And now we can finally pay attention to more important matters...
Top of mind: the future unemployment rate.
It's gonna be high.
So high that it sparks riots among people with no hope for employment - the young and agitated Americans for whom cheap accelerants such as alcohol and drugs are easily available while the American dream is not. They're going to take to the streets to raise hell and destroy property and demand some sort of government intervention to lift them out of the misery to come.
That's certainly not going to help the economy, regardless of this new president or the next one.
It will, however, have sharp and painful impacts on you and me and our collective wallets.
In the not-too-distant future, this is what will happen:
- Your refrigerator will monitor the bar codes on the products inside, and it will know when your inventory falls below preset par levels.
- When you're low on, say, malt liquor or mayonnaise, the fridge will automatically order refills from the local Grub-o-rama.
- Grub-o-rama's automated systems will dispatch a drone to grab the items in a warehouse and pack them into a driverless delivery vehicle.
- That vehicle will arrive at your door ferrying a delivery bot with (quite literally) more technical aptitude than the entire Apollo space program that landed a man on the moon. It will communicate directly with the smart lock on your door that keeps thugs and scallywags out of your house, but which is intelligent enough to unlock itself for the delivery that your refrigerator told the lock to expect. The fridge will have established a one-time, unhackable security code that it shared with both the smart lock and the delivery bot.
- The delivery bot will enter your house, open the fridge, deposit the products and retreat. The door will secure itself afterward.
Best I can tell, that takes every single human job function out of the transaction.
There's no bored order-taker, no warehouse runner tasked with retrieving and packaging your malt liquor or mayo, no cashier to take your payment and no driver to deliver the goods to your home.
Even you're out of the equation.
As the Internet of Things takes over the planet, it promises to do way more than make our lives simpler and more convenient. It promises to pretty much steal most of the jobs that exist today. And I'm not talking about menial jobs such as warehousing and delivering.
I'm talking about skilled jobs in law and medicine, policing and architecture, writing and financing, and, well, pick any job really, and there's a very good chance technology will replace the human component.
This is bad news all around for pretty much all of us.
Growth Without Humans
In eras past, new technology regularly spawned new types of jobs that replaced those automated out of existence. This time, though, something really is different. Technology is putting us on a path much different than the past.
It has created vast wealth for a severely limited number of people associated with the company as either founders, managers or investors. The company has roughly 1.8 billion users who generate $25 billion in profits for those founders, managers and investors. Yet the company employs about 13,000 workers. Facebook could easily double or triple its business without adding many more workers because the technology that runs the show can easily replicate itself for the next billion or so customers.
Home Depot can't add exponentially more customers without a commensurate investment in new stores. General Motors and Maytag cannot build and sell exponentially more cars and refrigerators without paying the costs of adding more production facilities. That creates real jobs and generates an investment in the economy.
But technology is just bits and bytes and pieces of code, replicating itself over and over and over an infinite number of times without the added cost of a single penny.
Indeed, technology is reaching the point where it doesn't even need workers for maintenance and repair. Worker bots and other pieces of coding can monitor other pieces of technology and address problems before they even happen. Technology is smart enough that it can now create its own technology, as Google recently demonstrated when it allowed a security program to figure out its own security algorithm without input from a human - and it succeeded.
It's all very cool and Star Treky and futuristic, and it promises a radically different world of convenience for us humans - at least on the Jetsonian cartoon side of this rapidly accelerating tomorrow.
On the other side is a very dark and dystopian Blade Runner world in which wealth aggregates among a select few and meaningful jobs are rare, if they exist at all.
Change or Face the Consequences
At some point in the very near future, nearly six of every 10 jobs in the developed-world economies will require no human activity, or so says a study from Citi and Oxford University.
The World Economic Forum posits that in less than four years, at least 5 million developed-world jobs will vanish forever because technology automated it out of existence.
Forrester Research estimates 12 million American cubicle-dwellers across a host of white-collar sectors - 13% of today's total U.S. workforce - will be jobless by 2025.
This represents a fundamental crisis for modern capitalism and for Western politicians, regardless of their party's platform.
Idle hands are the weapons of revolution.
People need a way to pay for their lives, and not just for some lifeless, utilitarian existence. Robotics and artificial intelligence do not square with that need. They kill jobs and care not about the human consequences.
Politicians will have to care, or they will face bloodshed in the streets and violent overthrow.
There are a few potential solutions:
- Limit the number of jobs technology can replace by forbidding companies from implementing certain types of technology. (That's probably not going to work.)
- Pay every American a "universal income," a basic monthly stipend to live on. That might work for a while - but it raises much bigger challenges: How does government pay for this when there are limited employment taxes and sharply reduced consumer/business taxes? And how will people living on a universal income and without access to a job afford expenses like property taxes or vacations or the niceties of life? The concept could be as malevolent as it is beneficial.
- Tax the hell out of technology to pay the cost of a universal income. Probably likely, but this is a catch-22: If the only income people have is a universal income, they can't afford much in the way of new consumer-tech items, which limits the income the tech company earn, which limits the taxes it pays to fund the basic income.
- Get rid of money and replace it with some other means of commerce. Also possible, though socially, politically and structurally disruptive on an immeasurable scale.
- Your Protection Against the Upheaval
So, what are we to do?
We can't change what's coming at us at warp speed. (And science is even working on warp speed, in case you care.)
Taxation is going to go much, much higher. I expect politicians will look to double the highest income-tax rates on individuals and businesses. They will double or triple capital-gains rates and eliminate numerous, if not all, deductions.
We could get to the simplified point where there's no longer a tax form to fill out and no IRS. All money will be electronic, and the government will simply deduct its pound of flesh from every bit of income that flows into your life.
That's a world for gold and other items with which you might barter for a haircut or those Fourth of July fireworks to celebrate all the wonderful freedoms we (used to) have.
As a lifelong world traveler, Jeff Opdyke has been investing directly in the international markets since 1995, making him one of the true pioneers of foreign trading. He is Investment Director for The Sovereign Society and a weekly contributor to The Sovereign Investor Daily.