number of affluent people in a handful of megacities and those who cut their hair and take care of their children. There will also be enormous numbers of increasingly destitute and displaced people in decaying towns around the country that the trucks drive past without stopping. Some of my friends predict a violent revolution if this picture comes to pass. History would suggest that this is exactly what will happen.
America has been getting less violent in most measurable ways — violent crimes and protests are all less common than in the past, even though it doesn’t seem like it. For example, there were approximately 2,500 leftist bombings in America between 1971 and 1972, which would seem unfathomable today. It’s possible that we may already be too defeated and opiated by the market to mount a revolution. We might just settle for making hateful comments online and watching endless YouTube videos with only the occasional flare-up of violence amid many quiet suicides.
Yet, it’s almost certain that increasing levels of desperation will lead to destabilization. One can imagine a single well-publicized kidnapping or random heinous act against a child of the privileged class leading to bodyguards, bulletproof cars, embedded safety chips in children, and other measures. The rich people I know tend to be somewhat paranoid about their own safety and that of their families. To me, without dramatic change, the best-case scenario is a hyper-stratified society like something out of The Hunger Games or Guatemala with an occasional mass shooting. The worst case is widespread despair, violence, and the utter collapse of our society and economy.
This viewpoint may strike some as extreme. Consider, though, that trucking protests were common in the final days of the Soviet Union, a large unemployed group of working-age men is a common feature in Middle Eastern countries that experience political upheaval, and there’s approximately 270–310 million firearms in the U.S., almost one per human being. We are the most heavily armed society in the history of mankind — disintegration is unlikely to be gentle. The unemployment rate at the height of the Great Depression was about 25%. Society experiences fractures well before all the jobs disappear.
The scholar Peter Turchin proposes a structural-demographic theory of political instability based on societies throughout history. He suggests that there are three main preconditions to revolution: 1) elite oversupply and disunity, 2) popular misery based on falling living standards, and 3) a state in fiscal crisis. He uses a host of variables to measure these conditions, including real wages, marital trends, proportion of children in two-parent households, minimum wage, wealth distribution, college tuition, average height, oversupply of lawyers, political polarization, income tax on the wealthy, visits to national monuments, trust in government, and other factors. Turchin points out that societies generally experience extended periods of integration and prosperity followed by periods of inequity, increasing misery and political instability that lead to disintegration, and that we’re in the midst of the latter. most of the variables that he measures began tracking negatively between 1965 and 1980 and now are reaching near-crisis levels. By his analysis, ‘the U.S. right now has much in common with the Antebellum 1850s [before the Civil War] and, more surprisingly, with France on the eve of the French Revolution.’ He projects increased turmoil through 2020 and warns that ‘we are rapidly approaching a historical cusp at which American society will be particularly vulnerable to violent upheaval.’
If there’s a revolution, it’s likely to be born of race and identity with automation-driven economics as the underlying force. A highly disproportionate number of the people at the top will be educated whites, Jews, and Asians. America is projected to become majority minority by 2045. Black and Latinx people will almost certainly make up a disproportionate number of the less privileged in the wake of automation. Racial inequality will become all the more jarring as the new majority remains on the outside. Gender inequality, too, will become more stark, with women comprising the clear majority of college grads yet still underrepresented in many environments. Less privileged whites may be more likely to blame people of color, immigrants, or shifting cultural norms than they will automation and the capitalist system. Culture wars will be proxy wars for the economic backdrop.
This is already happening. Author Alec Ross described the Freddie Gray riots in 2015 as partially a product of economic despair. The protests injured 20 officers, resulted in 250 arrests, damaged 300 businesses, caused 150 vehicle and 60 structure fires, and led to the looting of 27 drugstores. ‘While the triggering event was the death of a man in policy custody, the protesters themselves consistently rooted their cause and rallying cry in more than police brutality. It was about the hopelessness that came from growing up poor and black in a community that had been laid to waste with the loss of Baltimore’s industrial and manufacturing base and then gone ignored. Black working-class families had effectively been globalized and automated out of jobs.’ The Charlottesville violence in 2017 over the removal of Confederate symbols can also be seen as engendered in part by economic dislocation. The driver of the car that plowed into the crowd, killing a young woman, was from an economically depressed part of Ohio and had washed out of the military.”
“Truck drivers will soon start to lose their jobs or have their wages reduced. Let’s imagine that one owns a small trucking company with 10 trucks and 30 drivers. He sees his life savings about to go down the tubes because he owes the banks hundreds of thousands of dollars in loans he took out to buy his vehicles. He says to his guys, ‘Fuck this. We can’t be replaced by robot trucks. Let’s go to Springfield and demand our jobs back.’ He leads a protest in Illinois and hundreds of truckers join in, some of them bringing their vehicles and blocking roads. The police respond but are reluctant to use force. The crowds multiply as more drivers and rioters arrive.
Inspired by what they see on social media, truckers begin to protest in other state capitals in the tens of thousands. The National Guard is activated and the president calls for calm, but disorder grows. Various antigovernment militias and white nationalist groups say, ‘This is our chance,’ and arrive in each state to support the truckers. Some of them bring various weapons, and violence breaks out break. Locals take advantage of the police preoccupation in these areas and begin looting drugstores nearby.
The president calls for a return to order and says he’ll meet with the truckers. However, the protests morph into many distinct conflicts with unclear demands and fragmented leadership. The riots rage for several weeks. In the aftermath, there’s dozens dead, hundreds injured and arrested, and billions of dollars’ worth of property damage and economic harm. Images of the violence spread on the Internet and are seen by millions in real time.
