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Here's a startling fact:
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in the 45 years since the introduction
of the automated teller machine,
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those vending machines that dispense cash,
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the number of human bank tellers
employed in the United States
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has roughly doubled,
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from about a quarter of a million
to a half a million,
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from a quarter a million in 1972,
about a half a million today,
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with 100,000 added since the year 2000.
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These facts, revealed in a recent book
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by Boston University
economist James Bessen,
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raise an intriguing question:
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what are all those tellers doing,
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and why hasn't automation
eliminated their employment by now?
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If you think about it,
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many of the great inventions
of the last 200 years
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were designed to replace human labor.
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Tractors were developed
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to substitute mechanical power
for human physical toil.
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Assembly lines were engineered
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to replace inconsistent human handiwork
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with machine perfection.
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Computers were programmed to swap out
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error-prone, inconsistent
human calculation
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with digital perfection.
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These inventions have worked.
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We no longer dig ditches by hand,
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pound tools out of wrought iron,
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or do bookkeeping using actual books.
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And yet, the fraction of U.S. adults
employed in the labor market
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is higher now in 2016
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than it was 125 years ago, in 1890,
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and it's risen in just about every decade
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in the intervening 125 years.
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This poses a paradox.
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Our machines increasingly
do our work for us.
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Why doesn't this make our labor redundant
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and our skills obsolete?
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Why are there still so many jobs?
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(Laughter)
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I'm going to try to answer
that question tonight,
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and along the way, I'm going to tell you
what this means for the future of work
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and the challenges that automation
does and does not pose
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for our society.
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Why are there so many jobs?
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There are actually two fundamental
economic principles at stake.
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One has to do with human genius
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and creativity.
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The other has to do with human
insatiability, or greed if you like.
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I'm going to call the first of these
the O-Ring principle,
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and it determines the type
of work that we do.
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The second principle is
the Never Get Enough principle,
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and it determines how many jobs
there actually are.
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Let's start with the O-Ring.
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ATMS, automated teller machines,
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had two countervailing effects
on bank teller employment.
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As you would expect,
they replaced a lot of teller tasks.
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The number of tellers per branch
fell by about a third.
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But banks quickly discovered
that it was cheaper to open
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new branches,
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and the number of bank branches
increased by about 40 percent
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in the same time period.
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The net result was more branches
and more tellers.
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But those tellers were doing
somewhat different work.
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As their routine,
cash-handling tasks receded,
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they became less like checkout clerks
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and more like salespeople,
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forging relationships with customers,
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solving problems, and introducing them
to new products like credit cards,
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loans, and investments:
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more tellers doing a more
cognitively demanding job.
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There's a general principle here.
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Most of the work that we do
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requires a multiplicity of skills,
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brains and brawn,
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technical expertise and intuitive mastery,
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perspiration and inspiration
in the words of Thomas Edison.
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In general, automating
some subset of those tasks
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doesn't make the other ones unnecessary.
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In fact, it makes them more important.
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It increases their economic value.
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Let me give you a stark example.
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In 1986, the Space Shuttle Challenger
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exploded and crashed back down to Earth
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less than two minutes after takeoff.
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The cause of that crash, it turned out,
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was an inexpensive rubber O-Ring
in the booster rocket
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that had frozen on the launch pad
the night before
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and failed catastrophically
moments after takeoff.
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In this multi-billion dollar enterprise,
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that simple rubber O-Ring
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made the difference
between mission success
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and the calamitous death
of seven astronauts.
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An ingenious metaphor
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for this tragic setting
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is the O-Ring Production Function,
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named by Harvard economist
Michael Kramer
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after the Challenger disaster.
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The O-Ring Production Function
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conceives of the work
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as a series of interlocking steps,
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links in a chain.
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Every one of those links must hold
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for the mission to succeed.
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If any of them fails,
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the mission, or the product,
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or the service,
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comes crashing down.
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This precarious situation
has a surprisingly positive implication,
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which is that improvements
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in the reliability of any one
link in the chain
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increases the value of improving
any of the other links.
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Concretely, if most of the links
are brittle and prone to breakage,
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the fact that your link
is not that reliable
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is not that important.
