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  • Here's a startling fact:

  • in the 45 years since the introduction of the automated teller machine,

  • those vending machines that dispense cash,

  • the number of human bank tellers employed in the United States

  • has roughly doubled,

  • from about a quarter of a million to a half a million.

  • A quarter of a million in 1970 to about a half a million today,

  • with 100,000 added since the year 2000.

  • These facts, revealed in a recent book

  • by Boston University economist James Bessen,

  • raise an intriguing question:

  • what are all those tellers doing,

  • and why hasn't automation eliminated their employment by now?

  • If you think about it,

  • many of the great inventions of the last 200 years

  • were designed to replace human labor.

  • Tractors were developed

  • to substitute mechanical power for human physical toil.

  • Assembly lines were engineered

  • to replace inconsistent human handiwork

  • with machine perfection.

  • Computers were programmed to swap out

  • error-prone, inconsistent human calculation

  • with digital perfection.

  • These inventions have worked.

  • We no longer dig ditches by hand,

  • pound tools out of wrought iron

  • or do bookkeeping using actual books.

  • And yet, the fraction of US adults employed in the labor market

  • is higher now in 2016

  • than it was 125 years ago, in 1890,

  • and it's risen in just about every decade

  • in the intervening 125 years.

  • This poses a paradox.

  • Our machines increasingly do our work for us.

  • Why doesn't this make our labor redundant and our skills obsolete?

  • Why are there still so many jobs?

  • (Laughter)

  • I'm going to try to answer that question tonight,

  • and along the way, I'm going to tell you what this means for the future of work

  • and the challenges that automation does and does not pose

  • for our society.

  • Why are there so many jobs?

  • There are actually two fundamental economic principles at stake.

  • One has to do with human genius

  • and creativity.

  • The other has to do with human insatiability,

  • or greed, if you like.

  • I'm going to call the first of these the O-ring principle,

  • and it determines the type of work that we do.

  • The second principle is the never-get-enough principle,

  • and it determines how many jobs there actually are.

  • Let's start with the O-ring.

  • ATMs, automated teller machines,

  • had two countervailing effects on bank teller employment.

  • As you would expect, they replaced a lot of teller tasks.

  • The number of tellers per branch fell by about a third.

  • But banks quickly discovered that it also was cheaper to open new branches,

  • and the number of bank branches increased by about 40 percent

  • in the same time period.

  • The net result was more branches and more tellers.

  • But those tellers were doing somewhat different work.

  • As their routine, cash-handling tasks receded,

  • they became less like checkout clerks

  • and more like salespeople,

  • forging relationships with customers,

  • solving problems

  • and introducing them to new products like credit cards, loans and investments:

  • more tellers doing a more cognitively demanding job.

  • There's a general principle here.

  • Most of the work that we do

  • requires a multiplicity of skills,

  • and brains and brawn,

  • technical expertise and intuitive mastery,

  • perspiration and inspiration in the words of Thomas Edison.

  • In general, automating some subset of those tasks

  • doesn't make the other ones unnecessary.

  • In fact, it makes them more important.

  • It increases their economic value.

  • Let me give you a stark example.

  • In 1986, the space shuttle Challenger

  • exploded and crashed back down to Earth

  • less than two minutes after takeoff.

  • The cause of that crash, it turned out,

  • was an inexpensive rubber O-ring in the booster rocket

  • that had frozen on the launchpad the night before

  • and failed catastrophically moments after takeoff.

  • In this multibillion dollar enterprise

  • that simple rubber O-ring

  • made the difference between mission success

  • and the calamitous death of seven astronauts.

  • An ingenious metaphor for this tragic setting

  • is the O-ring production function,

  • named by Harvard economist Michael Kremer

  • after the Challenger disaster.

  • The O-ring production function conceives of the work

  • as a series of interlocking steps,

  • links in a chain.

  • Every one of those links must hold for the mission to succeed.

  • If any of them fails,

  • the mission, or the product or the service,

  • comes crashing down.

  • This precarious situation has a surprisingly positive implication,

  • which is that improvements

  • in the reliability of any one link in the chain

  • increases the value of improving any of the other links.

  • Concretely, if most of the links are brittle and prone to breakage,

  • the fact that your link is not that reliable

  • is not that important.

  • Probably something else will break anyway.

  • But as all the other links become robust and reliable,

  • the importance of your link becomes more essential.

  • In the limit, everything depends upon it.

  • The reason the O-ring was critical to space shuttle Challenger

  • is because everything else worked perfectly.

  • If the Challenger were kind of the space era equivalent

  • of Microsoft Windows 2000 --

  • (Laughter)

  • the reliability of the O-ring wouldn't have mattered

  • because the machine would have crashed.

  • (Laughter)

  • Here's the broader point.

  • In much of the work that we do, we are the O-rings.