After the riots, things continue to deteriorate. Hundreds of thousands stop paying taxes because they refuse to support a government that ‘killed a working man.’ A man in a bunker surrounded by dozens of guns releases a video saying, ‘Come and get your taxes, IRS man!’ that goes viral. Anti-Semitic violence breaks out targeting those who ‘own the robots.’ A white nationalist party arises that openly advocates ‘returning American to its roots’ and ‘traditional gender roles’ and wins several state races in the South. Graffiti and literature for the new party appear on college campuses, which leads to protests and sit-ins. A shooter arrives in the lobby of an SF tech company and wounds several people. Several tech companies move to Vancouver, citing a desire for employee safety. The California secession movement surges as state officials move to protect the border and implement checkpoints.”
Universal Basic Income
“The cost of $1 trillion seems like an awful lot. For reference, the federal budget is $4 trillion and the entire U.S. economy about $19 trillion. But there’s myriad ways to pay for it. The most sensible way to pay for it in my view would be with a value-added tax (VAT) — a consumption tax — that would generate income from the people and businesses that benefit from society the most.
Here’s the challenge: We need to extract more of the value from automation in order to pay for public goods and support displaced workers. But it turns out that ‘automation’ and ‘robots’ are very tricky things to identify or tax. If CVS replaces a cashier with self-checkout and an iPad, is that considered automation? Or if a bank replaces 200 call center employees with a software program, what do they pay? Assuming appropriate staffing levels is impossible.”
“The best way to ensure public gains from the automation wave would be a VAT so that people and companies just pay the tax when they buy things or employ services. For businesses, it gets baked into the cost of production at every level. It makes it much harder for large companies, which are experts at reducing their taxes, to benefit from the American infrastructure and citizenry without paying into it. The biggest companies, like Amazon, would pay the most into the system because a VAT gets paid based on volume, not profits. It would also make it so that we’d all root for progress — the mechanic in Appalachia would feel like he’s getting a stake every time someone gets rich.
Out of 193 countries, 160 already have a VAT or goods and services tax, including all developed countries except the U.S. The average VAT in Europe is 20%. It’s well-developed and its efficacy has been established. If we adopted a VAT at half the average European level, we could pay for a universal basic income for all American adults.
A VAT would result in slightly higher prices. But tech advancement would continue to drive down the cost of most things. And with the backdrop of a universal basic income of $12k, the only way a VAT of 10% makes you worse off is if you consume more than $120k in goods and services per year, which means you’re doing fine and are likely to be at the top of the income distribution. Businesses will benefit immensely from the fact that their customers will have more money to spend each month — most Americans will spend the vast majority of their money locally.
The hedge fund billionaire who spends $10 million/year on private jets and fancy cars will pay $1 million into the system and receive $12k. The single mom will pay about $2,500 and receive $12k, and will also have the peace of mind that her child will start receiving $1k/month when they graduate from high school.
For people who consider this farcical, consider the bailouts that took place during the financial crisis. You may not recall that the U.S. printed over $4 trillion in new money for its quantitative easing program following the ’08 financial crisis. This money went to the balance sheets of the banks and depressed interest rates. It punished savers and retirees. There was little to no inflation.
We did this nominally so that banks would lend money to businesses, who would then create jobs and shore up the economy. In practice, most of the money went to the balance sheets of the banks and to inflate asset bubbles all over the country, primarily in assets like Manhattan and Silicon Valley real estate and the stock prices of private companies like Uber and Airbnb. Many human beings did get rich from the money printing bonanza, but they were people among the best situated, not the least. We did this because we believed in institutions far more than we believe in our people.”
“It’s hard to fathom now, but the idea of a guaranteed annual income was mainstream political wisdom in the U.S. in the late 60s and early 70s. Medicare and Medicaid had just been passed in 1965, and the country had an appetite for solutions for social problems. In 1968, over 1,000 economists signed a letter supporting a guaranteed annual income. In 1969, Nixon proposed the Family Assistance Plan, which would provide cash benefits of $10k/family and serve as a guaranteed annual income with some eligibility requirements; this bill was supported by 79% of respondents polled at the time. The Family Assistance Plan passed the House by a wide margin but then stalled in the Senate due to, of all things, Democrats who wanted an even more robust plan. A Democratic congressman instead proposed an income floor equivalent to $33k today, and the original bill would be argued and reproposed for years thereafter.
The U.S. government funded a number of studies between 1968 and 1975 to gain insight into how guaranteed income would impact individual families. The primary agenda was to see whether people would keep working if they were getting money from the government with no strings attached. A New Jersey experiment gave cash payments to more than 1,300 families between 1968 and 1971 to get above the poverty line. Researchers found minimal impact on work — men worked one hour less per week, while women reduced their work weeks by five hours. Mothers spent more time with their children, whose performance at school improved. High school grad rates rose substantially over the period, by as much as 30%.
Similar studies were rolled out across the country, with similar results. However, the most rigorous and generous study in Denver and Seattle found work hour decreases of 9% for men, 20% for wives, and 14% for single mothers. The Denver study also showed an increase in marriage dissolution, which surprised a lot of people and helped arm opponents of the legislation, who defeated it for good in 1978. In 1988, scholars went through the data and found that the effect on marriage was dramatically overrated based on an erroneous model. Other scholars later questioned the work decrease as based on self-reported hours. But by that time, the debate had passed.
