The next industrial revolution starts. Beware the Pied Pipers who lull us into passivity.

Summary:  Are we ready for the future? Not if we don’t learn from the past. This is a follow-up to Techno-utopians keep us ignorant of the past so we cannot see the future, another look at the dreams and evasions they spin to cloud our vision so that we don’t grab a fair share of the gains.

“In the long run we are all dead. Economists set themselves too easy, too useless a task if, in tempestous seasons, they can only tell us that when the storm is long past the ocean is flat again.”
— John Maynard Keynes in A Tract on Monetary Reform (1923)

We are not here to curse the darkness, but to light the candle that can guide us through that darkness to a safe and sane future. … Today our concern must be with that future. For the world is changing. The old era is ending. The old ways will not do.”
— John F. Kennedy’s Acceptance Speech, 15 July 1960

Sailing To Future

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Dreams of a Third Industrial Revolution

Although its effects remain uncertain, by now any who look can see that the Third Industrial Revolution has begun. Like the others, it will reshape society. Power and wealth go to those who manage these changes.

We’re at the stage when pundits work to actively hide the obvious implications, to forestall public policy action to mitigate the damage to vulnerable — and prevent the 1% from grabbing all the gains. A tweetstorms tweets by Silicon Valley’s Marc Andreessen (@pmarca) shows how it’s done. He ignores what we’ve learned from the past, shifts the focus from obvious dangers to strawmen, and looks to the smooth waters at the end (ignoring the rapids and falls of the passage ahead).

1/One of the most interesting topics in modern times is the “robots eat all the jobs” thesis; best book on topic: The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies

2/The thesis is that computers can more and more substitute for human labor, thus displacing jobs and creating unemployment.

3/At core, this is Luddism — “lump of labor” fallacy, that there is a fixed amount of work to be done.

4/The counterargument is Milton Friedman: Human wants and needs are infinite; there is always more to do. 200 years of history confirms.

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5/To avoid the Luddite mistake, must believe “this time is different”, that either (a) there won’t be new wants and needs (vs human nature),

6/It is hard to believe that people will get these capabilities and then come up with… absolutely nothing useful to do with them.

7/And yet that is the subtext to the “this time is different” argument that there won’t be new ideas, fields, industries, businesses, jobs.

8/In arguing this with an economist friend, response was “But most people are like horses; they have only their manual labor to offer.”

9/I don’t believe that, and I don’t want to live in a world in which that’s the case. I think people everywhere have far more potential.

10/Nor should we. This is how we build a better world, improve quality of life, better provide for our kids, solve fundamental problems.

11/Utopian fantasy you say? OK, so then what’s your preferred long-term state? What else should we be shooting for, if not this?

12/So how then to best help individuals who are buffeted by producer-side technology change and lose jobs they wish they could keep?

13/First, focus on increasing access to education and skill development — which itself will increasingly be delivered via technology.

14/Second, let markets work (voluntary contracts and trade) so that capital and labor can rapidly reallocate to create new fields and jobs.

15/Third, a vigorous social safety net so that people are not stranded and unable to provide for their families.

16/The loop closes as rapid technological productivity improvement and resulting economic growth make it easy to pay for safety net.

He provides a more complete analysis in “This is Probably a Good Time to Say That I Don’t Believe Robots Will Eat All the Jobs“, 13 June 2014.

While fun to fantasize about the future, we have had two industrial revolutions — which provide a reasonable basis on which to make forecasts.

Internal view of a space colony
Internal view of a space colony

Perhaps the major error of Andreessen’s analysis: overlooking the timing of the pain and gains. We’ve gone through this process before; there is no excuse for starting a new cycle with such ignorance.

Industrial revolutions bring fantastic net benefits to society, but they come to the majority of the population only after decades — or generations. But the costs in lost jobs arrive faster.  Lifetimes of experience rendered worthless; lost incomes, and bankruptcies.

Fortunes are made more quickly, with the 1% collecting most of the gains.

These unequal outcomes do not result from the workings of nature, but raw hard politics. The gains go to the powerful, the losses to the proles.

So far we look to repeat the mistakes of earlier cycles, which created so much economic and political instability. Today we give aid to those hurt by automation in pennies, grudgingly given. Even more important, with longer and wider effects, spending cuts decrease social mobility when it’s most needed.  For example, everybody genuflects before the need for college degrees, and even more before advanced degrees. Back in the real world State support for public college systems is being slashed (see here, and a specific example here).

