The G7/I7 In Torino, Italy

This weekend I will be going to Torino, Italy.  Torino is the site of the information part of the G7 conferences that take place throughout the year.  You can see a link to the entirety of the G7 here.  I was invited by the US government to attend and advise the G7.  I will be advising the I-7, which is the G-7’s strategic advisory board on innovation.

For my part, I am going to be discussing the future of work.  That made the Economic Club of Chicago’s discussion on Karl Marx even more interesting.  It’s also why I have been listening to a lot of podcasts from different points of view on how autonomous vehicles will affect us or if we should have a basic income guarantee.  What happens when technology crosses borders and makes them irrelevant when it comes to “work”?  Can you have a country without a common culture?

Fortunately for me, I have a lot of friends that are very attuned to research in labor economics.  It’s a general interest of mine, and it’s one I have invested in.  Deskpass hits right at the future of work.  In our fund, we think a lot about what finance is going to look like post Fin Tech revolution.  What happens when blockchain powers a lot of things that used to be done by humans?  What about artificial intelligence and machine learning?

It’s easy to be terrified.

Fear comes because we are unfamiliar.  People get scared about what they don’t know.  The good news is technology ought to be able to help us know more about what we don’t know in the future than we do today!  There should be less known unknowns.

However, if we look at history innovation has raised standards of living.  It’s made people significantly more productive.  I love the Milton Friedman story about visiting a communist country and asking why they were digging with shovels and not heavy equipment.  The politburo representative said it was an “employment program”.  Friedman remarked that they should use spoons instead of shovels if that was the case.

We cannot predict with any accuracy what some future jobs will be.  It’s pretty easy to see which ones will be displaced by tech initially.  However, there are second, third, fourth, and fifth order effects of innovation that aren’t immediately apparent.  As Benedict Evans said, “What happens to Frito-Lay sales if there are no gas stations?”

Clearly, figuring out new ways to educate the masses for the coming changes is important.  It’s easy to say we should create a bunch of programmers, but what happens when the machines can program themselves?

One thing everyone should bear in mind that hasn’t been talked about a lot, what happens if because of all this technological upheaval the cost to live goes down significantly?  If we look at the cost of food over the course of the last 100 years, it’s dropped precipitously.  With autonomous farming, it could become extremely cheap and only use up 1-2% of our budget.  Autonomous vehicles could drop the cost of transporting goods.  Having software inside appliances could drop the cost of servicing them.  An autonomous power grid could drop the cost of energy.  Governments that adopt blockchain could significantly drop the cost of operating government.

That’s going to leave a lot of excess capacity when it comes to human capital.  There is dignity in work.  Public policy needs to recognize this.  For example, in most of Europe it is very expensive to hire and fire workers.  Changing policy around that might free up labor markets, change cost structures and decrease unemployment rates which are very high.

If you have any thoughts about the future of work, big data, and artificial intelligence with regard to public policy I’d love to hear your thoughts in the comments.

I am optimistic. Humans are creative.  They will find things to do.




5 thoughts on “The G7/I7 In Torino, Italy

    1. Thanks. I am really really interested in the perspectives of the people that i will be working with-and the perspectives of other G7 countries. Big issue that needs to be handled via good public policy. Not sure everything I have seen suggested over the past few years is the right answer.

  1. Congrats on the invitation.

    I feel that the future is super bright for any kid who wants to get into a trade/work with their hands. All of these autonomous vehicles and everything else from air conditioners to machining equipment will still need maintenance and need to be repaired. I always encourage kids who may be wayward or who don’t have the best grades to get into a trade NOW. Any skilled tradesman will be able to pick where they live and command great salaries in the future because nobody is doing it.

  2. I agree wholeheartedly with your point on labor markets in Europe. Can’t speak for it all, but I have seen effects firsthand in Spain and France.

    In Spain, the law used to be (still is, I think): if terminated for any reason, 1 month gross salary for each year of employment. One then sees a lot entrenched deadweight in management (10, 15, 20 years in) because it is more expensive for a company to fire them than to muddle through. There is little turnover, so upward progression is hard for anybody entering the labor market. When I quit my job, the company had me sign all kinds of papers to assert that it was my decision to leave. Like this, they didn’t have to pay indemnity.

    There is a whole demographic called “mileuristas” – literally “those who make about 1000 euros per month” – who don’t starve, but they never grow. Another demographic is the “becarios” – basically paid interns – who make even less. The “becario” contract is generally 12 months, after which the company has to hire at full-time salary or let you go (this was/is the law). More often than not, the company will let you go and cycle in a new “becario” for the same job. Young people especially will grind for years and years and years like this.

    I saw one time when the government issued a short window of exemption to the indemnity law. A bunch of companies immediately starting culling management. Then they raised the responsibilities for lower tiers of managers but didn’t raise the pay. To little complaint. “When you kill the chicken, make the monkey watch.”

    In France, it is also incredibly expensive and risky to hire new employees. The total labor cost to an employer is around double an employee’s salary (lots of social programs to finance). Once salaried full-time, it is virtually impossible to terminate an employee without indemnity or major for-cause, and meticulous record keeping. There is a separate judiciary for labor disputes in which the employer is generally defendant and the employee generally wins.

    As a small business, there is truly nothing I would like more than to hire an employee. The reality is that a small business simply cannot bear the cost of another employee, or the risk of hiring a bad fit. Only large companies can afford to hire new employees, but with little turnover of salaried positions. And salaried employees count the days to retirement, when they can get in on state mandated cash.

    It’s complicated. And this is only scratching the surface.

    Safe travels.

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