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MODULE 5 UNIT 1 Casebook
Video 2 Transcript
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MIT AI M5U1 Casebook Video 2 Transcript

DAVID AUTOR: If you think about it, many of the great technological advances of the last
200 years were designed specifically to replace labor. So, tractors were developed to
replace human muscle power with mechanical power. Assembly lines were built to
substitute machine precision for artisanal labor. Computers were developed to eliminate
cumbersome, error-laden human calculation and replace it with digital perfection. And, for
the most part, these technologies have worked.
We no longer dig ditches by hand, pound tools out of wrought iron or do bookkeeping using
actual books. And yet, despite 200 years of labor-saving automation, the fraction of the
adult population that participates in the labor market has risen, steadily, decade over
decade. In fact, the fraction of adults working in the United States now, in 2017, is higher
than it was 125 years ago in 1890. And this fact kind of raises a paradox, which is, why,
after so much automation, why hasn’t automation made our skills redundant, made our
talents obsolete? Why are there still so many jobs after so much technical progress?

And I think there are two, there is a two-part answer that’s relevant in understanding the
history. And then, after I explain that answer, I am going to talk about how that makes me
think about what I actually worry about, what concerns do I have, and what are, what’s
different, what’s happening as we move forward, what’s different about this era of artificial
intelligence prior to the era of, you know, conventional computing, prior to previous eras of
technological change?
So, why are there so many jobs? I think there is really a two-part answer to that question.
They involve fundamental, economic principles, which I am going to call, conveniently
enough, the first one is the so-called “O-Ring” principle, and it refers to human creativity
and what type of work people need to do and why that work is valuable. The second one I
am going to call the “never get enough” principle – it really has to do with, kind of, human
insatiability, or greed, and it, sort of, governs the amount of work there is to do.
So, let me start with the first. The “O-Ring” principle is the notion that many things that we
do, many types of work that we do – you can think of them as being a panoply of tasks, a
bunch of things that need to be done together to accomplish a job. Perspiration and
inspiration, you know, expertise as well as sweat. Usually those things go together. So, if I
am designing a building, if I am diagnosing a patient, if I am teaching a class of children, I
need to do all those things successfully to, you know, carry out my mission.
Let’s say I automate some subset of them – I improve medical testing, or I develop a
computer-aid design program to help me do these calculations. Or, as a teacher, I get an
electronic blackboard and a bunch of software to help with lesson plans. Does that increase
or does that decrease my relevance? Well, in most cases, what that does is it magnifies
the importance of my added value and what is left over. It increases the leverage that my
expertise, my creativity, and my judgment have in making that thing successful.
So, the phrase – the “O-Ring” principle – comes from a well-known paper by Harvard
economist, Michael Kremer. In 1986, the space shuttle, Challenger, took off from Cape
Canaveral, and within 90 seconds it had exploded and crash-landed back on the ground.

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And the cause of this catastrophe, as it turned out, was a simple rubber O-ring in one of
the booster rockets that had frozen on the launchpad the night before and failed
catastrophically on take-off. And the irony of that setting is, in this multi-billion-dollar, multi-
decade enterprise, this little O-ring made the difference between what would have
otherwise been a successful mission, and the calamitous death of seven astronauts.
The economic lesson of that story – and it has many other lessons – is that in any complex
enterprise, as you improve the reliability of all the pieces that go together, the reliability and
function of the remaining components becomes ever more central. So, for the mission to
be successful, every piece had to work together correctly. If the space shuttle, Challenger,
were, sort of, the, you know, space-era equivalent of, kind of, Microsoft Windows 2000,
you know, it would have crashed regardless of what the operator did, right – we would get
the blue screen of death. But because everything else worked perfectly, it all came down
to this one remaining piece.
Well, in many of, in the types of work that we do now, we are the O-rings, we are the last
piece. We provide a central input that determines whether the mission is successful,
whether we steer it correctly, or whether, you know, the whole, all the rest of the enterprise
is wasted. So, broadly speaking, as we automate a subset of tasks, we complement our
expertise, our creativity, and our judgment in the remaining set of tasks. That just describes
the type of work that people increasingly do, as automation advances. But now you might
say, well, what about how much work is there to do? So, we know, for example, in 1900,
you know, 40% of all US employment was in agriculture. By the end of the 20th century,
that was less than 2%. Where did all those farmers go?
Well, the answer is, of course, technological progress. Eventually, if you become
productive enough at something, you may be out of a job. And it is a remarkable fact that
a couple of million farmers can feed a population of more than 320 million, but it also means
that there’s only so many farming jobs left to do. And farming is not anomalous; many
sectors, many activities – after we become sufficiently productive – we actually employ
fewer and fewer people to do them.
What’s true about a single sector, a single activity, has never been true about the economy
as a whole. As we get wealthier, as we take care of necessities, we think of new things to
do that engage our attention, that occupy our creativity, and that take our time and create
work. Many of the things that we spend our money on – like air conditioning, sport utility
vehicles, computers, and mobile devices – didn’t even exist 100 years ago or were
incalculably expensive. Many of the industries in which we work – whether that’s, you know,
health and wellness, whether it’s finance, whether it’s software and electronics – those
things were tiny or almost nonexistent 100 years ago.
And this is what I call the “never get enough” principle, or “insatiability”, that as our wealth
rises, and as technological possibilities expand, we think of new things to do. And, now
you could say, well, maybe these things are frivolous, maybe we don’t need them, who
needs to go out to dinner seven nights a week, who needs Bitmoji, who needs, you know,
Pokémon GO, who needs, you know, extreme yoga, etcetera? That’s not for us to judge.
People desire these things and they seem willing to work very hard for them. The average
worker in 2015, if they wanted to earn the 1915 standard of living, could do so, notionally,
by working one third of the year – just 18 weeks a year. People choose not to do that

