Is the singularity point massive

Video interview with Heinz D. Kurz

05/14/2018 | BIBB

Society - Technology - People: Theory interviews on the relationship between societal and technological change


Interview with Prof. Dr. Heinz D. Kurz

This interview was filmed in Graz, AUT, on 14 May 2018. The interviewer was Thomas Leuchtenmüller. It is part of a BIBB research project on "Polarization of Activities in Economy 4.0 - Skilled Workers Qualifications and Needs for Skilled Workers in the Digitized Work of Tomorrow“, funded by BMBF.

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Theory interviews

for the English translation of the interview


Where do we find sources for technological change and social division of labor?

Sustained technological and organizational advances - the emphasis is on sustained - are a result of modern times. There was no such thing in the past. There are developments in Europe, England and Scotland in the 17th and 18th centuries. Century created a fundamental change in the conditions for technical progress. I'm talking about developing what Joel Mokyr called "a culture of growth and innovation". That has never happened before. If you look at world history you will find that there have been sporadic technological changes in different places, but these were individual events and there was no continuity. That has changed. And the change is the result of unintended consequences of purposeful human action. In those days, people created institutions that, working together, ultimately created a culture of innovation. Basically there are two essential factors that contradict the fact that something new is created and introduced into the economy, into society. On the one hand, this is the possession of old knowledge. Those who have old knowledge achieve monopoly rents on the basis of this knowledge and are, of course, against the introduction of news that undermines their monopoly position. One can say, for example, that for a long time farmers, i.e. the large landowners in Europe in the 15th, 16th and 17th centuries, resisted methods to increase productivity on the soil because they understood that this naturally reduced the scarcity of their soil would and that would drive the basic pension down. That is an argument that speaks for the fact that technical progress does not come about and is not introduced so easily. The second argument is that new knowledge cannot be kept secret in the long run and on average. That is, it will be adopted by others, it will be imitated. Second, that new knowledge is not rival in consumption. In other words, new knowledge is generally a quasi-public good. What do you mean with that? Private goods, think of a sausage roll, if I eat it, don't eat it. But with a Bessemer process in steel production, company A can use it, and company B can use it as well - one does not exclude the other. Such goods become available relatively quickly in the system as a whole, but this poses a problem, namely this: Those who had the costs of generating the new knowledge get only part of the income - possibly nothing at all. Others get it. And of course that is a reason not to generate this new knowledge in the first place. In this context, one speaks of market failure. Pure, self-reliant markets are not able to realize a sufficient amount of technological progress. And you can say that an important moment for technical change, a driver par excellence, if you will, is the competition. Because competition means that individual companies, individual players, cannot be sure that they will survive in the market if the neighbor, the other company, introduces innovations that lower production costs, i.e. that allow goods to be brought to market more cheaply, or new products that have better qualities. So you could say: the competition acts like a productivity whip, like a technical progress whip, and you can tell. This is also well documented in the literature, from an early age. Marx, for example, speaks of the compulsory law of competition, which forces individuals to innovate, to realize technical advances, if they are punished for their downfall. And Smith expressed himself in a very similar way, said Schumpeter, to name a few important social and economic scientists. # 00: 05: 13-7 #


Who is driving technological change and social division of labor?

I start with the structures. One is definitely incentive-compatible structures, as we economists say. This means laws, rules, institutions and so on that are open to the new. If they do not have that, if they are prohibited from introducing certain things at all, then that is a great disadvantage for the new. The second is: You need an education and training program that lets the new fall on fertile ground or finds a match in people's human capital. And it is certainly also important that in the case of technical advances, which always have not only winners, but also losers. These questions have been discussed since ancient times, that is to say in political economy since the end of the 17th and beginning of the 18th century. What are the mechanisms for enforcing the new? What we got there from Adam Smith and others are essentially the following considerations: One is, in a competitive situation, there is reason for the individual company to innovate, to make technical and organizational advances just to oppose it prepare to be kicked out of the market by others who do so. If you successfully introduce a better production process, in the sense that it allows you to reduce the unit cost of manufacturing a given product, then it is perfectly clear that you will be the worse in the market where you get the same price as your competitor produces -costs less favorably in that they make extra profits, higher profits than the other company. If you invest the same percentage of these higher profits to grow, then you will see very quickly that the company that innovates is growing faster than the other. The new gradually infiltrates itself through differential growth, diffuses in the system and relatively - not absolutely - displaces the other. It is a mechanism. Simply by different growth rates of the innovating company compared to the static companies. The second mechanism at play is of course that of imitation - imitation. Companies that see that the neighboring company makes greater profits because it introduces a new technology will try to imitate this other company, the successful one, the pioneer company. This can be done in a number of ways. Either through industrial espionage. This is not a rare case. But also, of course, by purchasing a license to use the new process and the like. In this case, the new technologies are also introduced by companies that were not the pioneers themselves. It is now also clear that innovations often have teething troubles, that the first car that has been produced may have serious defects and that the "second mover", as we say, achieves the advantage. Because of this, we will often observe that the pioneering company that was the first goes bankrupt after a period of time because it operates with a process that can be greatly improved. Whatever the case, however, the competition provides an impetus to smuggle in the new, broaden it and ultimately tend to suppress the old. # 00: 09: 18-8 #


Which consequences will arise from technological change?

