Globalization Means Substitution, Technology Means Complementarity

  • Globalization means substitution
    • Competition for labor is tough
      • In theory, the economy maximizes wealth when people specialize according to their advantages and then trade with each other.
        • => Gains from trade are greatest when there’s a big discrepancy in comparative advantage
        • But due to globalization, the global supply of workers willing to do repetitive tasks for an extremely small wage is extremely large.
    • Competition for resources gets tougher as well
      • People don’t just compete to supply labor; they also demand the same resources. While American consumers have benefited from access to cheap toys and textiles from China, they’ve had to pay higher prices for the gasoline newly desired by millions of Chinese motorists. Whether people eat shark fins in Shanghai or fish tacos in San Diego, they all need food and they all need shelter. And desire doesn’t stop at subsistence—people will demand ever more as globalization continues. Now that millions of Chinese peasants can finally enjoy a secure supply of basic calories, they want more of them to come from pork instead of just grain. The convergence of desire is even more obvious at the top: all oligarchs have the same taste in Cristal, from Petersburg to Pyongyang.

  • Technology means complementarity
    • On the supply side, computers are vastly different from people
      • People have intentionality—we form plans and make decisions in complicated situations.
      • Computers excel at efficient data processing
    • On the demand side, computers only require electricity
    • People miss the power of complementarity because we exoticize technology
      • Just look at the trendiest fields in computer science today. The very term “machine learning” evokes imagery of replacement, and its boosters seem to believe that computers can be taught to perform almost any task, so long as we feed them enough training data.

      • The other buzzword that epitomizes a bias toward substitution is “big data.” Today’s companies have an insatiable appetite for data, mistakenly believing that more data always creates more value. But big data is usually dumb data. ^^Computers can find patterns that elude humans, but they don’t know how to compare patterns from different sources or how to interpret complex behaviors. Actionable insights can only come from a human analyst^^ (or the kind of generalized artificial intelligence that exists only in science fiction).

    • As we find new ways to use computers, they won’t just get better at the kinds of things people already do; they’ll help us to do what was previously unimaginable.