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because they want to participate in all of the great activities and opportunities that are
available, by making a good standard of living, i.e., by working.
So, the economist, Thorstein Veblen, once said, “Invention is the mother of necessity.” So,
as we invent new things, we need new things, apparently. Now, so, those two principles,
the “O-ring” principle and “never get enough” principle, says there will be jobs. Or, at least,
that is my prognosis, or my prediction: there will be jobs. But does that mean that there is,
sort of, nothing to worry about, that it will all take care of itself?

And that’s not the argument I want to make. The argument I want to make is that these
technological possibilities, they create wealth, they allow us to do more work in less time,
they raise national income. But whether we use that wealth well is not determined by the
technology – it’s up to people and the institutions we create.

So, to give you an example of this, you know, consider two countries: Norway and Saudi
Arabia. Both are oil-rich nations, they literally have money coming out of a hole in the
ground, but they’re not equally well off. So, Norway is typically rated between first and forth
in national satisfaction, it’s a thriving democracy, it has higher labor-force participation rates
among both men and women than does most of Western Europe and the United States.
People are pretty satisfied.
Saudi Arabia is a wealthy country, it has relatively high material living standards, but
satisfaction is low for such a wealthy country – it is about 35th in the world – and the reasons
are not difficult to discern. It’s an absolute monarchy where, although people have high
material wealth, their possibility for personal advancement, for expression of creativity, for
controlling your own destinies, is quite limited. The difference between these two countries
is not their wealth and it’s not their technology; it’s the institutions they have created. And
there is a lesson for us, which is that we can use the opportunity of rising wealth well, or
we can squander it.
The challenge that we face at present is not one of running out of jobs. The US, for
example, has created 17 million jobs in net since the death of the Great Recession, which
is about the same number of articles written in that period saying how the robots are taking
all of our jobs. The problem is not the number of jobs, but it is the fact that many of the
really good jobs that are being created are only accessible to a minority of people, and
many of the other jobs that are being created are low-wage, low-pay jobs. In fact, the
economies of the US and Western Europe increasingly look like a barbell with growing
weight on either end of the bar.
On the one hand you have high-wage, high-education, professional, technical, and
managerial jobs. On the other, you have low-education, low-wage, personal-service jobs
like food service, cleaning, security, home health aides. And in the middle are contracting
lots of blue-collar and operative positions and also clerical, administrative support
positions. What’s going on isn’t super mysterious – many of those middle-skilled jobs follow
well-understood procedures that can increasingly be codified in software and done more
cheaply by machines. But the problem this creates is that it, kind of, knocks out rungs in
the economic ladder, potentially shrinks the size of the middle class, and inhibits economic
mobility.

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So, that’s a challenge that we face. The good news, or, at least, some encouraging news,
is we have faced fairly monumental technological transformational challenges in the past
and done so with a pretty good degree of success. So, in the late 1800s and early 1900s,
when agricultural employment was shrinking because of technological advances – in
fertilization, in irrigation, in genetics – people in farm states saw a future where their
children were no longer needed on the farm, but weren’t really prepared for industry.
And they took a really radical step, which was to mandate that all of their children stay in
school until the age of 16. That was called the so-called High School Movement. And what
was radical about that was not the idea of paying for books, or paying for buildings, or
paying for teachers – all of which were expensive – but that their children wouldn’t be able
to be work in those years; they would be in school. That was a real cost. They made that
choice despite the hardship involved, and, tellingly, it was the US farm states that led that
movement. And people at the time thought, maybe it was frivolous, maybe it was
excessive.

In retrospect, it was probably the greatest public investment the US made in the 20th
century. It gave the US the most educated, the most skilled, and the most productive
workforce in the world. That investment worked, and the key thing I want to emphasize –
it didn’t happen by itself. It wasn’t because the technology dictated it, it wasn’t because the
market dictated it, it was because people saw the opportunity and made an investment to
realize that opportunity.
THOMAS MALONE: Did you understand all the concepts covered in this video? If you’d
like to go over any of the sections again, please click on the relevant button.

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