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Probably something else
will break anyway.
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But as all the other links
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become robust and reliable,
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the importance of your link
becomes more essential.
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In the limit, everything
depends upon it.
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The reason the O-Ring was critical
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to Space Shuttle Challenger
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is because everything else
worked perfectly.
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If the Challenger were kind of
the space era equivalent
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of Microsoft Windows 2000 --
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(Laughter) --
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the reliability of the O-Ring
wouldn't have mattered
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because the machine
would have crashed.
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(Laughter)
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Here's the broader point.
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In much of the work that we do,
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we are the O-Rings.
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Yes, ATMs could do certain
cash-handling tasks
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faster and better than tellers,
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but that didn't make tellers superfluous.
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It increased the importance
of their problem-solving skills
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and their relationships with customers.
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The same principle applies
if we're building a building,
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if we're diagnosing
and caring for a patient,
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or if we are teaching a class
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to a roomful of high schoolers.
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As our tools improve,
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technology magnifies our leverage
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and increases the importance
of our expertise
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and our judgement and our creativity.
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And that brings me
to the second principle:
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never get enough.
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You may be thinking, okay,
O-Ring, got it,
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that says the jobs that people do
will be important.
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They can't be done by machines,
but they still need to be done.
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But that doesn't tell me
how many jobs there will need to be.
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If you think about it, isn't it
kind of self-evident
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that once we get sufficiently
productive at something,
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we've basically worked our way
out of a job?
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In 1900, 40 percent of all U.S. employment
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was on farms.
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Today, it's less than two percent.
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Why are there so few farmers today?
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It's not because we're eating less.
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(Laughter)
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A century of productivity
growth in farming
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means that now,
a couple of million farmers
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can feed a nation of 320 million.
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That's amazing progress,
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but it also means there are only
so many O-Ring jobs left in farming.
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So clearly, technology can eliminate jobs.
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Farming is only one example.
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There are many others like it.
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But what's true about a single product
or service or industry
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has never been true
about the economy as a whole.
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Many of the industries
in which we now work --
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health and medicine,
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finance and insurance,
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electronics and computing --
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were tiny or barely existent
a century ago.
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Many of the products that we spend
a lot of our money on --
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air conditioners, sport utility vehicles,
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computers and mobile devices --
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were unattainably expensive,
or just hadn't been invented
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a century ago.
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As automation frees our time,
increases the scope of what is possible,
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we invent new products,
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new ideas, new services
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that command our attention,
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occupy our time,
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and spur consumption.
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You may think some
of these things are frivolous --
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extreme yoga, adventure tourism,
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Pokemon Go --
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and I might agree with you.
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But people desire these things,
and they're willing to work hard for them.
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The average worker in 2015
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wanting to attain the average
living standard in 1915
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could do so by working
just 17 weeks a year,
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one third of the time.
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But most people don't choose to do that.
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They are willing to work hard
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to harvest the technological bounty
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that is available to them.
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Material abundance has never
eliminated perceived scarcity.
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In the words of economist ??,
invention is the mother of necessity.
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Now,
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so if you accept these two principles,
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the O-Ring principle
and the Never Get Enough principle,
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then you agree with me.
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There will be jobs.
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Does that mean there's nothing
to worry about?
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Automation, employment,
robots and jobs,
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it'll all take care of itself?
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No.
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That is not my argument.
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Automation creates wealth
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by allowing us to do
more work in less time.
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There is no economic law
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that says that we
will use that wealth well,
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and that is worth worrying about.
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Consider two countries,
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Norway and Saudi Arabia.
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Both oil-rich nations,
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it's like they have money
spurting out of a hole in the ground.
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(Laughter)
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But they haven't used that wealth
equally well to foster human prosperity,
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human prospering.
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Norway is a thriving democracy.
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By and large, its citizens
work and play well together.
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It's typically numbered between
first and fourth
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in rankings of national happiness.
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Saudi Arabia is an absolute monarchy
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in which many citizens lack a path
for personal advancement.
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It's typically ranked 35th
among nations in happiness,
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which is low for such a wealthy nation.
