(Paperback at Amazon.com)
Trade Paperback, 260 pages
About the Author
|Martin Ford is the founder of a Silicon Valley-based
software development firm. He has over 25 years experience in the fields of
computer design and software development. He holds a computer engineering degree from
the University of Michigan, Ann Arbor and a graduate business degree from the University
of California, Los Angeles.
The Lights in the Tunnel: Automation, Accelerating Technology
and the Economy of the Future
Excerpt: Chapter 1: The Tunnel
Detailed Table of Contents
Excerpts and Table of Contents also available in PDF format.
What if technology progresses to the point where a substantial fraction of the jobs now
performed by people are instead performed autonomously by machines or computers? Is that
likely, or even possible? And if it is, what are the implications for our economy?
In this book, we are going to explore what increasing technological advancement, and in
particular job automation, could mean to the economies of developed countries like the
United States and also to the world economy as a whole. To do this, we are going to start
by creating an imaginary simulation (or mental video game) that should provide some very
useful insight into what we can expect in the future.
As we all know, in recent years the practice of offshoring, or outsourcing jobs to
countries like India where wages are lower, has attracted a great deal of controversy.
Many people in a variety of jobs and professions in the U.S. and other developed countries
are now very concerned that their jobs might eventually be moved overseas. While
offshoring seems to get most of the attention at the moment, we also know that
automation—the complete replacement of human jobs by machines—continues to go on
in a variety of industries.
There are certain conventional views that most of us accept regarding these practices. For
example, we are told that although automation and offshoring may result in significant job
losses in certain industries, types of jobs, or geographic regions, this is part of the
normal functioning of the free market economy. As jobs are eliminated in one area,
economic growth and innovation create new opportunities. As a result, new products and
services are developed, new businesses arise and new jobs are created.
We also know that practices like the offshoring of jobs and the relocation of
manufacturing to low wage countries like China are creating new opportunities for workers
in those countries. As a result, a massive new middle class in being created. As those
newly wealthy people enter the world market, they create dramatic new worldwide demand for
consumer products and services. Businesses in countries throughout the world will thus
enjoy access to new markets, and as a result, new jobs will be created everywhere. In
short, the general belief is that the trends toward globalization and automation may
create temporary displacements and pockets of unemployment, but ultimately, technological
progress creates new jobs and makes all of us more wealthy.
In this chapter, we are going to start off by creating a mental simulation that rejects
these conventional wisdoms. We are instead going to make the following assumption:
At some point in the future—it might be many years or decades from
now—machines will be able to do the jobs of a large percentage of the
"average" people in our population, and these people will not be able to find
Many people might disagree with this assumption; they may feel strongly that in our
economy, new jobs will always be created. Let’s leave that aside for the moment;
we’ll discuss it in great detail in the next chapter. For now, let’s just go
ahead and use this assumption. After all, it’s only a simulation.
Who are these "average" people whose jobs we are going to simulate away? We
simply mean the bulk of the working people in our population. Let’s say at least 50
to 60 percent of the employed population. These are just typical people doing typical
jobs. In the United States, about 28 percent of the adult population has a college degree.
So many of these average people may have gone to college or even graduate school, but most
have not. They are the people who drive trucks, fix cars, and work in department stores,
supermarkets and all types of offices and factories. They probably are not neurosurgeons,
and they most likely do not have a PhD from MIT. They work on the loading dock, sell
insurance or real estate or laptop computers, work in customer service, or accounting, in
a variety of small businesses or at the post office. They are what we all think of as
So our assumption is going to be that, at some point down the line, machines or computers
will take over a great many of these people’s jobs. Not all of them, but a lot. Maybe
40 percent. Maybe half. The exact number doesn’t really matter.
We are also assuming that, although these people might try very hard, they simply will not
be able to find another job. Perhaps another job is created somewhere else in the economy,
but maybe that job requires very advanced or specific education, skills or training, so
that we can’t have any reasonable expectation that this "average" person
can fill that job. Or then again, maybe no new job is created. Maybe the new job just gets
automated right away.
Before we get started with our simulation, let’s look at the idea of the world mass
The Mass Market
Each of us, if we are lucky enough to live in one of the advanced nations of the world,
enjoys access to an immense variety of products and services. As you walk through one of
the large consumer electronics retail stores, you are confronted with a seemingly
limitless number of different products in a variety of price ranges. Similarly if you
enter a large bookstore, you’ll be presented with literally thousands of different
books, music CDs and movie DVDs.
