Automation and A.I. in the Economy

Hello and welcome back to Breaking the Dollar. I'm your host, Everett Millman. And on this week's show, we're going to be discussing a topic that I see come up a lot in the news, especially when we're talking about the future of the economy. And there are strong opinions on both sides. And that is robots and automation and how that is transforming not only the world we live in, but the economy that we all work in.

Now as I said, there are strong opinions on both sides. But what I'd like to do is kind of go over the pros and the cons. And then I will share what I think both sides of the discussion are kind of missing about where robots and artificial intelligence and all these really cool buzzword type things that are going on. Where is that all actually leading us? So first and foremost, if you don't really know what we're talking about when we say automation, it is basically where technology and artificial intelligence are taking the place of regular human tasks and jobs. That includes literal robots, you know, in factories where a machine is doing something that a human being used to have to do.

But it also includes artificial intelligence, which you see oftentimes abbreviated just as AI, replacing skilled positions that people used to have at companies or in the government or in the economy. Now you can just have a computer program that automatically does this and most of the times it does it much faster and more efficiently than any human being actually could. Now it makes sense that this topic is becoming more prevalent and it's an idea that gets brought up a lot because it is happening at a pretty rapid pace, and I will get to some of the drawbacks of it later on in the show. But let me just start with why this trend is happening. Why is it seen as such a positive thing by so many companies?

Now first and foremost, by taking the human element out of certain jobs, it means there's a whole lot less that a boss or a company owner has to worry about. Your robots will never complain, they will never miss a day of work, they'll never ask for a raise and they won't make certain mistakes that are part of the human element, that everybody is going to make certain errors. It's unavoidable. So in effect, it greatly increases the efficiency of that position. If you automate a task, what may have taken three, four, five people to do can now be done in less time by only one machine. And that happens especially in factory settings and manufacturing.

Another aspect of that that makes sense from a business standpoint is you're going to lower your costs. You have to continuously pay someone and pay them hopefully an increasing wage over time if they're doing their job well. With a robot or a machine, after you make the initial investment, you do not have to keep paying them. Moreover, once you program a machine correctly, it will do the task the right way every single time. Now of course, there are some small caveats to that. Like you have to maintain the machine or repair it; or from a computer programming standpoint, you have to debug the code every so often and make sure it doesn't get corrupted. But that's all much easier to handle than the kind of errors and inefficiencies that human beings are prone to. Related to that is the speed advantage you get that automation allows you to finish a task much more quickly and therefore you're able to do a lot more of it in a given amount of time. So it goes hand in hand with efficiency. And you can also think of it from the end user standpoint, whoever is the user of a product or service, by getting greater efficiency and speed, it's going to create a better experience for them as well. It's going to be more convenient.

One other advantage to automation that is sometimes overlooked is that it reduces certain risks, for example, in very dangerous jobs, like underground mining or any other task that really puts a human being at a physical harm at risk of being injured. It's obviously preferable if a robot gets beat up or destroyed than if a human being actually gets hurt on the job. So that is another thing that can be gained from automation. And then when you combine that extra speed and efficiency with what I mentioned before about reducing errors, that means that artificial intelligence can also figure things out, so to speak, in a job at a much better rate than a human being could. So if you're doing anything with numbers and you have to crunch numbers, robots and machines obviously have a higher capability for doing this than human beings do. So again, that benefits everyone, not just the companies that are using automation, but then the people who are the end users who are receiving the benefits from the greater efficiency and speed. Now of course, that is only half the story because I would say, just in my personal experience, more than half of the headlines that I see about robots, artificial intelligence, automation, they all do have a slightly negative slant to it because at the end of the day, it does destroy jobs. It does put a lot of people out of work over time.

Now there are some silver linings to that where it does potentially free those people up to pursue other interests and other things. And at the same time, there's a concept called creative destruction where even though an industry or an institution in society, like a certain occupation, is being destroyed, new opportunities and creative things can arise out of that. But given all that, I do think that the people who are very big proponents of artificial intelligence do need to empathize with the people who are losing their jobs and continue to lose their jobs because they are being replaced by robots and AI. And this is mainly happening in factories and the manufacturing sector and in the service sector. And examples of this, you can find all over the place, whether it's a kiosk or a little tablet replacing your server at a restaurant, or you can even step back a little bit in history and look at the fact that ATMs replaced a lot of bank tellers. Now something to keep in mind is that it reduces the amount of people working at certain jobs but doesn't always altogether eliminate them. Which just means there will be less people doing a certain job.

