The Chris Voss Show - The Chris Voss Show Podcast – The Technology Trap: Capital, Labor, and Power in the Age of Automation by Carl Benedikt Frey

Episode Date: August 13, 2020

The Technology Trap: Capital, Labor, and Power in the Age of Automation by Carl Benedikt Frey How the history of technological revolutions can help us better understand economic and political polarization in the age of automation From the Industrial Revolution to the age of artificial intelligence, The Technology Trap takes a sweeping look at the history of technological progress and how it has radically shifted the distribution of economic and political power among society’s members. As Carl Benedikt Frey shows, the Industrial Revolution created unprecedented wealth and prosperity over the long run, but the immediate consequences of mechanization were devastating for large swaths of the population. Middle-income jobs withered, wages stagnated, the labor share of income fell, profits surged, and economic inequality skyrocketed. These trends, Frey documents, broadly mirror those in our current age of automation, which began with the Computer Revolution. Just as the Industrial Revolution eventually brought about extraordinary benefits for society, artificial intelligence systems have the potential to do the same. But Frey argues that this depends on how the short term is managed. In the nineteenth century, workers violently expressed their concerns over machines taking their jobs. The Luddite uprisings joined a long wave of machinery riots that swept across Europe and China. Today’s despairing middle class has not resorted to physical force, but their frustration has led to rising populism and the increasing fragmentation of society. As middle-class jobs continue to come under pressure, there’s no assurance that positive attitudes to technology will persist. The Industrial Revolution was a defining moment in history, but few grasped its enormous consequences at the time. The Technology Trap demonstrates that in the midst of another technological revolution, the lessons of the past can help us to more effectively face the present. Carl Benedikt Frey is Oxford Martin Citi Fellow at the University of Oxford where he directs the programme on the Future of Work at the Oxford Martin School. After studying economics, history and management at Lund University, Frey completed his PhD at the Max Planck Institute for Innovation and Competition in 2011. He subsequently joined the Oxford Martin School where he founded the programme on the Future of Work with support from Citigroup. Between 2012 and 2014, he taught at the Department of Economic History at Lund University. In 2012, Frey became an Economics Associate of Nuffield College and Senior Fellow at the Institute for New Economic Thinking, both at the University of Oxford. He remains a Senior Fellow of the Department of Economic History at Lund University, and a Fellow of the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA). In 2019, he joined the World Economic Forum's Global Future Council on the New Economic Agenda, as well as the Bretton Woods Committee. In 2013, Frey co-authored “The Future of Employment: How Susceptible Are Jobs to Computerization?”, estimating that 47% of jobs are at risk of automation. With over 5000 academic citations, the study’s methodology has been used by President Barack Obama’s Council of Economic Advisors, the Bank of England, the World Bank, as well as a popular risk-prediction tool by the BBC. In 2019, the paper was debated on the Last Week Tonight Show with John Oliver. Frey has served as an advisor and consultant to international organisations, think tanks, government and business, including the G20, the OECD, the European Commission, the United Nations, and several Fortune 500 companies. He is also an op-ed contributor to the Financial Times, Scientific American, and the Wall Street Journal, where he has written on the economics of artificial intelligence, the history of technology, and the future of work. His academic work has featured in over 100 media outlets,

You wanted the best. You've got the best podcast, the hottest podcast in the world. The Chris Voss Show, the preeminent podcast with guests so smart you may experience serious brain bleed. Get ready, get ready, strap yourself in. Keep your hands, arms and legs inside the vehicle at all times. Because you're about to go on a monster education roller coaster with your brain. Now, here's your host, Chris Voss. Hi, folks. This is Voss here from thechrisvossshow.com, thechrisvossshow.com. Hey, we're coming to you with another great podcast.

We certainly appreciate you and you and you and that guy over there. Yeah, the one behind you. Did you know he was in the room? We certainly appreciate you guys tuning in to the that guy over there yeah the one behind you did you know he was in the room uh we certainly appreciate you guys tuning into the chris fosh show and being here we of course always have the most brilliant smartest guests on the show they actually have to pass an iq test and they also have to do that thing where they have to know an elephant and stuff and the 35 questions you hear about um they have to pass all that before they can get on the show naturally i can't pass any of it but that's why i'm the host so anyway we appreciate you guys

being here if you want to watch the live version of this go to the cvpn.com or youtube.com fortress chris voss hit that bell notification uh so you can see all the wonderful interviews we have some of the most brilliant authors around the world it's's just mind-blowing, the people we have on the show. And be sure to refer the show to your friends, neighbors, relatives, all that good stuff. Today we have someone coming to us from Oxford, from clean across the pond. Anyway, today we have a most wonderful guest on the show today. He is the author of The Technology Trap, Capital, Labor, and Power in the Age of Automation. His name is Carl Benedict Frey, and this guy is quite super brilliant, and he is a director of

the future of work at Oxford Martin School. Welcome to the show, Dr. Frey. How are you? Thanks for having me, Chris. Good, good, good, good. And thanks for coming on the show, especially all the way. What time is it over on your end of the world right now? It's eight minutes past six. Eight minutes past six. And I'm 11 a.m. over here, so awesome sauce. So you've written this interesting piece of work. Give us some plugs on where people can find you on the interwebs and

pick up the book. Sure, you can find me at carlbenedictfray.com and you can pick up the book at Amazon or Princeton University Press. There you go. So give us some background on you and what made you interested in writing this book.