It need not be like this. People of the past did not understand the social and economic processes at work. With their experience, we do not have their excuses. This time we can see through the propaganda, and prepare for the future — so we can harvest its benefits without so much pain.

Advice from Eleanor Roosevelt

Rather than rich Pied Pipers, we should listen to sages from our past.  Such as Eleanor Roosevelt. Here are most frequently cited words about the future, horrifically guidelines for making public policy:

“The future belongs to those who believe in the beauty of their dreams.”

It is, of course, a fake quote. Eleanor was too sensible to say such dreamy claptrap.  Her legacy is sound advice, like this from her last book Tomorrow Is Now (1963):

We face the future fortified with the lessons we have learned from the past. It is today that we must create the world of the future. Spinoza, pointed out that we ourselves can make experience valuable when, by imagination and reason, we turn it into foresight.

… There never has been security. No man has ever known what he would meet around the next corner; if life were predictable it would cease to be life, and be without flavor.

… We must know what we think and speak out, even at the risk of unpopularity. In the final analysis, a democratic government represents the sum total of the courage and the integrity of its individuals. It cannot be better than they are. … In the long run there is no more exhilarating experience than to determine one’s position, state it bravely and then act boldly.

… What we must learn to do is to create unbreakable bonds between the sciences and the humanities. We cannot procrastinate. The world of the future is in our making.

Robot hand holding the 21st Century world

For More Information about the 3rd Industrial Revolution

These posts link to a wealth of information and speculation, helping you to prepare for what is to come.

(a)  This post is a follow-up to Techno-utopians keep us ignorant of the past so we cannot see the future, 23 June 2014.

(b)  See all posts…

  1. About the Third Industrial Revolution — now in progress
  2. About inequality & social mobility: once our strengths, now weaknesses

(c)  Corporations build the future

  1. The new American economy: concentrating business power to suit an unequal society, 27 April 2012
  2. For Thanksgiving, Walmart shows us the New America, 19 November 2013
  3. Nike swooshs us into a future of fewer jobs, low pay, 10 March 2014

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Dreams of the Future

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17 thoughts on “The next industrial revolution starts. Beware the Pied Pipers who lull us into passivity.

  1. You highlight several times the issue of ignorance about the past.

    Of course, Marc Andreessen will probably benefit from this new industrial revolution, so it is in his interest to discard inconvenient facts. However, I have been wondering for a while how much of the assertions by those gurus of modern entrepreneurship actually derive from the fact that they are — to put it bluntly — surprisingly uncultured.

    Have they studied some economic history at all? Do they know why Belgium was the second country launching the 1st IR in Europe after the UK, whereas its much wealthier neighbor, the Netherlands, missed it? Do they understand why Switzerland, a highly industrialized country, remained a poorhouse into the 3rd quarter of the 19th century — despite a politically democratic, economically liberal, diplomatically peaceful society giving a high priority to education? Does he remember where all those European peasants, artisans and workers displaced by industrial machinery went (hint: start with the wikipedia pages “immigration to Brazil”, “immigration to Argentina”, “immigration to the United States”)?

    Such large-scale developments as industrial revolutions require quite a number of conditions to be satisfied in order to succeed; this is why historians have only been able to pin down fairly recently why the 1st IR started in the UK and not in China (ever since Joseph Needham, the question “why not China first?” was a major puzzle to solve).

    As you point out, a diachronic view of the issue is essential. The first and second industrial revolutions lasted about 75 years; there is thus no reason to assume that withstanding the upheaval of the third is just a matter of being a little bit patient before the benefits accrue to the population at large.

    1. All great questions. I’ve have “discussed” these with him on Twitter. He’s oblivious, and ignores all references to the past — or ways the future is following the past. He has his fantasy and will allow no objections from reality.

      I find it amazing how many people find his fantasies to be compelling. Sad, too.

    2. “The first and second industrial revolutions lasted about 75 years”

      And I mean — each one lasted that long.

      As far as the conditions of success — I emphasize that it is far from clear who will be the primary beneficiaries of the 3rd IR — at this stage, assuming it will be the USA is a bold gamble.

    3. “Do they know why Belgium was the second country launching the 1st IR in Europe after the UK, whereas its much wealthier neighbor, the Netherlands, missed it?”

      I don’t know why, but it sounds interesting. Could you enlighten me?

    4. “I don’t know why, but it sounds interesting.”

