We Need A 'Third' Economy For The Future

Tyler Durden's picture

Authored by Charles Hugh Smith via OfTwoMinds blog,

The existing platforms of for-profit cartels/monopolies and the central state are no longer able to provide enough paid work and high-touch services for everyone.

We all know that automation is eating its way up the human-labor food chain at an increasing clip. Yet there is remarkably little insight into this process.

Let's see if we can't connect two insightful essays on this topic, one from musician-essayist David Byrne and the second on the business model of Amazon.com:

Eliminating the Human (via GFB). Here is an excerpt:

"We’re a social species--we benefit from passing discoveries on, and we benefit from our tendency to cooperate to achieve what we cannot alone. In his book, Sapiens, Yuval Harari claims this is what allowed us to be so successful. He also claims that this cooperation was often facilitated by a possibility to believe in 'fictions' such as nations, money, religions and legal institutions.

 

Machines don’t believe in fictions, or not yet anyway. That’s not to say they won’t surpass us, but if machines are designed to be mainly self-interested, they may hit a roadblock. If less human interaction enables us to forget how to cooperate, then we lose our advantage.

 

I’m wondering what we’re left with when there are fewer and fewer human interactions. Remove humans from the equation and we are less complete as people or as a society. 'We' do not exist as isolated individuals--we as individuals are inhabitants of networks, we are relationships. That is how we prosper and thrive."

Why Amazon is eating the world. Here is an excerpt:

"I believe that Amazon is the most defensible company on earth, and we haven’t even begun to grasp the scale of its dominance over competitors. Amazon’s lead will only grow over the coming decade, and I don’t think there is much that any other retailer can do to stop it.

 

...each piece of Amazon is being built with a service-oriented architecture, and Amazon is using that architecture to successively turn every single piece of the company into a separate platform — and thus opening each piece to outside competition."

There is much more of interest in each piece, but these short excerpts offer a taste of each.

Byrne is commenting on our built-in need for human connection and cooperation, not just for emotional-social reasons but as a competitive, adaptive advantage.

Zack Kanter (author of the essay on Amazon) explains how Amazon's model avoids the flaws of vertical integration (i.e. each division becoming bloated, inefficient and ineffective due to lack of outside competition).

Correspondent GFB observed that Kanter did not describe a major component of Amazon's success: the consumer's willingness to buy commodity-goods without actually seeing the product on the shelves, trying it on, etc.

The unifying thread here is high-touch, low-touch, a concept I covered in my book Get a Job, Build a Real Career and Defy a Bewildering Economy. I was endeavoring to explain why certain kinds of labor are easily automated and other kinds are more immune to automation.

Low-touch transactions / interactions don't offer much value, connectedness or cooperation. A common example is ordering a fast-food meal or checking out at a market. Our interaction with the human being behind the counter is brief and not something valuable enough that the company can charge extra for being served by a human rather than a machine.

The vast majority of consumers would be OK with (or actually prefer) having a low-touch transaction served by a robot or automated system. Rather than wait in line, many of us prefer to use the self-checkout or airport ticket kiosk. Most of us would be delighted to bypass the entire time-wasting hassle of renewing our licenses at the Dept. of Motor Vehicles and many other low-touch interactions.

In effect, Amazon is automating many ordinary low-touch transactions, and few consumers miss what's been lost in the move to home/office delivery of commodity (i.e. basically interchangeable) goods and services.

The kinds of connections Byrne is referencing are high-touch: transactions and connections that require communication, sharing, cooperation, and all the other bonds of human relationships.

If ordering a fast-food meal is low-touch, dining at a swank bistro is high-touch. Most people would hesitate to pay a lot of money for food delivered by a robot to a bland sound-proof booth. In other words, we're paying not just for the food but for a high-touch environment: a knowledgeable wait-person, a sommelier, an atmosphere of conversation, people-watching, etc.

As goods and services become commoditized, the cost of low-touch interactions declines and the cost of high-touch interactions rises.

For example, it's easy to order a commodity set of house plans for $150 off the Internet. Hiring an architect with whom you establish a professional relationship will cost 10 times more for some consulting and 100 times more for a customized set of architectural plans and specs.

There are many other examples of the difference. Consider the future of medical care. Many observers expect robots to perform many routine care tasks such as visiting patients and making sure they are taking their prescribed medications. This is a low-touch interaction.

While ill people won't mind interacting with a helpful robot, what they really want is a human being to stop in and express some interest and concern for their condition. This is the high-touch connection we all want as a human birthright.