Sure, so back in 2013, Michael Osborne and I, Mike is an associate professor Give us some background on you and what made you interested in writing this book. Sure. So back in 2013, Michael Osborne and I, Mike is an associate professor of machine learning here at Oxford University. We published a paper trying to assess how many jobs that can be potentially automated given recent advances in artificial intelligence and mobile robotics. And at the time, we estimated that roughly 47% of American jobs are exposed to automation technologies as a result of these advances. And I think doing so, we contributed somewhat to this dichotomy

where people think that either this time is completely different, technology is going to take all the jobs, and history has nothing to teach us about what is going to happen. And on the other hand, Kemp saying that, well, you look at the past 200 years, we have had steady mechanization. It has, if anything, created more jobs during this period of time. So what should we really worry about? And the book that you mentioned, The Technology Trap, that came out last year, takes issue with both of these views, in that it's essentially asked the question,

should we feel reassured if the future of automation mirrors the past? And it comes to the conclusion that we should not. Yes, over the long run, technological change has been enormously beneficial to us all, especially in people of lower incomes. But in the short run, it's created enormous disruption in labor markets, and the short run can be a lifetime for some. Yeah. So it's going to make a huge difference with robotics and AI and stuff. I almost wonder sometimes if,

is it, if it just makes more of us as like one of the things we have here in America is like, we've gone from these industrial high paying union jobs, like you had in Detroit, you know, building automobiles, et cetera,

et cetera, in the eighties and prior to now where everyone just kind of works at subway, you know, these low, these low quality, I am, I don't mean to be mean to people at Subway, you know, these low quality, I don't mean to be mean to people at Subway, but, you know, they're low technical jobs that are low pay, you know, in a strip mall,

which you can find in every corner in America. And it seems like it just, it's just, there's this pressure that just keeps pushing down people into lower-paying jobs, lower-quality jobs. I mean, there's definitely higher-quality jobs. So is that kind of the thrust of the book? Yeah, so what we've seen over the past three decades is this polarization of the labor market that many have been writing about. David Dauter at MIT and co-authors have written several papers showing that middle-income jobs in particular have contracted across advanced economies, in large part due to automation technology, taking a lot of jobs in manufacturing in particular.

And what we've seen is that two types of new jobs have been created. So on the one hand, we see that relatively low skilled jobs have been created, as you mentioned, in the service sectors. We see more new types of jobs for fitness instructors and in restaurants and so on. And we also see an expansion of employment in technology industries and in professional services. And so seeing this polarization of the labor market, and as a general rule of thumb, we see that people with college degrees have done relatively well. They tend to be in these relatively skilled, well-paying jobs.

People without college degrees have done less well. They've often dropped out of these sort of middle-income manufacturing jobs and are now competing for low-income jobs in the service sector. Yeah, it's definitely a challenge too. It's become a real issue. And even people that get their college degrees, even if they get really good degrees here in America because of the way we're structured and the crazy way we do things.

Those people are still almost at an indentured servitude level of income because even though they get a better job and they get paid well, they're still servicing these crazy college loans that we have over here that you can't even get away from. It's basically indentured servitude. I mean, you can't file bankruptcy. I think they still charge you after you die. That is true, particularly in the United States, that the cost of higher education has been through the roof and people have been accumulating a lot of debt. I think it's important to keep in mind,

as you mentioned here, right, the cost of higher education has followed different trajectories in different countries, or at least the way it's been financed has followed very different trajectories in different countries. In Sweden, where I'm from, for example, higher education is primarily financed through the taxpayer. And if we look at Sweden, for example, you see that unionization rates are still enormously high. So in the United States, as you mentioned, a lot of these unionized jobs have been automated away. And you can argue that that is because of competitive pressures due to globalization as well.

And you have these right to work states in the US, which have attracted a lot of manufacturing companies. And you have had this race to the bottom. But you can't say that that is the reason why Walmart workers aren't unionized. So they are in the non-traded sector of the economy. In Sweden, for example, a lot of people, most people in the non-traded sectors of the economy are at least under collective bargaining coverage as well. So it depends a lot on institutions too. And policy of government? Absolutely, absolutely.

It's been a hodgepodge mix. We used to be a highly unionized society. And, of course, we went through, I think, the early 1900s where there wasn't unions. And, you know, the workers, if they tried to protest unsafe conditions, you know, just horrible working conditions, they were beaten and abused. And so then we went through this phase of unions and then somewhere in the 80s, they started getting disassembled. Like you say, we started seeing more right to work states. And a lot of it was from a Republican perspective of anti-labor and stuff like that, pro-business, pro-business owners, really, when it comes down to it, they claim to be pro-business, but they're pro-business owners, not labor.

