Totally Autonomous Businesses are Coming to Eat Your Lunch

You are probably already doing business with your replacement; algorithmic salesmen are everywhere, and they are just the beginning.

If you have ever bought something from an online retailer such as Amazon or even if you purchased these same commercial goods in a store, you have already been buying things from algorithmic salesmen. These increasingly complex algorithms use a number of metrics to try to set the best price for any particular item, including what the current market demand for these goods is and what other retailers are selling this item for.

If you want to get an idea of just how advanced the algorithmic pricing model is, you can try this simple experiment yourself. Go to a website which offers flight deals, of which many can be easily found through google so I won’t need to shill any here. Next, type in a destination you might be interested in going to and check out the prices that are on offer.

Now you need to wait a few days and go back and check the prices again. Have the prices changed? Now try opening the private-mode of your browser (such as incognito for Chrome), and perform the same airline search. You may find that the prices are suddenly lower. This is algorithmic sales in action, and it is the future of business.

Not only is the pricing algorithm using data such as the number of seats available of a particular flight, the prices that competitor airlines are charging, and the amount of time left before the flight, but it is actually using information about you as a customer to determine an individualized price aimed at maximizing profits.

Visions might come to mind of a robot dressed in a cheap suit hocking used cars. 

There remains little doubt that airlines are embracing this model of sales, as they make it increasingly difficult and expensive to buy an airline ticket through any means other than the internet. This model of mostly automated pricing could even be argued as the key driving factor behind the recovery of profitability in the airline industry over the last decade. 

The role of these kinds of algorithmic business strategies do not stop at the sales counter either. Have you noticed that google is getting better and at delivering those targeted ads for exactly what you are looking for. In particular, I have found myself much more often clicking the ad-links for specialized scientific items I am googling for. Algorithmic marketing through google is getting better at connecting me to the product that I am looking for, or the one that I didn’t even know that I am looking for.

Algorithmization of business is a much larger threat to the economies of the western world than the kinds of robotic automation of transportation or production that is typically discussed. Algorithms will replace more modern workers than robots. 

So what is all this driving towards?

Ultimately I see this kind of algorithmization of business leading to the evolution of a new kind of business, and one that involves little or no people. Over the next few years, I envisage the emergence and rise of totally autonomous businesses (or TABs).

TABs are business entities which employ few or no people at all; clever algorithms which identify demand through monitoring various data sources and act upon it. The classic example of this kind of algorithmic sales is the story of the algorithmic price-war which raised the price of a simple textbook on Amazon from somewhere around $70 to over $23 million. While this exposes the weakness of algorithmic sales, it is merely the infancy of an industry that stands to take the business world by storm. 

Say for instance that there is a swell of interest in widgets in South Africa. An algorithm notices that people are paying 80% more for widgets in South Africa than someone in India. The TAB then identifies a source for widgets, gets quotes for shipping said widgets, and can even identify retailers looking for widgets in South Africa. The algorithm then executes the sale and moves on to the next business deal.

Sounds like a typical business deal of the kind that enriches middlemen the world over. I predict that competition between these kinds of TAB businesses will serve to deliver goods to market with increasing efficiency, and involving diminishing numbers of human employees. These services will do nothing but connect producers to consumers, and will profit only their owners.

Businessmen hold themselves in high esteem for their ability “to generate wealth” with increasing efficiency, and rightly so. But with the ubiquity of the internet today, the friction of that created so much wealth for the middlemen of the business world is rapidly disappearing. The emergence of the totally autonomous business will be the death knell for middle-managers everywhere, and if we are not careful it may just be the end of the middle class too.

———-

This post was partially inspired by an interesting and insightful post by BTC Geek on Bitcoin and the Dawn of the Autonomous Corporation

Advertisements

The Life and Death of Economic Fairy Tales

The world is not what you think it is.

The astonishing pattern recognition engine that is your brain has leveraged years of observation, thousands of years of social evolution, and billions of years of genetic evolution to create the most amazing predictive model of the world ever constructed… but still it is not and will never be a true representation of the real world.

We are creatures of perception, living not in the real world but in an evolving map of it. 

While the gap between the real world and our model of it holds true in even our most dispassionate pursuit of natural scientific knowledge, nowhere is it more true than for the study of human systems. In particular, our understanding of something as complex as the mass of human interaction which makes up the economy is nothing more than a convenient story reflecting the current conditions of the world. We create economic fairy tales to break a complex system into easily digested chunks of metaphor. 

I do not suggest that we spin these economic fairy tales towards nefarious ends or willful ignorance, rather we believe in them for the same reason that we see faces in the martian landscape.  The human mind abhors a perceptual vacuum, and we will reach out to fill any gap of understanding with explanation. We create stories because we must.

Over the course of the 20th century, as the industrial revolution took hold and transformed human life we developed a deep belief in many such economic fairy tales, which fall all over the political spectrum. While these beliefs might have had pragmatic value in their time, changing conditions of the world mean that we must now reexamine some of our deeply held beliefs. It is time to rewrite some of our economic fairy tales or face collapse of the systems we have built on them. 

