As investors in disruptive technologies, we envision a future that is driven by automation: From self-driving cars to warehouses being run by robots, we see a categorical shift in how society functions. Advancements in artificial intelligence, machine learning, and robotics will usher in a new era of safer, brighter, more efficient life.
But this new era of disruption will have plenty of casualties that cannot be ignored.
To put it bluntly: Once cars and trucks become automated, what will taxi and truck drivers do for work? Same with factory workers, fast food employees, retail clerks, and millions of other low-skill jobs that could theoretically be phased out entirely with robotics. This isn’t some sci-fi future; one report compiled recently by the McKinsey Global Institute says that advances in AI, automation and robotics will displace between 39 and 73 million jobs by 2030.
We believe that companies will do whatever is best for their customers, so there’s really no way to slow down this shift. And optimistically, we also believe that it’s entirely possible that one day humans will find new ways to work, earn a living, and enjoy life. But until we reach that equilibrium, investors should expect a rising tide of inequality, political instability, and a potential for class warfare as millions of people are disrupted right out of the economy.
Right now, the unemployment rate is under four percent, but the reality is more people are disappearing from the labor rolls entirely, which means this process has already begun. And if we don’t confront these issues now, we don’t want to be blindsided by them 20 years (or even five) down the road.
I think about this issue issue often, but Martin Ford thinks about it every day. Ford is a futurist, business strategist, and the author of the deeply researched recent book Rise of the Robots: Technology and the Threat of a Jobless Future. In April 2017, Ford gave a TED talk that was viewed over 2 million times. Its title? “How we'll earn money in a future without jobs.” Clearly, his ideas are resonating.
“I think we are on the verge of a massive disruption,” Ford told me recently. “We see stagnant wages, and we see an erosion in the quality of the jobs. A lot of solid middle-class jobs are disappearing, and that alone has been remarkably disruptive... This is a big deal and I think it's going to get get vastly bigger, and I do think that this is a subject everyone should be a bit concerned about.”
Ford is right now on a campaign to educate business leaders, politicians and investors about the existential threat of automation, and the future of joblessness—and he’s got plenty of smart ideas about how to address this problem. He’s also working on third book about automation and the future of artificial intelligence. Its slated to come out later this year.
Martin believes that a universal basic income, while not necessarily a panacea, will eventually become a necessity as we confront a massive shift in the nature of work. But he knows this idea is going to be an uphill battle.
Read below for an edited transcript of my conversation with him. (Full disclosure: Worm Capital is long Amazon. Ford’s views do not represent that of Arne Alsin or Worm Capital.)
Arne Alsin: What brought you to researching automation and your interest in this area?
Martin Ford: I ran a small software company here in Silicon Valley for many years. I started that back in the mid 90s, and it mostly focused on tools for Windows software. But as I ran that business, I saw the transition that happened with computer software. When I started, it was a tangible product. It was something that’s on a CD-ROM, had be put in a box, and shipped to a customer.
So, there were a lot of jobs there for typical people, and I saw how fast that kind of work evaporated when things went digital. So, that was one of the things that got me started thinking about it. Then also, there was the financial crisis which I think focused me on the economy, and the impact of inequality, and what happens if you don't have consumers that can purchase the products being sold, and so forth.
Alsin: What are some of the more alarming trends that you’ve observed in your research?
Ford: One of the scariest things is that the average American cannot come up with $400 for some kind of emergency. They literally would have to go to a friend or family to generate that much cash. I mean, that really puts the focus on the level of inequality that we have right now, and I think that most people, certainly in the tech industry and in Silicon Valley, are really blind to that reality. And the problem is, I think, almost certainly get worse.
I don't see anything that would tend to counteract that, I only see things that would tend to accelerate that. In a country as wealthy as the United States or any Western country, there's a basic level of security that you have to provide to your citizens, or things are really going to get difficult and scary.
Alsin: So do you think artificial intelligence and robotics will be a net positive or net negative for society?
Ford: I absolutely believe it's a positive thing. I'm a big proponent of technology and the advance of artificial intelligence. I think it’s going to bring enormous benefits to humanity, and obviously to the business world.
