The Information Age Income Explosion

by Michael Ferguson

From 1875 to 2010 U.S. GDP per capita increased 13.67 times. If the same growth happens during the Information Age, median household income will increase to about $760,000 per year . The good news is that it most likely will happen and this time it will take about 35 years not 135. The bad news is that there will be no jobs in the traditional sense of the word. You will not be able to go to a ‘Help Wanted’ site and get ‘hired’ by a ‘company’. These terms will all be casualties of the Transformation. Many people, siting Technological Unemployment, expect radical and generally unpleasant results. I believe that the period of Transformation will be tumultuous, but that, in the end, personal economics will be vastly improved. Consequently, I advise wise and clever people to begin planning immediately how they, personally, will become an Information Age entrepreneur.

In my writings on the Transformation, I state that prevailing standards of living in the developed world will double in ten years and quadruple in twenty years. At this rate, the 13.67 multiple will be reached in 2048. This prediction, if anything, is not dramatic enough. It may actually happen faster. It will be the result of the implementation of state-of-the-art robotics and artificial intelligence deployed within the agricultural, industrial and service sectors.

The inescapable corollary to this is that few jobs will remain untouched and most will simply disappear. In fact, for most people, their whole job category will be eliminated and most likely sooner rather than later. So, it seems, you will need to find something else to do. What you are doing now won't be an option. Even if your job category remains, your employer will not. You will need to find somewhere else and some other way to do it.

With regard to occupation and income, I expect that the population will experience a socio-economic trifurcation. In fact, this is happening already. At the bottom will be people who will receive a supplemental stipend that will assure some minimum standard of living. In the middle will be people who engage in productive activities within semi-automated service industries and will enjoy incomes substantially in excess of the established minimum income. At the top will be the entrepreneurial knowledge workers. This description, of course, is an oversimplification. However, it is a wonderful starting point as you become familiar with and conversant in the economics of the Information Age.

In a civilization where nearly half the households will have annual incomes in the millions, it is unlikely that political sentiment will countenance any penury whatsoever. Consequently, we suspect that there will be a stipend for those without sufficient self generated income. It most likely will meet or exceed a level of income that, today, would be considered middle class income. We can imagine that what will be considered the poverty level in twenty years will have quadrupled right along with the quadrupling of average and median incomes. In other words, one person will be guaranteed $40,830 per year, a couple or a custodial parent and child will be guaranteed $72,840 per year and the classic ‘family of four’ will be guaranteed $136,200 per year.

These rates, however, will likely be subject to some adjustment in order to assist in balancing the labor supply and demand. When the number of people searching for work is less than is required, the level of support provided to those who do not work will decrease, thus encouraging to supplement their income. When the number of people searching for work exceeds what is needed, the level of support will increase.

The middle socioeconomic level will be engaged in service activities that, while automated, retain a human function primarily because humans wish to interact with humans when they are consuming them. Take for example, a fast food restaurant. Even now, we could probably build a restaurant that, through automation and AI, could function without human intervention. However, generally, people would prefer to interact with a person during the ordering, delivering and paying process. The price differential between a $4.00 hamburger in a human mediated fast food restaurant and a $2.65 hamburger at a totally automated restaurant, in a very affluent society, is going to be insufficient to cause the majority of people to frequent the totally automated one.

Of course, with a median household income of $760K per year, one may assume that, over time, even a $4.00 personally delivered hamburger is likely to be an endangered species. It will be replaced in most settings with a more leisurely fine dining experience. A $15 fast food bill for an average family today will be proportionately the same as a $190 restaurant tab in 2048. Consequently, we will expect that frequently the purchased meal will involve a chef and maitre d’ overseeing an automated fine dining experience.

From landscaping to interior design to medicine, even if AI programs can perform as well or better than humans, the customer will still want to interact with another person. For example, a landscaper may interview a customer and then go back to his office and create a computer assisted design. The computer did much of the work, but (s)he will present it and, if the customer accepts the design and price, (s)he will arrive with landscaping robots and oversee the work while interacting, again, with the customer.

An AI diagnostic software program may provide the doctor with a list of diagnoses in descending order of probability and suggest further diagnostic tests. Already these programs outperform most doctors. Another AI program may give the doctors a comprehensive list of treatment options with the likely probability of success and suggest possible combinations of treatments. However, no matter how AI assisted, the patient will want to talk to the doctor, ask questions of the doctor and feel reassured by a person, not an AI program. That may change for people born and raised in the second half of the 21st Century, but it is a relatively safe prediction for the first half.