  1. The fairy tale: Growth in the economy will lead to the creation of new jobs.
    Why it’s wrong: While this may have held true for previous epochs of economic growth, there seems to be a diminishing connection between between growth in economic output and the employment of people. Continual growth in automation, robotification, and artificial intelligence will mean that more and more can get done with less and less human involvement. I cannot stress enough how much of a fundamental problem this will be for a society built around the job as the sole legitimate mechanism of wealth redistribution. more here…and here
    What it should be: Job growth should no longer be the political or economic goal.

  2. The fairy tale: Economic growth will always raise the living standard.
    Why it’s wrong: The view that economic growth will make everyone’s lives better is central to the belief in the economic system as an overall good, sometimes simplified as “economic growth raises all boats”. Given the staggering disparity in wealth going to the top 1% or 0.1% of people, there is no reason to think that economic gains could not be so disproportionately distributed as to actually make some people worse off. The economy is not a zero-sum game, in that there could be more for everyone every year that we see growth, but there is no law that dictates that all those within the social hierarchy gain equally, or gain at all. This is of particular concern if we realize that the growth of capital could potentially become decoupled from the real world. growing of its own volition independent of actual growth in servicing human need. more here…
    What it should be: We do not need absolute equality, but we should aim for equality of betterment.

  3. The fairy tale: Economic growth means destruction of the environment.
    Why it’s wrong: People on the left of the political spectrum seem to be totally dedicated to the belief that the economy is an absolute bad when it comes to the environment. A properly regulated economic system could be the best friend of the environment, innovating new means to improve efficiency and decrease environmental impact. Economic benefit means environmental destruction only as long as we allow it. more here
    What it should beWe can have economic prosperity and environmental sustainability, but unless we have both we are going to end up with neither.

  4. The fairy tale: Technological progress will allow people live happier, healthier lives.
    Why it’s wrong: There is no belief more near and dear to the optimistic futurist such as I, than the view that despite ourselves technology will allow us to live happier and healthier lives than ever before. Yes, this is one possible outcome of technological progress, but technology can just as easily be turned towards human destruction. Maybe the robots can save us, but it’s up to us to ask them to. more here…
    What it should be: Technology will serve to magnify our successes and our sins, it is up to us to choose which ones.

These are just a few examples of the types of economic fairy tales that have grown out of the industrial revolution. While the use of such explanatory models to aid in our understanding of the world is absolutely inescapable, we risk becoming fundamentalist if we attach overzealously to any one of these beliefs. We must be willing to let go of our understanding if the changing conditions of the world dictate such a change. If we refuse to change our beliefs and the intricate systems of politics, justice, and economics which we have built on top of them then we face nothing short of oblivion.

We must adapt or die. 

The Thorium Problem Should be the Thorium Solution

I watched this wonderful talk from Jim Kennedy this week. In the talk, Jim beautifully breaks down the surprising economic connections between the loss of control of the rare-earth mineral market, the decline in the manufacturing dominance of America, and the potential to develop thorium as a nuclear fuel source.

Kennedy posits that by controlling the relatively small ($3 billion) market on rare-earth mineral production, China has put a lock on the huge market of value-added goods ($4+ trillion). Basically, by controlling access to the rare-earth minerals which are absolutely essential for the production of electronics, China is putting immense economic pressure on manufacturers to produce their goods in China.

Kennedy presents a strong argument, and where it really gets fascinating is the connection of this industry to nuclear regulation. Essentially, it seems that one of the major issues that has forced rare-earth mining producers to shut-down production in America is due to their tendency to produce a particular mining by-product known as thorium. Wherever you find rare-earth minerals you also find thorium.

Thorium is a relatively common mineral in the earth’s crust; it is also radioactive. Although it should be noted that this radioactivity does not make thorium particularly dangerous, as its alpha radiation is not able to penetrate human skin. In fact, people have a long history with production and use of thorium in the glowing mantle used in gas lamps, and it is thought that generally these uses are safe.

Because of its reactivity, thorium also has the potential for use as a nuclear fuel. In particular, there is a lot of excitement around the development of a thorium fuel cycle in a next generation reactor known as a molten-salt reactor. This type of reactor provides numerous benefits over current generation nuclear, including dramatically lower waste production and much improved safety systems. I would highly recommend a watch of this short video for an introduction to the liquid-fluoride thorium reactor, a technology that has the potential to provide sustainable and safe base-load electrical power for the future.

Through developing a thorium fuel cycle, we could easily meet world demand for power for thousands of years. This technology is actually so promising that it seems unbelievable, maybe even downright magical. Here is the fact we have forgotten though, nuclear technology is magicalAll that we have to do is bring the right concentrations of the right rocks together in the right space and they just start producing energy (like magic).  

