The Most Profitable Work Will Be Automated: The Rest Will Be Left to Us

What’s abundant and what’s scarce? The question matters because as economist Michael Spence (among others) has noted, value and profits flow to what’s scarce.What’s in over-supply has little to no scarcity value and hence little to no profitability.

What’s abundant is unprofitable work, commoditized goods and services, and conventional labor and capital (which is why wages are declining and yields on capital are near-zero).

What’s scarce is profitable work, highly profitable niches that are immune to commoditization/ automation, and meaningful work.

Drew Sample of the and I discuss scarcity and profit in the contexts of Decentralization, Entrepreneurship, Bike Paths, Craft Brew, Automation & more (1:12)

The conversation is not between two ivory-tower types who have never started an enterprise in their life; it’s a conversation between a young mobile creative(Drew) who is establishing a hybrid work career of multiple micro-enterprises and paid work and a grizzled veteran of multiple careers and businesses (me–with plenty of failures that gave me the necessary experience to learn how to accumulate all forms of capital and own my own means of production).

In other words, this is a conversation between people who are walking the walk, not just jawjacking about abstractions that somebody else is supposed to make real with their own money and time.

So let’s get started.

Everyone wants an abundance of “good paying” jobs, but employers can only afford to pay employees if the work being done is profitable. Paying people to do unprofitable work is a one-way street to bankruptcy.

Those who want the government to fund “good paying” jobs forget that government tax revenues depend on profitable enterprises and the private-sector wages they pay.

(Borrowing from our grandkids to pay public-sector wages today is immoral and financially unsustainable.)

If we look at urban slums and impoverished rural communities, we find the problem isn’t a lack of work that needs to be done–it’s a lack of paid work and a lack of profitable work.

Businesses have pushed unprofitable work onto the customer. Paying people to pump customers’ gas is not profitable (if it was, some corporation would be doing it). Rather than lose money by paying employees to pump gas, the industry shifted that unprofitable labor onto customers.

A great amount of useful work is not profitable and can never be profitable. We need to differentiate useful work from profitable work. One example that illustrates the difference is building and maintaining bikeways to serve commercial areas. (By this I mean bikeways not devoted to leisurely rides through parkways but bikeways that one can use to reach grocery stores, banks, post offices, cafes, childcare centers, etc.)

The work of building and maintaining safe bikeways is clearly useful. Safe bikeways have multiple benefits for commerce, communities, the environment and for individuals: safe commuter bikeways cut traffic congestion, improve the health of the bicyclists, lower healthcare costs, boost small businesses along the bikeways and reduce air pollution.

Safe bikeways (i.e. those which are dedicated to bikes so riders aren’t sharing the road with semi-trucks and autos wandering over the pavement while the driver is texting) are win-win-win, yet they can never be profitable unless bicyclists are charged a toll, which defeats the entire purpose of the bikeway.

Impoverished areas are impoverished because there are few highly profitable scarcities to fill and few people with the surplus income to pay for profitable services. Taking money from one community to fund make-work jobs in another community (the essence of government redistribution schemes) deprives one community of income while providing a temporary injection of income in the other community–income that is controlled by a government that is itself controlled by lobbyists and privileged elites.

Redistribution schemes act as bread and circuses to suppress social disorder, but they don’t address local scarcities in a sustainable way or foster the expansion of long-term solutions to a lack of work.

There are two fundamental solutions to a lack of profitable work. One is to pay people to do useful work that is not profitable and do so with a labor-backed crypto-currency that isn’t borrowed or taken from some other community, and the second is to nurture community-economy entrepreneurship that works within decentralized networks and groups rather than through central states and global corporations.

I explain how these solutions work in my new book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.

Slums get government transfers and remain slums. Communities that rely on global corporations sink quickly into impoverishment when those corporations pull up stakes and move to cheaper locales or automate the profitable work.

Communities that foster small-scale entrepreneurship, local efforts to address local scarcities and paid useful work thrive in ways that contrast sharply with communities dependent on bread and circuses and global corporations.

The model of expecting global corporations and Big Government to solve the scarcity of paid work is broken. Paul Mason does an excellent job of explaining why in this article from mid-2015: The end of capitalism has begun: the rise of non-market production, of unownable information, of peer networks and unmanaged enterprises.