At the highest socio-economic level will be knowledge professionals, for the most part Polymaths, who will create and communicate visions and apply volition to the social, cultural and economic systems. They will engage in activities that, even if a computer could do them, humans will prefer to retain as their prerogative. This will include great thinkers, pundits and leaders who will teach, present and discuss. It will include great designers who, with the assistance of AI programs, will create new products, new services, comprehensively designed communities, etc. It will include scientists, artists, composers who will drive human progress in a uniquely human way. It will include entrepreneurs who will oversee the automated production processes.

These three categories are somewhat arbitrary and differ substantially from the classic idea of 'class.' Many people will spend portions of their lives in different categories. A person may be on stipend during periods of intense learning, in service activities early in their life and then, over time, find that their productive activities evolve into one or more of the knowledge professions. Additionally, some activities are actually a spectrum that bridges the service sector and the knowledge professions. Many people will engage in both. For example, a person may design clothes but also oversee their robotic manufacture. So, while the trifurcated socio-economic description is basically correct, it is not exactly correct and should not be interpreted too rigidly.

It is manifestly clear, however, that there is not a category designated as ‘employee’, professional level or otherwise. As we all are very aware, manufacturing jobs left developed countries to chase cheap labor in low labor rate locations. Today, we now find that professional jobs are chasing cheap labor in underdeveloped countries. These activities will be returning, but they will not reemploy the previously displaced workers. Rather, they will be automated. This can be expected to happen very rapidly.

Right now at the larger companies, automated AR and AP software is being installed. From the time of order to receipt to payment, human hands will not touch the process. As a consequence, million of clerical level and lower professional level employees will find that, not just their job, but their job classification has been eliminated.

Everyone should Google ‘DARPA 2007 Urban Challenge’ and see what was possible three years ago. Today, the technologies have progressed and the results are amazing. Perhaps by 2020 and certainly by 2030, anyone who currently makes a living by driving a vehicle will be out of a job. Nearly half the jobs done on a residential new construction site are well within current robotic technological ability. Clothing will be custom tailored by robot. I could go on and on, and I will in this roundtable discussion.

I do not expect that there will be an unabated geometric explosion past my estimated income levels that result in a 'Singularity'. In fact, I believe that the rate of growth in computer technology is abating already. However, much of what is already possible is not yet implemented. Consequently, robotics and applied AI will not reach economic maturity until, at least, 2050.

Right now, the global economy is in disarray. The U.S. and E.U. are in a anemic economic recovery that, due to technological unemployment, is not creating much reduction in unemployment. I expect that economic growth will accelerate, but so will the force of technological unemployment. Banks have trillions of dollars of unused lending capacity. Corporations have, in aggregate, about $3 trillion of cash on their balance sheets. In other words, the funds are available to finance a major automation and AI retooling. According to the Bank of America Merrill Lynch Fund Manager Survey, investors would prefer companies used cash to increase capital expenditures rather than repair balance sheets.

Unit labor costs are falling at the fastest rate in the past 40 years. So, it appears that the automation that will drive the Income Explosion may already have started. It is just waiting for more clarity within the legislative and regulatory environments in order to accelerate to the predicted rates. Once this is realized, the cash and borrowing capacity can be moved quickly into capital expenditures.

In summary, this means that the current phenomenon of economic growth without increased employment will not only continue but will accelerate. Those people in the upper quartile in education will need to rapidly change their thinking from pursuit of highly compensated corporate employment opportunities to more entrepreneurial knowledge based activities. It will require aggressive pursuit of new opportunities in order to counteract the accelerating forces of technological unemployment. It is in this vein that I have created the Polymathic Institute. It is similar to LinkedIn.com, but is intended to bring together polymathic intellectuals, visionary entrepreneurs and risk tolerant investors in an environment conducive to creating the knowledge professions.

This is my perspective on the Income Explosion and Technological Unemployment. I am optimistic that the two can be properly balanced. I do not expect, as the Zeitgeist Movement does that in our lifetimes everyone will have whatever they want without work. I also do not expect an unabated accelerating growth to a Singularity. I do expect, however, a profound transformation of society and the economy. This discussion is completely absent in the broadcast and cable news media and in the political discourse. The awareness must be elevated or those who think that Technological Unemployment will outstrip the emergence of new economic activities are likely to be correct.