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Comments

fatcat

One obvious way to repurpose [semi-]deserted malls in the bay area is to create a 24/7 “Spa/Gym” with private bed/cabin similar to some Japanese airports. Technically not residential yet in direct competition with the rental properties in the aria.

Geoman

This is a pretty bold prediction.

I don't think you are necessarily wrong, but the more complex the prediction string of if/then, the more easily that chain can be disrupted by a unknown and unplanned repercussions, such as changes to human wants, needs, and behavior.

For example, if the cost of driving, in unproductive time, gasoline, and car ownership, drastically plummets, one effect might be that cars get bigger and more luxurious. Instead of an electric automated car, why not an electric automated motor home? I mean, I can sleep, use the bathroom, even sit at a desk and do work while I commute. In such a case, might not larger parking spaces be needed? Might I not be willing to drive even more? Perhaps the motor home becomes a part of my house - plugs in on return and becomes my home office? maybe the suburban mall becomes the "plug in" point for a vast array of motor homes, with the retail space converted to homes, and the open interior simply a common area.

Maybe it is the office buildings that are torn down to make way for more parking lots? And "office" is just a collected of hallways attached to mobile homes?

I sounds weird only because it is so different, but my point is things can change even more than you are imagining, and in even stranger ways. I can envision futures with no parking, or even more parking. With malls, or no malls.

Geoman

On your graph above, I would imagine retail and manufacturing to have continued their rapid growth since 2010 when the graph was created.

But I wonder about construction - how is it measured exactly? Gross value added is the measure of the value of goods and services produced. The graph suggests our construction is "less" valuable (less profitable) than it once was. But it occurs to me this may be a function of low interest rates - it is a well know phenomena that housing prices rise as interest rates fall - the homeowner can afford "more" home for the same monthly payment. So the productivity loss may reflect this more than anything. I guess just noting that construction is a different sector than the others on the graph, and may respond quite differently.

In addition land prices might have an outsized impact - productivity was much "higher" when land prices were cheaper. My construction cost in Los Angeles may be less, but the land cost is much more....so I show a negative growth in productivity?

Kartik Gada

Geoman,

Perhaps. But I am not so sure about bigger cars at that point. If most automobile transportation becomes autonomous, then there is a good chance that two-seater pods emerge, in order to not have as much unused capacity. Individual legroom may be more, but the total vehicle size may be less.

Existing lanes, turns, driveways, etc. are to embedded, so I don't think vehicles too large to use those will be widespread. Not to mention that most countries don't have that much room, so the volume of smaller vehicles will just be more (and hence have inherently lower price).

Overall, retail malls are being vacated, and the parking lot land represents dead capital. The huge amount of space devoted to retail in the US represents massive misallocation that will have a dislocating correction much more drastic than in countries that did not devote this much land to retail to begin with.

Kartik Gada

Geoman,

The interest rate point is interesting, and does seem to have a correlation with the timeline of construction productivity declines.

In that case, moving to ATOM-DUES is even more urgent, for construction productivity cannot rise until then.

The land price factor may be less when so much construction is redevelopment of land with old structures on them (i.e. demolished). For example, NYC is undergoing a huge skyscraper boom right now, the likes of which NYC has never seen. But it is still far more expensive to build a skyscraper in NYC vs. Shanghai, even after accounting for different labor wages.

The linked article from The Economist has more information on construction productivity declines.

Geoman

The one thing the ATOM does not do is create more land. Hence construction lags.

But the ATOM goes around the problem. The internet creates more land by making everything else need less (telecommuting, Amazon.com). The ATOM creates more land by removing cars from the road via automation, and doing away with car ownership. Or it could create more land by making it attractive for people to occupy the land with automated motor homes.

Or all of it, and a couple more things we haven't even dreamed of yet. Maybe automated drones flying us to and fro. Maybe Musk like tubes underground. Maybe gondolas like La Paz. The ATOM tries to do everything, and surges into every crack and crevice.

Thinking like the ATOM means accepting that everything is possible, anything can be disrupted, and nothing lasts, even our dreams. Last week's sure thing is discarded for next weeks promises.

Kartik Gada

Geoman,

People will have the option of calling for a pricier full-size vehicle that is large enough to lie down in, while others may want an economical two-seater pod. But overall, this disruption is continent on self-driving + electrical technologies making on-demand more economical than car ownership even for the lower-income car owners of today.

But yes, it is important to note that the ATOM relentlessly probes every crack and crevice, as you point out. That is why this construction productivity loss is huge. The Economist's article says that if it had merely kept up with the broader economy's productivity gain, annual world GDP would be $1.6T/year higher. Hundreds of millions more would have clawed out of poverty, vs. now.

One other area where the ATOM creates more is VR. People who live in a cramped little apartment can nonetheless put on the goggles and roam around 'their' custom mansion. They don't really own anything and can't show it to anyone out in the real world, but the dopamine rush to the brain is probably the same.

Sunny

Kartik - I am surprised you still have not included Blockchain in any of your posts as a disrupter. Matter of fact, I am curious to read your thoughts/opinion on this subject. I was dismissive of the technology until recently but have come around to its disruption, reason being its adoption (atleast the ledger part) by reputable and large multinational companies and banks. So the question is, first of all do you buy the disruption aspect of it and if so How pervasive and disruptive will be the impact of the associated crypto currencies that leverage Block chain, such Bitcoin and Ethereum.

Kartik Gada

Sunny,

I wrote about Blockchain here :
http://www.singularity2050.com/2016/09/deep-learnings-atom-effects.html

computer_guy524

https://hardware.slashdot.org/story/17/08/30/2152209/new-t-shirt-sewing-robot-can-make-as-many-shirts-per-hour-as-17-factory-workers

There ya go. Now, robots will take the jobs of even Chinese citizens, not just Americans :-) .

Computer vision is amazing.

Drew

I agree with Geoman in thinking that the construction productivity issue is a pricing issue more than _decreasing_ productivity. I can understand the Economist's belief that fragmentation and government contracts cause issues, but that is also the issue with eds and meds and even with those we don't see _decreasing_ productivity.

I did a quick Google search but did not find much useful information on the issue.

Kartik Gada

Drew,

Well, in a place where housing prices have risen greatly, but construction wages have not (like the Bay Area), isn't the high price a much higher profit margin for new residential and office construction?

In the Bay Area, builders are fighting tooth and nail to get projects approved, and the city councils only approve a small trickle out of the pipeline. Under a free market, the level of construction in the Bay Area would be five times what it is now, despite the low productivity of construction.

We keep hearing about how America can no longer build the same bridges and highways that it could build 50 years ago, and the productivity decline would seem to be the root cause of that.

It does appear that the same productivity metrics used for manufacturing should apply to construction, despite the interest-rate component (which again could be favorable given the higher prices inherent to lower interest rates).

But I am willing to be convinced otherwise.. Especially since that makes the ATOM-DUES even more necessary than before (as I said above).

Drew

Ah, that may be the issue. I was thinking productivity in terms of simply the physical construction itself. If they are measuring the entire process including design, permits, environmental studies, re-design, etc. and delays, then I can see a decrease in productivity. Simply comparing the original construction time and costs for the Twin Towers vs. their replacement for an example. I have my doubts that they are including the design time and legal costs for the productivity measurements in other industries, but those industries probably also have a lesser proportion of total costs coming from those costs. However, that isn't clear from the article. The comments on the article do call out the bespoke nature of construction projects and greater safety tradeoffs as well.

