April 17, 2014--Today's Luddites

A young friend who is making his way quite nicely in the IT field (he is a software builder with investable ideas for a company of his own) was talking the other night about the Luddites.

In addition to being impressed that he knew anything at all about them, he had interesting things to say about today's version.

We began by comparing the power of the Gutenberg Revolution with the advent of the Internet--"I think," he unsurprisingly said, "that the Internet will prove to be an even more powerful cultural and work-shifting technology. Everything is and will change, from knowledge acquisition to the way work is structured."

Though two generations removed from his, though feeling threatened by so much change that I do not and never will fully understand, I agreed. But, I wondered, as we moved on to compare the structure of work brought about by the Industrial Revolution with the Cyber Revolution, that the changes we are seeing globally are likely to be much more disruptive than those brought about when we shifted, less globally, from an agriculture-based economy to one dominated by machines and mass production.

"You're making my point for me," he said, wanting to retain control of the direction of the conversation. "But though I am in my small way contributing to these paradigm-shifting developments, I am worried about some of the trends that I see, unintended consequences--there are always some--that may not turn out to be either benign or progressive."

"Say more," I said, pleased to cede the direction of the conversation to him.

"In the past, the actual, historic Luddites got it wrong. They thought that brining waterpower and machines to the manufacture of textiles would both alienate labor further and ultimately lead to fewer jobs--machines would replace workers."

"What you're saying is correct. They did go about literally and metaphorically smashing the very machines that they felt would replace them."

"And they turned out to be wrong. Right?"

"Say more."

"Rather than replacing workers, though many were dislocated and/or needed to learn machine-based skills, over time the capital invested in mechanization, which temporarily shifted the economic balance more toward capital (things like machines and factories) than workers and wages, over time--and this is important--the balance shifted: more workers were ultimately needed and the demand for them, plus unionization, led to higher wages."

"Correct. Classic economic theory," I said, wanting to sound relevant, "says this is what happens historically as the result of capital outlays and aggregation."

"But back to my but," he pressed, "I do not see this happening now. And maybe it will not happen even during the upcoming decades."

"What won't be happening?" I admitted to myself that he was leaving me behind.

"IT, information technology . . ."

"I know what IT is."

He smiled at me. "It may turn out that IT will permanently not only dislocate workers but also make much of human, hands-on work work itself redundant."

"Redundant?"

"OK, obsolete. No longer needed. And, here's the worry, this may wind up permanently replacing the old, classic economic model. We may see a longterm shift in the balance between capital and wages. A shift in the direction favoring capital. The data in many countries, very much including ours, are trending in this direction."

"OK. But what about the Luddites?"

"Well, it may be a generational thing--with people from, forgive me, your generation serving as the contemporary Luddites. You, I mean they," he smiled again, "may be decrying these cyber innovations because you, I mean they, are feeling left behind by more than age. But, they may be right."

"Slow down. You're losing me. Right about what?"

"That the new machines, actual and virtual, will in fact replace hands-on workers (except maybe in health care and restaurant work). Replace them for the foreseeable future. Maybe permanently. Maybe if displaced, redundant workers acquire new skills there may not be enough jobs for them. Look at what goes on in auto assembly plants these days. Cars are now made more and more by robots. Yes, at the moment humans have to make the robots but after they are deployed (capital investment) very few actual workers are needed. Just maybe to grease the machines and manipulate them via computers."

"Wow," I couldn't help but say. "That's quiet a future you're presenting."

"To be truthful, these are not only my ideas. There are people who know tons more than me about this who are studying what's going on and alerting us to the changes."

"I know that," I said. "I've been reading some of their stuff too."

"And I'm seeing it where I work. What in the past would have required dozens of workers requires very few. Considering the economic size and reach of a Google and a Facebook, to mention a couple, they have relatively few workers. That's one reason they're so profitable. And my own guess is that if you look at them five years from now they'll be even bigger and will have even fewer employees. This is a very big deal." I

"Could you pour me a little more wine? I need some." I slid my glass toward him.

While doing so, he concluded, "In other words, you Luddites are right!"