No Universal Living Wage Required
I heard Elon Musk theorizing about how in the future so much of manufacturing will be automated that governments will need to consider moving society onto some kind of guaranteed universal income. The problem with Elon’s statement is that he’s forgetting about the law of unintended consequences. And there will be some very real consequences to automating manufacturing.
Factory automation requires a lot of volume in order to make any sense from a financial standpoint. The money that you have to sink into machinery, controls, and programming doesn’t pay off unless you can spread it over lots of units. Otherwise, it’s more expensive than just paying someone to do it by hand.
So the consequence of this overhead allocation on a large-scale means that corporations will by necessity be forced to reduce the variation of the products that they offer. Nobody in the tech world seems aware of this inconvenient little fact. As the cost structures of large corporations shifts to higher and higher fixed costs vs variable this means that their product lines will be further and further consolidated.
So where does the law of unintended consequences come into the picture? As large corporations consolidate their product offerings they will be forced to abandon anything that isn’t high enough volume. This frees up small companies or even sole proprietorship entrepreneurs to fill the void. Product categories that were once unattainable to them will be opened up and there will be less or no competition from the big guys.
Whether you’re talking about food, clothing, or even electronics it doesn’t matter. Every industry that gets automated will have larger niches that will need to be filled. Since by definition it won’t make sense to automate them that means these business will have to hire people to do the work. And the work will probably be more artistic and fulfilling to boot.
This may not happen over night and there may be a painful interim period. But eventually savvy entrepreneuers will see the new opportunities before them. Never under-estimate the power of the profit motive.
Yes, big corporations will be able to offer high volume products cheaper than ever. But the variety of what they’ll offer will be narrower. Offsetting this trend would be a boom in small business growth. That means jobs would simply shift, not be eliminated forever.
Perezonomics.com
So the consequence of this overhead allocation on a large-scale means that corporations will by necessity be forced to reduce the variation of the products that they offer. Nobody in the tech world seems aware of this inconvenient little fact. As the cost structures of large corporations shifts to higher and higher fixed costs vs variable this means that their product lines will be further and further consolidated.
So where does the law of unintended consequences come into the picture? As large corporations consolidate their product offerings they will be forced to abandon anything that isn’t high enough volume. This frees up small companies or even sole proprietorship entrepreneurs to fill the void. Product categories that were once unattainable to them will be opened up and there will be less or no competition from the big guys.
Whether you’re talking about food, clothing, or even electronics it doesn’t matter. Every industry that gets automated will have larger niches that will need to be filled. Since by definition it won’t make sense to automate them that means these business will have to hire people to do the work. And the work will probably be more artistic and fulfilling to boot.
This may not happen over night and there may be a painful interim period. But eventually savvy entrepreneuers will see the new opportunities before them. Never under-estimate the power of the profit motive.
Yes, big corporations will be able to offer high volume products cheaper than ever. But the variety of what they’ll offer will be narrower. Offsetting this trend would be a boom in small business growth. That means jobs would simply shift, not be eliminated forever.
Perezonomics.com
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