For some time now, humans have been operating with aids - with manufactured means of production - which they have controlled, more or less well. Be it agricultural implements or whatever. The scientist with computers, with computers, and so on. They influence the way we work. With new technology, some of these devices are actually of a quality that they control you rather than you control the devices. That will create a fundamentally new situation. Of course: The productivity of the individual will increase very, very strongly in many areas. In other words, they will see technological advances in areas that are of course very valuable to us. Just think of medicine, health care and the like. Think about treatment in hospitals and the like. What can be said is that the current technical progress is characterized by the merging or amalgamation of three spheres. And we haven't gotten to know that before. On the one hand, of course, there is the physical sphere. On the other hand, that's biological and it's digital. And they have these cyber-physical systems where software and hardware are coupled and communicate with each other. Today you can sell and buy all over the world, you can dismantle and split production processes and have individual parts produced in Germany and others in China. This is very closely related to the fact that over time the transport costs have fallen very sharply and therefore an "unbundling", a "unbundling" of the value chains has taken place. So basically you get an internationalization of the production and possibly also a very, very fast changeability of the production. The flexibility will increase. One can certainly say that what will happen there in the long term will depend very much on whether the machine remains a work tool for people and, so to speak, an appendage of people, or vice versa, people become an appendage of the machine. And I suspect that, in the long run and on average, the scale will point in the last direction. This means that people will often lose their sovereignty, their creative ability - not everywhere, but often - and will have to operate according to the rhythm of the machine. That seems to be the case to me, at least in those professions where knowledge can be codified, where little skills are required that can easily be taken over by machines. One must not turn a blind eye to the fact that artificial intelligence is increasingly entering a sector of the qualified workforce. Partly because we have recently seen that there has been a wage spread. The less skilled workers have even seen real wage reductions, while the very skilled have seen very steep increases in incomes. Well, anyone who minimizes costs will probably rack their brains about whether they can use machines to replace the very well-paid workers, including those of lower to middle management. That we have artificial intelligence, i.e. machines that are themselves able to learn, to learn while they are producing, and that never sleep - and you can see if that is the case, if they have artificial intelligence and when which should continue to develop dramatically, as it did, then you get a situation in which humans, possibly with a few exceptions, are no longer competitive with machines at all. It comes to the technological singularity point. That is, a situation where machines, in every respect in the extreme case, in every point, are superior to humans. The new technologies we are talking about also make use of new economic forms of implementation. The platform economy. eBay, in China alibaba, but also of course facebook, google and so on. And what they have there is that the more data they have processed, the more effective these platform companies become. It is a form of data capitalism that should be kept in mind. On the one hand, data is modern money alongside existing money. Because even if you don't notice it when you surf the Internet, you pay with the availability of your data. The companies learn. These algorithms, the machines learn from their data. They are always better able to tap into their preferences. They know when they want to buy certain goods, when they may have a case of illness because of implanted microchips and the Internet. But that means that the company that is one step ahead, that has processed the largest amount of data, will hardly be catchable. That means it becomes a gigantic monopoly. They do not adhere to the labor law, the existing one, to the trade regulations - they are footloose. In other words, they settle where the taxes they have to pay are the lowest. Some of these big companies pay no taxes, they make huge profits and that is basically a threat to national sovereignty and of course the budget sovereignty of the individual governments. Because when the tax revenue disappears but at the same time the problems that have been created by technological unemployment and the like that the state has to cope with, then you immediately see: the budget deficit is forced on you without you being able to do anything about it. Through technological development. I believe what can be said about employee representation: it will have a hard time because of the erosion of its base. The level of union membership seems to be declining, and it is particularly low among these cloud workers who, so to speak, take on temporary jobs in the gig economy. This means that they will no longer be able to or will no longer be able to afford a union fee there, possibly also due to low pay. That means the employee representatives are in trouble. But the companies and their representatives also have difficulties. If you have a corporate population where there are only a few very, very big ones who basically have power over the rest - who cares? So the rest would have to work together, also in the sense of a control of the very, very big ones, so that a representation of the companies, the enterprises in general in different branches and so on still has space. In other words, there is, I believe, a reason why many in society are in fact no longer willing to expose themselves to these huge monopolies. The developments that will result will be very variegated. There are, so to speak, lovely jobs that you enjoy doing where you are creative. Creativity is then a great asset that will be needed in the future, where you are also able to communicate, where you have knowledge across a narrow area, because that will be in demand. Well, there are lovely jobs, people who like it very, very much, who like to sit in front of their computer or operate with these technologies. But there are also lousy jobs. Those that basically reduce the workforce and make you a cheap henchman. What needs to be mentioned in the context is that there is a return to the publishing system. That is already the case. The publishing system was a matter where, for example, an entrepreneur gave the weavers in Silesia cotton which they then woven at home with their handlooms. With the introduction of new looms, they have been completely phased out. What we are now experiencing is a pervasive gig economy. Jobs that can be done in a day or two and then you lose the job. So, in a way, it is the rise of digital day labor. Precariat on a larger scale. No union organization, no social security, no health insurance and the like anymore. You are thrown back on yourself, are bogus self-employed or self-employed. I believe that in the long term, above all, certain activities will be saved, the jobs themselves may, at least in part, be preserved. If you adapt to the job profile. In turn, this naturally demands the training sector. But that there can be noticeable savings. That is a negative effect, if you will, as opposed to the positive effect of an increasing quantity of goods and a cheaper availability of these goods. But of course there are many, many other effects. If, as we know, the new technologies make it possible to monitor people at work, but also outside of work, to make monitoring much, much stronger than has been the case up to now, then we can say that this is a threat to individual freedom. The development in China, which is basically aiming to have people under control from morning to night and then to judge them with regard to the availability of travel or the like, is, I believe, a threatening matter. In short: the current technical progress has characteristics that are reminiscent of Big Brother. A control state, a surveillance state - and that is a huge danger, I think. You shouldn't underestimate them.May I take this opportunity to refer to the work of a Nobel Prize winner in economics, Angus Deaton, who studied in the USA the effects of information and communication technology on various areas of the economy. Specifically, the well-being of middle-aged white Americans. And what he found is that there has been a great clouding over there, a bitterness, a suffering from the worsening working conditions. They have led to an increase in obesity, people have grown fatter, drug use has increased, alcohol use has increased, family disputes have increased and this has led to what is called the death of dispair - Desperate death. This means that, among other things, life expectancy is now falling, which has risen for a long time due to technical progress - this was seen as a positive - it is falling against the background of more recent developments. So the negative effects are huge and it is of course also clear that Trump and similar people have a lot of support in these groups. This means that technical progress does not only change the economic world, not only the technical world, it changes society, it changes culture, it changes politics. So we're actually talking about the co-evolution of all these systems with technology as the main driving force, so to speak. And in this regard, I believe that in order to prevent society from drifting into popularist politics, which then of course, of course, may have warlike tendencies, it must be ensured that an inclusive program is carried out. # 00: 23: 21-2 #