The U.S. studies never tried to measure communal impact. Canada tried it all in one small town. In 1974, Canada spent the equivalent of $56 million to get everyone in the town of Dauphin, a 13k-person town northwest of Winnipeg, above the poverty line. 1,000 families got a check each month of different amounts with no restrictions. They called it ‘Mincome,’ short for minimum income. It last for four years, before a conservative government won control of the government and discontinued payments.
Many years later, in 2005, an economist tracked down and analyzed the results. She found that the only groups who worked substantially less were new mothers and teens, with the latter spending more time in school. Birth rates for women under 25 dropped. High school grad rates went up. Perhaps most dramatically, hospital visits went down 9%, with reductions in workplace injuries and ER visits. Domestic violence went down as did mental illness-related appointments and treatments. Basically, life got significantly better in a town without poverty.”
“It may be hard to believe, but one U.S. state has had something resembling a UBI for decades. In Alaska in 1976, the state started receiving billions in oil revenue from state-owned land. The Republican governor had an innovative plan — he pushed to place the revenue in a fund that would then pay out part of its earnings to state residents each year. He insisted that this fund had ‘a conservative political purpose’ by putting a brake on government spending and distributing more of the money directly to people.
The Alaska Permanent Fund accrued earnings and started paying dividends in 1982. Each Alaskan now receives a petroleum dividend between $1–2k per person/year; a family of four received more than $8k in 2015. The dividend reduces poverty by 1/4 and is one reason that Alaska has the second lowest income inequality in the country. Studies have shown that the dividend has increased average infant birthweight and helped keep rural Alaskans solvent. It has also created at least 7k jobs due to the increased economic activity each year. The program, now in its 36th year despite numerous changes in government, is overwhelmingly popular. 64% of respondents said that they would accept higher taxes if necessary to fund the dividend.”
“In 1995, researchers began tracking the personalities of 1,400 low-income kids in North Carolina. Then, something unexpected happened — 25% of their families started receiving $4k/person. They were Cherokees, and a casino had just been built nearby, with earnings flowing to tribal members. This development turned into a research treasure trove. Randall Akee, a UCLA economics professor, found that the impact of the extra cash actually impacted the children’s personalities over the years. Behavioral and emotional disorders went down. Two personality traits became more pronounced — conscientiousness and agreeableness. Both correlate strongly with holding a job and maintaining a steady relationship. These changes were most significant among children who started out the most deficient.
Akee surmised that the impact was due in part to less stressful environments. Relationships between spouses improved. Alcohol consumption went down. ‘We know that the thing poor couples fight about the most is money,’ said Akee. ‘In order to change outcomes among children, you’re best off treating the parents,’ said a Johns Hopkins economics professor who studied the same families.”
In 2008, Harvard grad students studying international development and doing fieldwork overseas visited Kenya, and everywhere they looked they saw misspent aid dollars in the forms of abandoned water pumps, unused clothing, and the like. They become convinced that more than food, bed nets, schoolbooks, sports equipment, cows, water jugs, or anything else, the people wanted cash. That summer, they gave a few thousand dollars of their own money to poor villagers and started to measure results. They found that among cash recipients, domestic violence rates dropped, mental health improved, and people started eating better.
They stuck with the idea and expanded it. In 2012, Google.org contributed $2.5 million to further their efforts. The more the pair measured, the more dramatically positive the results were. People started businesses. Children weighed more. Girls went to school more often. Women had more independence. It turns out that giving cash is very effective. Unlike most orgs, they documented all of their results and brought them back to show the world.
Since then, GiveDirectly has raised more than $120 million, in part to enable new ways to distribute money in developing countries. In 2016 they announced a $30 million 12-year basic income trial in a region in western Kenya. The Guardian wrote, ‘[Orgs] that ask for money on behalf of the poor should be able to prove they can do more good with it than the poor themselves.’”
“Today, economic inequality, frayed job markets, and the early signs of automation have produced a massive surge of enthusiasm for UBI worldwide. Finland started a two-year trial in 2017 in which 2k unemployed people 25–28 receive a basic income of $660/month with no strings attached. India’s actively considering implementing a modest basic income nationally in the next year after studies showed it would be more efficient than their existing programs. Canada’s giving 4k participants in Ontario grants of up to $13k for individuals and $19k for couples from 2017–2020 and measuring results. The Netherlands and Scotland are each running a small trial.
Iran implemented a full-blown equivalent of UBI in 2011 of approximately $16k/year in response to heavy cuts to oil and gas subsidies. Economists measured labor rates and found no reduction in hours worked — if anything they found people in the service industry expanded their businesses. This is hugely indicative because of the enormous sample size — Iran has 80 million people, equivalent to the combined total of NY, CA, and FL — over an extended period of time.”
“Money has to come from somewhere. We’re used to the government spending billions wastefully to no great effect. Trying to raise taxes is a tough assignment in any climate.
What’s fascinating is that a UBI doesn’t actually grow the government. It’s almost cost-free to administer. It doesn’t build a new bureaucracy. It’s less an expenditure and more a transfer to citizens so they can use it to improve their lives, pay each other, patronize local businesses, and support the consumer economy. Instead of hiring a new army of government employees, every dollar will be put into the hands of an American citizen and then largely spent within the American economy.
