Robots Won't Replace Human Labor Anytime Soon

I just got a rare piece of good news:  Australian IFM is going to buy Buckeye Partners (BPL)  for $41.50 a share, and the MLP rose 28% on the news.  My stake went up to about $10,000, and I'm thinking about what to do with the money.  For the most part, I'm getting old and want yield, so I'm putting a chunk into one of the preferred stock ETFs (PFF or PGX).  To maintain my exposure to the depressed MLP sector, I'm also putting some into Kinder Morgan (KMI) and possibly Kayne Anderson (KYN).  I'm thinking of putting the little left over into a robotics and artificial intelligence ETF, BOTZ.

Just yesterday a young academic suggested that artificial intelligence and robotics are going to replace much human labor so that the chief jobs for people will involve human interaction and interpersonal skills. He's probably right about the need for interpersonal skills, but the more generalized fear that machines will replace people is wrong. It goes back to the days of the Luddites and before.  In 1589 Queen Elizabeth refused to issue a patent to inventor William Lee because of demonstrations against his stocking frame. The reasoning of both crowd and queen was that technology would replace jobs. That was 200 years before the industrial revolution.

Nothing has been better for freedom than technology.  Before technology, the only way to become wealthy was to spare the victims of imperialistic wars and turn them into slaves. The Romans considered slaves to be the living dead because the alternative would have been death due to conquest.  The South lost the Civil War in part because slave-based societies are less productive, hence poorer, than technology-based societies.

Perhaps because technology ended slavery, one often reads superstitions about technology's ending people in general.  It is easy to see the more slave-like jobs that might disappear, but it is difficult to imagine the less slave-like jobs that will replace them.

There was less technology in 1780 than today.  At that time the population of the US was  three to four million.  If you had said to someone that one day there would be motorized tractors that  would enable one farmer to do the work of 50 today, you might have added the conclusion that 98% unemployment would ensue and that the workforce would decline.  It would have been difficult to imagine the advent of helicopter factories, the profession of accounting, state university professors, and so on. 

In early January I bought NCR, which has since had a nice run with the broad average  and is up 30%.  However, BOTZ, the robotics index,  hasn't had fantastic returns since its founding two years ago:

Source: Maks FS,Seeking Alpha

Apparently, fears about an explosion of robotics overtaking human labor are where the mouth but not the money is.

The reason to be concerned about job replacement is not the technology per se, but its subsidization by central banks and the financial system.  When interest rates are artificially depressed, the cost of capital becomes lower, and demand for labor-saving equipment increases.  Hence, in the long run low interest rates, the policy of the United States and especially the Democratic Party and its economists like Paul Krugman, have replaced labor with capital.  Low interest rates are the chief source of income inequality because they boost stock values, enhancing the income of commercial bankers, investment bankers, real estate investors, stockholders, bond holders,  and government employees, and at the same time they reduce wages because of money illusion or inflation and capital substitution.

The Democratic Party further exacerbates the tendency toward income inequality by favoring regulation that squashes human resource development. Minimum wages and mandatory workplace benefits make it more expensive to hire the least skilled, damning them to a lifetime of poverty and dependency.  That Democrats consider themselves altruistic in advocating such policies is in the altruistic traditions of Dr. Mengele and Dr. Benway.

Hence, BOTZ, NCR and similar investments are a play on a continued march toward socialism and crony capitalism, not a play on market-driven innovation. 

TRU TV's "Conspiracy Theory" Best Television News Show

My vodka bottle's running low and I needed something to do to relax from reading my students' papers so I violated my rule about not watching television news. In particular, my wife mentioned that Jesse Ventura's "Conspiracy Theory" is on truTV.  I'm watching the episode where a guy was talking about a nuclear bomb on the phone and the FBI came to his home six hours later because they can listen in via satellite. I think Jesse Ventura is performing a major public service. Whether the power plant in Alaska is really a Tesla death ray machine or there were bombs used at the World Trade Center on 9/11 are grist for Ventura's imagination.

What I think is especially important about this program is that it suggests that a large number of Americans have little or no trust in the government or the run of the mill media analysis and so emphasize conspiracy theories. In a sense this is a diversion because the underlying problems are ignored. Moreover, the conspiracy theories re enforce the sense of powerlessness that many feel.  But belief in conspiracy theories is a beginning.  The next step ought to be analysis, uncovering issues that are controllable. Then, empowerment is necessary so that people who have become alienated from the government can act on their concerns.

Many people have little faith in our government because it is too large.  The element of participation and control is lost with the enormity of the American state. This leads to a sense that shadowy powers are in control.  This may be close to the truth, although the conspiracies that Ventura emphasizes at most are symptomatic, if they are real.

The American state needs to be downsized through decentralization.  I'm not sure if "Conspiracy Theory" is empowering Americans or if it is just re enforcing their sense that Big Brother is out of control.  But I believe in the show's spirit to a much greater degree than say NPR, which apparently is now under George Soros's control and censorship.