Skilled Labor is Becoming Less Valuable

The Rate of Change

Ever since technological evolution started, the rate of improvement has been exponential. For example, Moore’s Law originated around 1970 and states that processor speeds or overall processing power for computers will double every two years. That is exponential growth, and it was proven correct for the past decades—even though the speed of processor improvement has slowed down somewhat in recent years due to technological limitations of materials used to make processors, growth in average is exponential over a longer time.

Past technological improvements have taken many jobs, and many new job categories have been created. People were able to adapt, relearn new skills, and find new employment in areas that technology could not replace yet.

But what if the rate of technological improvements surpasses the maximum speed of how fast people can change their careers? This moment in time has silently started three decades ago. Since 1990, productivity has increased by 70 percent, whereas salaries and wages only increased by 20 percent. This trend is accelerating. Today, many truck drivers will soon lose their jobs to self-driving semis, and taxi drivers are losing their jobs to robotaxis. I predict a violent revolt against the new technology will end with the machines’ victory and another jump in productivity progress. Progress always prefers less expensive and more efficient solutions.

Figure 1a Household Income vs. U.S. Productivity based on fred.stlouisfed.org

In other words, skilled labor performed by humans is becoming less and less valuable. This trend is the reason why the average household is becoming poorer. The wealth of nations is rising, whereas the wealth of people goes down. Karl Marx was right in one thing: capitalism has always meant a struggle between capital and labor.

I wrote this book for people who want to start replacing their earned income partly or entirely with income from capital. I envision that we all become entrepreneurs who work for free, using tangible and intangible capital to create more capital. I predict that poor people will keep working for money, whereas sophisticated investors will use technology as the ultimate wealth creation tool.

Comments

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