Disruption and Ingenuity

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Disruptive innovation is the core tenet of the startup scene everywhere, with young entrepreneurs proudly presenting what they view as an inefficiencies ripe for disruption, toiling away to find technological solutions to these problems. Whether it’s the retail industry with Amazon, or news outlet like The Huffington Post, the innovative products and services are being touted as the futuristic way of solving old problems. The established industries have either voted to join the revolution, going up in arms to protect their livelihoods, or simply resign to their fate and slowly die out.

I have recently stumbled upon this article from the Atlantic, discussing the automation and its effects both on the human workers and on the economy as a whole. It highlights how automation have reduced the bargaining power of manual labor, aggravating inequalities and reducing economic output as a whole. It is easy to view technological advances as reducing necessities for human labor, since the Industrial Revolution with the invention of steam engines up to the Information Era with the advent of personal computer, internet and now smartphones. What’s interesting, was that the article gave a quote from Farewell to Alms as a cautionary example :

There was a type of employee at the beginning of the Industrial Revolution whose job and livelihood largely vanished in the early twentieth century. This was the horse. The population of working horses actually peaked in England long after the Industrial Revolution, in 1901, when 3.25 million were at work. Though they had been replaced by rail for long-distance haulage and by steam engines for driving machinery, they still plowed fields, hauled wagons and carriages short distances, pulled boats on the canals, toiled in the pits, and carried armies into battle. But the arrival of the internal combustion engine in the late nineteenth century rapidly displaced these workers, so that by 1924 there were fewer than two million. There was always a wage at which all these horses could have remained employed. But that wage was so low that it did not pay for their feed.

The disruptive technologies by the startup culture also has a strong efficiency streak: if the work can be done with less labour, less cost, less “pain”, it’s all for the better. But will these disruptions lead to lower employment as a whole, creating vast underclass while ever strengthening the winners? And as automation encroaches every part of our lives, will it lead to economic setbacks and even irrelevance for most of human labourers, the way horses vanished in 20th century?

Hmm.

I came up with an answer after a discussion about Japan with a friend of mine Mr. Jorge Blanco. You see, Japan is a highly mechanized country – with a culture that worships technology, probably hellbent towards mechanizing the world. And yet, in that very country, they actually have invented a business model called cuddle cafe. You know, where you actually pay to sleep in loving arms for an hour or more. Of which, aside from the Japanese idiosyncracies like Soapland and Pop Life Akihabara that we talked about that day, goes to show that human beings value human touch. Most importantly, though, I realized that

Human Beings are the Arbiters of Value

as economic value is the most basic human invention. Horses, on the other hand, don’t assign value to things other than green grass. It is humans who value them as transportation means, or as part of military muscle. The things that human beings value, on the other hand, evolve over time, thanks to human ingenuity. When manual labor went out of style, the health and fitness industry has grown to $19 billion in the US alone. Isn’t it ironic that ancient humans run across the field to chase their prey and nowadays we run only on treadmills and urban marathons?

Disruptive technology may cause job losses and obsolete trades, but in the long run, human ingenuity will ensure that new values will be created, and the economy will recover.

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