This tremendous selection of products, and also services, which we now take for granted,
is unprecedented in human history. Never before has such a variety been available—and
certainly not to the "typical" people who comprise the majority of the
population. All these products owe their existence to the mass market. In today’s
world, a business that sells mp3 players, cell phones, laptop computers, personal
financial services, or automobiles sees a potential market comprised of tens or, in some
cases, even hundreds of millions of potential buyers. It is this seemingly limitless ocean
of good customer prospects that makes very high volume production and marketing possible.
When a business creates products or services at high volume, it realizes economies of
scale, and that, of course, results in lower prices. In addition, however, high volume
production also makes it possible for the business to adopt statistical quality control
techniques and to improve overall consistency and precision in the production process. The
result is not just cheaper products—but better and more reliable products.
Because of the mass market, we enjoy a seemingly infinite variety of choices, and we also
have come to expect products and services of consistently high quality. For most of us,
the benefits of the mass market have had such a deep impact, that in a very real sense,
they have become integrated into our culture and now govern the expectations that we have
for the quality of our daily lives.
Visualizing the Mass Market
So that we can better understand how the mass market works, let’s now create our
mental simulation or "video game" of the market. Once we can visualize a working
simulation, we can return to our original question about the impact of automation and see
what might happen.
Before we start, I should mention that in order to keep things simple, we are thinking in
terms of a single worldwide mass market. In fact, we know that different regions and
countries actually have distinct but highly connected markets. The markets are currently
kept separate by things like geographic distance, language barriers, incompatibilities
(many U.S. cell phones won’t work elsewhere for example), and cultural differences.
However, we know that continuing forces such as globalization and the Internet have caused
the markets to become much more closely linked than in the past. For this reason, we can
safely use a simple one-market model for our simulation.
* * * * *
To visualize the mass market, think of a vast tunnel. The tunnel is dark, but streaming
though the tunnel are countless points of white light. The lights float along at a
somewhat leisurely pace like tiny moving stars. Each light represents a single person (or
consumer) who participates in the world mass market.
The number of lights seems limitless, but in fact they represent only a small fraction of
the world’s population. The lights include the people of the United States, Canada,
Western Europe, Japan, Australia, New Zealand, and other developed nations. Also among the
lights are wealthy people from throughout the world and the fast-growing middle classes in
developing countries like China, India, Russia and Brazil. All told, there are perhaps
somewhere around a billion lights in the tunnel.
The brightness of each light represents the purchasing power (or discretionary income) of
each person. In order to enter the tunnel and participate in the mass market, a person
must meet a certain threshold of purchasing power.
If we could go outside the tunnel, we would find over five billion barely perceptible
lights. These dimly lit lights represent the world’s poor: the approximately 80
percent of the population that lives on less than ten dollars per day. These lights are,
of course, eager to enter the tunnel. However, they are prevented from entering until they
can achieve the necessary threshold of brightness. Nonetheless, at the entrance to the
tunnel, we can see that a continuous stream of lights suddenly begin to shine more
brightly and are thus able to enter the mass market. As we have said, these are the
growing middle classes of China, India and other nations. The number of lights in the
tunnel is constantly growing.
As we watch the lights float past, we notice that the vast majority shine with a medium
range of brightness. These are the average (or typical) people who make up the middle
class populations of the world.
Looking closely, we can see that there are also a significant number of much dimmer
lights. These are the marginal participants in the mass market—people who just meet
the threshold for remaining in the tunnel. These people either hold the very lowest paying
jobs, or in many cases, they subsist on government transfer payments, such as welfare or
unemployment insurance. Many of the dim lights stay that way only for a short time. They
may be unemployed for a while but then find a new job and quickly begin to shine more
brightly. Many others, however, are caught in the cycle of poverty and remain dim
indefinitely. These people must constantly fight to stay above the threshold of brightness
that keeps them in the tunnel. Some will fail. Even in the United States, there are
people, such as the homeless, who have been cast out from the tunnel.
Finally, we see that there are a fewer number of lights which shine much more brightly
than the rest. These are wealthy people. Many of these people have advanced educations or
specialized skills and, as a result, earn a high income. We can see that among these
bright lights there is also a range of brightness. We notice that the brighter the lights,
the fewer they are in number. At the extreme, we can very occasionally see an intensely
bright light, shining like a miniature sun. These are the truly rich people of the world:
people who through inheritance or entrepreneurship or other means have acquired vast
amounts of wealth.
