The Speculist: Automated Unemployment


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Automated Unemployment

In our Tuesday night show Phil and I talked about losing jobs to automation - a continuation of the conversation started by Phil's post, "What if the Jobs Are Never Coming Back?" We mentioned the new automated ordering systems that McDonalds is testing shown below (I suggest starting the video at 2:00).

If implemented I could imagine the need for cashiers at McDonalds to be cut in half. Why? A machine may be expensive initially, but it works all shifts for years without a paycheck. The purchase price plus maintenance on those machines will be much cheaper for the business than paying cashiers to take the number of orders the machine could take during its lifetime.

Customers will like these things too. How better to insure that your order gets taken correctly? You put in the order yourself - including the number of ketchup packets you want - review the order, and place it.

And "there's an app for that!" There will be soon. You'll order by smart phone, walk past the order lines (both at the counter and at the automated kiosk) and grab your completed order. Many of us already do this for movie tickets. Restaurants will see these smart phone apps as a way to integrate themselves further into their customers lives. The nearest McDonalds will be right on your cell phone.

And if we automate the cashier, why not the cooks? The guy taking orders for the drive-thru window could be in India... until he's replaced by an AI. The whole kitchen could be empty except for one lonely manager checking up on the machines from time-to-time.

Everyone will like it... what's not to like? The restaurant will be more profitable, the food will be cheaper, more convenient, and probably more sanitary. Its better for everyone except the kids who find it just a little harder to get jobs as time goes by. And, largely, those kids won't know they're being automated out of the workforce. At least the won't be able to point to a particular machine as the culprit. They'll just be staying in their parent's basement a little longer.

There is no natural stopping point that I can identify - that point where the customer shouts - "I don't need further price reductions or greater convenience - I'm good!" Or the restaurant owner decides, "That's sufficient profitability. No more money needed here."

Obviously we'll all want to educate ourselves so that we can have higher-level jobs. The kid that would have been a cashier needs to learn how to repair Kiosks. But there won't be as many of those jobs, and not everyone who could have been a cashier will be capable of becoming a Kiosk repairman. Its a problem.

Solutions are not going to be easy. The government will naturally want to jump in with welfare and Luddite laws, but I don't think that's the right way to go. Welfare is corrosive to society and legislated Luddism will put our country at a competitive disadvantage. I think better solutions - at least in part - are internship programs and loyalty cards.

The internship program will have the lonely manager joined by others who are not necessarily all that productive, but who are learning the business. Loyalty cards would actually give customers a stake in the business. You could literally be earning McDonald's stock by buying cheeseburgers. Both paid internship programs and loyalty card systems would allow the wealth created by this automation to be distributed throughout the economy. And that's important to the business. People need money to buy fries.


The idea of paid internships could be expanded broadly across industries to make up for the loss of jobs across the board. One approach might be for the government to require a certain number of internships for companies of a certain size. A more nearly free market approach (although it's really not) would be for the government to provide potentially massive tax breaks depending on how many internships a company creates.

The most intriguing idea is the loyalty program -- having people consume their way into ownership of production. Imagine your box of Frosted Flakes -- instead of a cool spaceship toy inside, theres a certificate for 1/1000th of a single share of Kellog!

Think of a trip to the store. You get it at the register - stock instead of green stamps! No certificates needed. You see it on your receipt, but it's all electronic.

Real potential here Stephen.

An X00 week internship of one day weekly advancing from initial orientation to entry-level upper management position as the individual's interest/talent allows would permit an eventual five-fold increase of "employment" possibility, without added infrastructure or businesses.

By folding the loyalty program into one's 401k (or similar) investment portfolio, the shares "earned" via independent transaction could be managed as sub-catagories of a more general investment program.

A positive method for government to encourage adoption of such a concept might be to require completion of an internship as a prerequisite to non-elective government paid occupation (whether traditional full-time or itself a paid internship model position), least intrusively in an Ombudsman/quality assurance inspection capacity possibly.

The only hope of getting this to be adopted almost certainly requires getting the established unions (and professional societies - AMA and the like) to actively support the transition away from the existing practice. From my own membership experience, short of direct application of The Hand Of God (or some otherwise "magical" technique), I'm not certain there are sufficient resources in the world for that though. :)

The idea of having virtually NO jobs available, just like the prospect of someday having no political parties, is a paradigm shift which is hard to imagine.

One positive aspect of a non-employment economy is one less excuse for borders between countries. If and when there are no jobs for foreigners to 'steal', and resources like solar energy and self-assembling nanotech are widely available, there are fewer reasons to prevent people from traveling freely from country to country.

Yes, there might still be safety issues, and certainly there will be 'patriotic' resistance. But in the long-term, I'll bet we will all be sailing or teleporting back and forth from Europe, without ever requiring passports or rectal scans.

I understand the worry, but we have no shortage of work. We are seeing the jobs we have nowadays go away in large amounts, but I have no doubt that many new markets will open up.

I think lighter work loads plus the increasing easy setup fabrication techniques will renew people's desire to know how things work.

I also think that then will allow people to create new products that large companies would not have spent the time to research.

When it comes down to it I think Alec Baldwin said it best in the Glenn-Garry movie. A.I.D.A attention, interest, decision and action. I'll spare you guys the full speech where he cusses everyone out.

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