Topic: high leverage and faster pace of automation make it exponentially more difficult to re-train enough people for new jobs
Solution: Buy Google and gold (many more companies in my newsletter)
Length: very short (a few minutes’ read)
Executive summary: Low interest rates and technological progress accelerate the ongoing process of automation, leaving more people needing -but less time for- re-training.
Low interest rates also mean more indebted consumers and governments, and thus less money for re-training the increasing hordes whose jobs are being automated away.
Swedish: Plus en länk till en paneldebatt i Lendifys och Börspoddens regi, om nya investeringsmöjligheter
Leverage and Machines are at the heart of the issue
low interest rates make capital relatively cheaper than labour
investments in automation have picked up speed due to
- accelerating technological development (“Moore’s law”, or, rather Kurzweil’s Law Of Accelerating Returns) is pushing technology over the threshold needed to replace humans in many areas in short order, thus attracting more investments
- low interest rates make investments in technology even more attractive
Thus, automation is proceeding faster and in more industries simultaneously than ever before, leaving more people than ever (at best) between jobs.
Low interest rates have fueled the build-up of debt among governments and private individuals. Despite lip service to deleveraging since 2008, debts are much higher today than at the “peak” 8 years ago, leaving less room for debt-financed re-training for new jobs.
Leverage => more machines, more debt => less jobs, less re-training buffer
The same forces that make automation investments more attractive and all the more people lose their jobs to machines, also work to make it more difficult for people to be able to finance re-training (one, because they are already over their heads in debt*; two, it’s happening faster and in more industries at the same time than before, leaving less time to re-train)
* Earlier, people hadn’t maxed out on credit card loans, auto loans, mortgages and student loans, which meant the few who lost their jobs to machines had some leeway in time and money to re-train for new employment.
Now, more people are automated away at the same time and they have more leverage and thus no economic room for time off or investing in re-training.
Goldman Sach’s take on the subject in a recent podcast of theirs called for new ways of financing re-training, including re-purposing (expropriating?) pension money. I, however, think that ship has already sailed.
So, what to do?
My 2 cents: Make sure you own assets that benefit from the changes, since I expect it to get really ugly first, in a way money printing can’t mitigate, before it gets better and we can approach the Star Trek ideal of no money.
The Sprezza (and Star Trek) credo
The acquisition of wealth is no longer the driving force in our lives.
We work to better ourselves and the rest of humanity
You could, e.g., buy stock in automation companies of all kinds (robotics, software etc., including a few dozen companies on the list in my next subscriber letter). You could also buy assets that benefit from low or negative interest rates, increasing debt levels and a possible monetary re-set.
Google, IBM and gold spring to mind.
Please note, however, that I do think it’s a little early to start preparing for a complete collapse just yet.
Links to previous articles on technology and jobs:
how tech steals your job, one
If you speak Swedish, check out this free investing seminar, with me and Ann Grevelius, in Stockholm on October 25, 2016.
Redan efter ett dygn är hälften av platserna slut så bestäm dig snabbt. OSA 20 oktober. Här är länken till fri dryck och tilltugg samt paneldiskussion om framtidens investeringsmöjligheter.