By definition, none of the money would be wasted because it goes to citizens. It’s analogous to a company giving dividends to shareholders. No one regards that was a waste of money, because the shareholders theoretically are the owners of the company. Are we not, as citizens, the owners of this country?
As a country, we’re easily wealthy enough to manage even a full UBI. Our economy has grown by more than $4 trillion in the past 10 years alone. The U.S. dollar remains the global reserve currency. We’re the most technologically advanced society in human history, and increased automation will allow our economy to grow well past its current level.
Not only that, but we’ll get a lot of the money back through new businesses and economic activity, better educational outcomes, improved health and preventative care, better mental health, reduced crime and incarceration, reduced services for homelessness, and many other social benefits.
You know what’s really expensive? Dysfunction. Revolution. Keeping people and families functional will largely pay for itself.”
“All of the available data shows that work hours stay stable or at most decrease modestly with a basic income. To the extent that people spend less time working, they tend to be young moms and teens, whom we might not mind working a little less if they’re taking care of kids or going to school.
There are two completely oppositional ideas that many people seem to hold simultaneously. First, work is vital and the core of the human experience. Second, no one will work if they don’t have to. These two ideas are at complete odds with each other. Either work is a core of the human experience and we’ll do it even if we don’t necessarily have to, or work is something we have no interest in doing and we only do it to survive.
Setting a Freedom Dividend of $12k/year would enable one to barely scrape by. Anyone who wants to accomplish anything, buy something nice, or build a better life for their children will still have to work. $12k/year is the equivalent of having $300k in savings and then living off the passive income.”
“If you reflect on your own costs, most things that are subject to economic competition, globalization, and tech have gotten either much cheaper or much better or both. I can’t believe how cheap clothing has become — $8 tshirts and $15 pants at H&M make me feel guilty for buying them. Cars cost the same in nominal terms as when I was growing up even though they feel like spaceships compared to my old cruddy Honda. Music, movies, and most forms of entertainment are cheaper than ever, particularly adjusted for inflation.”
“During the Great Depression, the U.S. government hired 40k recreation officers and artists at a cost of $3 billion — about $47 billion today — to make more things more enjoyable and keep people engaged. That would be the equivalent of hiring about 100k people to go to towns around the country today based on how much our population has grown since then. This strikes me as something of an upper limit of what the government could do specifically for the purpose of citizen engagement. Areas of instruction during the Great Depression included single-sex sports and games, arts and crafts, music, dramatics, book readings, discussion groups, hiking parties, woodwork, metalwork, furniture making, glee clubs and orchestras, and lectures on hygiene, diet, and even social etiquette.
Reading that list makes one yearn for a simpler time. A better approach today would be to try to supercharge the existing interests and opportunities of businesses, people, and local orgs. A UBI would go a long way in this direction. For example, let’s imagine a local nonprofit providing after-school recreation for underprivileged kids. It has five employees making $30k/year now. With a UBI, they might be able to hire seven employees at $21k/year instead, a 40% increase in staffing, because people with a level of financial security might take the job for less. The same would go for a school’s ability to utilize volunteers to provide teacher support, a church’s ability to enlist mentors, and so on. A UBI will bring down the average wage rate for attractive, intrinsically rewarding work. The fun things that people want to do that are socially and personally rewarding will pay less, but many more people will want to do them anyway. Jobs and purpose will in part be provided by more people teaching children, coaching others, caring for loved ones, and the like.
There’ll also be a dramatic expansion of painting, making music, shooting videos, playing sports, writing, and all of the creative pursuits many Americans would love to try, but can’t seem to find the time for today. Many people have some artistic passion that they would pursue if they didn’t need to worry about feeding themselves next month. A UBI would be perhaps the greatest catalyst to human creativity we’ve ever seen.
Perhaps most crucially, endless new businesses would form. If you’re in a town of 5k people in Missouri and everyone is struggling to get by, starting, say, a bakery would not be that attractive. But with a UBI, there’ll be an additional $60 million being spent in that town next year. You personally will have an income to fall back on if the bakery doesn’t work out. Now, the bakery may strike you as a great idea. Getting your friends and family excited about it would be a lot easier, too. This would play out over and over again throughout the economy, resulting in millions of new jobs — 4.7 million according to the Roosevelt Institute’s analysis. A UBI would address a significant proportion of the lack of work through increased humanity, caring, creativity, and enterprise.”
The Digital Social Credit
“There aren’t many job opportunities for Ted nearby, and he doesn’t want to move. Thanks to his savings, the Freedom Dividend, and the settlement he received from the Trucker Transition Act of 2022, he can get by financially if he’s frugal. Left to his own devices, Ted will likely spend a lot of time watching TV, drinking, and having his health deteriorate. The goal is for Ted to acquire a set of interests and relationships that replace the structure that work used to provide.
Now, let’s imagine Ted is in his home watching videos on his TV — he doesn’t like the new VR goggles some of the kids use. He gets a message on his phone that says, ‘One of your neighbors, Annie, could use some help changing her propane tank. Would you like to help her?’ It includes a picture of Annie, who’s a nearby 60-year-old. Ted shrugs and responds, ‘Yes’ and puts in a time for later that day. At one, he drives over to Annie’s and swaps out her propane tank. His back hurts a little as he moves the tank, but it makes him feel useful. Annie profusely thanks him and they make some small talk. Annie worked as a secretary at nearby hospital — her wrists are fragile. It turns out her children went to the same high school as Ted.
