The Slippery Slope Investment and Chuckle Forum: December 2014

I have decided to write a book about what I fear is the greatest threat to mankind and what might be too late to stop. I am no expert, I do not hear voices in the night that speak to me, I do not have a sixth sense, I simpy observe and look forward and extrapolate. As top of the food chain, we rarely have felt threatened by our own demise, albeit through natural or societal causes. We kill what we want to eat, we take what we want with force, we reap what we sow. We live in many ways by Darwin's rule of survival of the fittest. It is a crual reality but it has worked and has kept a balance in the world.

But something is changing? Something has changed. And it is a force multiplier. As much as I would like to point the finger at the grotestque and lothesome politicians and bankers, they do not worry me. They will cause mass carnage financially and more carnage through their wars but they are not to be feared. They sicken me but as history has recorded dating all the way back to the time of Jesus, the money changers will be thrown out of the temple and the politicians will be removed from office either by votes or force.

So what keeps me awake at night...what do I fear. I fear we are replacing ourselves without even knowing it. We are about to be replaced on the food chain by our own creations. Artificial intelligence is replacing human labor at a staggering pace.

Acording to an article in Computer World, "One in three jobs will be taken by software or robots by 2025".
In China, noodles are being made by robots as seen in this video....

"Let me share to links found just tonight on the Drudgereport. http://theweek.com/article/index/273612/how-computers-will-replace-your-doctor
http://www.nytimes.com/2014/12/16/upshot/as-robots-grow-smarter-american-workers-struggle-to-keep-up.html?_r=0&abt=0002&abg=1

So even artificial intelligence is coming to areas that are considered at the top of our economic ladder.

So isn't this a good thing? Won't this make life easier for us all? The answer is NO.

Let me share with you an article from The Harvard Business Review....

"....The technologies of the past, by replacing human muscle, increased the value of human effort – and in the process drove rapid economic progress. Those of the future, by substituting for man’s senses and brain, will accelerate that process – but at the risk of creating millions of citizens who are simply unable to contribute economically, and with greater damage to an already declining middle class.

Estimates of general rates of technological progress are always imprecise, but it is fair to say that, in the past, progress came more slowly. Henry Adams, the historian, measured technological progress by the power generated from coal, and estimated that power output doubled every ten years between 1840 and 1900, a compounded rate of progress of about 7% per year. The reality was probably much less. For example, in 1848, the world record for rail speed reached 60 miles per hour. A century later, commercial aircraft could carry passengers at speeds approaching 600 miles per hour, a rate of progress of only about 2% per year.

By contrast, progress today comes rapidly. Consider the numbers for information storage density in computer memory. Between 1960 and 2003, those densities increased by a factor of five million, at times progressing at a rate of 60% per year. At the same time, true to Moore’s Law, semiconductor technology has been progressing at a 40% rate for more than 50 years. These rates of progress are embedded in the creation of intelligent machines, from robots to automobiles to drones, that will soon dominate the global economy – and in the process drive down the value of human labor with astonishing speed.

This is why we will soon be looking at hordes of citizens of zero economic value. Figuring out how to deal with the impacts of this development will be the greatest challenge facing free market economies in this century.

If you doubt the march of worker-replacing technology, look at Foxconn, the world’s largest contract manufacturer. It employs more than one million workers in China. In 2011, the company installed 10,000 robots, called Foxbots. Today, the company is installing them at a rate of 30,000 per year. Each robot costs about $20,000 and is used to perform routine jobs such as spraying, welding, and assembly. On June 26, 2013, Terry Gou, Foxconn’s CEO, told his annual meeting that “We have over one million workers. In the future we will add one million robotic workers.” This means, of course, that the company will avoid hiring those next million human workers.

Just imagine what a Foxbot will soon be able to do if Moore’s Law holds steady and we continue to see performance leaps of 40% per year. Baxter, a $22,000 robot that just got a software upgrade, is being produced in quantities of 500 per year. A few years from now, a much smarter Baxter produced in quantities of 10,000 might cost less than $5,000. At that price, even the lowest-paid workers in the least developed countries might not be able to compete.

To be sure, technological progress has always displaced workers. But it also has created new opportunities for human employment, at an even a faster rate. This time, things may be very different – especially as the Internet of Things takes the human factor out of so many transactions and decisions. The “Second Economy” (the term used by economist Brian Arthur to describe the portion of the economy where computers transact business only with other computers) is upon us. It is, quite simply, the virtual economy, and one of its main byproducts is the replacement of workers with intelligent machines powered by sophisticated code. This booming Second Economy is brimming with optimistic entrepreneurs, and already spawning a new generation of billionaires. In fact, the booming Second Economy will probably drive much of the economic growth in the coming decades.

And here is the even more sobering news: Arthur speculates that in a little more than ten years, 2025, this Second Economy may be as large as the original “first” economy was in 1995 – about $7.6 trillion. If the Second Economy does achieve that rate of growth, it will be replacing the work of approximately 100 million workers. To put that number in perspective, the current total employed civilian labor force today is 146 million. A sizeable fraction of those replaced jobs will be made up by new ones in the Second Economy. But not all of them. Left behind may be as many as 40 million citizens of no economic value in the U.S alone. The dislocations will be profound.

Suppose, today, that the robots and smart machines of the Second Economy are only capable of doing the work of a person of average intelligence – that is, an IQ of 100. Imagine that the technology in those machines continues to improve at the current rate. Suppose further that this rate of technological progress raises the IQ of these machines by 1.5 points per year. By 2025 these machines will have an IQ greater than 90% of the U.S. population. That 15 point increase in IQ over ten years would put another 50 million jobs within reach of smart machines.

Impossible? In fact, the vanguard of those 115-point IQ machines is already here. In certain applications, the minds of highly educated MD’s are no longer needed. In 2013, the FDA approved Johnson & Johnson’s Sedasys machine, which delivers propofol to sedate patients without the need for an anesthesiologist. An emerging field in radiology is computer-aided diagnosis (CADx). And a recent study published by the Royal Society showed that computers performed more consistently in identifying radiolucency (the appearance of dark images) than radiologists almost by a factor of ten...."https://hbr.org/2014/12/what-happens-to-society-when-robots-replace-workers

Will humans be TERMINATED by Arnold Schwarzegger type deathbots....I doubt it. But will society as we know it forever be changed by artificial intelligence. The answer is undoubtedly yes. I fear what will our lives be like with no jobs as our labor has been replaced by machines that do not tire, do not require health insurance, that are never insubordinate, that do not file claims of sexual harrrassment. I fear we will be slaves to huge corporations and that we will forever live under a nanny state where food is rationed, eugencis are practiced and life is devoid of meaning of purpose. I fear a nanny state where we are fed, clothed from cradle to death. For the few lucky owners of these AI companies, life will be grand, but for the other 95 percent, there will be no future. Our lives will revive around distraction. We will sit and watch the NFL on Sundays where robots will battle it out on the gridiron, where there are no rules to protect the AI quarterback, where helmut to helmut collisions are the norm, where chop blocking is common place. We will cheer! We will cheer....but I will cry.