January 20, 2014

Average is over by Tyler Cowen

Average is over by Tyler Cowen

Powering America beyond the age of the great stagnation

The imbalance in technological growth will have some surprising implications. For instance, workers more and more will come to be classified into two categories. They key question will be: Are you good at working with intelligent machines or not? Are your skills a complement to the skills of the computer, or is the computer doing better without you? Worst of all, are you competing against the computer?

There is a joke that a “modern textile mill employ only a man and a dog - the man to feed the dog and the dog to keep the man away from the machines”.

In today’s global economy here is what is scarce:

Quality land and natural resource
Intellectual property or good ideas about what should be produced
Quality labor with unique skills

We are high returns to resource owners, such as the new resource millionaires and billionaires of Brazil, Russia, Canada and Australia and similarly huge revenues for intellectual property giants like Apple and other innovators in that sector.

General Philip M. Breedlove, US Air force vice chief of staff, works with military drones. He recently said, “Our number one manning problem in the air force is manning our unmanned platforms”. According to air force, keeping an unmanned Predator drone in the air for 24 hours requires about 168 workers laboring in the background. A larger drone, such as the Global Hawk surveillance drone, needs about 300 people working in the background to make the mission feasible.

Mark Zuckerberg of Facebook fame was a psychology major and insights from psychology helped him make Facebook into  a more appealing and alluring site.

Top 1 % of America comes from finance background.  There has been Steve Jobs, Mark Zuckerberg, and Bill gates, but finance is a common source of riches within the very highest tier of earners. To give one extreme but illuminating example, in 2007 the top 25 hedge-fund earners pulled in more income than all the CEOs of the S&P 500 put together.  The modern financial sector has computers, computerized trading, arbitrage, super-rapid communications, and computerized risk assessment at its core.

If you have an unusual ability to spot, recruit and direct those who work well with computers, even if you don’t work well with computers, the contemporary world will make you rich. If we look at the increase in the shares of income going to the top tenth of a percent from 1979 to 2005, executives, managers, supervisors and financial professional captured 70% of those gains.

The better the world is at measuring value, the ,more demanding a lot of career paths will become. it is easier to buy companies than to replicate their recruiting or lure away their best employees. A recent report laid out how these acquisitions work: Engineers are worth half a million to one million’, said Vaughan Smith, Facebook’s VP of corporate development.

It is well known from personal psychology and confirmed by experience, that women are on average more conscientious than men. They are more likely to follow instructions and orders with exactness and without resentment. That means, better jobs and higher wages for a lot of women in this new world of work, without a comparable upgrade for for a lot of men.

Let us draw up a simple list of some important characteristics in technology advanced modern workspace.

Exactness of execution becomes more important relative to an accumulated mass of brute force.
Consistent coordination over time is a significant advantage
Morale is extremely important to motivate production and cooperation.

We have been seeing what is called, labor market polarization’ a concept that is most closely identified with MIT labor economist David Autor. It means, that workers are to an increasing degree, falling into two camps. They either to very well in labor market or they don’t do well at all.

There are some particular reasons why employment opportunities are growing in finance, law and consulting. Today, laws are more numerous and more complicated than in my father’s day and that increase the demand for lawyers, at least at the top end of the market. A global economy means larger supply chains and consultants can help business track and evaluate those complex operation. Finance is growing in part because the promise of bailouts encourages banks to become larger and also take on more risk.

Freshly minted students form prominent colleges will seek out jobs that reward a high g-factor or high general intelligence. That mean,s finance, law and consulting. The students are productive fairly quickly, they make good contacts with other smart people and they can demonstrate that that are smart for future employment prospects. Working to exercise and demonstrate their general intelligence is in fact the main thing they are good for and moving beyond this can be quite a few years. Consider consulting. Take a smart but inexperienced and underspecified 22 year old and ask, “Can you draw up an effective PowerPoint for me? or can you research this new accounting practice or new congressional law? or even what is wrong with this business plan? You might get some pretty good answers.

Human-computer teams are the best teams
The person working the smart machine does have to be expert in the task at hand
Below some critical level of skill, adding a man to the machine will make the team less effective than the machine working alone
Knowing one’s own limit is more important than it used to be

Virginia Tech's Math Emporium is an open, 60,000-square-foot laboratory with 550 Macintosh computers serving more than 8,000 math students each semester. The facility occupies renovated, leased space in an off-campus shopping mall. (See Figure 1.) Spurred by the need to accommodate thousands of students and to improve learning outcomes, the emporium opened in 1997 to improve the quality of large-enrollment math courses in the face of growing resource constraints - http://www.educause.edu/research-and-publications/books/learning-spaces/chapter-42-virginia-tech-math-emporium

We are standing at an unusual point in the history of science. Many Americans who are not scientist can follow some of the basic results of say, evolutionary biology or Einstein’s theory of general relativity

Science itself, in many areas , moving beyond the frontiers of ready intelligibility. For at least three reasons, a lot of science will become harder to understand.

1. In some scientific areas, problems are becoming more complex and susceptible to simple, intuitive, big breakthroughs

2. The individual scientific contribution is becoming more specialized , a trend that has been running for centuries and is unlikely stop

3. One day soon, intelligent machines will become formidable researchers in their right.

It might be called the age of genius machines and it will be the people who work with them that will rise. One day soon we will look back and see that we produced two nations, a fantastically successful nation, working in the technologically dynamic sector and everyone else. Average is over.


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