Working Models of the Employment World to Come
Remnant Review
In a world of algorithms and robots, the middle class will shrink. We have a working model: untenured adjunct professors.
It is expensive in money to get a Ph.D. It is expensive in forfeited income. It takes years. You have to be smarter than average: probably at least a 120 IQ. IQ's are higher in the natural sciences.
The worst field is philosophy. It has been since the mid-1960's. No one needs to hire you. The few students who get a B.A. in philosophy sense early what Ph.D. means: a doctor of philosophy. There is nothing less marketable that a doctorate of philosophy in philosophy. Most undergrads in the field are smart enough to smell a wasted life. The arcane nonsense of modern philosophy alienates most people. Anyone smart enough to get a Ph.D. in philosophy should be wise enough to switch to math. The Ph.D. takes longer than any other degree to earn. There are almost no jobs on campus and none in business. Still, the lemmings keep coming. "I can beat the system," each one thinks. "I'll get a teaching job."
Close behind philosophers in intelligent stupidity are classics majors.
You can't teach these people. They are immune to common sense. They are immune to the threat of lifetime joblessness. They refuse to see what is coming.
These people are afflicted. They are the models of the blindness that afflicts the whole society with respect to competing against digits. They refuse to see what is obviously coming.
There will be jobs for people. But these jobs will be like adjunct professors: long hours, no security, no benefits beyond salary, and no likelihood of anything better. Yet the stream of Ph.D.-holding people does not slacken. "I can beat the system. I can get a safe, high-paying, tenured position where I teach 9 hours a week -- maybe only 6."
These lemmings face Pareto's curve. But they have never heard about Pareto's curve.
It's not a matter of IQ. These people have excess IQ. It is a matter of forecasting the obvious. The obvious does not occur to them.
Think of public school teachers, grades 5-12. They are no better off than the Ph.D.-holding adjunct professors. The handwriting is on the screen: Khan Academy. Video lessons of a dozen teachers, coupled with digital testing, can teach 100,000,000 students as easily as 25,000,000. They soon will.
Yet people will still get teaching certificates. They will still hope that their union cards will be sufficient to get them jobs. But as jobs dry up when students drop out, because students are learning online for free, the only jobs will be as teachers' aides. For that, school districts will hire people for peanuts -- not much above minimum wage. There will be no hope of promotion. How can you be promoted when the heavy lifting can be done by videos and online testing by algorithms?
Most of the job applicants will not get teaching jobs. Pareto will push down wages. We see this now: community college adjunct professors. This is the wave of the future.
Over time, the lemmings will learn. But Ph.D. students have not learned since 1969, the year the Ph.D. glut began. We see this clearly here.
Do people learn? Not if the government subsidizes a field.
Will optimism prevail? Yes.
There will be degree inflation. The MBA is now required to get jobs where a B.A. in business once was sufficient.
What happens to the people with a B.A. in business? They will get jobs where a community college degree used to be sufficient. Degrees will lose their value. Only performance will count. Performance always resemble Pareto's curve.
What about high school graduates with IQ's of 100? They will do low-paid grunt work.
By "low paid," I do not mean poverty. People will be getting richer. Income will be rising. But comparative wealth will not be distributed by a bell-shaped curve. Pareto's curve will be visible.
What about high school dropouts who are not gifted hustlers? They will be on welfare. Forever. All over the world. They will get lifetime pension checks.
But the nation-state is going bankrupt. Unfunded liabilities will lead to the Great Default. So, they will be paid by more local governments. There will be less money.
If you are employed, you must be wiser than someone who is working on an M.A. in philosophy. You must think ahead: "Why will someone pay me an above-average salary?" Then you must begin to plan ahead. What can you do that an algorithm cannot do?
COMMODITY TRADERS
Commodity traders stood on the floors of exchanges, yelling and making hand signals. They were the best of the best. The market gleaned them. They were the 1%. For 150 years, they did this. But there are no more trading floors any longer. The pits are closed. There are only algorithms. The Wall Street Journal published this in 2015: End of an Era as CME to Close Almost All Floor Trading for Futures -- Decision Comes as Activity in CME's Pits Has Fallen to 1% of All Futures Contracts Traded Daily.
One of the last vestiges of the swashbuckling era of commodities floor trading is fading away.CME Group Inc., the world's largest futures-market operator, said Wednesday it is closing most of its futures trading pits in Chicago and New York as electronic trading has become the overwhelmingly dominant way futures contracts are bought and sold. The move, which will take effect by July 2, brings to a close nearly 150 years of barking and jostling over the price of grain, oil and interest-rate contracts.
"The time has finally come," said Leo Melamed, chairman emeritus at CME and a former chairman who helped the exchange develop its electronic trading platform in the late 1980s. "It's a historic moment, but one that I think was always out there and was going to happen."
Really? Always out there? Then did floor traders see the inevitable and go into hotel management? Or did they go to the pits every day to yell and scream and stay in the game?
What do they do for a living today? The ones who did not learn how to trade with computers retired. This meant most of them. To do what? No one knows. No one cares. It's not worth any reporter's time to find out. They just drifted away. All this has happened since 2008. They were the best and the brightest. They were survivors. They lived by their wits and their capacity for highly leveraged uncertainty. But their unique skills do not earn money for them anymore.