Geoman

I wonder if they added government productivity to the chart what we might see!

Also, you could argue that the replacements for the Twin Towers, despite taking longer, are in fact "better" in many ways. Safer, longer lasting materials, taller, etc.

Kartik Gada

Geoman and Drew,

There are certainly some improvements in skyscraper construction technology, which is why NYC is seeing an unprecedented boom in skyscrapers (many of which are much thinner for their height than one would expect).

But this still could be amidst an overall decline in productivity. The costs in a non-democracy like China or the UAE are much lower, beyond just labor. The legal and government costs in the US are prohibitively high, and I think the chart above takes the apples-to-apples productivity stats across industries. Construction, like education and healthcare, is very entangled in government.

Regarding government productivity itself, that is certainly terrible. It is one of the core disruptions AI is going to deliver, IMO. AI, among other things, makes tax avoidance more accessible beyond just the biggest corps and ultra-wealthy individuals. The tax regimes of high-tax countries have no chance of keeping up with that.

A.M.

"It will be cheaper for almost everyone to take the on-demand service all the time, than to own a car outright or even take the bus."

If the buses are autonomous too, then buses will retain a cost advantage, due to sharing a vehicle. There will be a spectrum of vehicle sharing, with accompanying prices. Perhaps mostly shared rides during rush hour, and more solo rides off-peak, depending on the ratio of road capacity to demand - denser cities would have a higher balance of high capacity transit. Road capacity itself may be diminished (e.g. narrowing streets due to increases in spatial efficiency of vehicles).

Regarding an unmatched skyscraper boom in NYC, that's a fiction. People just lose their shit nowadays any time something is built. NYC was adding 100k units per year in the 1920s (according to Ed Glaeser), as Houston recently was. One reason why: "40 Percent of the Buildings in Manhattan Could Not Be Built Today." *

Personally, I think autonomous mobility is closer, based on the rapidly increasing investment flows. There's already small rollouts of autonomous buses. I'm predicting initial consumer availability some time in 2019, on distinct routes. Having autonomous cars operate on the top 1% of roads by usage alone would be massively beneficial.

Geoman, the mobile homes thing is interesting. I could see that happening - but the aggregate amount of parking is so vast, ~6-8 spaces per existing car, due to government mandates, that mobile homes wouldn't swamp that. Plus, the politics don't align - when people cease to own cars, they won't have the incentive to demand that government requires all buildings to have parking, like they do now. So our existing parking will more than meet mobile home growth.

* https://www.nytimes.com/interactive/2016/05/19/upshot/forty-percent-of-manhattans-buildings-could-not-be-built-today.html?mcubz=0

Kartik Gada

A.M.,

Regarding an unmatched skyscraper boom in NYC, that's a fiction. People just lose their shit nowadays any time something is built.

Those are two separate things that are not mutually exclusive. The NIMBYism is extreme, of course, but there is nonetheless a wave of NYC skyscraper construction that is more than it ever has been. Note that this is not quite the same thing as building raw square footage, which is usually met with mid-rise buildings that are probably being obstructed by NIMBYism.

As per this link, 18 of the 25 eventual tallest in NYC are 2014 or later completions :

http://skyscraperpage.com/diagrams/?cityID=8

35 of the tallest 50 are 2011 or later completions. The Empire State will soon be all the way down to #8 in NYC, despite being #1 until 2014.

If anything, the ATOM has adapted to NIMBYism by making unusually slender buildings possible, so that tiny footprints get more value.

Similarly, note that 16 of the 25 tallest currently under construction across the US, including all 5 of the top 5, are in NYC :

http://skyscraperpage.com/diagrams/?searchID=78438204

This, of course, reflects far more poorly on the rest of the country than it reflects favorably on NYC. San Francisco only has 3 underway, even though it is even more expensive than NYC.

If the buses are autonomous too, then buses will retain a cost advantage, due to sharing a vehicle.

Well, the busdriver's salary is a very small part of the bus operating cost. The proportion for an Uber driver is far more (Uber takes only 20-30% of the fare as its cut).

But yes, there will be a spectrum. Carpools of 2-3 riders will form dynamically, even if some deride that as a 'microbus'. Most rush hour traffic could easily form into dynamic, on-demand 2-3 person carpools. Niches like an entire camper/trailer as Geoman describes, are also possible.

A.M.

Ah, I was wrong about the skyscraper boom! Thanks for the correction.

I wonder why it's occurring - maybe between high land prices, mandatory highly skilled union labor and difficult permitting, that you might as well build as much as possible once you get everything together.

Well, the busdriver's salary is a very small part of the bus operating cost.

Actually, driver costs are a very high portion of bus costs:

"Driver labor, and related time-based costs, are the dominant element – often 70% or more — of transit operating budgets in the developed world. The only exception is a fully automated driverless service, such as Vancouver’s SkyTrain." - Jarrett Walker, a leading transit planner.

A manned mini-bus (say 10-15 seats) doesn't make much sense, because it can't carry many people at peak times while you still have to pay for a driver. With autonomous buses, having multiple smaller vehicles doesn't cost much more, and it allows you to run service more frequently (say 15 buses per hour instead of 5) which increases ridership.

It also means you can tailor your stops along a fixed route to the riders aboard, or at least have closer stop spacing, with less of a time loss to other riders.

http://humantransit.org/2011/07/02box.html

Kartik Gada

I wonder why it's occurring - maybe between high land prices, mandatory highly skilled union labor and difficult permitting, that you might as well build as much as possible once you get everything together.

That seems to be the case, since many of those buildings are far thinner than even appeared possible before. They are making the most of what little land has become available, using new technologies that enable buildings 12 times taller than their width despite heights above 1000 feet.

That is still better than San Francisco and Los Angeles, where very little is being built at all.

Actually, driver costs are a very high portion of bus costs:

That is surprising. Maybe busdrivers are paid far above market due to it being a unionized job. Otherwise, I can't see how that can be the case, given that the bus itself is just 3 mpg and over $300,000 in purchase price.

Autonomous driving will make most contemporary buses obsolete, even for poorer people, due to the point-to-point advantages. Although ATOM-DUES is needed as well to ensure that almost all can afford on-demand cars.

Kartik Gada

Here is another visual of how much is being added to NYC, 2014-2021 :

https://static.dezeen.com/uploads/2016/06/new-york-visualisation-skyline-2020-skyscrapers_dezeen_936_0.jpg

Anthony Scalzi

The under-construction 111w57th is even skinnier than that. At 65 feet wide and 1438 feet tall, it has a ratio of 22. It happens to be being built with nonunion labor.
Another proposed tower at 262 5th ave is 1050 feet tall and 50 feet wide for a ratio of 21. Both towers sit on lots that were formerly just a couple tenements. For zoning purposes though, developers still needed to buy up the air rights many neighoring buildings. These airrights tend to cost anywhere $200-300 per buildable square foot. A change in zoning could eliminate those costs overnight.

Fun fact-the Empire State building would be pretty much impossible to build today under current zoning since it has a floor/site area ratio of 25 and the current limit is 15 in much of midtown Manhattan. This is a big issue for developers that want to rebuild older office stock, since if they tear down an older overbuilt building, the new building will have to be the smaller size stipulated by the zoning.

A common justification given for these zoning restrictions is that transportation infrastructure couldn't handle the demand from larger buildings. That goes back to poor productivity for infrastructure projects.