Ted returns home. Later, he gets a message saying, ‘Thanks for helping Annie! You’ve earned 100 social credits. You now have 1,600 credits banked. You’ve earned 14,800 credits over your lifetime.’ He takes on an assignment like this once or twice a day — generally moving something around or picking someone up. He’s hoping to meet someone with a dog that he can borrow for the next time his son visits. His boy like dogs. He could post a request on the Tulsa Digital Social Credit Exchange but would prefer not to — he doesn’t like asking for help. He prefers to help others and earn credits. He has his eye on a couple of deals for Thunder tickets or to buy a tent at Cabela’s. He used a bunch of Social Credits to pay for a fishing trip earlier in the year. His local poker game just started using Social Credits instead of dollars, too — a couple of the guys have just started volunteering at the local youth center so they were swimming in credits.
This scenario is based on a system currently in use in about 200 communities in the U.S. called time banking. It’s a system through which people trade time and build credits within communities by performing various helpful tasks — transporting an item, walking a dog, cleaning up a yard, cooking a meal, providing a ride to the doctor, and so on. The idea was championed by an antipoverty activist in the ’90s as a way to strengthen communities.
For example, in Brattleboro, Vermont, today, 315 members of the local time bank have exchanged 64k hours of mutual work over the past eight years. The Brattleboro time bank was started by two grad students with 30 members in 2009 and has grown each year. A 40-year-old single mom wrote about her experience, ‘Three years ago, I was in a tough spot. My husband and I had separated, and I was in a large house that needed lots of repairs. I was home-schooling my kids and working part-time form home doing website customer service. I had a huge financial challenge. My friends knew I was overwhelmed, and more than one said I should join the Brattleboro Time Trade. At first I thought, Who has time to trade? Then I learned that you can run a deficit — get help immediately and pay back the time when you’re able. So I posted requests on the site to fix up my house. I’d hoped one or two members would respond, but a bunch of people ended up offering assistance. Before joining the group, I’d never have been comfortable requesting all that help. But you don’t feel like you’re pestering anyone, because people happily volunteer for the jobs and they always show up with a smile. And even though I’m so tight on time, I’ve always been able to find jobs that fit my schedule, like babysitting or making someone a meal. In fact, my whole family pitches in. I’ll tell my kids that we’re stacking wood for our neighbor in order to get our light fixture fixed. It makes them feel useful. In fact, we’ve come to realize the value of some of our hobbies, like making music. Once, we earned four time-trade hours by playing together as a family at a local garden party: two fiddles, a guitar, and a pennywhistle!’
Said the 49-year-old handyman on the other end of the exchange, ‘When I joined, it was clear that handy people were in high demand. And since I’m divorced, I thought, Great, I’ll meet single women! That hasn’t panned out yet, but I have expanded my circle of friends. I’ve used some of my time-trade hours for home-cooked meals. It’s aided me financially, too: I’ve developed a referral network that has helped get my own energy-efficiency business off the ground. My private business keeps me busy, but I still do time trades, and I often donate the hours I earn. The trades give me something intangible that just makes me feel good. I especially like showing my daughter that not every exchange is about money.’
Edgar Cahn, the Time Banking founder, was the former speechwriter for Robert Kennedy, who was looking for new ways to fight poverty at a time when ‘money for social programs [had] dried up.’ He wrote, ‘Americans face at least three interlocking sets of problems: growing inequality in access by those at the bottom to the most basic goods and services; increasing social problems stemming from the need to rebuild family, neighborhood and community; and a growing disillusion with public programs designed to address these problems. He proposed that time banking could ‘[rebuild] the infrastructure of trust and caring that can strengthen families and communities.’
Despite the success of time banks in communities like Brattleboro, they’ve not caught hold that widely around the U.S. in part because they require a certain level of administration and resources to operate.
Now imagine a supercharged version of time banking backed by the U.S. government where in addition to providing social value, there’s real monetary value underlying it. This new currency — Digital Social Credits — would reward people for doing things that serve the community. The government would seed each market with an initial investment, but administrators would be local. DSCs would be targeted toward regions that demonstrate a need for increased cohesion. You could earn a number of Social Credits anytime you do something for a neighbor. You would also get Social Credits anytime you volunteer at the local shelter, participate in the town fair, coach the Little League, take a new course, paint a mural, play in a local band, mentor a young person, and so on. Existing orgs could award and earn Social Credits based on how many people they assist.
The government could put up significant levels of DSCs as prizes and incentives for major initiatives. For example, ‘100 million DSCs to reduce obesity levels in Mississippi’ or ‘1 billion DSCs to improve high school grad rates in Illinois’ and then let people take various actions to collect it. Companies could help meet goals and create and sponsor campaigns around various causes. Nonprofits would generate DSCs based on how much good they do and then distribute it back to volunteers and employees. New orgs and initiatives could be crowdfunded by DSCs instead of money, as people ‘vote’ by sending points in. Events and media that draw crowds would receive DSCs based on the number of attendees or folks who upvote it; the currency would become a new way to support journalism, creativity, and local events.