And so you talk about in your book that basically from the Industrial Revolution all the way to the age of artificial intelligence, the different technological processes and how they've radically, radically shifted the distribution of economic and political power among society's mentors. I noticed in a video that I watched of yours, you were talking about what's gone on recently with some of the politics of America, why some of the different people have been elected under the perception of, of that they would bring jobs back, et cetera, et cetera. Yeah. So, I mean, first of all, I think you are absolutely right of what you mentioned about

unions i would add to that though that there is a global tendency of these middle-income jobs being hollowed out so it's not just a story of de-unionization it is also a story of globalization and automation and we should also keep in mind that wages began to rise in the 19th century and working conditions began to improve already in the 19th century, even before there was any widespread union movement. So I think it is important to remember that working conditions also, in a very large part, depends on the sort of alternative job options people have, right? Now, during that period, do we have a lot of globalization? What period was that?

So in the late 19th century, we do have the first wave of globalization. But what we also have is some changes in factory automation. So first of all, we're moving away increasingly from child labor because steam-powered machinery can only be run by adult labor. It's quite physically demanding to do so. And we also see machinery becoming increasingly standardized across factories. And what that means is that workers all of a sudden, they don't just have their human capital tied up in one firm. They can't just run one type of machine in one company.

They can run the same machine at all sorts of businesses. And that means that for the first time, they can actually credibly threaten to leave the company, which gives them a boost in terms of bargaining power as well. So we do see that technological change are improving people's wages and working conditions already before the union movement. And the switch to electricity as well played a huge role, right? So it made factories less polluted, it increased brightness, factory owners could get rid of all this jungle of shafts and counter shafts that threatened workers' fingers, arms and lives.

So we see that technology has been a key driver of these improvements too. And during a period of times when it sort of created new vast industrial undertakings and sort of electrical machinery, automobiles and so on, with rising wages, workers were gradually able to organise and take advantage of their growth in political clout to unionise and add to that. We see technologies that create new jobs, increase the bargaining power of labour, when they can then use that bargaining power to unionize and that sort of creates a virtuous cycle.

And conversely, you can have replacing technologies that reduces the demand for labor and also reduces the bargaining power of the union. So, for example, in 1964, when switchboard operators go and strike in the United States and the New York Times writes that the strike actually went unnoticed because the companies could just switch over some of the supervisors to run the already almost completely automated systems, right? These automation technologies also reduce the bargaining power of labor as it puts pressure on people's wages. It's interesting to me, too, what's going to happen in the future. COVID-19 has really thrown

America a curveball, and it doesn't help that we have really poor leadership over here, if you haven't seen it in the papers. And it looks like it's just going to make our economic downturn just, I can't even imagine how bad it's going to be. I was just reading that even the U.K. has really started going through a bad recession, but I think you guys are starting to rebound maybe a little bit faster than us, or you're not at least going through the trough. We're just going full America number one with it, where we're just like, yeah, baby, most deaths.

But I recently saw that Uber and the other ride sharing factors in here that a lot of people went and got jobs with, they recently lost their California lawsuit and that's saying that they now have to, you know, pay the extra taxes the health care and extra things, which I think is going to drive these car companies and more people in the gig economy, we call it over here, into automation. So it's going to be interesting to see how this whole menagerie of craziness, recession, businesses going out of business, a lot of jobs drying up, are really going to affect us here going into the future. Yeah, absolutely. And one thing I actually don't discuss that much in the book is this changing nature of work and the rise of the gig economy, as you mentioned. And I do think that it's still important.

I mean, gig work, it must be said, is still a tiny fraction of the overall economy, but it's growing and it's going to become more important. And it's going to be a force that will force us to think through labor laws and labor institutions the way that unions changed in the 20th century. So from the 19th century, you have these cross-based institutions that are structured around what production looked like in more or less a pre-industrial economy. As the second industrial revolution really takes off,

you have these mass production industries, and workers begin to organize more on the industry level, which makes more sense, given the rise of these mass production industries and we now see those jobs increasingly on the production lines being automated away and we're seeing to some extent this rise of these gig works

and these gig jobs and the question is how do we shape our institutions to accommodate on the one hand the flexibility that those arrangements bring, but at the same time providing safeguards that don't lead to this race to the bottom that we all want to avoid.

And I think that is one of the key challenges facing policy makers in this field sphere today. And it's pretty interesting right now. I mean, what we're going through and what you talk about in your book, you know, we, in our gig economy, there's a lot of the people that are on the gig economy that don't, we don't show up on unemployment things. You know, I've been self-employed all my life. I don't show up on unemployment rolls because I can't really file

for unemployment the way I'm based. So when I take a loss of a lot of money, which I did this year, you know, with all the speaking engagements are gone, events are gone, you know, everything that I would normally be doing that's technically guaranteed income for me year after year. You know, that's just that's just out the window. There's nothing I can do about it. The money's gone. I'm, you know, I still make money from a lot of different things than I do. Thank God I, you know, have multiple streams of income, but, but, you know, it has an effect on me. It has effect in the economy. I know some people, I know some of my friends that are just wiped out. They're just, they, they had one, they had revenue source, and they're part of that gig economy.