Bob Reisner

I strongly agree with the forecasted strength of the disruptions but I do think there is some additional points that might make for a faster arrival.

Batteries

The biggest missed point is the residual value calculation on ICE vehicles that businesses and consumer financing entities will make once it becomes certain that battery cost will achieve a $50 KWH market clearing level. Let’s assume that, consistent with your chart, the $50/KWH battery cost will be achieved by 2024 with this certainty seen somewhere around 2020-2022.

One the $50/KWH level becomes certain, there will be a rush to build dozens of battery factories the size of the Tesla gigafactory and automobile manufacturers will rush to move the vast majority of production to an electric platform.

The auto companies will understand that beginning 2024, ICE vehicles will be hard to sell, requiring lower prices and ever higher marketing costs. The reason is that ICE cars sold from 2022 on will not have the normal expected financial life. And it will get progressively worse as battery costs drop to the $25/KWH level in the late 2020s.

EVs will have half the cost of an equivalent ICE vehicle when fuel, repair and maintenance costs are computed. The simpler EV has a longer service life which makes it even more attractive.

So businesses will defer ICE purchases to get the less costly EVs. Banks and finance entities will shorten the projected financial life of ICE vehicles which will substantially raise consumer monthly costs. And the consumer will only choose an ICE vehicle as a last resort because they will know that the ICE vehicle will have little value when paid off.

And EVs will have great residual values because of their operating cost structure and longer projected life. Which means lower monthly costs for initial purchases which puts even more downward pressure on ICE vehicle prices.

ICE will be in a sharp downward production spiral in the mid 2020s and almost gone by 2030 in first world countries.

Autonomous Vehicles

Autonomous vehicles are going to be here way before 2032.

Google /Waymo has millions of autonomous miles on real roads today. And billions via simulation. At the beginning of 2017, a driver had to touch a wheel only once per 5,000 miles. And moving quickly to once in a 100,000 miles in early 2020. We will see consumer sales of fully autonomous Self Drive Vehicles (“faSDVs”) in the early 2020s.

And they will also have a very fast adoption.

Once the true availability date is known (say 2022), at least two years earlier purchase behavior will change. Car rental, Taxi, Rideshare, sales, and service companies will defer human driven vehicle (“HDV”) purchases around 2020 or earlier. The productivity impact on businesses of the faSDV is huge enough that if a company has too many HDVs in use when faSDVs become widespread, they might be so uncompetitive as to go out of business. It’s a binary event, the companies without faSDVs die.

Selected consumer categories will also defer purchases of HDVs because the value of the faSDV is so great. Examples include commuters, families with two cars, elderly, and the physically impaired. And of course, the coming availability and then real availability of faSDVs will crush the residual value of HDVs.

And the story becomes like the battery one above. Some buyers will not buy a HDV at any price. HDV prices fall and marketing costs rise for everyone else. Declining residual values means higher monthly HDV costs and initially faSDVs will have lower costs because of longer life spans.

Auto manufacturers get crushed again and faSDV adoption accelerates at a high level.

============

Retail is going to be far worse than projected here. And construction is already moving quickly.
Watch this 30 story building go up in a bit over 15 days including interior finish: https://www.youtube.com/watch?v=ajlUVSiUvWg
Watch this 57 story building go up in 19 days: https://youtu.be/AhLk7L1B_fE

I’d write more on these two but this comment is waaay too long!

Kartik Gada

Anthony Scalzi,

Wow. A skyscraper over 20x taller than its width will be a revelation. It gets around many of the horrid zoning and permitting problems.

I am surprised that an alliance between renters and construction companies cannot sue for removal of some regulations.

The 'transportation cannot handle demand' excuse used by the obstructionists is a poor one. More supply, as long as the ratio of office to residential is maintained, does not cause more traffic, since more people can live closer to their work. Even weaker is the 'it changes the character' excuse, even though whenever something new is built, no one even remembers what was there before. It goes to human hardwiring, where weaker people are afraid of change, as their survival is dependent on others. More self-sufficient people are more enthusiastic about disruptive progress.

Kartik Gada

Bob Reisner,

Remember that for autonomous vehicles, the real benefits are when over 80% of all cars are autonomous. The first 10% doesn't do much. Hence, I don't think this level of diffusion will happen before 2032. Remember, this is a technology that has been hyped in the past, only to miss deadlines. Progress is happening, but average people are slow to adjust, and regulators even slower.

Plus, the BSkyB construction videos have been discredited as just demos. The various videos of the time-elapsed 30-story building are almost 5 years old, yet they have not demonstrated any volume production, otherwise they would have built hundreds across the world by now and there would be wholesale deflation of existing multi-story building prices. Plus, they announced a 200-story 'Sky City' back in 2013, only to deliver nothing. Broad Group is a Chinese company that has no clue about marketing, PR, or branding.

Things are moving quickly, but not *that* quickly.

Bob Reisner

Kartik Gada,

When faSDVs become available at HDV prices will anyone want the 'obsolete' HDV? The HDV will lose all its resale value when faSDVs become available in volume. And Taxis/Rideshare/Rentals will not buy HDVs at any price. faSDVs will be a production capacity issue, not demand. And manufacturers have the same problem ... no one will buy the HDV once the faSDV is available.

The transition will be very quick.

Kartik Gada

Bob Reisner,

Note that of the 100M+ HDVs in the US that are under 6 years old, many were bought with debt. If those lose resale value quickly, most people won't even have the money to buy a new faSDV. They will have to keep using the HDV for a few more years, whether they like it or not. The average household can't just take a $20,000 hit to upgrade.

The three stages are :
1) When does a faSDV achieve complete cost parity with an HDV?
2) When do faSDVs achieve 80% or more penetration, enabling VtV communication?
3) When do faSDVs (along with EV capabilities) make on-demand more efficient than ownership?

I say it takes until 2032 for Step 3 to complete, partly because hundreds of millions of people worldwide will be left holding the bag on their HDV that they can't afford to ditch. Sooner would be better, but I wouldn't bet on it. Remember that faSDV progress 2007-present was much slower than they claimed it would be in 2007 (when they acted like it was just around the corner).

A.M.

"I am surprised that an alliance between renters and construction companies cannot sue for removal of some regulations."

Renters act like NIMBY homeowners when they're under rent control, because they're (mostly) insulated from rent increases. And in California, the construction unions seem a lot more powerful than developers and landlords. Our Democrat governor, Jerry Brown, tried to pass a law allowing more housing without special zoning approvals, but the bill went nowhere because the construction unions didn't like more building being allowed if high wages weren't mandated [1].

" They will have to keep using the HDV for a few more years, whether they like it or not. The average household can't just take a $20,000 hit to upgrade."

They can't afford not to use them, because the marginal cost of driving your ICE will be higher than the total cost of using an SDV, which will be fleet owned and operated.

I recommend this white paper on SDVs: https://static1.squarespace.com/static/585c3439be65942f022bbf9b/t/591a2e4be6f2e1c13df930c5/1494888038959/RethinkX+Report_051517.pdf

[1] http://www.spur.org/publications/urbanist-article/2017-01-11/bye-bye-right-housing

Kartik Gada

A.M.

They can't afford not to use them, because the marginal cost of driving your ICE will be higher than the total cost of using an SDV, which will be fleet owned and operated.

Yes, but that takes a while, since the sunk cost of the HDV has to factor into the equation of what is truly cost-parity. The average new-car transaction price in the US is $34K, or over 60% of the annual household income. If 100M US cars are under 6 years old, that is a lot of loss-swallowing that has to be done, particularly if debt-financed. 80% penetration of faSDVs takes until 2032.