Some might ask, ‘Why create a new digital currency instead of just using dollars?’ First, people will respond to points in a different way than they would if they were paid very low monetary amounts. If you tell me I’m getting $2 to do something, I may ignore it. But if it’s 200 points, I’ll find it strangely compelling. People right now spend countless hours becoming Yelp Elite or Mayors on Foursquare based upon points and social rewards. Second, everyone will feel much more open and comfortable sharing balances if it’s a new social currency. You want people to advertise and reinforce their behavior. Behavior is much more likely to be reinforced if it’s social and recognized. That’s one reason why people are more likely to lose weight or achieve fitness goals if they’re part of a group effort. Third, by creating a new currency, the government could essentially induce billions of dollars of positive social activity without having to spend nearly that amount.
As individuals rack up DSCs, they’d have both a permanent balance they’ve earned over their lifetime and a current balance. They could cash in the points for experiences, purchases with participating vendors, or support for causes, and transfer points to others for special occasions. As their permanent balance gets higher, they might qualify for various perks like throwing a pitch at a local ballgame, an audience with their local congressperson, or meeting their state’s most civic-minded athlete or celebrity. Maybe the community’s leading DSC earner would even get a special trip to the White House. People and companies could use cash to buy DSCs — this would help fund the system — but these DSCs would appear as a different color and be clearly purchased, not earned. We could create an entire new parallel economy around social good.
The most socially detached would be the most likely to ignore all of this. But many people love rewards and feeling valued. We could spur unprecedented levels of social activity without spending that much. Heck, DSCs could become even cooler than dollars, because you could advertise how much you have and it’s socially acceptable. If you wanted to spur attention, you could target various rewards and campaigns toward particular demographics and areas; things done for people with lower levels of DSCs could count for extra.
The DSC system would be an example of harnessing market dynamics to spur social good. The federal government would help set up and fund the platform but it would be up to local governments, nonprofits, individuals, and companies to figure out the best ways to achieve various goals. The overall goal would be to improve social cohesion and maintain high levels of engagement for people in a post-work economy.
The Freedom Dividend would elevate society beyond a need for subsistence and scarcity. The Digital Social Credit would tie together communities and give people a way to both generate value and feel valued regardless of how the market regards their time.”
Human Capitalism
“Imagine an AI life coach with the voice of Oprah trying to help parents stay together or raise kids. Or a new Legion of Builders and Demolishers that installs millions of solar panels, upgrades our infrastructure, and removes derelict buildings while also employing tens of thousands of workers. Or a digital personalized education subscription that is constantly giving you new material and grouping you with a few other people who are studying the same thing. Or a wearable device that monitors your vital signs and sends data to your doctor while recommending occasional behavior changes. Or voting securely in your local elections via your phone without any worry of fraud.
Each of these scenarios is possible right now with current tech. But the resources and market incentives for them don’t exist. There’s limited or no market reward at present for keeping families together, upgrading infrastructure, lifelong education, preventative care, or improving democracy. While our phones get smarter each season, propelled by tens of billions of dollars, our voting machines, bridges, and schools languish in the 1960s. This is what we must change.
At present, the market systematically tends to undervalue many things, activities, and people, many of which are core to the human experience. Consider:
- Parenting or caring for loved ones
- Teaching or nurturing children
- Arts and creativity
- Serving the poor
- Working in struggling regions
- The environment
- Reading
- Preventative care
- Character
- Infrastructure and public transit
- Journalism
- Women
- People of color
And now, increasingly:
- Unskilled labor and normal people
- Meaningful community connections
- Small businesses
- Effective government
There were periods when the market supported some of these things more than it does today. Today, it needs to be steered to do so. The U.S. has reached a point where its current form of capitalism is faltering in producing an increasing standard of living for the majority of its citizens. It’s time for an upgrade.”
“Many forms of capitalism are in service around the world right now. Singapore is the fourth-richest country in the world in per capita GDP. It has had an unemployment rate of 2% or lower since 2009 and is regarded as one of the most free, open, pro-business economies in the world. Yet their government regularly shapes investment policy, and government-linked firms dominate telecommunications, finance, and media in ways that would be unthinkable in the U.S. Singapore’s system of capitalism is very different than Norway’s and Japan’s and ours. Many countries’ form of capitalism is steered not by an unseen hand, but by clear government policy.
Now imagine a new type of capitalist economy that’s geared toward maximizing human well-being and fulfillment. These goals and GDP would sometimes go hand-in-hand. But there’d be times when they wouldn’t be aligned. For example, an airline removing passengers who’d already boarded a plane to maximize its profitability would be good for capital but bad for people. So would a drug company charging exorbitant rates for a life-saving drug. Most Americans, I think, would agree that the airline should simply accept the lost revenue and the drug company should accept a moderate profit margin. What if this idea was repeated over and over again throughout the economy? Call it Human-Centered Capitalism, or Human Capitalism.
Human Capitalism would have a few core tenets:
- Humanity is more important than money
- The unit of an economy is each person, not each dollar
- Markets exist to serve our common goals and values
There’s a saying in business that ‘what gets measured gets managed for.’ We need to start measuring different things.”
“The concept of GDP and economic progress didn’t even exist until the Great Depression. It was invented so that the government could figure out how bad the economy was getting and how to make it better. Upon introducing the concept to Congress in 1934, an economist remarked that ‘economic welfare cannot be adequately measured unless the personal distribution of income is known. And no income measurement undertakes to estimate the reverse side of income, that is, the intensity and unpleasantness of effort going into the earning of income. The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above.’ It’s almost like he saw income inequality and bad jobs coming.
Our economic system must shift to focus on bettering the lot of the average person. Capitalism has to be made to serve human ends and goals, rather than have our humanity subverted to serve the marketplace. We shape the system. We own it, not the other way around.