  • Yes, ATMs could do certain cash-handling tasks

  • faster and better than tellers,

  • but that didn't make tellers superfluous.

  • It increased the importance of their problem-solving skills

  • and their relationships with customers.

  • The same principle applies if we're building a building,

  • if we're diagnosing and caring for a patient,

  • or if we are teaching a class

  • to a roomful of high schoolers.

  • As our tools improve,

  • technology magnifies our leverage

  • and increases the importance of our expertise

  • and our judgment and our creativity.

  • And that brings me to the second principle:

  • never get enough.

  • You may be thinking, OK, O-ring, got it,

  • that says the jobs that people do will be important.

  • They can't be done by machines, but they still need to be done.

  • But that doesn't tell me how many jobs there will need to be.

  • If you think about it, isn't it kind of self-evident

  • that once we get sufficiently productive at something,

  • we've basically worked our way out of a job?

  • In 1900, 40 percent of all US employment

  • was on farms.

  • Today, it's less than two percent.

  • Why are there so few farmers today?

  • It's not because we're eating less.

  • (Laughter)

  • A century of productivity growth in farming

  • means that now, a couple of million farmers

  • can feed a nation of 320 million.

  • That's amazing progress,

  • but it also means there are only so many O-ring jobs left in farming.

  • So clearly, technology can eliminate jobs.

  • Farming is only one example.

  • There are many others like it.

  • But what's true about a single product or service or industry

  • has never been true about the economy as a whole.

  • Many of the industries in which we now work --

  • health and medicine,

  • finance and insurance,

  • electronics and computing --

  • were tiny or barely existent a century ago.

  • Many of the products that we spend a lot of our money on --

  • air conditioners, sport utility vehicles,

  • computers and mobile devices --

  • were unattainably expensive,

  • or just hadn't been invented a century ago.

  • As automation frees our time, increases the scope of what is possible,

  • we invent new products, new ideas, new services

  • that command our attention,

  • occupy our time

  • and spur consumption.

  • You may think some of these things are frivolous --

  • extreme yoga, adventure tourism,

  • Pokémon GO --

  • and I might agree with you.

  • But people desire these things, and they're willing to work hard for them.

  • The average worker in 2015

  • wanting to attain the average living standard in 1915

  • could do so by working just 17 weeks a year,

  • one third of the time.

  • But most people don't choose to do that.

  • They are willing to work hard

  • to harvest the technological bounty that is available to them.

  • Material abundance has never eliminated perceived scarcity.

  • In the words of economist Thorstein Veblen,

  • invention is the mother of necessity.

  • Now ...

  • So if you accept these two principles,

  • the O-ring principle and the never-get-enough principle,

  • then you agree with me.

  • There will be jobs.

  • Does that mean there's nothing to worry about?

  • Automation, employment, robots and jobs --

  • it'll all take care of itself?

  • No.

  • That is not my argument.

  • Automation creates wealth

  • by allowing us to do more work in less time.

  • There is no economic law

  • that says that we will use that wealth well,

  • and that is worth worrying about.

  • Consider two countries,

  • Norway and Saudi Arabia.

  • Both oil-rich nations,

  • it's like they have money spurting out of a hole in the ground.

  • (Laughter)

  • But they haven't used that wealth equally well to foster human prosperity,

  • human prospering.

  • Norway is a thriving democracy.

  • By and large, its citizens work and play well together.

  • It's typically numbered between first and fourth

  • in rankings of national happiness.

  • Saudi Arabia is an absolute monarchy

  • in which many citizens lack a path for personal advancement.

  • It's typically ranked 35th among nations in happiness,

  • which is low for such a wealthy nation.

  • Just by way of comparison,

  • the US is typically ranked around 12th or 13th.

  • The difference between these two countries

  • is not their wealth

  • and it's not their technology.

  • It's their institutions.

  • Norway has invested to build a society

  • with opportunity and economic mobility.

  • Saudi Arabia has raised living standards

  • while frustrating many other human strivings.

  • Two countries, both wealthy,

  • not equally well off.

  • And this brings me to the challenge that we face today,

  • the challenge that automation poses for us.

  • The challenge is not that we're running out of work.

  • The US has added 14 million jobs

  • since the depths of the Great Recession.

  • The challenge is that many of those jobs

  • are not good jobs,

  • and many citizens cannot qualify for the good jobs

  • that are being created.

  • Employment growth in the United States and in much of the developed world

  • looks something like a barbell

  • with increasing poundage on either end of the bar.

  • On the one hand,

  • you have high-education, high-wage jobs

  • like doctors and nurses, programmers and engineers,

  • marketing and sales managers.

  • Employment is robust in these jobs, employment growth.

  • Similarly, employment growth is robust in many low-skill,

  • low-education jobs like food service,

  • cleaning, security,

  • home health aids.

  • Simultaneously, employment is shrinking