I, Not Robot: Why The Rise Of SkyNet Leads To Automatic Unemployment For The People

Tyler Durden's picture

With so much hollow and pointless discussion over the past week, month and year over such fundamentally trivial things as who will inject more money faster, who will be bailed out first, who will go back to their own currency before everyone else, it is easy to forget that reality actually matters. And the reality is not who has their CTRL-P macro stuck, but what does the future of the world truly hold when one sidesteps such idiotic flights of fancy that debt may be cured with more debt. In order to completely change the topic from what has become trivial and generic - i.e., the various encroaching forms of central planning: Fed, SCOTUS, G-8 through G-20; European Finance Ministers, and now, with the ESM passing German parliament, the German Constitutional Court, we focus on something few have discussed, yet all have a morbid fascination with: Robots... And China. And why the combination of the two just may be the most dangerous thing for China's several hundred million strong migrant labor force, which, on the margin may just be the deciding factor defining the engine of global growth for the next decade. Oh, and did we mention global structural unemployment which will only get worse as increasing automation leaves more and more millions collecting their 99 weeks of extended unemployment benefits.

And since we have written far too much this week, we will let the charts do most of the talking.

Machinations and autobots, and unmet Chinese markets:

Robots and unemployment: correlation or causation?

Finally, here is why China better have learned all the tricks of the labor market manipulation trade from the BLS. It will need it.

Those who are lazy and/or have been replaced by a robot lately, can stop reading here.

For everyone else, here are some parting thoughts from Goldman's Hugo Scott-Gall

Who does automation benefit more? Low-cost producers in Asia or high-value manufacturers in the developed world? In the near term, it’s likely that we’ll see an accelerated adoption of automation in Asia, and in China in particular, as companies there face rising wages, increasing competition and slowing global demand and pricing pressure that necessitates higher efficiency. And to add to it, financing such capital investment is perhaps most convenient (and quickest) in a place like China in the current environment. Wrapping up that argument is the economy’s conscious effort to industrialize and move up the manufacturing value chain. When higher levels of automation materialize, it should lead to a pick up in productivity (off a low base – China has c.90 robots per 10,000 workers compared to more than 300 in Japan). But will it provide a sustainable advantage?


Transforming a factory teeming with people to an automated assembly line of complex machinery is easier said than done. It not only requires highly skilled talent and experience to manage the process (tough to acquire even through global recruitment), but also a much deeper shift in the way the manufacturing process is planned and executed. We think the advantage here lies with the West, together with Japan and South Korea, which is why they should be able to maintain their lead on higher-value exports (which includes robotics), for most of the coming decade. Does this mean manufacturing facilities will move back to the West? Taking cheap labour out of the equation, manufacturing facilities must stay close to end consumers (which is Asia for some sectors like autos, smartphones etc.), having balanced out the transportation costs and IP risks with associated infrastructure costs.


Companies that incorporate automation in their manufacturing process should see the labour intensity of their operations fall at the expense of capital intensity, though this may not be a 1:1 match and the payback could take time – lower asset turn versus higher EBITDA margin. Also, setting up industrial robots (with average life-spans of 12-15 years, but no pension costs!) requires management to have longer-term visibility and sound forecasting skills. Automation should also reduce working capital as production lead times fall, thanks to scheduling flexibility (i.e., if inventories have been built, or demand is weakening, it’s easier to run the machines for fewer hours or even shut them temporarily, at the expense of lower capacity utilization, than to reduce the number of employees – the cash cost of production falls and this advantage should be weighed against debt servicing if any). In essence, automation most likely works for a company with a healthy balance sheet, good demand visibility and superior industry positioning.


