Tuesday, September 29, 2015

Newletter #1 Technology


Every day it takes fewer people to produce the same amount of goods and services.
This one inescapable and incontestable fact is dominating our era and is at the root of all our other problems. All other factors, however contributory, are merely that—contributors, not sources.


In their quest to solve science's biggest mystery, namely the various forces that explain the interactions between matter, scientists seek a single explanation... a so-called 'unified force.' That's because it is illogical that multiple explanations exist for what seems so obvious—to some at least—to be a single problem. And so it is with the great socio-economic problems of our time: increasing income disparity, unabated poverty, under-employment of the middle class, whole countries on the brink of financial collapse, and troubling if not outrightly untenable costs for healthcare and college, not to mention a US national debt figure that stretches credulity.

If you're wondering why we are stuck in this endless cycle of bad financial news, the answer has been in front of us for about 40 years: the increasing pace of technology. Study any problem, not just financial ones, but the gamut of modern ills from gun violence to overpopulation, and while many factors may come into play, at the root you will always find technology as the enabling source.

Back in the '70's the news focused on automation taking jobs, but for some reason it's as if we're now surprised at the way it's played out. Yet it's clear that human labor will be replaced by new efficiencies until all remnants of the last 100 years' work world are gone. And this is likely to occur in increasingly larger waves, despite the comforting allure of the intervening troughs. Consider, for instance one of the most likely upcoming waves of disruption, as the dot-com folks like to euphomize it: when email reaches its full potential, about 300,000 letter carriers in the US Postal Service alone will no longer having jobs. After that telecomm will lose another tier of labor as Wi-Fi becomes ubiquitous. And when younger technologists finally become tomorrow's politicians, perhaps tax simplification (irrespective of being flat or progressive) will translate into tens of thousands of fewer IRS and street-corner accounting jobs. Against this backdrop many are convinced that this is merely tiresome, misguided hysteria that "the sky is falling," and that technology gives as much as it takes. Those are the people who have well-paying jobs, and generally in the professions well treated by technology, media pundits first-and-foremost. A more likely appraisal is that technology gives back one new job for every ten it takes.

To solve any problem you need an explanation—a mental model—that correctly assesses the circumstances. To figure out where the jobs will be you need to figure out wealth and its distribution. Wealth is the sum of the necessities, niceties, and healthiness that a society enjoys. Trust me, it's not as complicated as some might suggest. It's a certainty that we are producing wealth faster and in greater volume than it's ever been produced.

Distribution is more subtle, and of course, contentious. Ever since the hunter-gather days,when wealth was distributed evenly—if sparsely—among everyone, society has been on a relentless progression, through the agrarian culture, to the industrial age... in which successful individuals have ever-increasing ability to accumulate—concentrate—wealth. And, despite the recent arguing about "you didn't make that" (in reference to the business owner not creating the publicly funded infrastructure that enables their wealth accumulation), even the hardest working individuals don't have the work capacity to create the wealth of 100,000 people.

Technology has always been the lever in this equation. It estimated that in 1900 an American farmer could feed 25 people; today that number is around 1,000. But that figure might be from before tractors were guided by GPS and could plow a field without a driver.... at night... with optimal fuel consumption... at exactly the right time that the weather calls for... without overlapping its path at all...

Until recently, it's true that the jobs that were displaced were replaced in time. But that process is no longer able to take up the slack. A recent story in the New York Times magazine epitomized the relationship between wealth concentration and technology. The story told of devious stock trading companies surreptitiously undercut the rest of the investors—pension funds and day traders alike—by detecting trades before they are executed on a slower exchange and buying or selling a millisecond beforehand on their own exchange, a so-called 'dark pool' trade. (Never mind that this shouldn't even be possible, that's another story.) Despite the duplicity of it, that is the state in which we now exist: genuine work might not be completely detached from the genuine creation of wealth, but it is absolutely unnecessary for its accumulation and  concentration. By a recent account, half of the world's wealth is now owned by 85 people. We've all heard the statistics.

Problems that take many years to create aren't solved in months. But most of this problem has occurred in 50 years, not really 500. And, on the plus side, we don't by any measure have a shortage of wealth. Technology is creating wealth faster than even Americans can consume it. But what to do?

Adjustments could be made on many fronts, such as energy policy, healthcare, and education, but let's examine just the financial front. We need to mitigate the employment shock waves of the upcoming technology tsunamis with laws that balance corporate and personal interests. Plain-and-simple, this means "progressive taxation." And if the concentration of wealth is such that one person possesses the wealth of 42 million people, then the rate of "progression" has to be equivalently steep.

Most reasonable people inherently find laws that force redistribution of wealth to be troublesome. Progressive tax rates simply feed the governance machine that is just as self-perpetuating as the stock manipulators. Left to its own, government can't stop itself, as evidenced so gloriously by America's Congress, which doesn't have to live by the laws it decrees or the taxes it levies.

Possibly the best hope, more effective than a minimum wage law (which solves so little), is to enact laws that limit top executive total compensation—no-loopholes for stocks—to a multiple of the lowest paid employee. This still allows unfettered capitalism because it does not put an absolute limit on anyone's ability to concentrate wealth; it simply forces them to bring others along with them. Imagine even a multiple limit of 100: if an executive makes $10 million per year, the lowest paid employee must get $100,000. Or how about a hybrid? (Hybrids always win, by the way.) The portion of executive salary below the 100 multiple is taxed at X percent; the portion of an executive's salary above the 100 multiple is taxed at 2X percent. Now consider non-profit companies, such as the National Football League. To get the benefit of not sharing as much of their revenue with the public as a for-profit company does, shouldn’t the executive income multiple be lower… perhaps 10 times the lowest paid employee? Shouldn't such a law be easy to enact for non-profits?

The wonderful engine of corporate America is only that—our engine. It must be balanced by choices we make: choosing activities that produce truly long-term wealth and avoid its ungoverned concentration, and basing decisions on sustainability instead of growth. There is no question that, unabated, our businesses will continue to merge until there is one database, one human resources department, one CEO, one Board of Directors, one set of warehouses, one railroad, and one employee... or pretty close to it. Technology is the only root cause. It is neither evil nor good and there is no stopping it, nor should stopping it be any sort of goal. But it forces us to choose, not simply watch its effects ignorantly, powerlessly, and selfishly. And if we don’t choose the right balance between concentrating and distributing forces, technology will drive our children off a cliff.

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