We need a new system. A new system is self-organizing before our eyes. We just have to stop obstructing its rise and start facilitating its expansion in self-evident ways.

My new book is in the top 10 of Amazon’s category of international economics: A Radically Beneficial World: Automation, Technology and Creating Jobs for All. The Kindle edition is $8.45, a 15% discount from its list price of $9.95.

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  • tom

    “Borrowing from our grandkids to pay public-sector wages today is immoral and financially unsustainable”.

    Neither of those objections means a thing to government. They will all be dead long before the grandkids are old enough to swing any political weight. Immorality is good for a short, sharp laugh over a drink. As for financial sustainability, they will all be dead before that matters.

    The most amazing fallacy underlying the whole theory of democracy is that, just because someone wins an election, they automatically become altruistic rather than selfish. Especially since altruists have NO chance of ever winning an election, or even being adopted as candidate.

    • mulga mumblebrain

      The most common fallacy is that ‘democracy’ in any meaningful sense, can operate in a capitalist system. That is a truly Brobdingnagian Big Lie.

  • tom

    “A great amount of useful work is not profitable and can never be profitable. We need to differentiate useful work from profitable work”.

    Incorrect. We need to supersede the obsolete idea of profitability as the be-all and end-all with more nuanced ways of bringing about what is useful. Obvious, and one would have thought fairly simple, but apparently unthinkable.

    • unheilig

      Unthinkable, because it’s real socialism, Corbynist socialism, not the half-arsed Sandersonian version.

    • Silverado

      It’s unthinkable because what you’re…seeking is beyond human nature and so will fail. It’s the idea of a profit that has motivated capitalists (and 99.9% of humans) everywhere and is in human nature and is part of our DNA, especially in this country. To say otherwise is to ignore what every human deep down already knows. The Libertarians are right. Profitability may not be the “be-all and end-all” but it’s the best motivator for free humans we have. And always has been.

      • mulga mumblebrain

        Garbage. What you are talking about is ‘greed’, aka avarice, pleonexia etc. It is no more ‘part of our DNA’ that an homicidal inclination is. It is a social and pathopsychological construct, and its manifestation in everyday life, capitalism, in its innate cancerous nature where insatiability is its primary characteristic, is destroying life on this planet.

  • unheilig

    Thank you Charles and all you wonderful WB contributors. A merry Christmas and a happy New Year to you all. If you don’t celebrate Christmas, happy holidays.

  • jadan

    The most profitable work will be put in a basket with all other work and every US citizen will be issued stock in USA, Inc, at birth, regardless of who’s womb they come from. No smart guy will be able to steal from the commonwealth because he’s more gifted, and all stake holders will be motivated to make USA productive. What profit is generated by healthcare? Why are doctors and other elite providers compensated so lavishly? They produce “health”, but if you look at studies of hospital outcomes, you will have to admit they also produce a great deal of not-health. Can you monetize health, Smith? Can you make it fit into your profit-driven scarcity model of reality? Forget your libertarian, dog-eat-dog world for just a second, and consider the nature of the money you are using, the private Federal Reserve Note, that your government borrows from the plutocrats. This usury is a tax to support the aristocracy in our oligarchy. Treasury notes, generated without cost, non-debt based money, can eliminate this tax and fund many non-profit producing enterprises, such as health care, and not produce a burden on future generations. You never think along these lines because you do not examine your own premises. You’re not interested in any real change. What you’re after is a return to some ideal that never existed and never can exist. If the people were forced to live in your meritocracy, they’d die in misery for failing to live up to the standards of the grizzled old veteran curmudgeon and the smart-ass young creative. Merry Christmas.

    • JerseyCynic

      I’d live in CHS’s world any day.

  • d9rich

    Mr. Charles Hugh Smith (CHS), I have to disagree with your conclusions.
    Have you ever heard of MMT, Modern Money Theory? Economist James K. Galbraith, UT, said “the best economics in the country are being done at UMKC. Stephanie Kelton, who is a proponent of MMT at UMKC has been hired by Bernie Sanders and also sits on the Democratic Budget Panel which helps oversee the CBO (major coup for MMT).
    I would highly recommend that CHS contact either L. Randall Wray or Joe Firestone at UMKC (or go to New Economic Perspectives .com) and talk with them. I’m convinced he’ll be impressed and soon afterwards begin writing articles about it.