How are drivers and consequences of technological change connected?

The division of labor on the one hand within companies, on the other hand between companies in a region or a country and third, of course, the international division of labor. I start with the latter. One can already say that the international division of labor is on the rise due to the process of unbundling, the unbundling of value chains. This means that globalization will occur even more than before, where there will actually be a division of labor between regions and regions that may be far apart. If the transport costs are low, it is not a problem that you bring certain preliminary products from China to Europe. And as you know, the Chinese are busy with one of the really big innovations: "One Belt, One Road" of the new Silk Road. In other words, a railway drawn across the entire Eurasian and European area, docking at certain points where crude oils and natural gases have recently been found on a large scale - where the scarcity of these raw materials is currently no longer an issue - so that will be a big issue . Globalization will advance. Unless there is armed conflict and a new cold war. That cannot be ruled out at the moment. Then of course the division of labor within regions within a country. I think that too will increase. In particular, they will have knowledge-based and knowledge-generating centers - even more so than before - which will gain in weight relative to others and, of course, they will also have a much stronger division of labor within and between companies according to the qualification profile of the people. The increase in bogus self-employment, the gig economy, the publishing system, leads to a very high level of fragmentation in the labor market, to lone fighters who try to take their own fate into their own hands and generally, it is to be feared, not be very successful become. They are different in that today's technological advances create superstar companies that basically can no longer be jeopardized. Because of the endogenous learning process of the machines, the algorithms. Once the muzzle in front, so to speak, always the muzzle in front. And that means that they can no longer be denied in their monopoly position. They used to be able to do that. They had a monopoly, but they themselves could endanger the monopoly through technical innovations. That is the case today to a much lesser extent. In the past they also had a much stronger case of free competition, where many companies competed with one another, and if not nationally, then internationally. But today you have a situation in which at least in important areas a few companies, five, six, seven have the say worldwide. # 00: 26: 55-8 #


What measures can be taken to steer technological change?

Well how can you go about that? There are already economic policy measures to control them more closely here and there. One is, for example, that in the case of platform companies the location of the corporate headquarters is no longer the place of control. It's the place where the business is done. If you buy a book here in Germany from Amazon, for example, you pay the German tax and not the one in Ireland or elsewhere. That is an option. A second possibility is that they are indeed taxing them much more heavily than they have been up to now. What can be said today is that there are threats to freedom that are even more powerful than most nation states and that these are giant superstar companies, monopolies, uncontrollable with an abundance of power that we have never seen before. That means that here the state has to take on its old task of safeguarding individual freedoms, so to speak, and it can only do that by getting these superstar companies under control.