If it really does happen more quickly, all the more reason why the ATOM-DUES is urgently needed, as the sudden devaluation of 400M HDVs worldwide, many of which are debt financed, can cause a recession.

Renters act like NIMBY homeowners when they're under rent control, because they're (mostly) insulated from rent increases.

In California, very few are under rent control. It is somewhat common in SF and Berkeley, but not in Silicon Valley.

The construction unions are villains, as you point out, and they are part of why construction productivity has gone backwards over time. One more reason to cheer greater automation and factory-built modular construction, as their artificial union wages experience the same disruption that OPEC and taxi medallions saw.

Fatcat

Yes, but that takes a while, since the sunk cost of the HDV has to factor into the equation of what is truly cost-parity

Sunk cost will weight on the mental inertia. However, sucking tov the status quo because of the money spent is a sync cost fallacy

https://youarenotsosmart.com/2011/03/25/the-sunk-cost-fallacy/amp

https://www.google.ca/url?sa=t&source=web&rct=j&url=https://en.m.wikipedia.org/wiki/Sunk_cost%23Loss_aversion_and_the_sunk_cost_fallacy&ved=0ahUKEwinvqLX4JbWAhVs7IMKHXjtC1IQygQIcDAN&usg=AFQjCNGG_q1sH1VcODTPGsvjwDMGCmXLJQ">https://en.m.wikipedia.org/wiki/Sunk_cost%23Loss_aversion_and_the_sunk_cost_fallacy&ved=0ahUKEwinvqLX4JbWAhVs7IMKHXjtC1IQygQIcDAN&usg=AFQjCNGG_q1sH1VcODTPGsvjwDMGCmXLJQ">https://www.google.ca/url?sa=t&source=web&rct=j&url=https://en.m.wikipedia.org/wiki/Sunk_cost%23Loss_aversion_and_the_sunk_cost_fallacy&ved=0ahUKEwinvqLX4JbWAhVs7IMKHXjtC1IQygQIcDAN&usg=AFQjCNGG_q1sH1VcODTPGsvjwDMGCmXLJQ

Kartik Gada

fatcat,

Sunk cost fallacy is the reason why users will not ditch their relatively new HDVs for faSDVs. If anything, this delays the migration and ensures that this takes longer, not shorter.

Why would you think sunk cost fallacy makes it easier for the user base to take the $20,000 average hit and move to faSDVs?

Remember that the full vision requires multiple disruptions, so even if one is slightly faster than the others, it cannot do that much until the others catch up.

I still say 2032 for the above vision.

Bob Reisner

To: Kartik Gada

(Gada in normal type and my comments between /***/ marks)

Note that of the 100M+ HDVs in the US that are under 6 years old, many were bought with debt. If those lose resale value quickly, most people won't even have the money to buy a new faSDV. They will have to keep using the HDV for a few more years, whether they like it or not. The average household can't just take a $20,000 hit to upgrade.

/***/Not all HDV will be replaced immediately because USA production & sales capability is less than 20MM units per year. The faSDV move will compress a 10 to 12 year cycle to 5 to 7 years. Everyone will not move immediately but the vast majority will move much sooner than the normal replacement cycle. Some buyers will not move to a new vehicle but will end up with short term faSDV rentals or a 'timeshare' version of a rideshare faSDV. They might even save money even with a HDV disposal loss./***/

The three stages are :
1) When does a faSDV achieve complete cost parity with an HDV?

/***/faSDVs do not need to get to cost parity. They provide unique capabilities to taxi companies, companies with field personnel, elderly, disabled, those that shrink from 2 HDVs to 1 faSDV, long distance commuters, etc. Cost parity might be as early as 2022 but PRICE parity will not be for 5 to 7 years because high demand and shortage of production will allow for higher manufacturer price./***/

2) When do faSDVs achieve 80% or more penetration, enabling VtV communication?

/***/ 80% penetration might be late 2020s but no later than mid 2030s. But V2V communication is not that important. V2V helps with some edge conditions and traffic flow but not really a driver in vehicle automation. /***/

3) When do faSDVs (along with EV capabilities) make on-demand more efficient than ownership?

/***/For a substantial part of the population, on demand is viable on day 1 (think urban dwellers). Just a bit later as a way to eliminate suburban second & third vehicles. But there will always be consumer owned faSDVs. Demand peaks will always be an issue (by definition) as will the desire for some level of vehicle personalization and customization. A lot less ownership than now but still very substantial. Maybe even still a majority./***/

I say it takes until 2032 for Step 3 to complete, partly because hundreds of millions of people worldwide will be left holding the bag on their HDV that they can't afford to ditch. Sooner would be better, but I wouldn't bet on it. Remember that faSDV progress 2007-present was much slower than they claimed it would be in 2007 (when they acted like it was just around the corner).

/***/I've stayed away from world wide adoption predictions because faSDV adoption in some second world countries and almost all third world countries might be problematical. 2007 era predictions were all over the spectrum ... from never to tomorrow. My guide has been Google pronouncements and they have been off by only a year or two. The faSDV is an extraordinary product and the development speed has been astounding./***/

Kartik Gada

Bob Reisner,

80% penetration might be late 2020s but no later than mid 2030s.

This is what I am saying. 2032 is my prediction for the whole thing, as there are many components (including the e-commerce and real-estate component). Remember, the goal is to force real-estate repurposement.

It is not merely about V2V, but getting the majority of drivers towards on-demand, which requires both faSDV and electric capabilities to truly cause the migration of almost all current car-owners.

We aren't disagreeing by much. I am focused on when there is truly mass adoption of both faSDV and electric, leading to on-demand being 80-90% of all rides, leading to huge pressure to repurpose all the land wasted on parking lots and retail strip malls.

Even the first 50% won't do it. 80%+ penetration is needed, which is why it takes a while. The first 50% might take the $20K hit in stride, but the next 30% will hold out for a long time, even if the marginal driving cost per mile of an EV is lower. They stuck are in a trap for a few years due to the sunk cost and inability to just get out of it unless on-demand is really very cheap.

Geoman

When people own cars, they use them only about 4% of the time on average. The rest of the time we're in our houses and offices, and the cars are sitting idle. So in theory there are 25 times as many cars as necessary. 25 times more parking spots.

But that is not actually true.

If everybody's 4% at different times of the day, a dozen people could share a single car between them with no problem. The problem is that most of them want to use their cars at exactly the same times of day, before and after work.

So we happily pay for the idle time of the car, in order to get the reliability of the car always being available to us, and us alone, and not having to share.

Taxis have been around for 100 years, and they seem to have not reduced car ownership one tiny bit. I think it is bizarre to expect, just because we replace the cabdriver with a robot, or the petrol engine with a battery, suddenly taxis are going to rule the world. Why do you expect human nature to suddenly change?

So, no I don't think this version of the future is necessarily going to happen. It makes perfect sense mind you, and is totally logical, but human beings don't always act rationally. I think it will take a lot longer for this future to come about than most people think.

I think it is just as likely there will be even more cars on the road - automated driving means loads of elderly can get out and do more. It means children can cruise around town. It mean driving long distances will be even easier. if electric cars are cheaper, why not have 2 or 3 in the driveway? heck, one for every member of the family, including the dog, who can take himself to the park!