In your book, when you talk about all of this stuff and how it affects the cause and effect of it all, what's the conclusion of what's happening or what's going to happen at the end, or what's your summation or theory? Well, so the basic idea of the book is that the long run depends on positive attitudes towards technological change, and those positive attitudes can't be taken for granted. So it's really first in the 20th century that average people

really begin to see the benefits of technological change in their pockets on mass scale. They gradually began to see it in Britain already in the 19th century. But for the most of history, people resisted the introduction of new technologies. You had very powerful craft skills that would have nothing that threatened their skills and incomes, and fear and social unrest, monarchs and political elites, mostly actually sided with those who resist technological change. Everybody who had a stake in the status quo, and the same is true today, have very little interest in change and political instability.

And of course, innovation and technological change has always been a force of instability, right? And in order to ensure that people are still buying into that system of dynamism and creative destruction, we developed the welfare state. We developed public education to help people adjust. We provided these cushions for people that fell through the cracks. And the key theme of the book is that we can't take, you know, these positive attitudes for technological change for granted looking forward,

especially in the light of what has happened over the past three decades and what happened during the first industrial revolution. And these have been very similar episodes from an economic point of view. Obviously, the political economy is very different. The Luddites that rioted against the mechanized factory in Britain in the early 19th century did not have much political voice. Property ownership was a requirement for voting, and the Luddites were essentially politically disenfranchised. But they petitioned to Parliament to block the introduction of new technologies. They

rioted against the mechanized factory on several occasions. And they were essentially right in doing so because wages were stagnant or even falling for a large share of the population during this period of time. They had no way of knowing that industrial revolution would eventually bring huge benefits to their children and grandchildren.

In similar fashion, if we look at the wages of blue-collar workers with no more than a high school degree, who would have flocked into the factories before the rise of the robots, their wages have been falling in the United States for four consecutive decades now. roughly lower today than they were in 1979 at the manufacturing employment peak in absolute numbers. So they do potentially have an incentive to riot against the mechanization the way the Luddites did. And there's already been this backlash against globalization. The key point I make in the book is that globalization and automation have had very similar effects on the labor market. And if you look at, if you want to understand, for example, why three key swing states of Michigan, Wisconsin, Pennsylvania, that have been opted for the Democratic candidate in every election

by President Trump, automation is one of the key reasons. So there are more robots in Michigan alone than in the entire American industrial West, where we see robots being adopted more extensively, we see pressure on employment and wages, and these voters opted for President Trump. Many of them They're being adapted more extensively. We see pressure on employment and wages.

And these voters opted for President Trump. And many of them probably bought into the rhetoric about, you know, being tough on China and making better trade deals, protectionism and so on. But these jobs are not going to come back. And these measures are going to make things worse. If you want to understand what's happened to jobs in steel production, then you have to visit the steel mine. You won't find very many workers there because they are heavily automated. People will realize this eventually. They will see that globalization has not been the main driver of their economic misfortunes. And they will also, I suspect, realize that the rise of China can only happen once, right?

It's already happened. Most people today also already work in non-traded sectors of the economy. They are relatively shielded from future globalization, but they are not very shielded from automation. And so the job of a truck driver, for example, can be automated, but you can't get sent off to China. And the same is true for the job of a cashier. And there are roughly 3.5 million cashiers still in the United States today. So these changes are coming, They're going to continue to put pressure, I suspect, on the wages of low-skilled workers.

We are now in the midst of a pandemic-induced recession, which means that people's job options are a lot worse if they lose their jobs due to technological change or any other source of dislocation for that matter. And it is not a coincidence that most episodes of automation anxiety have actually been during recessions, right? The Luddite riots happened during the Continental War, the Napoleonic Wars, which caused disruption to British trade. There was tremendous anxiety over automation during the Great Depression,

again, during three post-Korean War recessions, again in the aftermath of the Great Recession. I suspect this time it's not going to be any different in that regard. Wow. So we have some unrest to look forward to and some

ugliness and more automation because I imagine companies will just be looking to, you know, since they can't afford as much, they'll be looking more to automation investment. Well, one of the points I try to make in the book is that, yes, these forces by themselves can be very destabilizing. They are, again, they are the drivers of prosperity over the long run, but they can be very destabilizing in the short run.