If this fact alone doesn’t just blow your mind, then you have lost your wonderment for the world. But it doesn’t really matter. It is a fact that a massive amount of energy can and will be obtained from the radioactive decay of fissionable material. The connection to nuclear arms and a number of high-profile accidents over the years may have taken the shine off of nuclear energy, but none of that changes the fact that it is a reliable source of cheap plentiful power. We cannot wish away the existence of nuclear technology, because it would make the world simpler. 

Trying to wish away the existence of nuclear technology is exactly what killed rare-earth mining in America. Because thorium was a major by-product of rare-earth mining, and thorium was classified as a nuclear fuel, it presented huge regulatory hurdles. The last rare-earth mine in America was actually closed following a minor release of mineral thorium. This impediment to rare-earth production in America is known as the thorium problem.

In order to make rare earth mining in America profitable, there needs to a profitable use of thorium in order to offset the regulatory costs of dealing with it. Hence, the development of new nuclear technology and a thorium fuel cycle would potentially provide not only a huge source of sustainable power, but it would also solve a major problem for rare-earth mineral production, and could lead to a reinvigorated electronics production industry in North America. Through a modest investment in research and development of thorium based nuclear reactors, we can turn the thorium problem into the thorium solution

While it does not seem to be gaining any traction in America (beyond the internet), it would seem that the great potential benefit of thorium as a nuclear fuel has not gone unnoticed in China. China sees that by developing power from thorium, they may be able to produce cheap baseload power in a safe and sustainable way. More importantly, as Jim Kennedy warns, China is not going to share this technology but they will lease it globally for great profit.

The energy industry is an absolute giant, and the only one that is bigger than the electronics manufacturing sector that China already has a lock on. If China can develop next generation nuclear technology for 10 cents a kilowatt hour, even while dealing with the minuscule amount of waste produced by a thorium reactor, this has the potential to turn the world upside down.

If China develops a modular, mass-produced thorium nuclear technology, it will also gain the associated economic and political power and there will be no looking back.

People have developed an irrational fear of nuclear energy over recent decades, but I would not count on this being enough to stop people from buying it. Maybe I am wrong and we in the west will turn our noses up at any thought of new nuclear power, but I am sure this will not be the case in the most heavily populated parts of the world. The developing world is desperately thirsty for electricity, and they are going to buy it from whoever can offer it to them at a competitive price.

More than just offering a means to raise the developing world in a more sustainable way, thorium could offer us a sustainable means to tap into high power applications in the western world. Things like going to space cost a lot of energy. Do you want to go to space? Thorium, or something very much like it, is going to be needed if we want to provide the kind of power that would be necessary so we all can go to space one day.

If we want to dream big, we are going to need the power to do it. 

The Arma Infinitum

In a dusty tome, on an old sagging shelf, in the dimly-lit basement of a disused library, there is an account of a forgotten legend. The words tell of an ancient people who sought to build the Arma Infinitum – the infinity weapon. It does not describe how they managed to build such a weapon, but only the consequences of its existence.

With their legendary weapon, the people had immeasurable power. Against this weapon there was no hope of defence. One by one the enemies of the people were vanquished. Entire armies surrendered at even the rumour of this glorious weapon. The people marched across the land, meeting with victory after victory. They laid claim to the best lands far and wide, and built a fantastic empire, the likes of which had never been seen.

It is said the the Arma Infinitum was so powerful, that even the gods cowered at its magnificence. The people saw they might use their weapon to gain control of the heavenly kingdom as well as the terrestrial one. With their shining weapon in hand, the people learned to control the winds and seas, and the earth and fire.

And now the people, having vanquished both kings and gods, looked out across their lands and considered what they might do next. The people no longer needed to worry about war with man or nature, as their weapon had brought them absolute victory. They had no worry of hunger or disease, as control of the sun, winds and rains had made them healthy and well-fed. Despite their success though, the people still longed for more.

So the people looked for more powerful gods to slay. Guided by their terrible weapon the people searched after the slumbering gods of the old world. They roused these titanic gods and whole worlds were destroyed as they did battle. But the Arma Infinitum would not be stopped, and the old gods eventually fell just as the new ones had.

Indeed the people learned to twist the very essence of the world to their own dreams and desires, they recreated their world to their liking and lived in perfect existence. But with no men or gods left to fight, their perfect existence was unfulfilling and eventually, as the Titans had before them, the people settled down for sleep. Even now, the people still slumber with the Arma Infinitum at their side, awaiting the next who would challenge them.

***********

At this point you probably should have figured out that the Arma Infinitum is actually a highly powerful artificial intelligence. A strong AI offers truly may offer the solution to any and all of our terrestrial and heavenly problems. Every problem we can logically conceive of, from the simple like how to efficiently distribute resources to the absolutely outlandish like how to overcome the limits of light speed, are problems that may potentially be solved by AI. AI may truly be the weapon that vanquishes all of our enemies but the question that bugs me is this: if AI does manage to solve all of our problems, what then?