Kartik Gada

Geoman,

Taxis have been around for 100 years, and they seem to have not reduced car ownership one tiny bit. I think it is bizarre to expect, just because we replace the cabdriver with a robot, or the petrol engine with a battery, suddenly taxis are going to rule the world. Why do you expect human nature to suddenly change?

Because cost will be much lower. Uber did a pilot where a few people were allowed unlimited Uber usage for $120/month, and they did not use their own cars anymore at all.

Not to mention that the real savings of an EV happen from 150,001 to 300,000 miles of the car's life, which is hard to get to under private ownership (especially if the owner wants the electronics of the car to not be too obsolete by that time).

Plus, many parts of the world don't have nearly as much private car ownership as the US. This includes developed countries. The pressure to get more value out of urban and suburban land is latent, but real. Note the chart in the article about retail space per shopper. The US really overshot and will correct this error (at least in expensive big cities).

It mean driving long distances will be even easier. if electric cars are cheaper, why not have 2 or 3 in the driveway?

I think this is the very reason that on-demand will be the primary usage, rather than ownership. You yourself pointed out the advantages of Uber just recently. Now imagine Uber at 1/5th the cost via faSDV, plus tons more new land available from demolition of many strip malls and their parking lots.

I agree that a few hobbyists will own several cars, but the same goes for horse ownership in modern times.

We shall see.

Geoman

No comment on the electric automated doggie Uber? I was quite proud of that ridiculous leap of logic! It could be a cute little tiny car. It could drive up and whistle for the dog to come down and get in. Dogs love to drive around. They also love sniffing where other dogs have been. Win-win if you ask me.

Joking aside, I always think the future will be much weirder than we can imagine. So far it is certainly not what I expected as a kid - some things I thought would never change have changed, and others I expected to be long gone are still hanging about.

Kartik Gada

Geoman,

Joking aside, I always think the future will be much weirder than we can imagine. So far it is certainly not what I expected as a kid - some things I thought would never change have changed, and others I expected to be long gone are still hanging about.

Perhaps. But I think it is more about finding the true trendlines, rather than the 'decoy' trendlines. This blog has a very high success rate of prediction (over 80%), going back almost 12 years now.

It is also possible to quantify and to some extent rank how overdue a given disruption is. This does not enable a timing prediction, but does enable quantification of the speed and degree of eventual disruption.

Plus, there are many assumptions people make, that ought not be made. For example, I don't think humans will ever colonize space en masse. It will be AI, for reasons described elsewhere. Another example is the assumption that income tax is mandatory and unavoidable. I contend that it is not necessary after 2025 or so.

fatcat

I would like to nominate something that is well-known for the ATOM of the month: Ubiquitous intgernet connected cell&smart phones .

While there is nothing new or revealing they illustrate the technology pattern. First mobile phones were luxury and gimmicks in 80s. Then they came to the masses in the 90s. There were some attempts at smart phones/mobile computers, albeit not very successful. Somewhere in the early 00s the cell phones started displacing landlines. The payphones almost disappeared. I still can see a few here and there but have to make a real effort.
When the mobile internet not only appeared but got a standard smart-phone/phablet then the smatphones started displacing laptops and desktop computers. While arguably less capable and less ergonomic they are always available and pack GPS/camera/camcorder/pda that fits in your pocket.

In the last few years there is a noticeable progress to integrate credit card and payment processing with the phones (in Japan they had it for a really long time, and technically speaking, it is not that hard to be implemented even using the dumb cell phones)
Ubiquitous cell phone cameras are changing the political and social landscape (where are the blurry pictures of those UFOs?). As a side benefit cheap high speed internet changes traffic reporting and navigation.

There are somewhat successful attempts to have realtime weather and traffic alerts.
As both the mobile internet and the wearable hardware become more affordable there will be new developments we cannot even foresee.

What can we see in the next few years?
• Always on cameras and microphones that get aggregated for form real-time models and send back to users to be used as enhanced information or augmented reality. (Surveillance state rejoice)
• All kind of personal assistants that can comparison shop just using a picture of a product or using some form of AR.
• PR nightmares and mitigations due to many cameras and microphones always available almost everywhere (actually we already had one recent example with American Airlines)

Sunny

Hi Kartik
I think you should do that post you talked about in response to one of the posters about explaining your position on the market and the economy. I say that because everyone from Robert Shiller to Hugh Hendry have thrown in the towel. Hugh just closed his Eclectica fund and the fed just announced that they are trimming their balance sheet essentially the opposite of QE. So for those of us who have bought into the ATOM, it is hard to understand the correlation or lack thereof in this to the ATOM. I have forwarded the ATOM to a lot of my friends and acquaintances and they are highly skeptical of the various points being made in the ATOM and keep pointing me to share buybacks of various companies and things such as the Fed announcement today, which frankly even has me confused. It would be great if you could do that post you talked about, perhaps provide some clarity on what is going on and how it applies to the timeline and effects put forth in the ATOM.

Kartik Gada

Sunny,

Yes, I will do that before the end of the year, as I said 2017 would be the start.

Note that they have not yet started trimming the balance sheet. They are just talking about it.

Meanwhile, the ^vix has been around 10 for most of the last 4 months. That is one of the most reliable indicators of a top (in 2006-07, it was this low for only two months).

Buybacks? What does that have to do with anything? If people tell you that 'buybacks' refute anything about the ATOM, they are unclear about the nature of both.

Share buybacks are a negative for economic growth :
https://www.forbes.com/sites/aalsin/2017/08/09/how-stock-buybacks-cause-economic-stagnation-a-qa-with-robert-ayres-and-michael-olenick/#6067a9316dd4

It is not a sign of bullishness at all.

Don't worry about what laypeople think, and even less about armchair bloviators who think 'buybacks' are evidence that refutes the ATOM. They might still think QE causes inflation, even though oil and gold have fallen by half amidst $20T of cumulative printing.

More to follow.

agimarc

One of the things I am hearing about construction is that the influx of illegals has all but taken over the labor pool in the industry. A large, new, growing, unskilled workforce would tend to keep wages, productivity, and innovation low. Wonder if this is the reason for the anomaly. Cheers -

fatcat

Hi Sunny,
So for those of us who have bought into the ATOM, it is hard to understand the correlation or lack thereof in this to the ATOM
Another counterexample would be the price increases in both Apple and Pixel2 phones. That’s basically an antithesis of ATOMs idea of constantly diminishing cost on electronics and semiconductor-related products

Kartik Gada

fatcat,

Another counterexample would be the price increases in both Apple and Pixel2 phones. That’s basically an antithesis of ATOMs idea of constantly diminishing cost on electronics and semiconductor-related products.

Not quite, since that is a branding exercise. Samsung and LG phones cannot do this.

Apple has merely done what Gucci, Prada, and Burbury have done to their products, and this won't last too long either (note how iPods are gone since they are fully absorbed into the iPhone). A huge markup due to marketing alone will always dupe the brand-obsessed (this is more common for products where most customers are women, as it the case with iPhones). The ATOM does not compress that, but it *does* compress the resale value of older phones (iPhone 6, iPhone 5, etc., which do indeed sell for much less since the brand factor is gone).

fatcat

Hi Kartink,
> Not quite, since that is a branding exercise. Samsung and LG phones cannot do this.
In fact that’s what Samsung was doing the last couple of years. Slowly creeping into the premium segment. We can rationalize this behavior in different ways. One can argue that the value(as of utility) of having a phone increases and the people are simply willing to pay more for something more useful, albeit from a fashion POV.