Still, as we watch the scene inside the tunnel, it is the overwhelming number of the
average lights that truly captivates us. We can feel instinctively that it is these
average lights that collectively represent the true power of the mass market.
Now let’s change our perspective so that we are inside the tunnel with the lights.
Looking around us, we see that the walls of the tunnel are alive with a continuous mosaic
of color and motion. The tunnel walls are tiled with thousands upon thousands of flat
panel displays. Each display runs a continuous advertisement for a product or service that
is offered for sale in the mass market. These panels vary greatly in size and arrangement.
Some panels are huge and are arranged in clusters, each advertising a specific product.
These are the large corporations that have become household names. Although the large
companies stand out, we can see that huge areas of the tunnel walls are covered in a
patchwork of many thousands of much smaller panels. These are the products and services
offered by small businesses that also cater to the mass market.*
As we continue to watch the lights, we can now see that they are attracted to the various
panels. We watch as thousands of lights steam toward a large automaker’s panels,
softly make contact and then bounce back toward the center of the tunnel. As the lights
touch the panel, we notice that they dim slightly while the panel itself pulses with new
energy. New cars have been purchased, and a transfer of wealth has taken place.
We know that a natural cycle exists within the tunnel. Almost instantly, we can see that
many thousands of lights scattered randomly throughout the tunnel shine a little more
brightly. These are the employees of the automaker being refreshed with new light. Another
transfer of wealth has taken place. The autoworkers in turn make purchases from other
business, small and large, and the light continues to parade through the tunnel.
We also know that behind the walls of the tunnel there are more businesses and
interconnections that we can’t see. A large steel company receives payment from the
automobile manufacturer and, in turn, its employees shine with new light.
If we could watch the action in the tunnel over a long period of time, we would find that
the tunnel is not at all a static place. We would notice that some of the panels on the
walls gradually grow dimmer and attract fewer lights. In some cases, they may reverse
their decline and become strong again. But in many other cases, they weaken and grow dark.
Even as this happens, however, elsewhere on the tunnel walls, we see that new panels are
appearing and growing stronger. A few seem to grow rapidly in size before our eyes. This
is the process of creative destruction. In the mass market, the collective purchasing
decisions of the lights determine which businesses succeed and thrive, and which ones
ultimately decline and fail. This is a natural and cyclical process. When an inefficient
business fails, its capital, resources and employees will eventually be transferred to a
new, stronger business. As a panel on the tunnel wall goes dark, the lights that represent
that company’s workers will also grow dim. But over time, they will find new jobs and
their light will be restored.
We now have a pretty clear picture of how the mass market works. We see the lights
streaming toward and contacting various panels, and then, elsewhere in the tunnel, other
lights brightening as wealth is cycled between consumers, businesses and workers within
the tunnel. Over time, we see panels die and other new panels spring up, as old businesses
that can no longer compete in the market are replaced with new, more competitive
start-ups, often in completely new and different industries.
We can also feel that, in general, the total amount of light in the tunnel is increasing.
This is partly due to the new lights constantly streaming into the tunnel, but we also
have the sense that as the light is cycled throughout the tunnel, its intensity seems to
very gradually increase of its own volition—as though the very process of moving the
light around naturally makes it grow over time.
This then is the mass market: a natural cycle of increasing light and wealth governed by
the logic of the marketplace. It is the primary engine of our free market economy.
Automation Comes to the Tunnel
Now that we have a working simulation of the mass market, let’s go ahead and perform
our experiment with job automation. To keep things simple, let’s first focus on the
issue of jobs being taken over completely by machines or computers and leave the question
of offshoring for later.
* * * * *
Now we are back in our tunnel. Very gradually, we begin to eliminate the jobs held by many
of the average lights. As this happens, the impacted lights grow dimmer and in many cases
The automation process affects jobs throughout the world. In developed countries, the
people who lose their jobs will usually continue to receive income, at least for a time,
from government programs such as unemployment insurance. However, as we have seen, these
programs generally produce only very dim lights. In third world countries with little or
no safety net, these unlucky people will likely be cast out from the tunnel, and their
light will disappear entirely.