And people's response to them are in large part going to also depend on the type of policies that are implemented to help smoothen the transition and help protect jobs. So I think in the end of the day, predictions about how all of this will play out are predictions about what is likely to happen in politics. And since we struggle to predict the outcome of the next general election, even the same day, I'm not going to sit here and make political predictions. But I think all of this is going to play out in the sphere of political economy rather than the sphere of technology itself. So you bring up a good point, and one of the most – I don't know if this is in the book, but one of the most ironic stories of the Trump era was the carrier story, If you're familiar with it, the carrier factory and the president went in and this was before he officially become president. I think he'd been elected and he was in that, that,

that segue that we have between when you're officially elected, but a carrier was going to lay off a lot of people. Like it was, I think it was 150 years, like a lot of people. And he jumped in and started yelling at them and blah, blah, blah. And they went, Oh, okay. Well, well, you know, they were going to ship a bunch of jobs to Mexico and they're like, Oh yeah. Okay. Whatever. Uh, we, we've decided that, you know, since he's given us hell, we're not going to do that.

And he triumphed it as, you know, like I'm fighting for the worker and stuff. And what carrier did is they use the, they used a bunch of money and they just automated that facility. So they ended up laying off the workers and effectively ended up still moving jobs to Mexico. Just not as many. It was an interesting story. The ironicness of a politician claiming they're going to save jobs. We're going to keep those jobs from moving.

And they just brought in automation to eat the jobs. It is indeed. And had it happened a bit earlier, I would have put it in the book as well. That's pretty crazy. I was like, oh, my God. And then just later, they just moved all the jobs, and they just didn't even care. And since it wasn't being politically watched or cared about at that moment, no one did it. So what do people have to do?

Is there a mandate in the book that gives advices to people on how they can do for themselves, or is it an open-ended book where this is the history of what people keep doing and how they should approach it. Do governments need to work at re-educating or re-engineering, re-skilling, re-educating and skilling workers to adapt to the automation, et cetera, et cetera? So it doesn't provide much personal advice. And the reason for that is I think that tends not to be the speciality of academics in general. We are almost unable to help ourselves, so how could we potentially help others? But it does provide some suggestions for policy changes. And I think one of the key points I try to make that often you will hear that we have this big challenge with automation and it requires one really big solution and that needs to be

universal basic income. But I think that has become more of a distraction than something that is helpful. And what I propose in the book is a range of policy proposals that individually may sound minor, but I think that can collectively make a big difference. And I think there are several things that can be done to help workers adjust. So on the one hand, you know, we see this imbalance where new jobs are being created

and old jobs are disappearing. So we see that in old manufacturing towns in particular, there's a lot of job loss in the manufacturing industry. But not only that, every manufacturing job also supported jobs in the local service economy. People spend the money there. So we also see the local service economy. People spend the money there. So we also see the local service economy taking a hit as these jobs disappearing. Conversely, we see these high-tech industries in biotech, software engineering, and online technology, and so on.

And these industries tend to be highly clustered. And these are also very high-paying jobs. And as a consequence, when people go out and spend most money where they live, that means that a lot of these low-skilled service jobs are also being created in cities where these industries cluster. So there's enormous relocation of economic activity taking place. And at the same time, we see less geographic mobility so a lot of people are no longer actually moving to where the jobs are being created and that suggests to me that there are significant hurdles to actually moving where the jobs are and one is the cost of housing right so where a lot of people and on higher incomes live where a lot of wealth is, housing tends to be also quite expensive and also quite constrained.

So you have a lot of zoning restrictions in those particular places intended to keep people out. And we need to deal with that to build more where new jobs are actually emerging. But we also need to realise that everybody is not going to want to move, and we need to make it easier for people to commute to places where new jobs are emerging from where they already are. So one example that is close to my own heart, because it's where I grew up in Sweden,

I grew up in a small university town called Lund. And just south of that is an industrial city, what used to be an industrial city called Malmö. Malmö had long profited enormously from its shipyard, which closed down in the 1990s. And the city did very poorly for a long time after that. And the revival essentially came with the bridge to Copenhagen, which meant that people in Malmö could stay put in Malmö, where housing was cheap,

commute into Copenhagen, where there was a greater abundance of well-paying jobs, more opportunities. Most people would still spend their income where they lived in Malmö, which gave a boost to the local service economy there, and which created a virtuous cycle, and it's become one of the most dynamic labor markets in Europe. So I think by connecting, expanding, and declining places through smart infrastructure investment, a lot can actually be achieved. In addition to that, I do think we need to do something about falling incomes at the lower end of the income distribution. So

I'm all in favor of tax credits and on the lower end of the income distribution. The trouble with UBI and in my view is that the EU right so UBI without the EU would not be so bad and you would then end up with something like a negative income tax right so people you know and there will be a floor below which people's incomes cannot fall and then you know you can work more and top up that income so that would be a bad idea but if you make it universal you're essentially redistributing income for the lower end of the income distribution to the middle and the top right because existing welfare transfers target people in the lower end. So if you make it universal, you're actually going to worsen inequality. And for that reason, I don't think that is a great solution.

And finally, I think we need to do something about the subsidy of automation technology in particular. So what we've been seeing now for some time is corporate tax rates being slashed, taxes on labors being flat or even rising. And what that does is essentially incentivize businesses to invest in automation technology rather than capital saving and technologies, right? So it's essentially directing technological change or incentivizing businesses more to invest in technologies that replaces labor rather than technologies that save capital.