And yet , it is surprising to have a modest technological improvement paired with rising prices…

Kartik Gada

fatcat,

And yet , it is surprising to have a modest technological improvement paired with rising prices…

The branding component is interesting, yes, as the economics of fashion accessories are a part of the tech product now, which was never possible for any tech product before. If Intel and Microsoft could have done it with their products, they would have.

But the actual components of the phones (processor, memory, display, camera, battery, etc.) still see price deflation at ATOM rates. As do older phones on Craigslist. If there was any evidence that the components had stopped seeing rapid cost improvements, that would be notable. But that has just not happened.

Sunny

Hi fatcat
Good Observation, I missed that.

I think both you and Kartik are on to something though about the branding part, especially the PREMIUM piece of it that you mentioned. The thing is though, this is what happened to Blackberry. Remember when Blackberry was a status symbol. Everybody knew you had arrived, because now you had a blackberry and because most (the overwhelming majority) was issued by corporations/companies. You had to be somebody to get one. And look where that is now, it is actually sad to see what happened to a once mighty company. At its height RIMM owned 70 percent of the market. The point I am making is branding especially the premium kind is very fickle. And if that is what iPhone is banking on then it doesn't have a lot going for it, especially with the disruption that the ATOM will/is bringing (the Blackberry messenger to date remains the MOST effective messenger on mobile platforms and yet Blackberry is now at 1 percent usage). I have wrestled with this a lot, so I am curious to hear both your opinions, about my theory below. It is indeed (the iPhone pricing) an antithesis of the paradigm shift that is coming with the ATOM. So why then, why is the iPhone managing to keep this premium. Here's my theory, while the iPhone was indeed a status symbol and hence the association with Prada that Kartik illustrates. I think the reason why iPhone is managing to keep the margins so high is because the ecosystems for the iPhone is significantly higher, magnitudes higher then most mobile platforms when it comes to commercial usage. The API's being built for it are exponentially higher then the ones for android or other platforms. I personally think and as someone mentioned in this blog in the comments (maybe it was you fatcat)this is the closest thing to the Betamax and VHS comparison there is. From a coolness perspective, the Samsung and Lg are just so much cooler. So then it must be the adoption, the ecosystem - which is why Kartik I would have to agree with fatcat this is the antithesis of the ideas in the ATOM. That then, leads me to believe, perhaps the ideas of the ATOM will be EVEN MORE disruptive then you postulated. Because I would argue the ATOM will bring to light the idiocy of human nature and will make it visual, as in it will be no longer just "a saying" but a fact. That while there are better and more functional products out there. The product that survives and "bafflingly" thrives, is the product that might be inferior yet more prevalent because of a baffling logic. What could be more disruptive then to make transparent the fickleness of human nature and maybe illuminating that, might actually bring about the TRUE disruption that technology is not being adopted like it ought to be - this I would argue would also apply to the logic that you have used for the real estate mess in the bay area. I am curious to read what both of you think about this.

fatcat

Hello Sunny,
Blackberry vs APPL / Android
I would say that Blackberry a whole different story. Their main market is mainly large corporate, with some spill-over to the consumer segment. They had more or less competent platform but were too smug to adapt to the emerging (at the time) mobile app duopoly. As for status/virtue signaling, that was true. You show an expensive (and somehow rare) device that also was coupled with an expensive plan. And your company was paying for it because you were a valuable enough resource to be available all the time, roaming included. On the individual level it wasn’t fashionable enough and had very little value outside of business-style emailing/messaging. (as an anecdote I remember some 10 years ago, at the company I worked, that one of the main selling points of the models given to the employees was that there were no phone cameras …At the times when the phone cameras were all the rage on the flip-phones…) And yet the blackberry was never a fashion object on the order of jewelry or purses.
There seems to be some wannabe branding from both Apple and Google. Even Samsung is trying to play the game. It is all natural for the phone makers to try to climb the premium-price ladder where the most profits can be made. However, those are niche, albeit large with large percentage, approaches.
Now the smartphones/phablets have become an entertainment venue for the average person. And we have billions potential users here and only a precious few in the corporate sector. And even they would like to have the multimedia features. And that’s how RIM stopped being relevant. They should have merged either with Apple (luxury tier of the el-cheapo devices, customers with potentially deeper pockets) or one of the big Android producers (huge user base looking for value deals). But they were too late to the game. Too little , too late…
To make the long story short, Apple and Android (not google alone) opened huge user base and could afford to develop and monetize better platforms. And the higher user base with lower costs crept on the RIMs turf with richer and better maintained app platforms.

fatcat

continued
Apple & Android vs others
Microsoft tried to get into the mobile OS game. In fact they had windows CE in the late 90s and it was even useful. Then had to start over with windows mobile in the face of roaring growth in iOS and Android
There was Nokia with Symbian. And there were some other niche OS systems. However, APPLE was first on the mobile mass multimedia market. They biggest innovation was to twist the elbows of the music copyright holders and introduce the practice of paying 99c per song. Movies are a nice icing on that cake. Don’t forget that iOS at the beginning had no public API. At some apple added javascript/html-only apps which were basically glorified web pages. And yet the iPhone was an instant success because it was a personal entertainment revolution, which was closed enough to appease the music industry fears.
Android has come a bit later, with worse performance but it was open from the beginning. Probably too open for DRM music and videos, though.
At the same time all other platforms were failing either to attract developers or weren’t even trying. The network effect was so huge that if you are an aspiring mobile app developer you pick iOS or Android, write the app and if it is successful enough, you port it to the opposing system. And that’s why all other ecosystems were at huge disadvantage. Probably if Apple didn’t release the iPhone android would be a RIM-like device with buttons. But then it would have even less competition on the market.

fatcat

Hi Sunny,
I think the reason why iPhone is managing to keep the margins so high is because the ecosystems for the iPhone is significantly higher, magnitudes higher then most mobile platforms when it comes to commercial usage. The API's being built for it are exponentially higher then the ones for android or other platforms.
I don’t think that API-wise APPLE is better. In fact, for many years it was lagging behind Android features. However, what Apple has is paying customers that are willing to pay even more for content and services. Android was a poor’s man Apple, where it was harder to get blood out of stone, with many competing producers and pricing racing to the bottom.
Samsung managed to climb to the premium segment with their gorgeous amoled screens and beefed-up specs. And google introduced the pixel phone which had worse hardware than Samsung (which arguably was on par with apple)… at essentially the same premium prices.
It is only understandable that each producer wants to milk the market as much as possible. But the way to entice the people in is to either reduce the prices (old Samsung and the current Chinese producers) or give much higher perceived, if not real, value.
But what we see is an iterative improvement with INCREASED nominal prices. Is that a fluke ?

Kartik Gada

fatcat,

But what we see is an iterative improvement with INCREASED nominal prices. Is that a fluke ?

Not so much a fluke, but rather pulling in the brand premium psychology to temporarily boost the price of a fashion accessory. Premium car brands have done the same for decades, despite only small deltas of technological superiority over middle-class cars.

The individual components of an iPhone continue to see expected technological price declines, and older iPhones on craigslist experience the same rate of decline as any other consumer electronics product.