But there are drawbacks. I was at a panel discussion recently at a university, and there was a philosophy professor on this panel arguing that we ought to have a pause [on AI research] for like 30 years, which is, you know, insane. But there are intelligent people making this this argument already, and it's going to get a lot worse. There's going to be a backlash if we don't start to address these issues, and think about the implications. So, there clearly are two sides to this coin; there's an enormous benefit ,but there is this disruption that's going to really impact real people's livelihoods, maybe on a on a massive scale.
And arguing that well, we're going to have great medical innovations in the future and or self-driving cars are going to save a lot of people's lives... it’s not going to resonate with someone that's losing their livelihood, and can't support their family and can’t pay their mortgage and all the rest of it. So, we really need to think about both sides of this coin and find a way to adapt to this, so that we can leverage these benefits on behalf of everyone at every level of our society, and not just on behalf of the top 5%.
Alsin: So let's take self-driving cars, because that's one that I think about a lot. How does that square itself in the long term? It’s a much-needed technology that will inevitably save lives in the long-term, but in the short-term it will lead to huge job displacements.
Ford: I think that ultimately, we're going to have to have some sort of broad-based policy or adaptation to this, and then government's going to have to probably be the primary driver and implementer of that. So, one thing I talked about in the book is a basic income, which is getting tossed around a lot. People like Mark Zuckerberg are talking about that, so I imagine it’s something like that.
There's also a discussion of a jobs guarantee, which I think would be a lot less efficient. I think that sounds very messy and difficult, but it's going to take something on that scale ultimately to address this. So, I think the role of businesses probably is to really be open to this and to help support implementation of these policies, and to also understand that, you know, businesses need customers. If we get into a situation in the future where either there is outright unemployment or jobs are deskilled, and everyone's working these really low wage subsistence type jobs, then where is the market demand going to come from? Where are the consumers that are really going to drive the economy?
So, I do think that businesses have a very strong invested interest in the long-run in solving this problem, and that one thing I'd like to see is more people in the business world moving away from the short term orientation of, ‘Let's have the lowest possible taxes, let's move capital offshore so that we are taxed at a lower rate,’ and all this kind of stuff. We need to think about how we are going to coordinate and to solve this problem for the long-term.
Obviously it's difficult in the current business environment where the focus is on short-term returns in the stock market. I do a lot of speaking engagements, where I talk to CEOs and hedge fund managers and all these kind of people at the top, and I try to make this point, because I do think that it's going to be very difficult to solve this problem, unless those especially influential people buy into this idea that we've got to have a solution.
Alsin: What about corporate boards? Theoretically, a board is there to help think about the long-term management of the business. Are they talking about this issue?
Ford: I haven't heard of boards of directors taking on this issue. Again, I'm a bit skeptical of the proposition that the business world can solve this problem, because there is this competitive dynamic. I mean, if one company is very socially responsible and another company doesn't do that, and just pushes the technology to the limit and cuts costs, that second company might potentially have a competitive advantage.
So, there is this dynamic to really drive toward labor-saving maximization, and I think that's the story of capitalism. So, I really think that holistically, it looks a bit like a tragedy of the commons problem, where you know, one actor, even a major corporation can’t solve this problem by themselves. It really takes some sort of collective coordination and certainly, the best entity to do that is government, and I tend to feel that rather than trying to regulate things or somehow slow down the automation of jobs, it’s better just to have something like a basic income, where you provide an alternative and then just let the technology go basically at maximum speeds, so that we can get the benefits in that.
To me, that sounds like the best approach, so I think it's really important for corporations, CEOs, and boards to be aware of this and be willing to engage in the discussion that we're going to have to have. But I'm skeptical that themselves, in their organizations or in the business world, they have a solution. It's probably takes broader coordination than that.
Alsin: We’re already seeing stagnant wages across the board and rising inequality. So do you think the effects of automation is already happening?
Ford: I absolutely believe that the disruption is beginning to unfold, and I think this is pretty clear that, so far that disruption has manifested as you say, in stagnant wages, certainly not outright unemployment given headline unemployment rate.
However, the other really important thing to note is that the unemployment rate is low, but the labor force participation rate has declined, so a lot of people are leaving the workforce entirely, and partly that's demographics but it's certainly not explained entirely by demographics.
And in fact, even among what are called prime age workers, I think it's 25 to 54, is also declining. Once people leave the workforce entirely, and they're not actively looking for a job, then they're no longer counted as unemployed. It’s a real concern. And the other thing is the quality of the jobs out there. We have low unemployment in large measure because we are robustly creating these low-wage service sector jobs, right?