In every occupation where an algorithm can do what present employees can do, the employees should be looking ahead. They should be looking for ways to perform services that people are willing to pay for. These must be services that an algorithm cannot yet do. But people do not see the freight trains coming at them.
EDDIE THE BARTENDER
Stephen Leacock was the greatest humorist who ever had a Ph.D. in economics. He taught at McGill University. He was Canada's greatest humorist for decades. I don't know when he wrote "Eddie the Bartender." It was a story about a bartender whose job was going to disappear because of Prohibition. (Yes, some of Canada's provinces went through that experiment, too.) Eddie was serving drinks, right to the end. The story is online here. It begins:
HERE he stands -- or rather, there he used to stand -- in his wicker sleeves, behind the tall mahogany, his hand on the lever of the beer pump -- Eddie the Bartender.
The key words are these: "used to stand."
I don't know when I first read this story. It was at least 40 years ago. I never forgot it.
Entrepreneurship is basic to life. We must forecast the future. We must make estimates of future supply and demand. We must allocate wealth in the present in order to meet future demand. We hope we guess correctly. We hope our investments pay off. But invest we must.
Most people choose not to stare at the handwriting on the wall. They are like Ph.D. students. "I can beat the odds." The masters of beating the odds were floor traders in commodity exchanges. But the odds caught up with them.
GRADING ON PARETO'S CURVE
The productivity of the free market will continue to make most of us richer -- richer than what we are today. But we are also graded by the market -- customers -- on a curve. Some will be richer than others.
We customers are relentless. We are always on the lookout for a better deal. We expect a better deal. For two centuries, the free market has delivered better deals. But certain fields were doomed. It hit farmers first. Decade by decade after 1830, the percentage of farmers shrank. The mechanical reaper forced the inefficient farmers into the cities. Today, about 2% of Americans live as farmers. Most of them barely get by. They do it for the lifestyle, not the money.
We talk of the disappearance of blacksmiths and buggy whip manufacturers. Yet they still exist. We call them "Amish." They call us "English." They do it for the lifestyle.
Why did farmers move to the cities? Because customers were relentless. Why did buggy whip producers go into other lines of work? Same reason.
Purchase by purchase, bid by bid, customers exercised their authority. They had money. Money is the most marketable commodity, as Austrian economist Carl Menger said first and Ludwig von Mises developed into a theory of money and credit two decades later. The power of the much-maligned almighty dollar is in fact the power of the ever-praised almighty customer.
The customer does not care if a robot built the item he wants to buy. He does not care if Amazon uses robots to deliver packages from warehouse shelves to the mailing room. He cares about price and delivery, speed and accuracy. He wants free shipping. He may join Amazon Prime to get shipping at no extra marginal cost for a year. I did.
Robots are working for us. We do not notice or care. Algorithms are working for us. We do not notice or care. Commodity floor traders used to work for us. We did not notice. They are unemployed today. We do not care.
Robots do not care, either. They just do whatever they were programmed to do.
If robots ever do care, we will enter the realm of science fiction. If they ever care, we are in trouble as a species. But I don't think they will ever care. I do not think mankind will create robots in their image the way that God created man in His image. We are analogical creatures, not digital creatures.
CONCLUSIONS
Digits are important. To the extent that our jobs are subject to digital imitation, we are like Eddie the bartender. I close just as Leacock closed.
Thus on the sunshine of Eddie's tranquil life descended, shadow by shadow, the eclipse of prohibition.Eddie watched its approach, nearer and nearer.
"What are you going to go at, Ed?" they asked.
"I've been thinking of going into chicken farming," Eddie used to answer, as he swabbed off the bar. 'They say there's good money in chickens."
Next week it was turkeys.
"A fellow was in here telling me about it,' Ed said. 'They say there's big money in turkeys."
After that it was a farm in Vermont, and then it was a ranch out in Kansas. But it was always something agricultural, bucolic, quiet.
Meanwhile Eddie stayed right there, pumping up the flooding beer and swabbing off the foam from the mahogany, till the days, the hours, and the minutes ticked out his livelihood.
Like the boy on the burning deck, he never left.
Where is he now? Eddie and all the other Eddies, the thousands of them? I don't know. There are different theories about them. Some people say they turned into divinity students and that they are out as canvassers selling Bibles to the farmers. You may still recognize them, it is claimed, by the gentle way in which they say, "What's yours this morning?"
There is no doubt their tranquil existence, sheltered behind the tall mahogany, unfitted them for the rough and tumble of ordinary life.
Perhaps, under prohibition, they took to drink. In the cities, even their habitat has gone. The corner saloon is now a soda fountain, where golden-headed blondes ladle out red and white sundaes and mushy chocolates and smash eggs into orange phosphates.
But out in the solitude of the country you may still see, here and there, boarded up in oblivion and obliquity, the frame building that was once the "tavern." No doubt at night, if it's late enough and dark enough, ghostly voices still whisper in the empty barroom, haunted by the spectres of the Eddies -- "What's yours, gentlemen?"