Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
1. Machines replacing workers (rather than supplementing them as in the past). 2. Debt accumulation -- which pulled-forward so much demand, without increasing productivity. 3. The inflated demand (caused by debt) has caused overcapacity in many industries. 4. Insufficiency of monetary policy. 5. More direct state intervention in the economy (the "next normal"). 6. Investment implications.
I have never gotten a clear answer on where the new jobs will be. Machines are taking over everywhere and in places we thought were safe only a few years ago. Fast food jobs? Nope, machines will do it all. Humans use a kiosk to order. Machines are already building machines and I predict they will be able to repair themselves in due time.
Some areas like nursing may get retrained labor thus flooding the market.
The one area that I have mentioned to youngsters is engineering. That's probably not safe either.
John, you nailed what I think is the biggest issue -- the coming tsunami of labor-replacing (rather than labor-enabling) automatons. The other issues, while daunting, are primarily 'only' monetary/economic.
But, the prospect of displacements of huge swaths of workers with automatons is more fundamental-- it will alter human traits. Thrift, industry, hard-work -- human virtues -- will no longer be incentivized to large swaths of people, due to labor market largely consigned to automatons. There is no offsetting job-creating industries on the horizon. Besides, any 'new industries' will just as likely be staffed by automatons.
The topic of 'robotizing' jobs was recently discussed on M*. One poster proferred an idea that has, I believe, merit: use the tax code to ameliorate & slow this process. Disallow expensing/depreciating labor-replacing automatons by businesses. Instead, require such automaons be registered, and impute taxable income to them --- payable by their owners. Said payments would not be deductible. Someone once said "the power to tax is the power to destroy". It is also the power to "slow things down".
Computerization Automation Artificial Intelligence Globilization and free flow of knowledge, capital and goods People living longer and needing to work longer
I think to see what the future looks like, you need to look at the worlds past. In the past, before 1900s the was very few rich (Monarchs, industrialists) small middle class (those close to the monarchs and industrialists) and the rest poor - surfs, laborers.
We have in our mind a large middle class. In the US the middle class has been shrinking since the 1970s. A middle class rose in China but it is now under pressure.
The historical analog that strikes me is the last days of the Roman Republic. The patrician classes bought large swaths of farmland, then employed slaves to work the fields. The family farmers could not compete with slave labor. Deprived of their income by the wealthy/slave plantations, the small farmers and their families increasingly abandoned their farms, went to the urban centers, there too, found slaves increasing inserted into the economic fabric of the Republic, made earning a living wage impossible, and increasingly became dependent on the govt dole. Roman capitalism, rationalizing the substitution of slaves for free citizens, essentially 'ate its young'. What was left was the patricians, slaves, and a 'free' plebian/proletariat which was slothful and wards of the state.
In 2012, much was made of Mitt Romney's bemoaning the "47%" who took money from the 'gubmint'. When the automaton joblessness builds, that 47% will look quaint. The more working age people that have no work, the more demands their will be for 'income replacement' (i.e. govt dole). And the fewer employees there are, the less resistance their will be to tax business heavily. The argument against taxing businesses heavily is that doing so was a 'job destroyer'. If businesses pre-emptively destroy (human) jobs by substituting automatons, well, that argument goes away (with the jobs).
Economic freedom means a job & yes, a career. Take away jobs and you take away individual freedom. Once enough people are not free, they will sell their vote to whichever pol promises the most 'free' govt checks. Capitalism again, is getting ready to 'eat its young'.
Maybe its just me, but I found this very muddled. Starting with credentials.
Epoch Times (now there's a publication I rarely reference) calls Shvets "the global strategist of the investment bank Macquarie Group." BI says merely that he's "a" global strategist at the Hong Kong outpost of Macquarie. Bloomberg is likely more accurate, describing him as "Macquarie Securities Head of Asian Strategy."
That might explain why slide after slide is about the Chinese economy. That, or its appearance in Epoch Times. As to the substance ...
Sure, machines can augment or replace people. Markoff's book, Machines of Loving Grace may offer a more balanced perspective than the doom and gloom here. I'm embarrassed to admit that the book is still sitting on my shelf after listening to Markoff talk about it.