Automate and eliminate


Finally, we address the potential impact of automation on human capital. It’s easy to be wholly negative in the current environment and conclude automation would drive structural unemployment, leading to lower disposable incomes and weaker consumption. And this would not be completely wrong – we think the sticky unemployment we are seeing in the US and in Europe has a lot to with jobs permanently eliminated by technology. The average duration of unemployment in the US has never been as high as in this downturn, and this follows the relentless export of jobs to lower-cost countries over the past decade or so, making it particularly painful (and for a period slowing down the penetration of automation). And, ceteris paribus, you could envision a world dominated by a machine-to-machine economy, where most things are done by intelligent technology, leaving only highly skilled people with the lion’s share of the limited jobs. This would lead to further income inequality. Would estimates of global population growth remain the same if we did not need 10 bn people, and if we didn’t have the means to feed them? And could automation then be seen as a driver of globalisation that through its success provokes de-globalisation?


In mankind, we trust


But we take a more positive view than the bleak dystopian one outlined above. The global workforce has been able to adapt to the advent of machines since the industrial revolution, and the subsequent evolution in the types of jobs that a typical economy has to offer. When more and more women entered the workforce in the 1960s and 1970s, particularly after automation in the home, the developed countries could handle the boost that gave to their workforce, since they were transitioning from a physical, manufacturing-based economy to a services-based one. We could see something similar happen with automation too. Twenty years from now, it’s more likely that there will be different sorts of jobs to fill in the gap that technology is creating now. But this will not happen without short-term dislocations, as the current workforce needs to be better trained, not for a particular type of job, but to be nimble enough to evolve along with the changing needs of the world. This will take time, perhaps even a generation, and until then automation could continue to hurt the labour market.


To conclude we think automation is spawned from innovation and technological advancement. Things that the West and the developed world have been very good at. Automation can bring with it a productivity surge for industries that employ it, and those that could potentially employ it. Initially automation is an attractive way of reducing labour costs and the risks associated with labour. However, increasingly it is a more meaningful driver of product quality and process, and therefore an important part of competitive advantage. We expect automation penetration to increase and can see winners in both providers (Andritz, Spectris, ABB, Dassault) and users like (Sirona, Sonova, Nissan, Rio Tinto and Apple).

Well, there's the forced utopian view. And then there is the one which those who are unemployed for years and years will have no choice but to adopt, if for no other reason than to create a cognitive dissonance barrier that preservers the last shreds of one's dignity: namely that it is all the robots fault that structural unemployment is now worse than it has ever been.

And there is nothing some central banks' printers can do about that.

Maybe the Terminator movie was right all along...

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Skateboarder's picture

Automation will come through startups at first, then giant corporations, as we all slowly get eaten. I am skilled in software and mechanical automation among other things, and the kinds of code I foresee future codemonkey slaves writing scares me. Welcome to the future boys. They're gonna where you are, what you do, what you say, and what you think at all times.

NotApplicable's picture

Entropy and chaos theory will keep us code-monkeys busy for quite some time, given that the world is run by criminals, rather than engineers.

It's easy enough to envision an automated future, but dive into its inner workings, and one quickly discovers fubar anywhere one cares to look.

As for mechanical automation, well, those same criminals cannot escape the ramifications caused from their malinvestments (just think of all of the Detroit robots out of work, for instance). Capital squandered today will not be available tomorrow.

Much like the modern, financial world, the productive one needs rationality in order to survive, and I just don't see that happening anytime soon.


Skateboarder's picture

I serve real science and exploration; I still value real storytelling. That's why I can't serve their machine, and working for a lot of shit out there sucks. There are some decent folks mindful of their evil footprint, and I like to help them out for compensation. It's easy to be a human robot that kind of plugs into the greater machine, but you have to realize that we have any of this shit in the first place because we spent time exploring things organically, for the pleasure of pursuit and not for monetary reward. Hah, money... what a joke of a compensation. Most people don't value their work to begin with. Perfection is seen as an oddity rather than the norm. It's an unbalanced society completely brainwashed by inorganic thought processes, and people are losing their place with the natural order of life on this planet as everything is being automated. This isn't the world I came into when I was a kid, and it aint lookin pretty for the future either. Nonetheless, all I need to obtain is a a couple of acres of land for a good time with my human and animal friends in a big barn with a halfpipe and good times to come, independent of any collapse.