The impact of automation is still very difficult to discern among the multitude of lights
in the tunnel. We notice, however, that some of the brightest lights in the tunnel are
beginning to shine with even more intensity. As jobs are eliminated, many of the
businesses in the tunnel become more profitable. Some of this wealth is then transferred
to the owners and top executives of the businesses. As this process continues, we see the
brighter lights continue to slowly gain strength as more of the average lights gradually
dim or flicker out. The distribution of income is becoming more concentrated in the
Now, finally, we begin to see a real difference in the tunnel. It becomes obvious that
there are fewer lights and that the number is continuing to diminish. Just as this
realization strikes us, we immediately feel that there is a new sense of urgency pervading
the panels that line the walls of the tunnel. The panels begin to dance with more and more
desperate motion and color as they attempt to attract the dwindling number of lights.
The businesses on the walls of the tunnel are now suddenly seeing significantly slower
demand for their products and services. This is happening even though many of the
brightest lights in the tunnel have continued to gain in strength.
Imagine that your job is to sell as many $50 cell phones as you can in one hour. You are
offered two doors: Behind door #1 sit Bill Gates and Warren Buffet, the two richest people
in America. Behind door #2 are a thousand average people. You may well be tempted to
choose the first door just so you’ll get to meet Bill and Warren, but in terms of
getting your job done, you would probably agree that door #2 is clearly the best choice.
This is because the demand for the mass market products that drive our economy depend much
more on the number of potential customers than on the wealth of any particular customer.
You are not going to be able to sell 40 cell phones to one person, no matter how wealthy
We can now sense that many of the businesses in the tunnel are clearly in trouble. Even
though they are continuing to save money as automation slowly eliminates some of their
remaining workers, this is not enough to make up for the reduction in sales they are
experiencing. Many of these companies are now at the point where they must take action to
A great deal of each company’s resources is invested in factories, machines and
equipment and offices. These things, which an economist might refer to as capital, are
very hard to quickly get rid of. For example, if you just bought a lot of new automated
machines for your factory, then you are stuck with them. You can’t just return them
and get your money back if demand for your products suddenly starts to fall. For this
reason, a business which sees rapidly falling demand usually has only one choice in order
to survive: cut more jobs. We see this, of course, as part of the normal business cycle.
Businesses routinely lay off workers in bad times and then rehire in good times.
In the tunnel, we now see that the businesses are beginning to cut more and more jobs.
They are becoming more desperate and, in many cases, they must eliminate even key
employees that they formerly felt were crucial to their operations. As this happens, we
begin to see some of the brighter lights in the tunnel rapidly begin to dim.
The continuing decrease in demand falls especially heavily on the manufacturing businesses
located in developing nations like China. These businesses rely on producing very high
volume products, which they export to first world nations. They are now severely cutting
jobs and the flow of new middle class people into the tunnel has all but stopped.
As a result of the job cuts, the lights are becoming even more sparse in the tunnel. Many
of the businesses are now failing and whole regions of the tunnel walls are growing dark.
Now we see that many of the very brightest lights in the tunnel finally feel the impact
and also begin to lose their light. The owners of the businesses in the tunnel are seeing
much of their wealth gradually drain away.
The tunnel has become a far darker and more stagnant place. We sense clearly that the
hopes of even the remaining brighter lights are gradually evaporating into the new
emptiness of the tunnel.
A Reality Check
Clearly, our simulation did not turn out well. Perhaps our initial assumption about jobs
being automated was wrong. But, again, let’s leave that for the next chapter. In the
meantime, we might wonder if we have made a mistake somewhere in the simulation.
Let’s see if we can perform some type of "reality check" on our result.
Perhaps we can look to history to see if there is anything in the past that might support
what we saw happen in our simulation.
Let’s leave our tunnel and travel back in time to the year 1860. In the southern part
of the United States, we know will find the greatest injustice ever perpetrated in the
history of our nation. Here, long before the new light of advanced technology first began
to shine, men had discovered a far more primitive and perverse form of job automation.
The injustice and moral outrage associated with slavery rightly attracts nearly all of our
attention. For this reason, most of us don’t have occasion to think about the overall
economic impact of slavery. At the time Abraham Lincoln was elected president, we know
that while the Northern population’s moral objection to slavery was a primary
divisive issue, there were also significant differences and debate about issues relating
to the differing economic systems of the North and the South.
The Northern economy was built on free labor and entrepreneurship and tended to spread
opportunity more equally throughout the population. In contrast, the Southern states
relied on slave labor, and wealth was primarily concentrated in the hands of white
plantation owners who owned many slaves. One result of this system was that it was very
hard for poorer whites to advance their situation because relatively few free labor
opportunities were available.