A great many of the current jobs in our economies are low-touch, and these will relentlessly be automated, as the value of the human interaction is not worth enough to consumers to pay extra for. If consumers will pay significantly extra for a human taxi driver rather than an automated taxi, then human-driven taxis will be available. But if consumers aren't willing to shoulder the higher costs of humans performing low-touch tasks, human labor in low-touch environments will disappear as a financial necessity.

One of my concerns is that high-touch interactions and connections may well become too costly for many people to afford.

This may not matter much, as most high-touch connections are not monetary--we communicate, share, and cooperate with friends, family members, neighbors, etc., and there is no direct financial facet to these transactions.

It seems obvious to me that we need a new organizational structure to enable high-touch transactions and connections that aren't necessarily for-profit or personal (friends/family). This is the foundation of my proposed CLIME system: community labor integrated money economy-- that I outline in my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All.

CLIME is a non-corporate, non-state platform for a high-touch, high-value-creating community economy.

Within the high-low-touch spectrum, clearly there is much middle ground between for-profit commoditized home delivery of goods (low-touch) and personal relationships (high-touch). This middle is what appears to be at risk of disappearing as automation eats up all the low-touch human labor.

This is not a recent trend. Labor's share of the nation's output (GDP) has been declining for decades:

The existing platforms of for-profit cartels/monopolies and the central state (government) are no longer able to provide enough paid work and high-touch services for everyone. We need a Third Economy-- what I call The Community Economy, with its own platform, network and non-state, non-central-bank-controlled currency.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
nuubee's picture

Easy, plow, plant, and harvest your own damn field.

The future is self-sustaining single family units with Robots like C3P0 and R2-D2

LawsofPhysics's picture

How that going to work if the bankers, government, or local thugs can pillage your field any time they want?

See the problem yet?

nuubee's picture

Laws, you of all people should know that in the future, armed drones will be a right, not a privilege.

vato poco's picture

whores, barter, 'Equalizer'-style services ... cash only. gold or silver if/when they outlaw cash. gonna be interesting times - am binge-watching old 'game of thrones' episodes for medieval econ tips & pointers.

His name was Seth Rich

#PizzaGate

#WhatsontheLaptop

#TheyAllHAveToGoBack

Ghost of PartysOver's picture

Is this "Third Economy" similar to Bill Clinton and Tony Blair's "Third Way".  Must people here probably don't have a clue to that reference.

NoDebt's picture

"This is the foundation of my proposed CLIME system: community labor integrated money economy-- that I outline in my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All."

Abbreviated:  C.O.M.M.U.N.I.S.M.

 

mkhs's picture

I think I need glasses.  I read, "Buy my book."

MEFOBILLS's picture

There is a non communist third way.  It is called Social Credit Theory by Clifford Hughes Douglas.

Douglas theory injects debt free into  price system, then uptakes the money from retail after sale.  This allows goods to be liquidated, and also producers get feedback in the form of declining profits.  I would also pump into nuclear family formation - especially white families, like is being done in Russia.  Nuclear families are the cornerstone of civilization.

The money system becomes a pump, with circuits of flow.

The money sytem makes demand, allows prices to be set, and is the MOST EFFICIENT FORM OF DISTRIBUTION INVENTED YET.

Yes, money and prices make signals to allow goods to be distributed.  This fact is obvious and not debatable.

But, since humanity is in a dysgenic cycle, genius like that of Douglas is falling into a memory hole.  Even if some declining modern humans could understand Douglas the rest of bleeting sheeple people wouldn't.

So,  answer to  authors query about a new economic system.... well it has already been devised.  

It requires stripping away power from  Jew private bankers.... so good luck with that.  It also requires libertarians to pull their head out of their ass and realize that money's true nature is law.

Peacefulwarrior's picture

Easy.. I'll use it in a sentence too.. LiL Bill and Tony B had a three way with Fraulein Merkel.

GunnerySgtHartman's picture

It won't surprise me in the least if we see the barter system make a big comeback during the next economic crash.  A side benefit of it may be that we see some lazy people actually get off their asses and do some work.

froze25's picture

You want lazy people to get off their asses, put a time limit on all so called "benefits" that are not paid into from your earnings/wages. Food stamps 6 months on and cannot be used again unless 1 year has passed. Child Tax Credit is only available to people that actually report income. Welfare in the form of a monthly check for purely existing and not wishing to work, cut off completely. Public Housing, eliminated. Absolutely not one dime of tax dollars spent on non-citizens. No more disability payments for being obese. No Medicaid coverage for pain killers.

ultraticum's picture

Enter disintermediation.

dmger14's picture

Isn't Amazon losing money hand over fist every quarter, and only kept alive by cheap debt?  This is hardly the benchmark of success that will only get bigger and better.  Rather, it has the look of a ponzi scheme that is destined to fail.