Apple is the only consumer electronics company with such margins (even if it makes its own chips and OS). Samsung has MUCH lower margins than Apple. Other comparables are/were HP's consumer business, Dell, etc.

fatcat


Hello Sunny, Kartik,

… apparently I cannot convey my opinion succinctly …


Electronics Price Creep
We can explain away the price increase with the status symbol and fashion spending. It is very real ( what can you give to the loved ones that is nice, not cheap , and yet not prohibitively expensive and is useful and not pure waste of money :) ? )
Another hypothesis could be that the users are getting more valuefrom those devices and are happily willing to spend more. I guess that one is real too. We have more mobile websites, mobile apps like banks and trading, shopping, navigation, traffic, weather and all kinds of personal assistants. There are some immature features like VR/AR, but they are just expensive toys at the moment. This idea is consistent with semiconductors attracting ever larger investments to grow their share of the economy above Moore’s law alone.


Slow-down in ATOM
… If Intel and Microsoft could have done it with their products, they would have…. the actual components of the phones (processor, memory, display, camera, battery, etc.) still see price deflation at ATOM rates…

And here comes the worrying part. The deflation is slowing down and , in some segments, even gets reversed:

• The new surface pro 4 prices are higher than SP3.
• The RAM prices are trending up for the last year (https://pcpartpicker.com/trends/price/memory/)
• Storage prices , both SSD and HHD are up too (https://pcpartpicker.com/trends/internal-hard-drive/)
• AMD forced Intel to decrease prices somewhat.
• Even mobile phones are improving the performance about 15-30% a year

All this might actually signal that the technology(semiconductor, specifically) are hitting some kind of wall.
The lithography processes are becoming increasingly harder to improve. And probably we are close to the end of the C-MOS paradigm… What will be next ? Will be another Moore’s law ride for the next 30 years? Who knows…

Kartik Gada

fatcat,

• The new surface pro 4 prices are higher than SP3.

This is only notable if it sells in volume.

• The RAM prices are trending up for the last year

RAM is volatile, but the trend is always downward. RAM prices rose in 1999-00, only to crash 90% in the bust. It never got to the highs again. Same for storage.

The lithography processes are becoming increasingly harder to improve.

The ATOM came in, since parallel computing processes Neural Nets at 20x to 50x the speed of serial processing, even if the parallel processor is on the same lithography process. So computing is advancing at the same race, even if transistor shrinkage is falling away. Computing has often graduated underlying technologies (and architectures) and moved seamlessly to new ones.

Will be another Moore’s law ride for the next 30 years? Who knows…

Moore's Law, no. That is dead by 2022. But exponential progress in computing efficiency? Yes! That will not stop (100% guarantee). and Moore's Law was merely a subset of that.

Geoman

You know, in business school we discussed something called the duopoly. The way it works is this - in every market segment there must be two or more players. Usually the minimum is two majors, and one minor. One major exists solely to oppose the other. The third (if it exists) is there for those who don't want to support the big guys.

Ford, Chevy, Chrysler
Coke, Pepsi, RC
McDonalds, Burger King, and the rest.
Dunkin and Starbucks
Marvel and DC
windows and apple OS

The question is always why this happens. It seems to be a psychological issue with people. So neither apple or android can ever corner the phone universe. But because of marketing synergies, the number of brands is probably reduced to two strong and one weak.

By the way - this is the weird power of Amazon - they are finding ways to be the number 2 choice for everyone for everything.

Right now you are seeing the shake out in streaming video - I'm going to go with Netflix, Amazon and Hulu. All the rest will fade off pretty quickly.

Sunny

Hi fatcat
Thanks, good explanation.

Hi fatkat, Kartik
Ok, so the next logical step up or follow up question/questions is:
how disruptive will the cloud be to all this. What I mean is, with the increase in bandwidth and reduction in latency most personal computers have become dumb terminals. You only need a medium to connect to the web/network and the web/network does the rest, all the computing is done for you. You just get the output - right. SO How do you envision this playing out for the mobile platforms. Do you see the cloud changing the way phones/MD will be used, as in as dumb terminals as well ?. And if so, what do you foresee as the timeline.

Anthony Scalzi

Yellen: Fed is perplexed by chronically low inflation
http://www.foxbusiness.com/markets/2017/09/26/yellen-says-fed-may-have-misjudged-low-inflation.html

Gee, I wonder what could cause that....

Kartik Gada

Anthony Scalzi,

Yes. Thank you for noticing that. It is astonishing that the 'best' economists in the world (i.e. the most formally decorated within the established hierarchy) still refuse to see what is in plain sight, even as the ATOM publication has gotten 400,000 pageviews.

Nonetheless, I am making headway only at an inch-by-inch rate. But we will get there.

Joe

• I am making headway only at an inch-by-inch rate.

I have tried to get some interest in your ideas on the Reddit Basic Income subreddit ( not the best place, I know ) but it is a bit of a slog. Most people there seem to think the only way to a UBI is more taxes or Socialism. Quite disheartening.
Kartik Gada

Hello Joe,

Thanks for doing that.

Yes, it is very disheartening. Especially since it attracts people who are far more interested in taking from others, rather than helping recipients.

I say that the only real path to basic income is a *lowering and eventual elimination* of taxes.

But we'll get there. Eventually.

Geoman

I do find it funny - socialism and communism have largely failed wherever tried, often with mind-bendingly catastrophic results. Yet, a few years later, there it is again. So depressing.

I've always thought here was a mathematical reason for the failure of socialism.

Let's assume there is one ideal answer to a complex economic problem. There are two strategies to derive the answer. One is careful analyses, thought, calculations, etc. to determine what the ideal answer might be. The other is to try every possible solution, and pick the one that works.

Socialists believe that the solution to any problem in the economy can be determined through analyses, thought, planning, calculations, etc. They continuously fail to find the correct answer, but don't realize the problem is generally too complex, too nuanced, and they can't possible ever generate enough information in real time to solve it.

Capitalism says, eh, screw it. We will try every possible solution till we find one that works. We see the spectacular successes, what we don't see is all the failures, all the companies that went under, all the ideas that were tried out before the right one came along. But by trying every answer, all at once, capitalism, while it wastes energy trying things that don't work, gets to the right answer much much faster. That speed to the correct answer is more important than all the money spent on failures.

Socialists veer into authoritarianism for one simple reason - they are trying to make people fit the models, to behave as numbers on a spreadsheet, so everything will work out as it is supposed to. The hate capitalism, because they see the waste, they see all the money that went into things that didn't work.

The early chess games used to do exactly this - they couldn't build a computer that could outfox a chess champion, so instead they built a really fast computer that simply tested every possible variation of every possible move. Eventually they built computers that could see far enough ahead to beat a chess champion. The computers are not "thinking" they are not planning, they are just brute forcing the problems. Much like capitalism.

Kartik Gada

Geoman,

Indeed. Part of the reason socialism keeps returning is that the 70-80% of adults that are net consumers can only survive through drawing from the 20-30% of adults that are net producers. This is also why democracy always drifts towards socialism unless a radically new structure like ATOM-DUES is implemented.

Government tinkering to find 'light' versions of socialism tend to create complete oligarchies, so socialism always creates exactly the opposite situation than the proponents intended.

The ATOM-DUES is the fairest safety net, as it is fully equal and diffuse. It is the safety net that fully enables the next stage of free market entrepreneurship.

Joe

I also like the way that the ATOM-DUES is implemented in a way that ties in with the experimental nature of Capitalism that Geoman mentions. By starting small and growing incrementally the experiment could be stopped at any time if it wasn't working, without much, if any, damage being done. The Reddit Basic Income 'we want $1000 per month and we want it now' method would involve a huge reconfiguring of the economy that would take years to plan and have all sorts of unforeseen consequences. The ATOM-DUES could start in a year.

