Imagine that tomorrow a company introduced androids that could do absolutely everything a human worker could do, including building more androids. There’s an endless supply of these robots, and they’re extremely cheap to buy and virtually free to run over time. They work all day, every day, without breaking down.
Clearly, the economic implications of such an advance would be profound. First of all, productivity and output would skyrocket. The androids would operate the farms and factories. Food and products would become much cheaper to produce. In a competitive market, in fact, their prices would fall close to the cost of their raw materials. Around the world, we’d see an amazing increase in the volume, variety, and affordability of offerings. The androids, in short, would bring great bounty.
They’d also bring severe dislocations to the labor force. Every economically rational employer would prefer androids, since compared to the status quo they provide equal capability at lower cost. So they would very quickly replace most, if not all, human workers. Entrepreneurs would continue to develop novel products, create new markets, and found companies, but they’d staff these companies with androids instead of people. The owners of the androids and other capital assets or natural resources would capture all the value in the economy, and do all the consuming. Those with no assets would have only their labor to sell, and their labor would be worthless.
This thought experiment reflects the reality that there is no ‘iron law’ that technological progress must always be accompanied by broad job creation.
One slight variation on this thought experiment imagines that the androids can do everything a human worker can do except for one skill — say, cooking. The economic results would be unchanged, except that there would still be human cooks. Because there would be so much competition for these jobs, however, companies that employed cooks could offer much lower wages and still fill their open positions. The total number of hours spent cooking in the economy would stay the same (at least as long as people kept eating in restaurants), but the total wages paid to cooks would go down. The only exception might be superstar chefs with some combination of skill and reputation that could not be duplicated by other people. Superstars would still be able to command high wages; other cooks would not. So in addition to bringing great bounty of output, the androids would also greatly increase the spread in income.
How useful are these thought experiments, which sound more like science fiction than any current reality? Fully functional humanoid androids are not rumbling around at American companies today. In fact, they don’t yet exist, and until recently progress had been slow in making machines that can take the places of human workers in areas like pattern recognition, complex communication, sensing, and mobility. But as we’ve seen, the pace of progress here has been accelerating greatly in recent years.
The better machines can substitute for human workers, the more likely it is that they’ll drive down the wages of humans with similar skills. The lesson from economics and business strategy is that you don’t want to compete against close substitutes, especially if they have a cost advantage.
But in principle, machines can have very different strengths and weaknesses than humans. When engineers work to amplify these differences, building on the areas where machines are strong and humans are weak, then the machines are more likely to complement humans rather than substitute for them. Effective production is more likely to require both human and machine inputs, and the value of the human inputs will grow, not shrink, as the power of machines increases. A second lesson of economics and business strategy is that it’s great to be a complement to something that’s increasingly plentiful. Moreover, this approach is more likely to create opportunities to produce goods and services that could never have been created by unaugmented humans, or machines that simply mimicked people, for that matter. These new goods and services provide a path for productivity growth based on increased output rather than reduced inputs.
Thus in a very real sense, as long as there are unmet needs and wants in the world, unemployment is a loud warning that we simply aren’t thinking hard enough about what needs doing. We aren’t being creative enough about solving the problems we have using the freed-up time and energy of the people whose old jobs were automated away. We can do more to invent technologies and business models that augment and amplify the unique capabilities of humans to create new sources of value, instead of automating the ones that already exist.
This is an extract from Erik Brynjolfsson and Andrew McAfee's The Second Machine Age published by WW Norton Company