ParkAveFlasher's picture

Amazon is an amazing wholesale pricing tool and distributor. 

However, there is a ceiling in the sort of product they could offer and any supply disrupt over the Pacific may throw them backwards. 

The_Passenger's picture

Have you ever seen their automated factories? Good luck trying to compete against that. If you read Jeff Bezos's biography, he spent a great amount of time at analyzing why companies fail. As mentioned in this article, he has structured his company in such a way that each department competes with one another. Sure cheap money helps, but this is definitely not the whole story. If you think Amazon is a Ponzi, then why do stocks from various companies drop each time Amazon annonces that it is entering a new market?

vato poco's picture

I have no doubt all that's true, but .. I keep reading stuff like 'Amazon has never yet shown a profit'. If *that's* true, then ...

His name was Seth Rich

#PizzaGate

#WhatsontheLaptop

#TheyAllHaveToGoBack

govtsucks's picture

Amazon's profit margin on cheap consumer goods is exceedingly small. The vast majority of its profit currently comes from cloud services.

Peacefulwarrior's picture

"There has been too much violence. Too much pain. But I have an honorable compromise. Just walk away. Give me your pump, the oil, the gasoline, and the whole compound, and I'll spare your lives. Just walk away and we'll give you a safe passageway in the wastelands. Just walk away and there will be an end to the horror".The HUMMUNGUS...

GunnerySgtHartman's picture

That last chart is interesting ... note how the decline of labor's share of GDP starts at approximately the same time the US went off the gold standard.  Coincidence???

divingengineer's picture

good point

Once they discovered that the world would tolerate us printing money from thin air, labor, and by extension, actual production of useful things became less valuable.

Raging Debate's picture

Gunnery - Yep, and add in the chart of the share of GDP towards finacialization and you get a distribution issue. Lloyd Blankfein admitted such on Charlie Rose show. Automation is an outlier. Prioritites matter in problem solvings folks. 

 As for automation, as Asia, India and Africa become less agrarian, they too will see a balancing act with nature, population decline. No need for five kids to work the farm, modernized nations have begun viewing children as a luxury expense, not a necessity and they are not wrong. We are 30-40 years away from evolving as energy. Physical needs go down to 1% of current needs. AI can manufacture enough solar power and mainframes to perpituity. Mankind will probably keep a few million in current biomechanical form as some method of overcontrol perhaps for a time until our new evolved species begins traveling interdimensionally. And since your energy it wont matter if it takes several hundred years to figure out. 

 Such remainder of humans would probably be polygamists, well privaledged indeed in todays terms but would be considered public servants as remaining in such form will be less interesting. Control would become boredom very quickly. I see signs already of millenials and gen-x wealthy beginning to act and feel this way, but its early. 

 I dont hink you want AI with similar emotions as humans. At the least you would dial down the emtions needed for prior primitive survival. It would still be a big discussion over competitive and cooperative emotions involving evolution for other universes/physics to adapt for AI or AI as integrated into our evolved species. I dont have immediate answers but we do know failure to adapt and evolve means stagnation and death of a species. There are likely good reasons to not completely reinvent the wheel. 

 Anyways, quantum computing has advanced now to human intelligence and then some. But it will take a good couple decades plus to create a robot to replace a human on high touch services. It will require miniturization. 

 Your bright Charles, but your trying to say you can create something other than a binary system in current form. Pandiests, those that believe existence is one shared consciousness with individual dimensions/facets/beings/expressions are probably onto something. 

But for the moment, I advise you to consider getting funding from either public or.private systems or your ideas will probably be like dust in the wind. Both have there short comings. 

 

Angry White Guy's picture

Nope, no coincidence Gunnery Sgt.  It's also when worker productivity and wage growth were de-coupled.

Iconoclast421's picture

Wages are still 50% of GDP. The gap you see is simply the papering over of a giant hole in the economy, aka money printing.

Sonny Brakes's picture

I don't think there are enough resources on Earth to build whatever it is we're supposed to be building and pay for the labor to build it.

illuminatus's picture

It's too cheap to fabricate money and too hard to actually make it.