Here's where we get into muddled economics. The actual slides (BI link) focus strictly on TFP (Total Factor Productivity) - a metric that incorporates all production factors, both capital and labor, in calculating productivity. But the ET article interjects worker productivity (comparing Walmart with Amazon). This confuses matters because by simply shifting costs from labor to capital (for example giving workers tools), worker productivity goes up, even if TFP remains constant. Apples and oranges.
For a much clearer discussion of TFP in general, and productivity eras specifically, I found this 2013 CBO paper informative.
IMHO the question is not so much whether TFP is going up (though that is certainly preferable), as what happens to the excess labor. That can be used to produce more (or better) goods and services if there is a demand, or the same output can simply be produced with less labor.
That's not necessarily a bad thing. It depends on how the reduced work hours are distributed. It was considered wonderful when the American work week was reduced to a nominal 40 hours. Europeans work shorter hours, with longer vacations, family leave, etc., and arguably value these benefits.
But if the economy sets a 50 hour week standard for those still working, and leaves the rest out in the cold, demand will go down and inequality will continue to increase.
All those sci-fi books I read when I was a kid imagined a world where robots do most of the work as a good thing (except for the books which then imagined the robots rebelling against us, but that's something else.) I do think it's possible to be happy without laboring 40 hours or more a week from 18-65. Studying till 25 or 30? A three-day work week? Retirement at 55? 1 or 2 years paid leave for father and mother of each child? If robots can make that possible, I say bring'em on. I mean, aren't most of us investing here because we want to stop working sooner rather than later?
Also, most wealthy, educated societies move toward lower birthrates. If we all arrive at Japanese and Western European levels, we'll a declining population which will need all those robots to support it in its old age.
The caveat is that we would need aggressive government policies to spread the wealth and make an orderly transition to a society which needs less human labor.
I'm sure it won't work out as smoothly as I portray above, maybe somewhere in between my sci-fi utopia and Edmond's fall-of-Rome dystopia.
What that means about mutual fund investments, I don't know.
At a roundtable years ago CEO's and business leaders were discussing shifting jobs overseas and outsourcing in general. The discussion resulted in a near unanimous opinion this would be a good thing for America. After all, we were going to be a service economy remember? The CEO's were ecstatic salivating over higher stock prices. When it was Warren Buffet's turn to speak he asked "what will we do when the last job is shipped overseas"? No one promised Capitalism would last indefinitely. It might have a start and end. IMHO, it appears to have progressed to the point of punishing more Americans than it is rewarding. We can't all be PhD's.
The solutions are evident, but will not be politically tenable until robo-advisers replace every financial planner and index funds cause every Wall Street trader and analyst to lose their jobs. Only when the uber-capitalists are themselves Ubered out of their jobs will they acknowledge that "creative destruction" sometimes has ugly consequences.
The solutions are evident, but will not be politically tenable until robo-advisers replace every financial planner and index funds cause every Wall Street trader and analyst to lose their jobs. Only when the uber-capitalists are themselves Ubered out of their jobs will they acknowledge that "creative destruction" sometimes has ugly consequences.
As ugly as it makes me, I do enjoy the picture that paints in my head.
The solutions are evident, but will not be politically tenable until robo-advisers replace every financial planner and index funds cause every Wall Street trader and analyst to lose their jobs. Only when the uber-capitalists are themselves Ubered out of their jobs will they acknowledge that "creative destruction" sometimes has ugly consequences.
It won't happen but the solution is in the past with the Luddites. The future is metaphorically in the movie Terminator.
Comments
I have never gotten a clear answer on where the new jobs will be. Machines are taking over everywhere and in places we thought were safe only a few years ago. Fast food jobs? Nope, machines will do it all. Humans use a kiosk to order. Machines are already building machines and I predict they will be able to repair themselves in due time.
Some areas like nursing may get retrained labor thus flooding the market.
The one area that I have mentioned to youngsters is engineering. That's probably not safe either.
But, the prospect of displacements of huge swaths of workers with automatons is more fundamental-- it will alter human traits. Thrift, industry, hard-work -- human virtues -- will no longer be incentivized to large swaths of people, due to labor market largely consigned to automatons. There is no offsetting job-creating industries on the horizon. Besides, any 'new industries' will just as likely be staffed by automatons.
