But this isn’t the industrial revolution.
By Wolf Richter of WOLF STREET
How many jobs do robots – whether mechanical robots or software – destroy? Do these destroyed jobs get replaced by the Great American Economy with better jobs? That’s the big discussion these days.
The answers have been soothing. Economists cite the industrial revolution. At the time, most humans replaced by machines found better paid, more productive, less back-breaking jobs. Productivity soared, and society overall, after some big dislocations, came out ahead. The same principle applies today, the soothsayers coo.
But this isn’t the industrial revolution. These days, robots and algorithms are everywhere, replacing not just manufacturing jobs but all kinds jobs in air-conditioned offices that paid big salaries and fat bonuses.
Just today, BlackRock announced a plan to consolidate $30 billion of their actively managed mutual fund activities with funds that are managed by algorithms and quantitative models. As these software robots take over, “53 stock pickers are expected to step down from their funds. Dozens more are expected to leave the firm,” as the New York Times put it.
“We have to change the ecosystem – that means relying more on big data, artificial intelligence, factors and models within quant and traditional investment strategies,” BlackRock CEO Laurence Fink told The Times.
In a similar vein, “robo-advisors” are becoming a cheap and hot alternative for many customers at major brokerage houses, replacing human financial advisors. A lot of the grunt work that used to be done during all-nighters by highly paid law school grads in big law offices is now done by computers.
So job destruction due to automation is not a blue-collar thing anymore. It’s everywhere. But soothsayers have been steadfastly claiming that for each destroyed job, the Great American Economy will generate more and better jobs, because, well, that’s how it worked during, you guessed it, the Industrial Revolution.
But two economists have changed their mind (more on that in a moment) and published a gloomy working paper…