A few days ago, I saw an ad for Miso Robotics’ crowdfunding campaign. If you don’t know about Miso Robotics, here’s how they describe themselves:
“Developing technology to assist and empower the Quick Service Restaurant industry to make food.”
These are robots targeted at fast food chains — Whitecastle and Caliburger have signed up as per Miso’s disclosures. These are not glamorous jobs, but they have been stepping stones to higher education, or even better jobs.
Charlie Munger is a big admirer of McDonald’s for this very reason. During the 2010 Berkshire Hathaway Annual Meeting, in response to a question on how children could be better educated to avoid the follies of the 2007/08 crash, he said this:
I had fun once at a major university when I said I thought McDonald’s succeeded better as an educator than the people in the university did.
And what I meant was McDonald’s hires a lot of people who are quite marginal at the very start of their working career. And they learn to show up on time for work and observe the discipline.
A lot of them go on in employment to much higher jobs. And they’ve had an enormous constructive effect about educating into responsibility a lot of people who were threatened with not making it.
So I think we all owe a lot to the employment culture of McDonald’s. And it’s not enough appreciated.
We are at an inflection point in history, with many factors multiplying each others’ effects. There is opportunity in this, as well as huge challenges, for which we may not have answers in the short run.
Historically, massive change in society has come about when biological, technological, economic, and societal change have occurred nearly concurrently. It is debatable which factor was more important in an era, and at time the changes themselves were spread out over many years.
Broadly speaking, we have undergone three revolutions so far:
- The transition from Hunter-Gatherer to Agriculturist
- Agriculturist to Industrial Society
- Industrial Society to Information Society
Each era has resulted in an increase in our collective wealth. What is sometimes left out in the discourse often, is the societal upheaval that was felt during and after these changes in society.
A good dataset we have to understand these changes is Bradley Delong’s estimation of Average World GDP (based on 1990 prices).
Agriculture to Industrial Society
The Industrial Revolution did not start in the 18th century, but the effects of machine powered mass production only started taking off then.
In the hundred year span between 1750 and 1850, two emerging technologies had profound, long lasting effects.
These were James Watt’s innovations with the steam engine in the 1770s, and the development of the telegraph.
Watt’s design, and subsequent improvements in the steam engine allowed it to be used in many applications, ranging from the locomotives to ships.
As William Rosen wrote in ‘The Most Powerful Idea in the World’, this brought the Industrial Revolution to life, and freed it from the tyranny of location. Factories could now be located away from rivers, and locomotives could bring in raw material and take away finished goods.
Around the same time, massive improvements were made in telegraphy, with Samuel Morse ultimately coming up with a common code that allowed communication between different countries.
The combination of locomotives and telegraphy was also a major factor in the demise of coins as a medium of exchange, and the rise of paper currency. Banks could send payments efficiently on trains, and communicate with each other using telegraphy. Saifedean Ammous goes into much more detail on this in his amazing book ‘The Bitcoin Standard’.
In under 200 years, the Average World GDP went from $178 in 1750 to $679 in the year 1900, a nearly 4x increase. The next 4x increase took less than 65 years, with the world reaching an average of $2736 by 1965. This was of course, despite two World Wars, a near global pandemic, and millions dead.
The assembly line, telephony, telegraphy and vaccinations, along with greater participation of women in the workforce had transformed the economic potential of the world. Not to forget that by this era, the printing press, locomotives, electricity, hydrocarbon fuels and automobiles were ubiquitous.
Some of the greatest beneficiaries of these advancements were unskilled workers. University of Michgan’s Prof Stephen Meyer chronicles this:
In the mid-1920s, a Yale student worker in the Ford River Rouge plant observed: “In most cases complete mastery of the movements does not take more than from five to ten minutes.” The only on-the-job training was the “one or two demonstrations by the foreman or the workman who has been working on that job.” Once shown how to perform these tasks, the novice worker “is considered a fully qualified ‘production man.’
Two demonstrations from a foreman and you were a trained automobile worker. In developed economies, there still exists nostalgia for the good old industrial era of the 50s and 60s for this very reason. People from a working class background with little to no education could reasonably expect to be lifted to middle class lives within a generation, provided they had a long enough career and they had a good work ethic.
The 18th Century Luddites were prescient. Contrary to popular perceptions, they were not deluded technophobes, they were skilled textile workers who could forsee being supplanted by unskilled factory workers with machines. Many skilled trades were destroyed by the industrial revolution.