      In summary:

      Belgium had a long tradition of cloth making, had huge reserves of coal, a fair amount of iron ore, access to the larger iron mines of Luxembourg next door, harbors nicely located on the European Atlantic coast to export and import whatever additional raw materials were needed and to export steel products. Coal, iron, textiles are what made the 1st industrial revolution.

      The Netherlands had a superb trading and shipping infrastructure, a textile tradition, but very, very little coal, and no iron ore whatsoever. In fact, the Netherlands were severely constrained energetically, to the point that the population literally dug its own country and burnt it — in the form of large peat deposits. This was of course completely unsustainable, and by the end of the 18th century – early 19th century, just as the 1st industrial revolution was getting momentum, peat was exhausted, and entire Dutch regions were transformed into water-filled trenches. Covering large energy needs with wood was out of question — it was reserved for shipbuilding. This basically left wind (lots and lots of windmills), and expensive coal imports.

      Thus, the Netherlands did not manage to latch from their advanced pre-industrial economy on to the 1st industrial revolution; they only caught up with the 2nd industrial revolution.

      By the way: the question of energy is the main explanation why China did not make it first, although it had everything (and even more) than the UK. It did have huge coal reserves — but in locations not easily accessible from the iron ore/population centers to enable a large-scale economic steel production.

      Now, an interesting question would be to determine what are the material conditions for the 3rd industrial revolution to be successful in a country (or region). I guess plentiful, relatively cheap energy will be one of them anyway.

      Sorry if this is a bit long.

  2. “Tomorrow has come like it’s drunk on the blood
    Of the men who have dared to be there”
    – Jakob Dylan “Valley of the Low Sun” (Seeing Things (2008))

    A pessimistic quote, but worth noting in light of the post above. I agree with the overall FM theme of getting us to see where we are actually at; assess reality and from there move towards promoting a more humane world.

  3. Part of the solution will be redefining “the job.” Education and training are a necessary component of putting people back to work in something other than building roads (generally).

    I don’t think the automation of low-level jobs will be a process where we “examine the past” and try to avoid mistakes. Not because that isn’t a good idea, but because we get excited about our technology, and plow ahead with using it.

    The folks at the top of the wealth heap think they will make more money by automating low-level jobs, so they’re going to do it. Marc benefits from participating in that economy, so his opinion is mostly biased towards “plowing ahead.”

    His book recommendation is good though (The Second Machine Age is excellent). I don’t agree with everything in that book, but it’s a solid read.

  4. Seems like people who develop technology are eager to approach this subject, while economists and historians know to stay away from it.

    I think the techies might not realize at first, that if they turn over this rock, there are going to be some labor relations and social justice topics wriggling around. And if the techies get down and start to really get into the details, they might offend their free-market-purist friends.

  5. Google’s Larry Page has a better informed perspective than Andreessen:

    {excerpt from a long interview: source here}

    “I totally believe we should be living in a time of abundance, like the Peter Diamandis book. If you really think about the things that you need to make yourself happy: housing, security, opportunity for your kids. I mean, anthropologists have identified these things. It’s not that hard for us to provide those things. The amount of resources we need to do that, the amount of work that actually needs to go into that is pretty small. I’m guessing less than 1% at the moment. So the idea that everyone needs to work frantically to meet people’s needs is just not true.

    I do think there’s a problem that we don’t recognize that. I think there’s also a social problem that a lot of people aren’t happy if they don’t have anything to do. So we need to give people things to do. You need to feel like you’re needed, wanted and have something productive to do. But I think the mix with that and the industries we actually need and so on are — there’s not a good correspondence. That’s why we’re busy destroying the environment and doing other things maybe we don’t need to be doing. So I’m pretty worried until we figure that out, we’re not going to have a good outcome.

    One thing, I was just talking to Richard Branson about this. They have a huge problem that they don’t have enough jobs in the U.K. So he’s been trying to get people to hire two part-time people instead of one full-time. So at least, the young people can have a half-time job rather than no job. And it’s a slightly greater cost for employers. I was thinking, the extension of that is you have global unemployment or widespread unemployment. You just reduce work time.

    Everyone I’ve asked — I’ve asked a lot of people about this. Maybe not you guys, but most people, if I ask them, “Would you like an extra week of vacation?” They raise their hands, 100% of the people. “Two weeks [of vacation], or a four-day work week?” Everyone will raise their hand. Most people like working, but they’d also like to have more time with their family or to do their own interests.

    So that would be one way to deal with the problem, is if you had a coordinated way to just reduce the work week. And then, if you had slightly less employment, you can adjust and people will still have jobs.