So I think we need to close that tax gap. And finally, what is true of every industry is that it has this sort of cycle right where it grows rapidly for a period of time and at some point it saturates and stagnates and at that point you know um the business is going to continue to be profitable through efficiency gains gains through automation through offshoring and saving labor costs and so on at that point you know that industry will release labor. What you need then is new industries emerging and expanding and new businesses coming in. And something that you see in the United States is that new business formation

has been on the decline for 30 years as well, at the same time as productivity has been in decline. So we need to create more new businesses that can actually absorb the labor that is being shredded in all those industries. And I think there is growing evidence that many of these firms, and I'm not just talking about the tech companies,

have market power and they spend a lot of their profits on actually maintaining their competitive position through lobbying, right? And something that we do know is that companies with more political connections tend to be less innovative. And they tend to try to block entry of new companies. So we really need to do something about money in politics. Because it's not just a question of declining labor unions, right? Bargaining power is a relative,

right? You can still have unions, but if you see a rise in spending on lobbying, while the power of unions is flat, it still means declining, potentially declining bargaining power. Debt in the US is both unions being

in decline and tremendous expansion of spending on corporate lobbying in particular. And I think that is a huge problem, not just for the labor market, but the overall dynamism of the American economy. You know, you bring up some really good points. Let me get to, let me start kind of where you started. One of the issues with the Trump thing that you mentioned, like with Michigan, Pennsylvania, and what they call the flyover states, is many of these states used to be thriving metropolises. They had jobs, union jobs, and then they vamoosed. Manufacturing either went someplace else or it disappeared in the country um and it created these places where these people are in little goat little literal ghost towns that

just haven't given up yet but they literally are and um you know not a lot of i i suppose on some on some level are you know you can say well policy people you know they've they've looked to a president or somebody to create jobs for them. And for some reason, Americans, there's some Americans that are stupid enough to believe that a politician gives them a job. So we have these people that live in these dead zones. And then we have all this unused land. Like you mentioned earlier, if you go to California, the cost of it is expensive. But if you go just up from California, between Nevada and California, there is all this desert that could easily be developed with cheap housing and everything else.

So we could just move those people. Or, you know, I've often wondered through all my technological friends in the discussion we had about jobs, is there a way to get jobs there? But it sounds like a lot of what you're talking about is a multifaceted, very complex, and a lot of it seems to have a lot to do with policy of what governments need to be looking at and jobs and whether or not they're more concerned about the people lobbying them and filling their coffers for their offices and running for office

or whether or not they really care about the workers in really supporting the jobs with maybe wage um wage guarantees or you know wage things like we've had this whole argument here in in in america about like oh god if we go to 15 bucks an hour for minimum wage people they're all gonna you know all the businesses will go out of business turns out you know it goes around comes around with the money just like you talked about with uh sustaining people on the low end of the field so um i don't know it's it's really interesting but i i like what you're saying because you're saying it's it's a very complex thing from a lot of different facets because politicians will run around and play the shell game and they'll be like

uh it's all about unions oh it's all about you know this over be like, it's all about unions. It's all about this over here. Oh, it's all about taxes. And really, it's about a lot of different things that combine and mesh into each other. I think that's absolutely right. I mean, everybody has their preferred solutions. I have some preferred solutions as well. But I think what is needed is a package of a lot of things coming together because there are a lot of things that have been going wrong in the economy lately

that can't just be derived to one factor. Yes, automation, globalization has been driving inequality, but it's not the only sources of dislocation. And it's not the only sources of rising inequality. And as we see when we look at different countries, all of these forces interact with institutions, interact with policy decisions. And I think that's important to keep in mind. Yeah, definitely interesting. What about, you know, one of the problems we've had here in America

is the tax rate has fallen for the top 1% from like 90% down to where they actually pay less in taxes than the average American does. And it used to be that they held a higher burden to a contribution to our society, even our corporations, you know, get away with murder. You've probably seen where, you know, companies like Apple and other places are using Ireland post office boxes as a way to park profits to avoid paying taxes. It's like insane. I mean, more and more what we've seen in America is the burden of maintaining this economy, or at least the debt of this economy, or I wouldn't say economy, but the funding of the federal government has fallen more and more to the average American

and just eaten them alive in taxes. Well, billionaires just keep getting more money and more rich. In fact, they just got richer over this last recessionary period we've had of doing the quarantine. Everybody's taking a bath, and they're still just getting richer. Yeah, I have to say, though, I think there's been an overwhelming focus on wealth taxes and on billionaires, but I actually do think these lobbying groups are more important.

