We create robots. Will robots create jobs for us?

One of the real hassles that I face in my profession is this: to be able to always convey to the youth a sense of  optimism.  "The world is your oyster" is what I tell them, yes, but only after warning them about the dangers that lie ahead.  That Shakespearean phrase follows weeks of a bottom-line of a different kind, not always explicitly stated though: "you are screwed!"

I have been giving them such a message, perhaps in contrast to the overly optimistic hype from most of the rest of my university colleagues, because over the past few years I have been seriously worried that we might be able to generate fewer productive jobs that will promise a prosperous middle class life.  I have been guided by an intuitive understanding that this brave new world of computers is very, very different from the two centuries of industrial revolution.  MIT economist Erik Brynjolfsson phrases it well for me:

[There's] no economic law that says everyone has to benefit equally from increased productivity. It’s entirely possible that some people benefit a lot more than others or that some people are made worse off.

Exactly!

Brynjolfsson explains how computerization is that kind of a game-changer, as opposed to other machines of the past:

It’s called superstar-biased technical change, or talent-biased technical change. If somebody has talent or luck in creating something that people want, that thing can be replicated with digital technology much more easily than in the past. Think of someone who writes software. You can take that talent or luck and replicate it a million times. And while the person who created it does very, very well, the people who previously did that job are less important or maybe not even necessary. The example that I gave in my TED talk was TurboTax. You’ve got a human tax preparer being replaced by a $39 piece of software. It makes the pie bigger in the sense that you create more value with less effort, but most of that value goes to a very small group of people.

Or, my favorite example: Twitter.  At $10 billion, the company might still be quite a bargain.  For that kind of a valuation, Twitter employs only about 1,600 people.  And even that draws a remark as to whether that many are really needed!

@bill_gross What are 800 developers doing all day at a product that hardly changes? 800? That's like 80 Instagram-like Start-Ups. #wondering
— Michael Hirschbrich (@MicHirschbrich) March 8, 2013

Back to Brynjolfsson:

And technological change is affecting more industries simultaneously. Threshing changed agriculture, but digital technology is affecting pretty much every industry. Finally, these technologies are just qualitatively different. The ability to digitize makes it more valuable to be a creator and less valuable to be someone who carries out instructions or replicates stuff. You don’t need to pay people to handcraft each copy of TurboTax. That’s different than, say, an automobile—at least for the time being.
In a way, we were just kind of lucky during the 19th and 20th centuries that technology evolved in a way that helped people at the middle of the income distribution. There’s no economic law that says technology has to work that way.

If any student were to read his book, or listen to him, it will be very difficult not to walk away with a feeling, "damn, I am screwed!"

I am not sure what kind of new industries we will come up with so that people displaced by automation will have more productive things to do.  And whether these new industries will generate enough employment, or whether it will be a case of newer industries generating fewer and fewer jobs.  These are very uncertain times, that much I know for sure.

This Bloomberg editorial echoes my sentiments:

Robots are evoking some deep economic anxiety these days. They’re routinely mastering human tasks -- driving cars, trading securities, diagnosing diseases - - that not long ago appeared permanently beyond their capabilities. And as automated technology advances at an exponential rate, more and more jobs, in more and more fields, will be done by intelligent machines in the very near future.
This transition will involve some scary trade-offs. Growth and productivity will probably accelerate, and low-cost, high- quality goods will probably proliferate. But many workers will find their skills obsolete and their ability to compete diminished. Unemployment could be exacerbated. Wage stagnation for the middle class could persist or worsen. And inequality seems likely to widen.
For all that, we remain optimistic. Throughout history, technology -- from the steam engine to electricity to the computer -- has upended old ways of doing business and created useful and edifying new fields of human endeavor. This long cycle of creative destruction suggests, however, that the robot revolution will be a time of significant turmoil. And that the more we prepare for it now, the better off we’ll be. 

Yes, the more we prepare for it now, the better off we will be.  But, what kind of a preparation might be the best way?

Sometimes I wish I could simply go to the classroom, yap, and come home feeling secure that my paycheck will be automatically deposited in my account, at least for now until robots replace me.  If only I didn't worry about students and their futures!

Statue of Liberty, summer 2000