    1. Original Sandwich Man,

      Thanks for posting this. It’s amazing how ideas re-appear each cycle. Page’s come from the late 19th century, and were commonplace in the 1930s. None of these get implemented — then or now — due to opposition from people of Larry Page’s class. His ignorance on this point (real or pretend) is quite astonishing. That these people stick to friendly audiences, awed by their wealth, keeps them from meeting reality — by laughter of the audience.

    2. Thanks for the formatting.

      Thomas Brassey’s 1872 book Work and Wages is a good case in point for the late 19th century. It was quite a sensation and had a tremendous impact on the thinking of American economist, Francis Amasa Walker and Cambridge’s Alfred Marshall. One might say it was the straw that broke the back of classical political economy and its wages-fund doctrine. Chapter Six was titled “Hours of Labour”, the same title used 37 years later for an article by Sydney J. Chapman in the Economic Journal, which supplied the theory explaining Brassey’s empirically-based argument. Between 1904 and 1914 Chapman wrote a three-volume “continuation” of Brassey’s Work and Wages with an introduction by Brassey to each volume. Chapman was one of Marshall\s star pupils.

      Brassey, like Page, was a very wealthy industrialist. His father had built a worldwide railroad construction empire. It wasn’t that he was the first to have his insight, just that his prominence in business lent credibility to what he said.

      Although Chapman’s theory was considered authoritative by the notable economists of the 1930s, it was duly forgotten after the second world war because it created untenable obstacles for the program of mathematizing economic theory.

      I don’t scorn Page for reinventing the wheel. The real problem is the academic economists, hack journalists and rubes like Andreessen who have devoted so much intellectual effort to reciting the “fallacy” that there could be such a thing a wheel or that anyone would ever find a use for one.

    3. Original,

      Thanks for the additional background on this. It’s useful info, details new to me.

      “I don’t scorn Page for reinventing the wheel. ”

      Me, neither. But I doubt he’s lifting a finger to implement his fine thoughts, sitting amidst his libertarian fellow plutocrats working hard to move us in the opposite direction — back to the Gilded Age.

    4. Prince’s Tavern, Princess-street, Manchester,

      Monday, Nov. 25, 1833. At a meeting called, at the above time and place, of the Working People of Manchester, and their Friends, after taking into their consideration—

      That society in this country exhibits the strange anomaly of one part of the people working beyond their strength, another part working at worn-out and other employments for very inadequate wages, and another part in a state of starvation for want of employment;

      That eight hours’ daily labour is enough for any human being, and under proper arrangements, sufficient to afford an amply supply of food, raiment, and shelter, or the necessaries and comforts of life, and that to the remainder of his time every person is entitled for education, recreation, and sleep ;

      That the productive power of this country, aided by machinery, is so great, and so rapidly increasing, as from its misdirection, to threaten danger to society by a still further fall in wages, unless some measure be adopted to reduce the hours of work, and to maintain at least the present amount of wages:— It was unanimously Resolved,

      1. That it is desirable that all who wish to see society improved and confusion avoided, should endeavour to assist the working classes to obtain ‘ for eight hours’ work the present full day’s wages,’ such eight hours to be performed between the hours of six in the morning and six in the evening; and that this new regulation should commence on the first day of March next.

      2. That in order to carry the foregoing purposes into effect, a society shall be formed, to be called ‘the Society for Promoting National Regeneration.’

      3. That persons be immediately appointed from among the workmen to visit their fellow-workmen in each trade, manufacture and employment, in every district of the kingdom, for the purpose of communicating with them on the subject of the above Resolutions, and of inducing them to determine upon their adoption.

      4. That persons be also appointed to visit the master manufacturers in each trade, in every district, to explain and recommend to them the adoption of the new regulation referred to in the first Resolution.

      5. That the persons appointed as above shall hold a meeting on Tuesday evening, the 17th of December, at eight o’clock, to report what has been done, and to determine upon future proceedings.

      et&: http://ecologicalheadstand.blogspot.ca/2011/02/society-for-promoting-national.html

    5. At least Page has the good sense to consider the arithmetic… hours worked / number of people, vs stuff produced / hours worked. Presumably, the second ratio goes up as technology advances, so what happens to the first ratio?

      That all is the easier part of the technology “problem”. A shorter workweek is the obvious solution. Even if Page is being hypocritical, at least he is saying it out loud.

      I guess the harder part is that the changes to “hours worked” are not evenly distributed among people and in time, but come in concentrated lumps, when entire occupations, and the investment people made building their lives around them, become obsolete.

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