Kartik Gada

Joe,

Indeed. ATOM-DUES has a very systematic transition process (as does the income-tax phase-out that has to happen in tandem). Today, the calculated payout level is $500/month. This is not much, but the rate of increase is very quick. $1000/month is just 3-4 years away, and $10,000/month is just 15-18 years away (in the US).

Plus, everything is tax free, as there would be no income tax post-2025.

There is also considerable leeway in which to correct small errors without any problem, as there is a monthly recalculation that is widely published.

Lastly, remember that the crude wealth transfer for $1000/month basic income that the socialists want already exists :

http://futurist.typepad.com/.a/6a00d83452455969e201b7c86ce4a6970b-pi
http://futurist.typepad.com/.a/6a00d83452455969e201bb09105ec9970d-pi

Yet it is structured in a manner that is very anti-productivity and hence costs far more than whatever benefit it generates.

fatcat

I see several necessary steps


  • officially asses the QE/ATOM-DUES monthly amount.

  • create a fund to tap the ATOM QE amount

  • implement policies to distribute the DUES rent

  • start reducing income and other taxes

  • start eliminating various taxes

The first step is the hardest to push and the model has to be well codified and yet adaptable. That’s a sea change and total paradigm shift in the money supply management.

Kartik Gada

Hi fatcat,

See Chapter 10 in the ATOM for the disbursement plan (if it were started at the time of ATOM publication) :
http://atom.singularity2050.com/10-implementation-of-the-atom-age-for-nations.html

It is very systematic.

That said, the US will not be the first country to do it anyway. If a country like Singapore or even Canada wanted to start immediately, there is almost no risk with erring on the higher side of QE, as there just will not be domestic inflation even with a very high level of per-capital printing for such a small country.

fatcat

Smaller economies cannot do it. Don’t forget that any large-scale QE will immediately affect the exchange rate. The only way for the smaller currency not to fall is to be backed by several percents of annual GDP growth. For example, the Canadian loonie lost about 30% compared to the greenback over the last 5 years due to falling oil prices and other factors https://tradingeconomics.com/canada/gdp . The US economy, on the other hand seems stronger. Singapore has seen some minor contraction over the last couple of years. It will be a very hard sell to introduce QE-backed rent, especially when the exchange rates are unfavorable…

Kartik Gada

fatcat,

Singapore and Hong Kong have currencies pegged to larger currencies. For that reason, those two are the most suitable.

Canada does not, but can still do it. A weaker currency will be a temporary thing, since the much higher GDP growth rate and FDI that comes in will offset that. But this is the reason for the gradual ramp in the DUES.

Note that DUES starts out at a level of money creation that is in fact lower than recent central bank programs. The increase is only gradual.

Stephen murray

Is there any chance that the "right minds" are in place in Singapore or HK to grasp the DUES concept before 2020?

Kartik Gada

Stephen,

Probably not. It was presented to some higher-ups in Singapore by someone who had a relationship there. But the Singaporeans said "After someone else does it, we might do it.". That is a common approach to anything in Asia.

That said, I am going there again in November for FinTech week, so we shall see.

HB

I must be missing something.

Isn't the basic income essentially another method of redistribution so that the 70-80% of adults who are net consumers can draw from the 20-30% who are net producers?

Perhaps as the singularity approaches the breakneck pace of development will dwarf everything else, bit still, won't those societies that engage in redistribution diminish the enthusiasm of the 20-30% who are net producers? And even in an era of ATOM exponential high growth won't that affect the rate of progression towards the singularity ? Even as you get closer to the event horizon, it still matters whether your country's annual growth rate is 17% or 26%. Isn't it?

Kartik Gada

HB,

Isn't the basic income essentially another method of redistribution

How is it 'redistribution' when income tax is 0%, and nothing is taken from another person?

HB


Why basic income is redistribution:

If large percentages of people get to consume without producing, then somewhere there is redistribution. It's like those physics problems where one is asked to find the hidden conservation of energy in an otherwise perfectly plausible perpetual motion machine.

So, more specifically, even assuming that nothing bad happens macroeconomically, basic unconditional income is redistribution because it distorts the otherwise strong natural deflation that would accompany rapid technological growth. It essentially denies producers the effect of unaffected deflation, in other words, it denies them the otherwise much stronger effect of increasing reward with delayed gratification.

As an example, people who engage in delayed gratification by investing in funds will have a lesser reward compared to a situation where technologically propelled deflation is left to take its natural course. Maybe the fact that our dinosaur economic policy pundits must consider is that perhaps ATOM instigated deflation is not a bad thing after all.

Basic (unearned) income basically "spreads", as you say, the benefits of technological advance to everybody rather than concentrating the reward on the actual producers of such technological acceleration. That is still redistribution. Many different ways of looking at it reveal implicit redistribution.


And societies where redistribution is active will have less motivated ATOM drivers in the end, compared to societies that let producers enjoy the full benefit of their efforts (and this enjoyment includes the unaffected strong deflation).

Implicit redistribution is just as real as explicit redistribution. For example, on the surface, nothing is "taken" from anybody by keeping interest rates artificially low. But low interest rates deny those who contribute to the ATOM the stronger effect of delayed gratification that comes with higher (real) interest rates. The risk/reward curve is inflated. Real interest rates are nowadays negative, so that producers (these are the ATOM enablers) are forced to spend their money on otherwise less productive endeavors, e.g. lower productivity (more busybody type) job creation for the seventy to eighty percent of the population who are net consumers.

Now, one may think that such redistribution is moral, or perhaps necessary if only to placate the mediocre masses who do not participate in the ATOM, but that is another story. The ATOM is also mobile, and will become increasingly so. Thus the ATOM is likely to migrate to jurisdictions where this overt redistribution does not take place. And the ATOM will certainly be able to defend itself, since its exponential growth will exhibit a higher exponent than the more redistributive jurisdictions with the basic income.

The reward for getting to the singularity first are enormous (if one takes the optimistic scenario) so anything that accelerates a jurisdiction or group of people towards it has tremendous differential value. Even if the ATOM produces so much exponential growth that there is plenty to redistribute, still, those societies that do not redistribute will grow at a comparatively faster rate, and reach the singularity first.

Kartik Gada

HB,

If large percentages of people get to consume without producing, then somewhere there is redistribution. It's like those physics problems where one is asked to find the hidden conservation of energy in an otherwise perfectly plausible perpetual motion machine.

No. Otherwise, there would be no economic growth. ATOM-DUES is just a monetization of productivity gains.

About the rest of your points, keep in mind what is politically possible vs not. We have created a debt-based society, so letting deflation run freely will not work. Similarly, every first-world democracy is at a point where the majority of government spending is just redistribution. This works within that reality (fair or not) for an easier transition process.

HB

The points about political reality are well taken. The debt based economy might very well be something that is under threat for a paradigm shift. Frighteningly, democracies whose voters have painted themselves in a welfare corner may also be in danger. The fact that growth now sustainably lags below world average in virtually all first world democracies is also a bad omen -- a trajectory of deterministic worldwide prosperity decline, I'd say. These democracies shot into the top wold prosperity rankings through growth that structurally surpassed world average (simple arithmetic reality) but that trend has now sustainably reversed.

Singularity, almost by definition, means that truly unimaginable to us changes will happen, especially as we get closer to the event horizon.

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