So many of the jobs are in fast food, Wal-Mart and warehouse work— but I would raise a warning there. There is no guarantee that we are going to continue to create these types of jobs in these numbers. I know several companies here in Silicon Valley that are focused on fast food automation, momentum machines. There’s the company that makes the Flippy robot, focused on making hamburgers. There's a company called Zoom that's doing pizza automation.
So fast food is going to be impacted; It's going to be disrupted at some point in the future, I can't tell you exactly when but it wouldn't surprise me that five years from now, that industry is going to become a lot more automated. Same thing with retail, you're seeing more robots, and then of course, there's a continuous impact from Amazon and online shopping, which is essentially is migrating jobs away from traditional retail environments to Amazon warehouses.
Those jobs are also going to be susceptible. It seems to be inevitable that they're just going to be less people working in those types of environments in the next 5 to 10 years or so. And that's where a lot of the jobs are coming from. And then a lot of the other job creation that we'll see in the future is related to the aging population—home health care aides and so on. But these are very low wage jobs, and, you know, looking after the elderly woman is not necessarily going to be a great fit job for the truck driver that loses his job because automated trucks come along.
So there are all kinds of skill mismatch, and personality mismatch issues that we're going to face in the future as well. So right now it's low wages and a declining workforce participation rate, and stagnant wages and so forth, but in the future, it could be much worse than that, and that wage is bad enough.
Alsin: You obviously push for a universal basic income, but what happens if that measure isn’t adopted?
Ford: I see even more unemployment, even lower wages, massive impact on the social fabric of society. We see it already with the opioid epidemic. I believe more people have died from opioid addiction than were killed in the Vietnam War.
So, it's a national tragedy which really is still not getting as much attention as you might think, and so far it's primarily been focused in rural areas, but it's actually now invading the inner cities as well. So, the demographics of it is becoming much more broad-based; an erosion of hope about the future, an erosion of dignity in terms of the kinds of jobs that are available to a lot of average people.
There’s also the potential for demagogues to rise in the future; right now, you see most of that focused on immigration and on global trade, and technology is not really something that [politicians] are focused on, partly because it's not so visible. But just wait until we really have self-driving cars zooming around with nobody in there, and when we really see robots in fast-food places and so forth. It's going to become a lot more visible, a lot more central to our debate, and clearly we’ll see a backlash. And again, that could result in in the slowing of progress, which is not the thing we want. What we want is to have the progress but to find a way to make sure it benefits everyone. I believe that's sort of the central challenge we all face in the coming decades.
Alsin: What do you say to the person who says to you, “Sure, but plenty of people have made this argument before.” In the industrial revolution, many of your ideas were brought up, but humans still found ways to work. Why is it different now?
Ford: The fundamental argument is that machines and algorithms are now taking on genuine cognitive capability. They are beginning to think in a narrow way, and it's a way that's broadening over time.
Like I said in the TED talk, that's not science fiction. Machines are making decisions and solving problems and they're learning. And what this means is that, finally, technology is competing with our core competency. The trade-off between labor and capital is just going to become a lot more dynamic in a way that it couldn't have been in the past.
Alsin: Are you an optimist about what the future holds?
Ford: I am. I am an optimist in the long run. I believe in the technology. I am working on a new book, which is actually quite different from all this heavy focus on labor and unemployment. It's a book of interviews with the top AI researchers in the world. These people are all optimistic, too. Most of them do acknowledge the disruption is going to come to the economy, and to the job market, and they certainly don't agree on everything, and they understand that there are two sides to this.
But I do imagine a sort of utopian future, where maybe we don't have to work so much if you don't want to, and maybe nobody has to do a dangerous job or dirty job or really mind-numbing boring jobs, or jobs that they hate. Technology will take on more of that, we'll have more time for our families, and for leisure, and to do things that genuinely reward us. I can imagine a future where, if you want to be an artist, you can be an artist without starving. You can actually devote your energies to that without the concern that it's hard to make a living.
So these are great things—you imagine something that looks more like Star Trek, right, where people are still engaged in meaningful things but they're not working nine to five jobs to put food on the table. So, that's the possibility of the future. Getting there is not easy, transitioning to that is going to be very difficult. I do think again, a basic income is part of the solution. That's our future, that's the vision that we should be striving towards, but there are real challenges in getting there.