In addition to GDP and job stats, the government should adopt measurements such as:
- Median income and standard of living
- Levels of engagement with work and labor participation rate
- Health-adjusted life expectancy
- Childhood success rates
- Infant mortality
- Surveys of national well-being
- Average physical fitness and mental health
- Quality of infrastructure
- Proportion of elderly in quality care
- Human capital development and access to education
- Marriage rates and success
- Deaths of despair/despair index/substance abuse
- National optimism/mindset of abudance
- Community integrity and social capital
- Environmental quality
- Global temperature variance and sea levels
- Reacclimation of incarcerated individuals and rates of criminality
- Artistic and cultural vibrancy
- Design and aesthetics
- Info integrity/journalism
- Dyanmism and mobility
- Social and economic equity
- Public safety
- Civic engagement
- Cybersecurity
- Economic competitiveness and growth
- Responsiveness and evolution of government
- Efficient use of resources
It would be straightforward to establish measurements for each of these and have them updated periodically, similar to what is set up at USAFacts.org — a treasure trove of social data.”
“When Truman left the presidency in 1953, he was so poor that he moved into his mother-in-law’s home in Missouri. All he had to live on was his pension as a former army officer of $112/month. He refused to trade on his celebrity, turning down lucrative consulting and business arrangements. ‘I could never lend myself to any transaction, however respectable, that would commercialize on the prestige and dignity of the office of the presidency,’ he wrote.
For a long time, former presidents tended to recede from public and commercial life. The practice started changing with Gerald Ford joining the boards of American Express and 20th Century Fox after leaving office in 1977, and it’s mushroomed ever since. Bill Clinton has amassed $105 million in speaking fees since leaving office. George W. Bush has collected a relatively modest $15 million. The going rate for one of the former presidents is $150-$200k for a speaking engagement plus various expenses.
The irony is that back in 1958, President Eisenhower and Congress felt so bad for Truman that they passed the Former Presidents Act, which authorized a lifetime pension that today pays former presidents $250k/year and gives them a budget for staff, health insurance, and the like. The money-making activities of former presidents surged after we started taking care of them.
Is it possible that even a president might go easy on various parties because he or she might be getting paid $200k or even $400k to speak to them a few years later? One of the reasons why we’ve lost our way as a society is that the market has overrun our leaders.”
“In order for humanity to trump capital, the state must represent the public interest above all. The goal should be to create a leadership class that can welcome the hatred of others with no fear of getting frozen out of opportunities afterward.
We should start at the top. We should give presidents a raise from their current $400k to $4 million tax-free per year plus 10 million Social Credits. But there’d be one condition — they would not be able to accept speaking fees or any board positions for any personal gain after leaving office. This would keep them free and clear of any need to make powerful people happy. We should do the same for members of the Cabinet and the heads of all regulatory agencies.
It’s tough working in DC. Most of the public servants I know are motivated by the right things. But you quickly get jaded by the system. You become quite influential in your own way, yet you interact with people who are making much more money than you at every turn. Your time in government runs out. Then what? Most government employees make about $100k. Private industry may offer you 4–10 times as much. Industry implicitly becomes one of your most appealing options.
It’s highly irrational for any regulator to come after industry too hard, because industry is waiting with the big paycheck afterward. Sheila Bair, a former head of the Federal Deposit Insurance Corp, lived through this conflict herself. She now advocates a lifetime ban on regulators working for the institutions they regulated in return for an increased government salary to $400k. ‘It would change the regulatory mindset, said Bair, and it would remove the ‘upside down’ incentives for regulators to keep companies happy to command high salaries later. For Human Capitalism to take hold, we need leaders who can truly ignore the market.”
“Here’s an idea for a dramatic rule — for every $100 million a company is fined by the Department of Justice or bailed out by the federal government, both its CEO and its largest individual shareholder will spend one month in jail. Call the new law the Public Protection against Market Abuse Act. If it’s a foreign company, this would apply to the head of the U.S. operation and the largest American shareholder. There would be a legal tribunal and due process in each case.”
“One idea is instituting an American Exchange Program during which all graduating seniors go on a month-long trip to several different parts of the country, hosted by host families and paid for by the government. They would volunteer for a local org and participate in programming with 24 other high school grads from diverse regions and backgrounds. The 25 young people would get to know each other in structured yet personal ways. It could be run by the top-rated teachers and professors in the region each August and take place at high schools or community colleges. There would be some required programming on the basics of citizenship and civic investment. Afterward, everyone would have at least a few friends from vastly different backgrounds. Young people have the potential to develop significant relationships in short periods of time in the right context.”
Healthcare
“Healthcare bills were the number one cause of personal bankruptcy in 2013, and a study that year found that 56 million Americans — 20% of the adult population — struggled with healthcare expenses they couldn’t afford to pay.”
“Author Martin Ford suggests that we create a new class of healthcare provider armed with AI — college grads or master’s students unburdened by additional years of costly specialization, who would nonetheless be equipped to head out to rural areas. They could help people monitor chronic conditions like obesity and diabetes and refer particularly hairy problems to more experience doctors. Call them primary care specialists. AI will soon be at a point where tech, in conjunction with a non-doctor, could offer the same quality of care as a doctor in the vast majority of cases. In one study, IBM’s Watson made the same recommendations as human doctors did in 99% of 1,000 medical cases and made suggestions human doctors missed in 30% of them. AI can reference more cases than the most experienced physician while keeping up to date with the latest journals and studies.
