There is nothing intrinsically profitable about either robotics or AI.At the request of colleague/author Douglas Rushkoff (his latest book is Team Human), I’m publishing last week’s Musings Report, which was distributed only to subscribers and patrons of the site.)
The core assumption of Universal Basic Income (UBI) and other plans to redistribute wealth and income more broadly is that the world is becoming wealthier, and so the pool of income and wealth that can be taxed is always expanding. This pool of available wealth and income is so vast, we’re assured, that taxing the super-wealthy will not really dent their wealth or the economy as a whole.
But what if the world is rapidly becoming poorer in every important sense?
We must start any discussion of total wealth/income by asking: what are we measuring with currencies such as dollars? What’s not being measured?
As often noted in my writings, we optimize what we measure, and so since we measure financial accounts embedded in markets, we maximize the accumulation of currency and measure what it buys in markets. But as I’ve explained in my books, markets only price goods and services in the here and now. They lack mechanisms to measure the lifecycle costs of the goods, the degradation of wild fisheries, the loss of soil fertility (depletion), the opportunity cost of what could have been done with money squandered on consumption, and so on. The decline of fresh water tables and the shrinkage of glaciers that feed fresh water rivers don’t make it into “price discovery” of markets.
As a result, the expansion of “money” creates an illusion of rising wealth when in fact the natural capital we depend on is declining rapidly. But since we don’t measure this in “price,” it’s ignored. If we combine the loss of purchasing power of labor with the tremendous loss of natural capital/wealth, it becomes self-evident that adding a zero to financial “wealth” hasn’t made us actually wealthier in terms of what we can buy with our labor and what resources are still available to us for future “growth.”
This is the story of commoditized manufacturing in China, where few companies reap significant profits and most scrape by on extremely thin margins. As a Chinese economist recently observed, there is really only one very profitable Chinese corporation: Huawei.“The profits earned by 1,444 listed companies on the SME board and growth enterprise board are not even equal to one and half times the profit of the Industrial and Commercial Bank of China.” Why would commoditized robotics and AI software be any different?
Consider Uber and Lyft, both of which are losing billions of dollars operating at their current scale. Profits are presumed to emerge at some magical point when their incomes rise and the expenses drop. But given the presence of competition and the cost structure, how can these services raise prices enough to turn a profit? As for eliminating the expense of drivers via self-driving cars: if we look at commoditized business models like Uber and Lyft, we find the labor component is actually rather marginal. Cutting $1 billion in costs by eliminating drivers presumes a monopoly and equipment and software that are proprietary, i.e. a means to push higher prices on a customer base with few other options. But if we know anything about the push to self-driving cars, we know the competition in fierce and global, and all the necessary parts–sensors, artificial vision software, etc.– are rapidly being commoditized.
The truth is these services are not inherently profitable:
There is an exception, of course: people will pay more for status. People pay inordinate sums for an Apple phone because it has intangible but oh-so coveted status. But there is no equivalent in the vast majority of commoditized sectors. Very few people will pay extra for an Uber ride based on the company’s brand. What unique and highly coveted status is associated with Uber or Lyft? The answer is none, just as it is for digital memory, mobile phone cameras and thousands of other commoditized technologies. Apple has status because it protects its proprietary integration of software and hardware which make it difficult to commoditize. But Android and cheap components are chipping away at the functional advantages of Apple’s proprietary offerings. There is only one Apple globally. Very few enterprises escape the commoditization of their business, and these generally have high barriers to entry. Semiconductor fabrication plants cost upwards of $2 billion each; that’s a high barrier of entry to a highly volatile and uncertain market. Few companies are willing to gamble the $2 billion in a field already crowded with competitors.
1. The problem is we have based our entire civilization on “growth,”
2. Just as the high cost and complexity of robotics and AI
3. The planet’s natural capital and buffers are being exploited
Counting on phantom wealth to power an unsustainable system is delusional. We are adding knowledge and information to the pool of
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