If you look at campaign contributions, yes, there has been an upsurge in campaign contributions by the top 1%, but it's nothing if you look compared to lobbying groups. So I think we need to look more actually to the institutions that are really driving this, that are really stifling competition and bending the rules in ways that means that they can make profits through rents rather than innovating and creating new products. And I think that is, to me, the key issue. And I mean, there's clearly, you know, a lot of room for improvements with the tax codes concerned. But when it comes to, you know, innovation and the labor market, I actually do think that the shift in political power that has happened between, you know,

the decline of labor unions and the rise of corporate lobbying is more important than, you know, the political influence of, let's say, Bill Gates. On balance, I would say he's been a positive contribution to America. Maybe he should pay some more taxes. I don't think that's the case. You know, I think you're right. We had Citizens United get tossed out by the Supreme supreme court and since then we have gotten into so much trouble as a country with dark money i mean we've got russia money coming in here like

you guys do that's that's that's funneling around buying out our politicians um and you're right there's the between the packs and and the dark money and the different ways they have lining politicians politics uh one of the things that we've had that's been a huge boon in this country in different states has been the legalization of marijuana. And a lot of places have been against legalization of marijuana, largely the prison unions, the police forces. You know, that's where they make all their bread and butter. That's where they keep people, you know, they arrest them, throw them

in jail for marijuana and then they keep them in prison for the next 30 years for, you know, four grams of marijuana. And then you have the pharmaceuticals that are trying to protect their, you know, they want people to buy their product instead of marijuana which is you know interesting here in las vegas when um uh marijuana became legal recreationally uh i started i started taking it um and i literally went for like six months without taking acetaminophen you know tylenol and i i was like and i was using it for pain from my old age and my broken down body. And I literally went, oh, wow, I get why big pharma doesn't want me, you know, marijuana legalized because I, for much cheaper, I can, I can actually, you know, deal,

deal with my pain. I have people that, the OCD, people that have, you know, got war scars, et cetera, et cetera. But we've seen a huge amount of taxes come from it. So there's been a huge income that's come from that to cities and states that has been unprecedented. So that's helped lift schools and funding and stuff and then like you say innovation technologies uh we have a we have a podcast called pop biz podcast where we just talk about the investment part and the business part of of marijuana and there's all sorts of service industries that come into it there's clean rooms there's like you go to the conventions and there's like a million different accessory services to the manufacturing of marijuana, the packaging, the shipping and stuff. And like you

say, right now, big pharma and unions and other people are trying to keep that from spreading through the U.S., but it's a new technology. It's fresh, it's new, et cetera, et cetera. And, you know, may have the chance to save us from whatever. Who knows the way we operate here in America. We're crazy. You guys have seen that movie. But, yeah, you're right. It's something that needs to be done. So basically we just need to elect better leaders that, I don't know,

think from a more complex standard and maybe hopefully could save us? Well, I mean, I think it's one desirable way of going. But obviously we need to think through and come up with new good proposals as well that we can push to do this and new ideas that are electable. And I think something that a lot of mainstream politics have struggled with, with the rise of populism is finding those new ideas. And I'm an academic, we don't tend to be visionaries. Here's your history and here's why you keep repeating it. I'm an economist I do believe in the division of labor and there are people that are better placed in coming up with some of those ideas than I am. But what you outline in your book is pretty much we keep repeating a lot of the same things through history and going through these technological ups and downs, correct?

Yeah, I think that was one of the striking things when researching the book, that we've actually had this same conversation over and over again for the past 200 years or so. And these things, as you say, often come in cycles. And many of the ideas that I thought were fairly innovative in the debate these days I found being proposed in the 1960s and the 1930s and some of them going back to the 1930s. It's like I always say, the one thing...

I think we have new ideas often for our ignorance of history. So that's why it's important to read your book, so that people can figure out these cycles and how everything's going on. The one thing I always say, the one thing man can learn from his history is that man never learns from his history. There lies the physical nature of the dichotomy or the irony of it. So very interesting. A lot of different stuff you go through the book um showing how this works uh you know this has always been something that has fascinated me because i watched the

i've watched over the years the the dissolving of the middle class the dissolving of unions you know i grew up i grew up in an age where uh you went to work for one company for all your life. They gave you a ring at the end, you know, or a watch, a gold watch. You got a gold watch saying, hey, thanks for working here. And you retired, and it was like off in the sunset. And now it just becomes more disposable in our workforce. You know, now one of the big things that's huge here in America is contract labor, where they just don't even bother hiring you.