Predictably, doctors have lobbied against nurse practitioners and unsupervised residents seeing patients, and they would doubtless feel even more negatively about this new class of primary care specialist. But this change would make healthcare much more widely available, open up a new employment category for smart and empathetic college grads who genuinely want to spend time with patients, and eventually lighten the time burden on individual physicians.”
“A shift in incentives would allow doctors to treat patients holistically. The Southcentral Foundation, a healthcare provider for Alaska Natives, treats health problems and behavioral problems as related issues. When you get a health checkup, you also get a psychological appointment. It turns out that problems like obesity and depression are linked, and the local citizens’ top concerns — child sexual abuse, child neglect, domestic violence, and addictions — all involve psychology and behavior as much as medicine and drugs. Integration of physical and psychological services there lowered hospital admissions and visits to the ER by more than a third between 2000 and 2015, and 97% of patients said they were satisfied with the care. Integrating medical and behavioral healthcare could save tens of billions of dollars each year from the nation’s healthcare costs.
In time, freedom from being paid a fee for service would give physicians and orgs the opportunity to solve problems in new ways. At first, the goal would be to measure patient outcomes and decrease readmissions and errors. Eventually, one can imagine hospitals being measured against stats on the health of the surrounding population.”
Education
“Only 6% of American high school students were enrolled in a vocational course of study in 2013, compared to 42% in the U.K., 59% in Germany, and 67% in the Netherlands. Many available categories of employment will fall into nonroutine middle-skill jobs of welding, glass installation, electricians, machinists, maintenance, line repair, technicians, and the like as the economy changes. A Georgetown center estimated that there are 30 million good-paying jobs that don’t require a college degree, many of which need some specialized training.
College is being dramatically overprescribed and oversold as the answer to all of our job-related economic problems. The most recent grad rate for first-time, full-time undergrads was 59% after six years, and this level has been more or less consistent the past number of years. The same number at selective schools is 88%; among for-profit universities the six-year grad rate is 23%; the grad rate from two-year associate’s degree programs within three years is only 29%. College, more than high school, is America’s true dropout factory.”
“Universities are spending a lot of money on making more money. In 2015, a law professor pointed out that Yale spent more the previous year on private equity managers managing its endowment — $480 million — than it spent on tuition assistance, fellowships, and prizes for students — $170 million. This led Malcolm Gladwell to joke that Yale was a $24 billion hedge fund with a university attached to it, and that it should dump its legacy business.
Yale and all other nonprofit universities are tax-exempt and receive millions in research money from the government, which means that American taxpayers are paying for and subsidizing the accrual of billions to both the universities and their endowments. A research group documented the cost of taxpayer subsidies for a community college student as between $2-$4k/year per student, with that figure climbing to $10k/year per student at a typical state university. For Harvard the taxpayer subsidy jumped to $48k/year per student, for Yale it was $69k/year per student, and for Princeton it was $105k/year per student. Being tax-exempt is more valuable the more money you’re generating.
This is a perverse use of taxpayer resources — it’s literally just helping rich schools get richer as opposed to spending money on education. One way to change this would be a law stipulating that any private university with an endowment over $5 billion will lose its tax-exempt status unless it spends its full endowment income from the previous year on direct educational expenses, student support, or domestic expansion. This would spur elite universities to spend billions each year directly on their students and expansion within the U.S. There could be a Harvard center in Ohio or Michigan as well as the new one they just opened in Shanghai. This would also induce investment from schools that approach the $5 billion threshold, such as Dartmouth or USC, who would want to stay below this level. Another possible approach would be to simply tax rich universities’ endowments and use the proceeds to subsidize students at community colleges and public schools. One could also mandate that they spend a certain percentage — say 6–8% — of their endowments per year.
The trickiest part is to introduce cost discipline and discourage administration bloat at universities. Capping cost increases now won’t be that helpful because the horse is already out of the barn. In 1975, colleges employed one professional staffer — admissions officers, info tech specialists, and the like — for every 50 students. By 2005, the proportion had risen more than 138% to one for every 21 students. It will likely be necessary for the government to install benchmarks around the proper ratios of administrators to students and administrators to faculty and then give institutions time to move in that direction. The government subsidizes education through research money, the tax-exempt status of universities, and the provision of hundreds of billions of dollars of student loans — it needs to help rationalize all of this spending without blindly saying ‘more college will fix everything.’ It won’t.”
“We also need to amend or ignore college rankings. At present, they reward colleges for accepting more rich students by including measures like financial strength, student-to-teacher ratio, and alumni giving. Perhaps not surprisingly, Yale and Princeton admit more children from the top 1% than from the bottom 60% combined. Schools that admit more varied types of students or even operate more efficiently will be penalized in the rankings. A former chancellor said, ‘If some foreign power wanted to diminish higher education in America, they would have created the U.S. News and World Report rankings. You need both more college grads in the economy and you need many more low-income students getting the benefit of higher education — and U.S. News has metrics that work directly in opposition to accomplishing those two things.’ It’s insane that the rankings of a single publication shape the behavior and policies of dozens of billion-dollar orgs against the public interest.”
“The proportion of Stanford students majoring in the humanities has plummeted from over 20% to only 7% in 2014, prompting panic among history and English departments.”
“The SAT came into its own during WWII as a way to identify smart kids and keep them from going to the front lines. Now, every year is wartime.”
