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Automation Doesn't Just Destroy Jobs - It Destroys Profits, Too

Automation Doesn't Just Destroy Jobs - It Destroys Profits, Too




Tyler Durden's picture



Submitted by Tyler Durden on 11/09/2015 11:38 -0500 Zero Hedge

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The idea that taxing the owners of robots and software will fund guaranteed incomes for all is not anchored in reality.

Automation is upending the global order by eliminating human
labor on an unprecedented scale--and the status quo has no reality-based
solution to this wholesale loss of jobs.

Two recent articles highlighted the profound consequences of advances
in robotics and AI (artificial intelligence) on employment: four fundamentals of workplace automation and Robots may shatter the global economic order within a decade as the pace of automation innovation has gone from linear to parabolic (via Mish).

The status quo apologists/punditry have offered two
magical-thinking solutions to the sweeping destruction of jobs across
the entire spectrum of paid work
:

1. Tax the robots (or owners of robots) and use the revenues to pay a
guaranteed income to everyone who is unemployed or underemployed.

2. Let the price of labor fall to the point that everyone has a job of some sort, even if the pay is minimal.

Neither one is remotely practical, for reasons I will explain today and tomorrow.

Today, let's examine the misguided fantasy that automation/robotics will generate enormous profits for the owners of robots. Here's the problem in a nutshell:

As automation eats jobs, it also eats profits, since automation turns labor, goods and services into commodities.
When something is commoditized, the price drops because the goods and
services are interchangeable and can be produced almost anywhere.

Owners must move commoditized production to low-tax regions if they want to retain any profit at all.

Big profits flow from scarcity, i.e. when demand exceeds supply. If supply exceeds demand, prices fall and profits vanish.

(Monopoly is a state-enforced scarcity. In our state-cartel economy,
there are many monopolies or quasi-monopolies. While eliminating these
would lower costs, that wouldn't reverse the wholesale destruction of
jobs and profits--it would only speed the process up.)

The other problem the "tax the robots and everything will be
funded" crowd overlooks is the falling cost of software and robots
lowers the barriers to competition
: nothing destroys profits like wave after wave of hungry competitors entering a field.

The cost of automation and robotics is falling dramatically. This
lowers the cost of entry for smaller, hungrier, more nimble competitors,
and lowers the cost of increasing production. When virtually any small
manufacturer can buy robots for less than the wages of a human laborer,
where's the scarcity necessary to generate profits?

The parts needed to assemble a $45 tablet are dropping in price, and
the profit margins on those parts is razor-thin because they’re
commodities. Software such as the Android operating system is free, and
many of the software libraries needed to assemble new software are also
free.

Automation increases supply and lowers costs. Both are deadly to profits.

Here’s the core problem with the idea that taxing the owners of robots and software will fund guaranteed incomes for all: the more labor, goods and services are automated/commoditized, the lower the profits.

http://www.zerohedge.com/news/2015-11-09/automation-doesnt-just-destroy-jobs-it-destroys-profits-too

"We are shaped by our thoughts; we become what we think. When the mind is pure, joy follows like a shadow that never leaves."

Comments

  • Matt_ADMIN_Matt_ADMIN_ Administrator
    Well here's an easy solution - eliminate profit! Why not share the fruits of production amongst everyone and let machines do the toil so we can be free to pursue other things? 

    This is what I mean about our current economic model. *Everyone* is trying everything to try to make it work, despite the obvious flying in their face: It's over, the labour-vs-profit model is dead because technology and wealth concentration has killed it.
    -------------------
    "...Say, 'GOD is sufficient for me.' In Him the trusters shall trust." (Quran 39:38)
  • People think profit is the incentive to work. i.e. making something extra out of nothing much!

    "We are shaped by our thoughts; we become what we think. When the mind is pure, joy follows like a shadow that never leaves."

  • Farmer_Sean_DEP_Farmer_Sean_DEP_ Member, Moderator
    One way to help speed along an end to profit is to decrease the level of competitiveness in modern society.  Everyone is taught from a young age to be #1 whatever it takes, and to fight until you get what you want.  Competitive parents, childhood sports leagues, academic awards and even ridiculous competitions like spelling bees all contribute towards making a bunch of egotistical competitors who disdain those beneath them and hate and envy those above them.

    If everyone wasn't so concerned about having a bigger house or faster car than their neighbour there might not be so much need for profit, and therefore even less need for this outdated economic model we cling to.  Remember this scene from Borat?



    We laugh because of how petty his competition with Nursultan is, yet aren't most of us engaged in the same struggle with more fancy, expensive things?  Isn't it just as laughable when John Smith buys a $700,000 house he can't afford to show off to his family, friends and coworkers?  It sure is to me.
  • Have credit cards contributed to the instant gratification trend?  It's so easy to buy something outright that would have been saved for or put on layby years ago. The difference being with layby you didn't pay interest, just ran the risk of losing it if you didn't pay in full in 6 weeks.  Some places have stopped offering layby terms.  Maybe because it's easier to take it home and pay interest that visit to make a payment every week.

    "We are shaped by our thoughts; we become what we think. When the mind is pure, joy follows like a shadow that never leaves."

  • Matt_ADMIN_Matt_ADMIN_ Administrator
    I've never understood the concept of lay-away. What's the point of paying in that manner, versus simply saving up on one's own, if the item can simply be bought by someone else in the mean time?
    -------------------
    "...Say, 'GOD is sufficient for me.' In Him the trusters shall trust." (Quran 39:38)
  • Easily justified.  There's one outfit in a dress shop in your size and your colour that screams "buy ME". Do you walk away with head held high saying "I can't afford it" ... or....   "I guess that just wasn't meant for me"?  Used it a lot as a teenager.

    "We are shaped by our thoughts; we become what we think. When the mind is pure, joy follows like a shadow that never leaves."

  • Matt_ADMIN_Matt_ADMIN_ Administrator
    I don't mean the justification, but rather the process - let's say you've paid for 90% of the dress, then someone the next day and just buys it. What happens then? Do you get your money back at least?
    -------------------
    "...Say, 'GOD is sufficient for me.' In Him the trusters shall trust." (Quran 39:38)
  • hansel49hansel49 Member, Permitted to post new threads
    edited November 2015

    I don't mean the justification, but rather the process - let's say you've paid for 90% of the dress, then someone the next day and just buys it. What happens then? Do you get your money back at least?

    It was put on lay away though, they can't buy it.(i don't think so anyways, never used it)
    11-13 Illinois
  • Hi Matt and hansel49.  When people put things on layby (layaway) When the first payment is made the goods are wrapped and stashed away for the customer and  client has a docket saying what the balance is and final due date. If they make their payments and pick it up by that date it's theirs.  If they break "the contract" by becoming overdue the shopkeeper has the right to put it back on display and resell at full price. In the "olden" days if you phoned the company and said you were ill they might be kind and keep it extra time.  If not your money is gone forever.

    "We are shaped by our thoughts; we become what we think. When the mind is pure, joy follows like a shadow that never leaves."

  • Matt_ADMIN_Matt_ADMIN_ Administrator
    Ah I see, so basically it's an interest-free loan with release upon fulfillment. That's actually a really good way to do business, I approve. 
    -------------------
    "...Say, 'GOD is sufficient for me.' In Him the trusters shall trust." (Quran 39:38)
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