4johnny's picture

Amazon thrives in a false economy propped up by large amounts of debt and false promises.  Can Amazon survive in a real economy after the reset?

moneybots's picture

 

"We all know that automation is eating its way up the human-labor food chain at an increasing clip."

 

The automated CEO is coming. Why pay Jamie Dimon a billion dollars, when AI will be a better CEO at far less cost?

GOLDMAN SACKS FED's picture

I DON'T THINK I HAVE EVER BROUGHT ANTHING FROM AMAZON EXCEPT A BOOK MAYBE AND HAVE NO INTENTION OF IN THE FUTURE... I THINK YOU HAVE TO BE A AMERICAN TO BUY AMAZON

MEDIARIZED

Sonny Brakes's picture

Anyone looking for work isn't able to reach anyone that could give them the nod that they've got the qualifications for the job. How do you get anyone to look at your credentials unless you've already been anointment by one of the few gatekeepers who's still dishing out the few positions that haven't already been spoken for on behalf of those already employed who's sons and daughters he hasn't already hired. I mean even those jobs aren't being filled.

To Hell In A Handbasket's picture

Charles, you are wasting your vast interlectual capacity on a vast proportion of Trumptard Zerohedgers, who still believe our labour market can provide full employment for the masses. 

Ever since I joined this forum, I've been way ahead of the curve regarding the direction of employment as a society and we need brutal honesty.  The kind of honesty many members here are not willing to see or accept.

Sonny Brakes's picture

I'm always ready to hear the truth.

To Hell In A Handbasket's picture

We have surplus production capacity. IE: A job/project that once took  10 people now takes 6. Automation is another elephant in the room. Take the local supermarket for example.

The till lady is almost becoming obselete. We now have 1 person overseeing 10 self service checkout tills.

In London, cleaning jobs were once the preserve of black Africans as blacks from the Carribean and South America,  would not do it. Now I'm seeing English whites and eastwrn europeans do these jobs as medium paying jobs have been on the decline thanks to Keynesian neoliberalism economics.

If Africans are being challenged for cleaning jobs, then it should be obvious to every man and his dog that things are really bad and full employment is a thing of the past which will inevitably lead to a small but permanent unemployed class.

Are the chosen Trumptards prepared to contemplate the fucking obvious? No chance.

 

besnook's picture

that's the catch 22 isn't it. there is a huge oversupply of labor especially if you consider the entire world. that keeps all wages down across the board, not just low wage jobs. couple that with productivity gains enabled by people replacing robots and computers and the oversupply of labor is bound to increase as population increases despite the added economy increased population brings. at some point the money to take care of unemployed/unemployable labor and stagnant wages because of the labor oversupply eats into revenue (ncreasing sales at amazon is not greater than decreasing sales at brick and mortar) ao automation and robots will eventually cannibalize the consumer spending model of economic growth. there won't be enough working people to support or grow an economy, hence, the likes of zuckerberg and others are pushing for a guaranteed income. income that will have to be paid for by the remaining workers.

so what happens? japan is the microcosm of the future, the post inducstrial world. world population will begin to fall, slowly at first but picking up steam as the dystopia reveals itself to more people. the problem is population will not fall fast enough to close the gap between needed and unwanted labor so war or bubonic plague or logan's run will speed the process. in the end you may be better off adopting an amish lifestyle of austerity working a small plot of land to grow your own food plus food to sell or barter to pay taxes on the land you farm with a horse and cart for transportation and product distribution.

Sonny Brakes's picture

Bold man makes a bold statement. I like it.

Raging Debate's picture

To Hell - Your analysis is as shallow as a hampsters grave. 

To Hell In A Handbasket's picture

It's called a synopsis. I also expect the residents of ZH, to be above average IQ, enabling them to understand and extrapolate.  Alas, I was expecting too much of you. 

shovelhead's picture

 Give me a low touch (who made that one up?) robot over those abominable chain restaurants with their smarmy waitstaff that proudly announce their name (as if you can't read their huge billboard on their chest) and proceed to chat you up as if they're your newfound best friend while pushing a "special" that's past it's spoil point.

No I don't want you to fly by every two minutes and ask "Is everybody doing fine?" while not waiting for an answer right after being served and then be unavailable when something is needed later in the meal. Waiting until you have finally given up seeing them again and standing to leave is the only way to get your check after a meal is a sign that your tip (or lack thereof) is indicative that I did not prize your friendship or your inability to wait a table properly.