Global Hunter's picture

I logged in to vote you up.  Thoughtful posts for sure, Mrs Global Hunter has been in the hospital for 2 weeks and its very sad but I took out my 1989 re-issue Corey O'Brien deck and cruised around to mix it up and try to be happy, after a 2 or 3 false starts I was doing some decent ollies...gota to get my nerve up to go down to the skatepark with it I'm nearly 40!

Skateboarder's picture

Thanks man. Rapid recovery thoughts for Mrs Global Hunter, hope she is well soon - hang in there and be the pillar. That's rad that you brought your skate out of retirement. I'm the mid-20s crowd and I'm already usually the oldest one in the park, but there's a few dudes in their 30s and 40s cruisin around gently from time to time. I evenmet one dude in his 30s who worked at IBM lol. It's still the best physical activity you can do where there is concrete or wood - hope you get back into it!

A sick video part to cheer you up and blow your mind and stuff:


my puppy for prez's picture

You're a wise one for your age, Skate!  Well, if we are going to have 3-D printing, I hope we can "print" a lot more of your type with heart, soul, and a human brain!

Global Hunter's picture

That video shows how much the sport (is it a sport lol?) has progressed in the last 25 years, its unbelievable, check out some vids of the mid to late 80s, guys have taken this and just ran away with it.  Its like night and day it really is.  Thanks for the words about the mrs, my concept of time has changed, its not day to day any more its second to second, moment to moment, be thankful for what I do have and the time I have.

spentCartridge's picture

Thanks for the vid Skate!


Can you post a link to the wipe outs please?

my puppy for prez's picture

GB:  I am sure this is none of my business, but I'll take a shot anyway, just in case.  I don't know why the Mrs. is in the hospital, but if there is any chance that it is related to cancer, I would really suggest checking out this website:


The site's owner is named Rick Simpson.  I have heard him a couple of times on radio, and he is really the nicest guy.  He says that high quality, high potency hemp oil cures cancer amazingly (along with other illnesses) and is nature's perfect healing medicine.  Maybe you could contact him through his site and ask advice should this be the situation you are in.  It's worth a try!  He knows EVERYTHING there is to know about the oil and has helped cure thousands of people and himself as well.


Godspeed to you both! 

Global Hunter's picture

Thanks my puppy for prez, its not cancer but severe depression combined with a break from reality, rather than her body attacking herself her mind is.  She needs fresh air, flouride free water, organic food and yes maybe some hemp oil.  I don't like the idea of her being medicated but right now she needs it to fight another day.  I believe that there is untapped potential in hemp/weed and as well with mushrooms (not just the magic ones) to humanity, probably part of the reason why they're shunned.   Thanks again for the thoughts and the link, I'm sure many will find it useful, cancer, diabetes, depression etc. are on the rise and we will only see more of it...I'm sure its all related to the stress, pollution and humanity playing around with things they don't fully understand (nuclear energy, gmo foods, keynesian economics etc.).

A Nanny Moose's picture

I say humanity has taken a break from reality. If this is reality, please let me off at the next stop. Perhaps she is ahead of the curve in getting back to really real reality?

Best of luck to you both.

Skateboarder's picture

Hey man, I've seen depression and anxiety for the last couple of years and only recently been coming back to a more stable and happy person ready to face whatever challenges lay next. I can say that the best cure for depression is a few bowls of pot, a guitar, and a skateboard. When your wife gets out, see if she would be down to try any of that. Oh and THC + alone time is invaluable as well. That's when a lot of unraveling of thought occurs and you come to the source of your troubles through careful introspection. It takes time...

Bob's picture

Exercise is the most powerful medicine.  Do it wisely and it's one hundred percent upside.  And free.  Bringing matters full circle, reviving the physical activities you loved as a younger and happier person will give you an immediate bang for your buck. 

Dancers gotta dance, singers gotta sing, jocks gotta jock . . . disrespect the things central to your nature and you'll be as happy as a bird that can't fly. 

Damn, sounds like I better get out and ride that bike before it gets too hot. 

thurstjo63's picture

My thoughts are with you and Mrs Hunter. There are cures for every disease, but if you go the conventional route, most likely it will end sadly. May I recommend that you learn a bit about how the body maintains your health before making a final decision on treatment. Google dr. gary tunsky or dr. richard schulze to better understand how your body maintains your health and you will have the info you need to help Mrs. Hunter overcome her illness. All the best!

daveeemc2's picture

i dont know which part of your comment i find more interesting. the fact you in late 20's and hold the same world perspective as i did then (and still do now in my mid 40s) or the fact that we on same trajectory, or that you think farming is answer.

1) you are going to get sick of learning the next newest thing all the time. Age will catch you. Luckly for me db stuff is pretty constant, so i keep my edge.

2) you might think farming is answer. Sometimes maybe. Automation exists there too. Get big or get out. Farming is capital intensive and you almost pay retail for everything. There is a reason big ag owns the world..they own all means of expense input channels. Its why u can buy a chicken for 4$ at grocery store....try producing 1 for that ridiculous price.

I recommend keeping day job and stay healthy cause Darwin is alive and well in the economic world in the ole us of a; you might think (hope) that you can survive coming apocalypse by farming, but remember: you dont ever really own anything....its alway rent (aka taxes). You must have cash to pay those taxes, and if u dont, unk sam will take your skateboard.

For the record - yes, i am in technology. Yes, i farm part time. Yes the farm has been able to pay the taxes and provide us with safe food, but not without explosive capital investments.

r00t61's picture

I'm an engineer by training.  We can solve some problems, sure.  But it would be arrogant presumption to think that if engineers were given the keys to the castle, they'd magically do a better job of central planning than the current pols in charge.

FYI, most of the central planners in the Soviet Union were engineers by training. Brezhnev trained as a metallurgist.  Andropov attended technical college, as did Kirilenko. 

Though Stalin, famously, was training to be a priest before he joined the Party.  Think about that the next time some corrupt pol invokes the name of the Christian God when he's stumping for election.

AldousHuxley's picture

Russia is no longer poor my friend. 44 billionares and 90,000 millionares..... European vacation spots are full of Russians and Arabs. Not much Americans except banksters and trust fund kids.


One thing communism provided was free GOOD education.

Now Chinese socialists are providing free GOOD education, while Americans are dumbing their citizens down.


Think about the trend....


TheMerryPrankster's picture

If you can see that Russia is fucked, you must realize we are all fucked. Globalization is the rope that assures a falling tide sinks all boats.

Yen Cross's picture

 I let you slip on the "funny" Tom comment Blythe.  Putin is a " megalomaniac"...   Albeit I get your sordid sarcasm.

AurorusBorealus's picture

I agree. Russia probably had the best education system in the world during the Soviet years.  That system is paying dividends now.  Russia is growing again quickly as a major world power.  One can deny the growing power of Russia, but denial does not make fact disappear.

Russia is moving in to play in Southern Europe.  Is this why Germany keeps blinking?

MeBizarro's picture

That ended more than 20 years ago.  Anyone who thinks Russia is growing into a world power borders on the delusional.  Outside of Moscow and St. Petersberg regions, the country is essentially dying.  Get away from the rhetoric. 

Just look at things which are hard to fudge including demographic trends such as life span and birth rates.  Average male life expentancy has DECLINED since the end of the Soviet Union and if you remove Russia/St. Petersburg it is notably worse.  Russia's infrastructure is also in serious decline too across the board. Ditto the health system.  The only reason this doesn't get out more is because Putin closely controls all forms of Russian media and even independents have to fear serious reprisal including the very real prospect of death if they paint life in Russia as grim or try to reveal epidemic levels of corruption. 

Russia is still an important global player because of its nukes, its sheer size, its agricultural production (especially wheat), and its natural resources especially oil/natural gas.  Outside of raw natural products & limited amounts of chemicals, agricultural products, and weapons, it exports almost nothing of value.  

Russia has generally been a miserable place since the Golden Horde sacked trashed Moscovy several centuries ago.  Won't change any time soon.  

mvsjcl's picture

No Child Left Behind was really a policy of No Child Allowed To Get Ahead.

Element's picture

Martin Ford - The Lights In The Tunnel

Quantitative_Appeasing's picture

One thing this does not take into account - the coming decentralization within manufacturing VIA 3D printing machines.

Why spend money to build a big factory, ship unfinished goods to one location and then ship fnished goods from there

when you can essentially have a franchise model producing the finished product locally, or even eventually at the customers location.


This has the potential to be the greatest disruptive factor in economics that mankind has ever seen.




falak pema's picture

French company : Dassault systems, CAd and systems conceptualising expertise. Tops.

One way of bringing back business to developed world; change the business model concept to go to integrated designs for solutions including, modularised design and fabrication, support maintenance  planned obsolescence and object dismantling and recycling. The total product cycle as one product service for the local market. You interface with the client as a solution provider with integrated expertise. It has to be a partnership more on peer to peer basis. Not on a client server heirarchy basis. That is the trick, cultural shift. Networked society, social networks. Maximising economic efficiency includes non quantifiable benefits like risk profile reduction on quality assurance. less waste. Our society wastes too much and does not quantify the mal function costs associated with all the different types of pollution that this generates and the associated societal risks. 

Skateboarder's picture

Oh falak, if only more people had thoughts along these lines. The circlejerk mentality of information secrecy and hoarding through patent and copyright protection prevents us from even having the idea of a standard for modular design. Such a wasteful world... "useful idiots," as another ZHer goes by.

Quantitative_Appeasing's picture

Did the record companies stop mp3's?

Have the file companies stopped movie downloading?


When the tech reaches the end user, nothing is going to stop them from using it to print Legos etc.....



Spastica Rex's picture

Your plan doesn't sound like it supports unbridled hedonism, consumption, and built in obsolescence; it must therfore be evil/communist/socialist/gay/islamo-fascist. I'm going to stick with the model presented to me by the greatest, most productive members of our society (bankers, marketers, bureaucrats, athletes, celebrities etc.) because then I have a chance of being just like them if I work hard.


HungrySeagull's picture

Or have robots drive the trucks and the trains.

The tech is there.

g speed's picture

and when AI uses printers to replicate itself the question "when did skynet become aware" will become relevent.

Husk-Erzulie's picture

This has the potential to be the greatest disruptive factor in economics that mankind has ever seen.

It's a total game changer and one which will mature with breathtaking speed.  Many people are still unaware that this technology even exists let alone thought through it's implications.  With one printer the size of say, a Yugo, or even a dishwasher,  a thumb drive loaded with instructions and access to basic raw materials one could build an automated factory anywhere, even in orbit or say a moon.  It also scales, think ultra nano tech all the way to death star huge.  Coupled with other emerging tech like evolutionary design (which I suspect got more or less Darpa'd) and you begin to see the very near horizon writ large.  Barring a dark ages style collapse of course :-)

Taint Boil's picture



Robots - here are some real robots for the Fiat 500 line (in a dry cycle with no cars) Yeah, the whole line is ran with just a few people. The Mexican serfs working for $150.00 per week for about 45 hours of work. Good to be the Gringo - sucks to be the Mexican slave.

resurger's picture

It's Sarah Connors fault

New_Meat's picture

That damn "sticky unemployment" is so such a 1930's excuse.  Keynsians in the '30s couldn't figure it out either.

- Ned

reader2010's picture

Give me 1000 strong robot sex slaves, and I need to put them where those GS traders are and where those pols are. 

Jay Gould Esq.'s picture

Intriguing thought, Reader.

Pris the pleasure droid may oblige, but can those Goldman dudes handle her type ? Exceedingly strong thighs...


silver surfer's picture

I love this post!

But why have we not gained more spare time from this innovation as promised? And why are we working more than ever?

Ctrl P ?

css1971's picture

But why have we not gained more spare time from this innovation as promised?

We did, on average. It just isn't distributed evenly. Some people are completely unemployed and some are working twice as hard.

And why are we working more than ever?

Well, when 95% of money is based on debt, everyone has debts to pay.


mjk0259's picture

Very true. Maybe the Europeans have the right idea with limiting work week.

The theory was that all this surplus labor would be absorbed in new industries. There are new industries but they employ hardly anyone. i.e. Facebook.

Something is very seriously wrong when we constantly invent new ways to produce things more efficiently but the standard of living keeps going down.

New_Meat's picture

"Maybe the Europeans have the right idea with limiting work week."

and how'd that work out?

especially since there were others siphoning in to "take up the slack"

dpn't cha' know

- Ned

mjk0259's picture

So far the way it's worked out is they work less hours, get much longer vacations and generally retire a lot sooner with a bigger pension and no health care worries throughout. Of course during the last years of crisis, the euro has dropped by 7 cents so it would cost them slightly more to visit NYC if their benefits were not indexed to inflation which they generally are.


raios_parta's picture

No so far it has worked out that they work 6 months a year just to pay taxes, that in practice you have maybe 4 people working so 6 can do nothing and especially it was worked out that young people have no jobs and are being royaly screwed by being forced to pay for the privileges of the older generations, which will be denied to them. Europe is great if you wish to live of the tax payer and do nothing, because then you truly get free stuff. If you are one of the few that actually works to pay for it all, you get a shit deal. And about the health care worries, well, maybe that's what is being sold in the USA, but when anything you need from the "free" health care system(that we work 6 months a year to pay for) takes months or years, while maybe that cancer is growing inside, it makes you wonder who's getting the better deal.

Milton Waddams's picture

The theory was that all this surplus labor would be absorbed in new industries. There are new industries but they employ hardly anyone. i.e. Facebook.

That indeed was the theory.  To wit, check out this LIFE Magazine article from 1959 discussing automation (beginning on page 36, but most of the entire issue is interesting):

Many displaced workers find jobs in the host of service trades which automation has spawned in its wake.  And although there are some who either lack the will or the opportunity to retrain themselves for better jobs, experts believe that the rapidly expanding economy will manage to absorb them.

Humorously, the advertisement following the article containing the above passage is headed with:

'Divide and conquer

your space problem with walls

from Weldwood paneling'


MeBizarro's picture

Yup.  A lot of what Schumpter initially wrote about creative destructionism in the mid-20th century and is a staple of neoliberalism and the University of Chicago Economic Dept is going to be proven inadequate or debunked completely over the next 25-30 years I bet especially regarding finding alternatives to oil as the primary fuel for transportation. 


sgt_doom's picture

Because this post is along the typical silly nonsensical drivel, much like all the silly stuff ignoring all the jobs offshoring of the past thirty, forty and fifty years.

Like trying to explain those "official" four jobless recoveries (actually six, but everyone seems to ignore the two from the Reagan administration) to people who can't do arithmetic.

If the first "official" one back in the late 1980s to 1992, the millions who lost full-time employment, only around one-half ever regain fulltime employment once again (and half of those at below their original wages).

So, after three more of those jobless recoveries, in America, we have 1/16th the number of jobs in 2012, that we had in the late 1980s.

Factor in deaths, retirements and illnesses, then the number goes a bit up to 1/4 to 1/8 the number, and we'll be conservative so we'll make that 1/4.

So, if we have 1/4 the number of jobs that we had in 1988 -- this correlates to 1 out of 2 Americans today being at the low income to poverty and below-poverty levels.

Voila!  As those clever French say --- and mostly, it was due to the offshoring of jobs to dramatically increase labor deflation, etc. etc.

But that must not be discussed -- just as now that old robotics and automation must be the culprits.

Skynet is really about all those drones that RambObama is unleashing, me thinks?