The topic of 'robotizing' jobs was recently discussed on M*. One poster proferred an idea that has, I believe, merit: use the tax code to ameliorate & slow this process. Disallow expensing/depreciating labor-replacing automatons by businesses. Instead, require such automaons be registered, and impute taxable income to them --- payable by their owners. Said payments would not be deductible. Someone once said "the power to tax is the power to destroy". It is also the power to "slow things down".
Automation
Artificial Intelligence
Globilization and free flow of knowledge, capital and goods
People living longer and needing to work longer
I think to see what the future looks like, you need to look at the worlds past.
In the past, before 1900s the was very few rich (Monarchs, industrialists) small middle class (those close to the monarchs and industrialists) and the rest poor - surfs, laborers.
We have in our mind a large middle class. In the US the middle class has been shrinking since the 1970s. A middle class rose in China but it is now under pressure.
In 2012, much was made of Mitt Romney's bemoaning the "47%" who took money from the 'gubmint'. When the automaton joblessness builds, that 47% will look quaint. The more working age people that have no work, the more demands their will be for 'income replacement' (i.e. govt dole). And the fewer employees there are, the less resistance their will be to tax business heavily. The argument against taxing businesses heavily is that doing so was a 'job destroyer'. If businesses pre-emptively destroy (human) jobs by substituting automatons, well, that argument goes away (with the jobs).
Economic freedom means a job & yes, a career. Take away jobs and you take away individual freedom. Once enough people are not free, they will sell their vote to whichever pol promises the most 'free' govt checks. Capitalism again, is getting ready to 'eat its young'.
Epoch Times (now there's a publication I rarely reference) calls Shvets "the global strategist of the investment bank Macquarie Group." BI says merely that he's "a" global strategist at the Hong Kong outpost of Macquarie. Bloomberg is likely more accurate, describing him as "Macquarie Securities Head of Asian Strategy."
That might explain why slide after slide is about the Chinese economy. That, or its appearance in Epoch Times. As to the substance ...
Sure, machines can augment or replace people. Markoff's book, Machines of Loving Grace may offer a more balanced perspective than the doom and gloom here. I'm embarrassed to admit that the book is still sitting on my shelf after listening to Markoff talk about it.
Here's where we get into muddled economics. The actual slides (BI link) focus strictly on TFP (Total Factor Productivity) - a metric that incorporates all production factors, both capital and labor, in calculating productivity. But the ET article interjects worker productivity (comparing Walmart with Amazon). This confuses matters because by simply shifting costs from labor to capital (for example giving workers tools), worker productivity goes up, even if TFP remains constant. Apples and oranges.
For a much clearer discussion of TFP in general, and productivity eras specifically, I found this 2013 CBO paper informative.
IMHO the question is not so much whether TFP is going up (though that is certainly preferable), as what happens to the excess labor. That can be used to produce more (or better) goods and services if there is a demand, or the same output can simply be produced with less labor.
That's not necessarily a bad thing. It depends on how the reduced work hours are distributed. It was considered wonderful when the American work week was reduced to a nominal 40 hours. Europeans work shorter hours, with longer vacations, family leave, etc., and arguably value these benefits.
But if the economy sets a 50 hour week standard for those still working, and leaves the rest out in the cold, demand will go down and inequality will continue to increase.
Also, most wealthy, educated societies move toward lower birthrates. If we all arrive at Japanese and Western European levels, we'll a declining population which will need all those robots to support it in its old age.
The caveat is that we would need aggressive government policies to spread the wealth and make an orderly transition to a society which needs less human labor.
I'm sure it won't work out as smoothly as I portray above, maybe somewhere in between my sci-fi utopia and Edmond's fall-of-Rome dystopia.
What that means about mutual fund investments, I don't know.
Great question. Maybe hire a "temp" robot to go out and steal money for us?
"Technology ... is destroying the middle class (i.e. accountants; lawyers; traders; logistics; clerks; pilots; economists; editors; investment advisors)."
The future is metaphorically in the movie Terminator.