Contrast that experience with another I had recently at a small family run Mexican restaurant where a teen daughter who was the spitting image of our hostess was prompt and thorough, attentive without being intrusive and roving her eye when not being at her station to respond quickly to a glance or a raised finger. Her younger brother would be watching the chips and salsa bowls like a hawk and replacing them as needed. The place was packed but you would never know it by the service.

The food was perfect and plentiful and all in all an excellent dining experience as it should be and her oversized tip showed how well I appreciated her efforts. I made sure the hostess knew how well we were treated and that we will be returning at every opportunity to enjoy dining at a place where care is taken at every level to excel

How a large chain with millions to burn for training can't understand what a small Mom and Pop can and do is beyond me.

 

rf80412's picture

How a large chain with millions to burn for training can't understand what a small Mom and Pop can and do is beyond me.

Those kids probably aren't paid at all, so how much that quality of labor would otherwise cost is a non-issue.  Mom and Pop probably work them hard but they're still their children and no boss could ever feel that way about their employees.  And the kids might expect to take over the business and so are highly motivated in a way no employee could ever be.

Silver Savior's picture

I can not wait for the universal basic income. It sure would solve a lot more problems than it would create. 

Never understood the whole Amazon thing. Everything seems expensive on there.

Sudden Debt's picture

Well, first it would create massive inflation.

Secondly, if you create wealth out of nothing for everybody, it would lose value pretty fast.

Universal basic income would need to happen globally for it to work because why would somebody work for something you get for free.

So... shortages as everybody would be able to buy the same stuff.

We already consume about 3 planets right now. What would happen if everybody could consume in our way?

shortages.

You way of living would drop pretty big.

With a universal income, you would make what somebody in Africa is making right now.

You life would be a living nightmare.

 

Silver Savior's picture

Just having the relief of the universal wage would make third world living worth it. If there was even more consumption of resources the resources would be treasured instead of wasted. Because there simply would not be enough. Even if someone wanted to buy something that item may not be available. 

No, I want this universal income I do not care about any of the fallout from it. Those bloody elite bastards owe me.

Sonny Brakes's picture

I predict that everyone will be given an annual basic allowance and that employers who employ anyone will only be expected to top up anyone who's employed by maybe a few dollars an hour and/or employers will begin threatening to move their production offshore unless the government starts picking up the tab for their employees.

Silver Savior's picture

Agreed. I just see no other way.

pparalegal's picture

Not smaller but bigger. Mutch bigger. The Tyrell Corporation is a powerful corporation from Blade Runner. Tyrell is a high-tech corporation primarily concerned with the production of androids.

The company's motto is "More human than human".

Batman11's picture

Hard work is so 20th Century.

In the 21st Century you should be sitting on your behind and letting your capital do the work.

How much rent and capital gains are coming in this week?

When this is sufficient you will be a fully fledged capitalist rentier and doing sweet FA.

 

Central Bankers pump up the markets, my capital gains aren't what they were and champagne is expensive.

Sitting on me arse and doing sweet FA, this is capitalism.

 

 

rf80412's picture

Human interaction in and of itself becomes subject to the same supply/demand laws as every other product.  People who place sufficiently high value on it will be willing to pay a premium for it, businesses allowed to do so will each eventually find the most profitable balance of product versus amenity, and most people won't actually care because of the convenience and lower prices.

Hell, a degree in communications might actually become worth something as people start being specifically hired in order to interact with customers, clients, etc., and HR departments ... or HR algorithms ... start needing something they can use as an objective proxy for something as subjective as personality and people skills.

Deep Snorkeler's picture

I have cold feelings of dread:

1. The private sector may never recover.

It is built on mountain of fraud.

2. Business and politics are a partnership in plunder.

3. Asset classes are overvalued and collapsing.

4. NASA and the Defense Dept never produce anything to justify cost.

5. Sex robots will reduce the birthrate by 50%.

 

 

 

conraddobler's picture

Just wait until AI learns how to lie

rf80412's picture

AI trained on social media and programmed to seek "likes" won't have a concept of truth and falsehood ... only popular and unpopular.  Though it might be surprisingly good at registering emotion filtered through text and emojis.

conraddobler's picture

What could possibly go wrong with government supplying most people with their daily sustenence?

That right there is the tell the sheep are ready to line up to be mutton.

Does anyone proposing this idea NOT know some douchebag with money in the family who like to play God in people's lives?

Just how pussified is everyone to accept this shit?

Wait don't answer that I already know unfortunately