They just go, we're going to test drive you for a while. We're just going to do contract labor. And that's just made workers even more disposable. Yeah, no, that has been a trend for some time. And obviously that being exacerbated by the gig platforms that we talked about earlier. Now, I'm in favor of flexibility, but I'm not in favor of a race to the bottom. And as we discussed earlier, there needs to be some rebalancing there to ensure that there is still some source of job security for people that fall through the cracks. When CEOs or huge business leaders that run large industries read your book,

what's a good take that they should come from it? Well, I think, first of all, for CEOs, I think it's hopefully enlightening to see that, you know, businesses have been facing the same challenges for the past 200 years. So they can actually, you know, learn something from that history. But I think the book as such is not primarily targeting corporate managers. So one thing that you clearly see in the book is that when it comes to a lot of the social challenges we face, they need to be solved on a political level. So, for example, if you go back to the 1920 1920s you had a lot of these welfare capitalist schemes

being developed where you know the business provided social security pension schemes all sorts of benefits and then the depression hits and guess what these are the first things that are being cut during the depression and you need more continuity than that right we had the business roundtable last year but now in the midst of the pandemic we will see you know how firms keep to their you know social pledges through this time but the lesson of history is that during economic downturns you tend to see businesses cutting costs and they have to cut costs in order to survive so you know providing these safety nets is something that we need governments for and that's why we need a strong state yeah it's interesting to when i look at what the united states is going to have to do to bail

out of this i mean we're already deeply in debt we already had the trump administration early on uh spend a trillion dollars of giveaway to rich people in in uh in tax breaks and tax incentives um and then now we're now we've spent i think we've spent another trillion on that last bailout and we're going to have to do another trillion of bailout and uh or more it could be three to four trillion if not to hold the economy and right now we're at this thing if you've been watching us where we recently expired the uh support that we were giving people who are unemployed we recently expired the evictions and i've been looking it from an economic standpoint because I know what goes around comes around, you know, a rising tide lifts all boats. And, you know, everybody's kind of sharing the pain in something like this, I suppose, in some way. But we almost need to be spending

money to ensure that the very bottom part of our society the people that are the most going to be the most hurt by this are going to be the most people that if we have to give a livable wage to of some type or minimum wage um we need to do that because if if we i don't know if you've seen like in state in in states like california and san francisco we have we have this growing people of people that are living out of their vans and their campers. And, you know, there's even, there's even people at Berkeley in their professors that are living out of the cars in San Francisco, their professors. And, and so what I'm wondering is if we have all these evictions and all this stuff going on, we're just not going to have a whole mess of people living on the campers.

And that hurts the economy because like what you talked about earlier, what they spend in the local economy, what they buy. And, you know, it just becomes this, like you say, race to the bottom drain where we, you know, things just keep getting worse because nothing's no money's coming into the economy and everyone's sitting on their, on their cash or something, or if they have any. Yeah, so I'll try to get that bit of a more positive spin since we're coming to the end of the Indy.

One of the lessons from the Great Depression, though, is that what it did is that it helped foster some sort of cross-class loyalty, if you like. And because what it did, it showed people that misfortune can happen to almost anybody. And that is what we're seeing with this pandemic as well. Yes, low-income workers are much more exposed than people that are able to work from home, for example. You know, the crisis clearly showing and pointing very clearly to many of the inequalities in our societies. But it does also affect almost anybody in one way or another. And I do think that, and I certainly hope that when we come out of this, it will have fostered some of those bonds that the Great Depression did foster, and that, you know,

Britain and the US and other countries in Europe come out more united as a consequence. Hopefully so. It's going to be really interesting for us in November as to who wins that election, and it's going to affect everybody, including countries like you're in. And I think you're right. I guess we have to go through the bloodletting to get to the other side.

I know that the recession that we had in 2008 created a huge different technological economy. The iPhone, what came out of it? Consulting, Twitter, social media networks, Facebook, you know, this whole sort of different economy. It made it easier. It democratized so many different things that were kind of exclusive to, I don't know what you call them, tier industries. But, you know, suddenly people broadcast. I mean, I have a podcast now because of what came out of the 2008 thing.

But before, you know, I probably still these days they wouldn't let me on radio. But so, you know, I mean, it'll be interesting to see if there's going and you probably wrote about this in your book. This is one of the cycles that we're going going to hopefully come out the side with something better but um to me is a i don't know i'm a weird sort of person i you know i looked at like i when i looked at like the the communist wall fell and everyone was so joyous like hey happy days i was like how many people had to die for that thing how many people had to suffer for 60 70 80 years under years under the duress of that, dying in the horror? It's interesting the amount of casualties of human toll and suffering

that have to go into these things, but I suppose that is part of the gig. I don't know. There you go. Well, Carl, it's been wonderful to have you on. Give us some plugs so everyone can check the book out online and find out more about you. The book is called The Technology Trap, Capital, Labor, and Power in the Age of Automation.

You can find it on Amazon. You can find it at Waterstones. I'm not sure what are the big book sellers in the U.S. Part of Amazon. Waterstones. I'm not sure what are the big book sellers in the US. You can find it on most of these booksellers' pages, I would suspect. And you can find more about it on my homepage called benedictfrey.com. There you go. The Technology Trap. Capital, Labor, and Power in the Age of Automation. Thanks for being

on the show, Dr. Frey. We certainly appreciate it. Be sure to check out his book and order it up online. You can take and see the video version of this at youtube.com forward slash Chris Voss. Hit that bell notification. And also refer your friends and relatives to thecvpn.com or chrisfosspodcastnetwork.com where you can subscribe to all nine podcasts that we have on the Chris Voss show network.

Thanks for tuning into my audience and we'll see you next time.