Documented observations illustrate the impact of slavery on the Southern economy. In her
book Team of Rivals: The Political Genius of Abraham Lincoln, Doris Kearns
Goodwin describes a journey that William Seward, who would years later become
Lincoln’s Secretary of State, took in 1835. Seward traveled with his family from his
home in New York State to the slave state of Virginia. As the Sewards cross into Virginia
they leave behind the bustling towns and cities to which they had become accustomed.
Instead, they travel a rough, deserted road with few homes, businesses or taverns.
Dilapidated shacks dot the landscape, and the land itself seems to have been assaulted by
poverty. During his journey, Seward observed: "How deeply the curse of slavery is set
upon this venerated and storied region of the old dominion. Of all the countries I have
seen France only whose energies have for forty years been expended in war and whose
population has been more decimated by the sword is as much decayed as Virginia."
It seems clear that there are some definite parallels between what we saw in our
simulation and the slave economy in the South. We noticed that in our tunnel, the
brightest lights initially became even brighter as the average lights began to dim and
flicker out. This fits well with the fact that most wealth in the South was concentrated
in the hands of rich plantation owners, while the majority of the population was trapped
There is one important discrepancy, however. In our simulation, the situation continued to
deteriorate until even the brightest lights eventually began to lose their strength. In
contrast, slavery in the Southern states lasted for over two hundred years. The plantation
owners were able to hold onto their wealth at least until the start of the Civil War in
1861. If our simulation seems to indicate that a slave (or automation-based) economy is
destined to undergo continuing decline, how is it that the slave states were able to
maintain stability for so long?
The answer lies in the fact that the South was primarily an export economy. The large
plantations produced raw cotton which was then shipped to Europe and to the Northern
states where it was manufactured into textiles and clothing. It was this constant wealth
flowing in from the outside that was able to maintain the economy over time.
Our simulation, of course, was of the entire world mass market, so there was obviously no
export market available. In the simulation, we found that across-the-board automation of
jobs eventually reduced demand for products and services as the number of lights in the
tunnel decreased. You can imagine that, if the South had been completely isolated
economically with no outside trade allowed, it would likely have followed a path of
decline similar to the one we saw in the simulation.
In fact, one of President Lincoln’s first acts after the Southern states seceded from
the Union was to implement a complete blockade of the South. The blockade became
increasingly effective as the years progressed—ultimately achieving a 95 percent
reduction in Southern cotton exports—and was certainly an important factor in the
outcome of the war. By the time the war ended in 1865, the Southern economy was in
complete ruin. One can speculate that if the blockade could have been maintained without
an actual shooting war taking place, the economic impact alone might have in time led to
the end of slavery.*
Both our tunnel simulation and our examination of the Southern slave economy seem to
support the idea that once full automation penetrates the job market to a substantial
degree, an economy driven by mass-market production must ultimately go into decline. The
reason for this is simply that, when we consider the market as a whole, the people who
rely on jobs for their income are the same individuals who buy the products produced.
Another way of expressing this is to say that although machines may take over
people’s jobs, the machines—unless we are really going to jump into the stuff of
science fiction—do not participate in the market as consumers. Recall from our
example of selling cell phones to the two billionaires or to a thousand regular people,
that making a few people richer will not make up for losing a large number of potential
customers. That may work for yachts and Ferraris but not for the mass produced products
and services that are the backbone of our economy.
At the very beginning of the automation process this effect was not at all clear. The
first businesses to automate saw a significant reduction in their costs as they cut
workers, while the impact on the demand for their products was negligible—or in fact,
demand may have actually increased for a time, as they were able to lower their prices. As
a result, their profits, and therefore the wealth of their top employees and shareholders
increased. These were the brighter lights in the tunnel that initially became stronger.
However, as nearly all businesses in the tunnel continued to automate jobs, at some point
the decrease in the number of potential customers began to outweigh the advantages gained
from automation. Once this happened, businesses were forced to cut even more jobs, which
eliminated even more consumers from the market and caused demand to fall still further.
From this point on, the economy entered a continuing downward spiral.
Not a very happy ending. However, we still need to examine our initial assumption. Is it
really possible that, at some point in the future, machines or computers could take over
the jobs performed by a large percentage of average workers without new jobs within the
capability of these people being created? Could that really happen?
We’ll look at that question in the next chapter. We’ll also look at something
called the Luddite fallacy—which is an established line of economic reasoning that
strongly contradicts the result we saw in our simulation
Detailed Table of Contents
To continue reading, please purchase the book at Amazon.com: