Inequality, Unethical Robots and Unemployment

  Source: KKR

Source: KKR

Something's going on when MITKKR and Bain & Company all publish on inequality, automation and ethics breaches resulting from technology. The KKR report highlights that GDP growth is likely to slow in the West resulting from an aging population and a displaced worker force due to declining manufacturing employment. Productivity may go up on average as augmented humans become more efficient the work place, but the long tail of regular people who do not have gainful (i.e., cyborg) employment will increase. Re-skilling has not kept up, and the down-case is that 30% of all activities across 800 occupations can be replaced by software. We have argued before that digitization results in 50% revenue declines in industries that are fully transformed. 

The Bain study reiterates the main points -- automation of the US service sector has the potential to be a catastrophic event in terms of human employment (20%+ down), a conclusion previously reached by McKinsey. The corollary is that this will happen much faster than the transitions out of farming and manufacturing. Therefore, volatility in capital markets will increase, driven by the the middle-class being hollowed via the power laws of software and capital rents, thereby negatively impacting many industries targeting them as consumers. And the headline takeaway is a $5.4 trillion GDP shortfall by 2020. Yikes.

And the robots we make aren't even nice to us! In a study of image recognition artificial intelligence systems, top three commercial software packages had an error rate of 0.8% when determining the gender of a light-skinned man, and a 20-24% error rate when analyzing pictures of dark-skinned women. This bias comes from the underlying data, which does not have enough diversity to correctly teach the software, and the bias in the data comes from bias in the development team and organizational culture. Now imagine that such systems are used by police to identify criminal suspects, the way China is doing today. Would discrimination go up or down, if all people of a certain type are imprecisely profiled by software? Or imagine connecting these data sets to access to financial services? 

So what solutions can we imagine to this dystopian television series? Well, one idea is Universal Basic Income, which is being explored in Finland, Scotland, and the UK. Or maybe Amazon and JP Morgan will save us.

 Source: Bain

Source: Bain

  Source: Bain

Source: Bain