So a couple examples might be at a library or a pharmacy where you had to have a lot more staff to handle all of the sorting of the inventory and all of the different tasks involved in the job. Now if you have an efficient automated system, perhaps one person can do the job of what used to take five to ten people, for example. But there is no doubt that there are a lot of important industries and jobs that are directly threatened by the rise of automation. So you may have heard about autonomous vehicles where companies are trying to test vehicles that don't need a driver. They are fully or at least partially autonomous, meaning they can do something on their own. Once that technology is perfected and it's safe, you could think of it like it's purely a positive thing for society. It kind of gets back to what I was saying about dangerous situations and not putting people at risk on the highways. But at the same time, it threatens the entire industry of people who are truck drivers. And depending on what industry you work in or where you live in the country, you may not know this, but that is one of the top occupations in all of the United States. And it's interesting because this whole idea pops up in places you may not at first initially expect it to.

So one example that I think of is in the music industry. There used to be a job that was basically called a studio musician, someone who they weren't in a band or a group necessarily, but they worked for a music studio and they would play their instrument for filler or background music or what have you. Again, back a few decades ago, that employed a lot of people. But now that so much of that can be automated and can be done with computers, you don't really need as many studio musicians, if any at all. Someone with a program that simulates an instrument can essentially do that with the press of a few buttons now.

Another area where you see this popping up is actually in the financial industry when it comes to financial advising. They have robo-advisors that are basically pre-programmed to give you advice on what investments you should have, which once again, reduced the costs of hiring someone to be a financial advisor. And it makes it really convenient for the end user because they basically just have to log on to the internet and they don't have to worry about any face-to-face discussions with people. And when you factor in what I said before about error reduction, it does take part of the human emotional element out of it. It takes a lot of that bias out of it and study after study has confirmed that human psychology is one of the biggest influences in investing and trading decisions. But again, that is taking a job away from a human being and giving it to an automated computer system. So what really strikes me about the two sides of this that we seem to be missing is when it is portrayed in a negative light, there is this emphasis on how it is going to destroy the economy, it is going to leave millions of people out of work and unemployed. And although it will make life much more convenient, it will have this overall negative effect on society.

And this idea pops up a lot, not surprisingly, in science fiction. So there is a novel by Kurt Vonnegut that I really enjoy called Player Piano. And the idea from the title is that a player piano is a piano that can be pre-programmed to play songs, doesn't need anyone sitting at the piano actually playing it, it will do it on its own. And in the story, that idea is applied to the entire economy. So not only have robots and machines basically taken over every job that laborers used to do, but they also entrust every decision in the economy to one giant supercomputer. That really is the epitome of automation, because once you set it, there is no human being behind it anymore, it is just the program or algorithm doing it on its own. That same kind of idea is what pops up in Terminator with Skynet. But once that system is built and it runs on its own, human beings basically lose control of it. And so in both of those works of fiction, we're seeing a warning about some of the dangers of artificial intelligence and allowing robots and automation to sort of replace humans in the economy. I would say that the flip side of that is people who are perhaps overly optimistic about it and they think that artificial intelligence will simply lead to utopia, where nobody has to work and everything is done for us by robots. And this is where I want to bring a different perspective to it. We sort of are always prisoners of the moment with this idea, because technology is something that's always very new and futuristic.

So it does seem like within our lifetime, something dramatic is going to happen. Something big is going to change just around the corner. And actually what I've seen is that this whole process of resisting automation goes back much, much longer than most people acknowledge. There are a group of people in the 1700s, right when the Industrial Revolution was beginning, that were called the Luddites and they were anti-technology, anti-machines. Only because they believed that they were taking jobs away from laborers and workers and factories. Now the Luddites took it to an extreme and would literally sabotage and destroy machines, hoping that that meant they would be able to keep their jobs. But you can already see that same idea developing 300 years ago. I would point out that Vonnegut's book Player Piano I brought up was written in the 1950s and he was already worried about everyone losing their jobs to automation. My point in bringing that up is that this is clearly a very long process that happens. It might actually be slower than you think it would be.

