Sam Olsen
May 11, 2017

Taxing robots

How will society cope with the AI driven jobs revolution?

Taxing robots

“If properly harnessed, [artificial intelligence] can generate enormous prosperity and opportunity”. So said President Obama in August 2016, ahead of a White House report, published just before he left office, which outlined the significant benefits AI is expected to bring to the economy.

Marketing is part of the AI story. As Campaign recently reported, US company Adgorithms has had success in replacing digital agencies with its AI platform, ‘Albert’. "He doesn’t sleep, he’s fast, he doesn’t get into a fight with his girlfriend and lose focus," said one admiring CEO, who had used ‘Albert’ to triple her company’s ROI and increase its customer base by 30 percent.

AI is being used to power other traditional marketing tasks too. Netflix uses predictive algorithms to make better recommendations to its viewers, whilst US sportswear maker Under Armour has been working with IBM’s supercomputer Watson to offer relevant, personalised training and lifestyle advice to consumers. San Francisco-based company The Grid harnesses intelligent image recognition, algorithmic pallette and typography selection, to effectively automate website design.

It’s clear—well, probable—that these marketing developments have been designed to enhance outputs, rather than to reduce costs by making humans as vestigially useful as an appendix.

Yet unfortunately this is probably going to be part of some of the negativity that AI could create. As Obama also said “[AI] also has some downsides that we’re gonna have to figure out in terms of not eliminating jobs. It could increase inequality. It could suppress wages.”

AI is likely to cut a swathe through the employment market, and in fact, it’s already begun. In May 2016, one of the world’s largest outsourced manufacturers, Foxconn, announced 60,000 layoffs from just a single Chinese factory. The workers, it said, were being replaced by robots powered by AI. 600 other companies in the same city declared they were looking to follow suit.

It won’t be just factory workers impacted by the new technology: as the scientist Stephen Hawking has observed, “the automation of factories has already decimated jobs in traditional manufacturing, and the rise of artificial intelligence is likely to extend this job destruction deep into the middle classes, with only the most caring, creative or supervisory roles remaining.” 

It is true that civilisation has been here before. The process of creative destructionism, the watch-phrase of capitalism, has seen previous industrial revolutions make weavers, kerosene lamp makers, and messenger boys all redundant; but these have been replaced by new jobs created by the substitute technologies.

What makes this AI-driven revolution potentially different is the pace. It is estimated that the majority of the 3.5 million American truck drivers – a solid, middle income job – could be lost in the next five to ten years. That is too quick for substitute employment to absorb all those laid off, at least at the same salary. In the same way, what will marketing professionals do if (or when) Albert et al start to elbow out their human competition?

It seems the public is beginning to wake up to the threat, if the steady stream of news articles and academic papers is any indication, and initiatives to help society deal with the impending sweep of AI have been rising to the surface.

One idea that has been gaining currency in recent years is Universal Basic Income (UBI). This, in a nutshell, is when citizens are paid a monthly wage whether they are working or not. Tech entrepreneurs seem particularly well disposed to the idea, with key opinion leaders like Sam Altman, founder of the accelerator Y Combinator, a leading proponent. Altman strongly believes it can be a viable solution to the possible “massive job destruction” in the next 10-20 years, so much so that he has created his own testing ground by giving 100 families in Oakland, California, $2,000 a month for free.

As might be guessed, such a utopian ideal has its drawbacks. As Karen Buck, a British Labour MP, has noted, pushing people from welfare to work has been not only effective, but popular politically in recent years, and UBI would throw it into reverse. It would also be extraordinarily expensive and would never be adopted without a fight.

Another way forward has been proposed by Bill Gates. “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

In other words, government should levy a tax on robots – and, by extension, the algorithms that power the AI revolution—to pay for the welfare and re-education of those made surplus to requirements.

Robot taxes, like UBI, also have their critics. Politicians and capitalists alike claim that such a move would stymie innovation: in February this year the European Parliament rejected a robot tax proposal for those very reasons.

Even if these proposals are not quite the solution, it is clear that the public and private worlds need to keep trying to work out how to deal with the coming storm. There is still time to plan, but the window of proactivity is closing. The sooner politicians and business people start to look at cushioning the impact of AI in earnest, the better, before the tsunami sweeps both aside.

Sam Olsen leads the tech consultancy practice of M&A advisory firm SI Partners.  He's based in Singapore. 

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