Industrial to Information Society
Our transition from an Industrial to an Information Society started shortly after WWII. Louis C. Gerken’s “The Little Book of Venture Capital Investing” goes into the history of Silicon Valley, right from Shockley Semiconductor to Fairchild, and the birth of Intel.
The Information Age started with the semiconductor revolution.
The constant drive to minimise the size of the equipment, while doubling it’s efficiency and halving the price has got us to the point where our Instagram machines are more powerful than our Apollo 11 onboard computers. The Independent wrote this in 2019:
On board Apollo 11 was a computer called the Apollo Guidance Computer. It had 2048 words of memory which could be used to store “temporary results” — data that is lost when there is no power.
This means that the Apollo computer had 32,768 bits of RAM memory.
In addition, it had 72KB of read-only memory (ROM), which is equivalent to 589,824 bits. This memory is programmed and cannot be changed once it is finalised.
To put that into more concrete terms, the latest phones typically have 4GB of RAM. That is 34,359,738,368 bits. This is more than one million (1,048,576 to be exact) times more memory than the Apollo computer had in RAM. The iPhone also has up to 512GB of ROM memory. That is 4,398,046,511,104 bits, which is seven million times more than that of the guidance computer.
But memory isn’t the only thing that matters. The Apollo 11 computer had a processor — an electronic circuit that performs operations on external data sources — which ran at 0.043 MHz. The latest iPhone’s processor is estimated to run at about 2490 MHz. Apple does not advertise the processing speed, but others have calculated it. This means that the iPhone in your pocket has more than 100,000 times the processing power of the computer that landed man on the moon 50 years ago.
100,000x more powerful, in 50 years.
Along with speed, we got an increase in the amount of storage. In 1967, a 1MB hard drive costs $1 million. A megabyte costs roughly $0.02 or less now.
Together with the internet, four themes will completely transform the way we live.
- Artificial Intelligence
- Connected Devices/IOT
Implications for the Information Age
We might very well see another 4x jump in the average, but there is bound to be some social upheaval over the next few years, or even decades.
Coming back to the ad for Miso Robots, what are some events that might unfold in the near future?
1. Major economic hubs/startup hotspots will lose prominence: Twitter, Facebook, Google, Microsoft are among some of the tech firms that have announced a work from home policy, perhaps indefinitely. Seattle is no longer going to be the 787’s home, with Boeing deciding to move to South Carolina.
Anecdotally, I know of many people who left NYC and the Bay Area. The data has been suggesting that well. And NYC’s much detested Mayor is totally oblivious to the effect it will have on the city and it’s finances.
“I am not going to beg anybody to live in the greatest city in the world,” Mayor de Blasio said at a recent press conference, when asked about anecdotal evidence of well-to-do New Yorkers moving out. “The wealthy have become more global, in many ways, much less rooted. They will come, they will go.”
If there’s one thing uniting Republicans and Democrats in the city, it’s about how inept the Mayor is.
California too will face a major revenue shortfall. This exodus had started pre-Covid, as this report from 2019 highlights, and Covid has accelerated it.
It wouldn’t surprise me to see both states, or at at the very least, a few prominent cities within them like NYC, San Francisco, and San Jose go bankrupt like Detroit once did.
2. Remote Worker Visas: Estonia, Barbados, Jamaica, Albania etc have already announced remote worker visas. If your job is remote, why wouldn’t you want to go work in low tax jurisdiction like Estonia?
It’s remarkable how many predictions by the authors of ‘The Sovereign Individual’ are coming true. Jurisdictions within and outside a nation state will be competing to lure away high income earners. In the past, those with high incomes stayed in despite having to pay since productivity was tied to proximity to economic centres. Not so anymore.
3. An expansion of the welfare state: High income techworkers, Venture Capitalists, Small Business Owners, Joe Rogan et al are leaving New York and California. Unfortunately, lower income citizens may not all be in a position to leave. And due to policies adopted in their home states, they may be priced out of jobs by robots.
Already, many cashiers have been automated away by iPad based POS systems. Miso Robotics’ burger flipping robot, Flippy, costs about $3/hour to operate. How is a worker at a $15/hour minimum wage supposed to compete with that? Cleaning jobs will soon be gone too, as they already have in many large industrial sites where Industrial Cleaning Robots have taken over. Anyone flying out of LaGuardia Airport will have likely come across primitive robot security guards.