To grab another example from pop culture, think about the TV show The Jetsons. That show was made in the '60s and it gave us a vision of this awesome futuristic society where we have flying cars and all these great gadgets. I mean, it was a cartoon, but they still were imagining a believable, plausible future. Well, where are my flying cars? 20 years ago, I think everybody believed that we would have greater technologies than we do. We do tend to overstate how quickly these changes are going to happen. At the same time, it sort of underestimates how resilient and resourceful and adaptive people can be. Yes, in the short run, people who have been in a certain job for 30 years are now out of luck. And there's absolutely something tragic about that. But like I said with creative destruction, there are always new opportunities and new things that arise out of technological change. There are potentially new jobs and positions that we can't imagine yet in the same way that we can't necessarily imagine how all of these changes will play out. On top of that, I think we also overstate how much we can really survive by getting rid of the human element. There's a certain personal touch that no level of automation or even artificial intelligence can necessarily replace. When you look at the rise of robo calls and how so many businesses just have kind of an automated answering machine system where you never get to talk to a real person on the line, does that mean that nobody works in a call center anymore? No, those jobs still exist. People still want to talk to a real person sometimes. And so even though there are less of them, it does still exist.

Along those same lines, there are always unpredictable things where a human being would have to step in where an automated system could not be pre-programmed to account for a situation. So sort of in a similar sense, maybe someone has a question that there's not an option for in the automated call system. Well, then you need a human being to get on the line and answer their question or at least be able to understand what it is they're looking for. And of course, I think we should also always acknowledge the limitations to what our technology can already do. On one of the previous episodes on the show, I was complaining about how the models that economists use to try and come up with policy to run the economy. A lot of times, those models cannot account for all of the different human interactions that make up free markets. So the same is true in a lot of job and service settings. No matter how well a program is devised or how good an artificial intelligence is at learning things, there are still unpredictable things that can only be accounted for by an actual living human being who can think dynamically and think on their feet. That makes us more flexible than AI and robots in a lot of ways.

One silly example from my own lifetime is some of you might be old enough to remember when libraries used to have these little index card systems when you would check out a book, where it had to be stamped and you would physically check it out by signing something. And all of that eventually got replaced by automated computer systems. Now, that's a much better, more efficient system when it works. So around the time I was in fifth grade, I think, the internet or the electricity went out in the library and nobody could check out a book. There was no flexibility in the system to account for something like that. And then what was really sad is because they didn't maintain the old system of index cards, they couldn't even go back and do it the old-fashioned way because they'd already eliminated it. So there are obviously benefits and drawbacks to this trend of automation that I think sometimes gets lost in the debate about whether it's good or bad, or whether it's inevitable or should be stopped. I think the long history of this stuff shows us that it's really a little bit of both.

So I think that wraps things up for today. I'll move on to our mailbag and our question from the listeners. And this is one that was submitted a few weeks ago. I've been holding on because it does fit in very nicely with this topic. This question came from anonymous and they asked, what do you think the future of money is or will be? They left it off. But I think it's a very kind of similar question because on the one hand, as we often talk about on this program, new technologies and new innovations like Bitcoin, cryptocurrencies, digital money, whatever you would like to call it, all of that is clearly a part of our future. We are definitely moving in that direction in some capacity. To me, I think that is undeniable. Those technologies offer a lot of the advantages that we already have with fiat money, but without some of the drawbacks.

Now, on the other side of that, there are still some serious drawbacks with our monetary system that could perhaps be improved upon if we instead looked backward in time and we went back to some of the hard money policies that we used to have with gold and silver. To me, it's not a contradiction for both of those things to be true, that in some ways, the future of money will incorporate these really new, interesting innovations and perhaps also borrow from our past traditions that we have forgotten about and thrown aside. And just like with the discussion about AI and robotics, it's basically impossible to put an exact timeframe or prediction on when these things will really change in a dramatic or radical way. It's just a silly to me to suggest that those changes are right around the corner and there's going to be this revolutionary movement in the very, very near future. It's just as silly to say that as to say things are going to stay the same forever. Neither of those things are true, but I tend to see people think that way a lot. So that's my two cents on that.

Anyway, thank you so much for tuning in. Really appreciate everybody listening. Please join us for next week's episode when I walk everyone through the concept of financialization and how that is changing the economy. So check it out.