Rise of the Robots (Part 1)
The Great Recession (2007–09) was costlier than you could ever imagine.
Forget GDP contraction — by 2010, the economy had fully recovered.
Forget the decimation of the stock market — by 2012, it had recouped all of its losses.
Forget the massive layoffs — by 2016, unemployment had returned to pre-recession levels.
The cost I’m referring to is far more insidious… with deeply profound and wide-reaching consequences… in fact, we may never recover.
See, the Great Recession took a lasting toll on human life.
Since the onset of the recession in December 2007, fertility rates in the United States have fallen by nearly 20%. By one expert’s projection, “Had pre-recession fertility rates remained steady through 2018, there would have been 800,000 more births last year [in 2018].”
Let’s try to quantify that in economic terms, shall we?
The value of a statistical life (VSL) is a simple algorithm — used by government agencies like the Department of Transportation, the Centers for Disease Control and the Environmental Protection Agency — that assigns a monetary value to every theoretical human life.
Per the latest VSL data, one human life is worth $10 million.
Therefore, the economic loss of 800,000 nonbirths caused by the Great Recession runs north of $8 trillion. Worse yet, as long as fertility rates continue to decline, the $8 trillion figure will exponentially expand every year.
Ask any economist and they’ll tell you that a declining population is a nation killer.
When fewer people make less stuff… fewer people consume less stuff… fewer people invest in less stuff… and fewer people innovate less stuff…
Societal problems and countrywide instability are very predictable outcomes.
Or as John Maynard Keynes once said in a lecture called Some Economic Consequences of a Declining Population…
“An era of increasing population tends to promote optimism, since demand will, in general, tend to exceed, rather than fall short of, what was hoped for… But in an era of declining population the opposite is true. Demand tends to be below what was expected and a state of oversupply is less easily corrected.”
But this two-part series isn’t about babies (or the lack thereof)…
It’s about robots.
See, robots represent an exacerbation of America’s population problem… a classic double-whammy… more gasoline on the fire… a genuine existential threat to our status as the world’s premier nation.
In the manufacturing industry alone, there are already 228 robots for every 10,000 U.S. workers… and the rate of automation is growing by 10–15% per year.
Industries like health care, transportation, agriculture and defense are experiencing similar robot takeovers… with the Rust Belt — highly unionized Midwestern states — having the highest robot intensity.
So should you be concerned?
Given the coinciding population problem, definitely.
According to a brand-new study from MIT and Boston University, every robot added per 1,000 workers in the United States causes wages to erode by 0.42% and the employment-to-population ratio goes down by 0.2%.
The study suggests that robots have killed 400,000 American jobs to date. Although U.S. workers will surrender millions of jobs to robots throughout the decade, it’s not all bad news…
I’ll placate your robot anxiety next week.
iI Part 2, we’ll cover how to invest alongside the rise of the robots.
Onward and upward,