What will people do when they are unable to work, mostly because they have been priced out of the market, due to policies espoused by politicians who don’t understand higher-order effects? Rely on the already depleted state coffers. Expect inept politicians like Bill DeBlasio to further encroach into your private lives. I also wouldn’t be surprised if we see 21st Century Neo-Luddites — (skilled) non-tech workers who are wary of machines taking away their livelihood.
4. Anti-Immigrant Robots: As from the above point, AI, Connected Devices, and Robotics are automating away from many jobs. In OECD countries, many such jobs are performed by first generation immigrants.
Japan might be leading this phenomena, due to a mixture of cultural and economic reasons, but won’t be the only one ten years out.
Former Prime Minister Shinzo Abe articulated this in 2017:
“Japan has no fear of AI. Machines will snatch away jobs? Such worries are not known to Japan. Japan aims to be the very first to prove that growth is possible through innovation, even when a population declines,”
In which case, low wage workers might be better off in their own countries (assuming they are economic migrants) where their labour will be valued at a decent rate per hour.
5. Bitcoin (and other Cryptocurrencies) will soar: With central banks printing money like there is no tomorrow, the welfare state expanding, and high income earners trying all they can to move to lower tax jurisdictions, Bitcoin will be the store of value for digital natives, as well the well adjusted digital immigrants.
As for how this might look like, we can always look towards Argentina as an example.
Argentina (and Venezuela) have suffered from severe economic stress and high inflation. Citizens don’t trust their own currencies. In fact, I was in Venezuela shortly before the currency was devalued from 4.30 Bolivars/USD to 6.30 Bolivars/USD. That was the official rate. One could easily get up to a 100 Bolivars/USD or more at hotels and grocery stores.
In Argentina, stablecoins such such the DAI have allowed people to circumvent capital controls, and hold on to more of their wealth than if they were exclusively using the Peso.
From MakerDao’s blog:
In Argentina, especially, Dai has become a popular store of value — at least for individuals. “Dai isn’t yet used much for day-to-day purchases, such as groceries, because merchants typically don’t accept it,” says Di Pietrantonio. “But people are storing their savings in Dai, and then converting their Dai back to their local currency as they need it.”
Quite like the bi-metallic/tri-metallic standard of the past, we might see a situation where Bitcoin becomes a store of long term wealth, a stablecoin is used for smaller transactions, and local fiat curency becomes the equivalents of the copper coin — used for the smallest of everyday transactions like buying groceries or paying for a coffee.
6. We might start getting paid for our data: The volumes of data we generate knowingly or unknowingly is constantly training machine learning models, at both public and private institutions. We are data generating pods.
Add to that data from sensors — the IOT revolution. Sensors are now ubiquitous, and we don’t even realise they are around.
Imagine for a moment how much data you personally generate everyday. In my own life, these are some of the datasets I create everyday (that I’m aware of):
- Health Data: Via my Whoop band, and iPhone
- Location Data: Google, Facebook, Twitter, Uber, MTA Card Swipes
- Financial Transactions: Banks, Credit Cards, Brokerages
- Blockchain: DeFi, Transactions
- Voice Signatures: Siri, Alexa
- ISPs: Websites visited, data transferred, devices used
We now have the privilege of being subject to state and private surveillance at the same time. And now that people have started to realise this, there are apps to help you monetise your data.
NYU Stern’s Prof Anindya Ghose has an interesting analogy to think about this in his book TAP. He suggests that we think of our phones as our butlers, not as our stalkers. One way to do that, is to provide more information, not less.
The Basic Attention Token (BAT), for example, helps monetise the interaction between the user, the publisher and the advertiser. There are others like Datum, Wibson, and the Ocean Protocol which have similar aims. This could end up being a blockchain version of Andrew Yang’s ‘Freedom Dividend’.
Regardless of positive long term consequences, the transition from one economic order to next is never pretty in the short term. And while we have already seen social unrest in 2020, politicians continue to to fuel resentment.
Doesn't matter that over a hundred years of optimising for 'Equality of Outcome' has failed. Politicians after all, don't have to deal with any long term consequences of asinine political theories, unless if in the rare case of a Ceaușescu or a Beria.
Please fasten your seatbelts!