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Just by way of comparison, the U.S.
is typically ranked around 12th or 13th.
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The difference between these two countries
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is not their wealth
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and it's not their technology.
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It's their institutions.
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Norway has invested to build a society
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with opportunity and economic mobility.
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Saudi Arabia has raised living standards
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while frustrating many other
human strivings.
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Two countries, both wealthy,
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not equally well off.
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And this brings me to the challenge
that we face today,
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the challenge that automation
poses for us.
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The challenge is not
that we're running out of work.
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The U.S. has added 14 million jobs
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since the depths of the Great Recession.
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The challenge is that many of those jobs
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are not good jobs,
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and many citizens cannot qualify
for the good jobs
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that are being created.
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Employment growth in the United States
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and in much of the developed world
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looks something like a barbell
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with increasing poundage
on either end of the bar.
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On the one hand,
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you have high-education, high-wage jobs
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like doctors and nurses,
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programmers and engineers,
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marketing and sales managers.
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Employment is robust in these jobs,
employment growth.
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Similarly, employment growth
is robust in many low-skill,
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low-education jobs like food service,
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cleaning, security,
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home health aids.
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Simultaneously, employment is shrinking
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in many middle-education, middle-wage,
middle-class jobs
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like blue-collar production
and operative positions
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and white collar clerical
and sales positions.
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The reasons behind this contracting middle
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are not mysterious.
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Many of those middle-skill jobs
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use well-understood rules and procedures
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that can increasingly
be codified in software
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and executed by computers.
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The challenge that
this phenomenon creates,
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what economists call
employment polarization,
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is that it knocks out rungs
in the economic ladder,
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shrinks the size of the middle class,
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and threatens to make us
a more stratified society.
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On the one hand, a set of highly paid,
highly educated professionals
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doing interesting work,
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on the other, a large number of citizens
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in low-paid jobs whose
primary responsibility
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is to see to the comfort and health
of the affluent.
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That is not my vision of progress,
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and I doubt that it is yours.
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But here is some encouraging news.
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We have faced equally momentous
economic transformations in the past,
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and we have come
through them successfully.
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In the late 1800s and early 1900s,
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when automation was eliminating
vast numbers of agricultural jobs --
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remember that tractor? --
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the farm states faced a threat
of mass unemployment,
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a generation of youth
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no longer needed on the farm
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but not prepared for industry.
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Rising to this challenge,
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they took the radical step
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of requiring that their
entire youth population
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remain in school
and continue their education
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to the ripe old age of 16.
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This was called the high school movement,
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and it was a radically
expensive thing to do.
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Not only did they have
to invest in the schools,
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but those kids couldn't work
at their jobs.
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It also turned out to be
one of the best investments
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the U.S. made in the 20th century.
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It gave us the most skilled,
the most flexible,
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and the most productive
work force in the world.
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To see how well this worked,
imagine taking the labor force of 1899
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and bringing them into the present.
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Despite their strong backs
and good characters,
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many of them would lack the basic
literacy and numeracy skills
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to do all but the most mundane jobs.
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Many of them would be unemployable.
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What this example highlights is
the primacy of our institutions,
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most especially our schools,
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in allowing us to reap the harvest
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of our technological prosperity.
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It's foolish to say
there's nothing to worry about.
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Clearly we can get this wrong.
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If the U.S. had not invested
in its schools and in its skills
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a century ago with
the high school movement,
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we would be a less prosperous,
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a less mobile, and probably
a lot less happy society.
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But it's equally foolish to say
that our fates are sealed.
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That's not decided by the machines.
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It's not even decided by the market.
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It's decided by us
and by our institutions.
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Now, I started this talk with a paradox.
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Our machines increasingly
do our work for us.
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Why doesn't that make our labor
superfluous, our skills redundant?
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Isn't it obvious that the road
to our economic and social hell
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is paved with our own great inventions?
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History has repeatedly offered
an answer to that paradox.
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The first part of the answer
is that technology magnifies our leverage,
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increases the importance, the added value
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of our expertise, our judgment,
and our creativity.
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That's the O-Ring.
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The second part of the answer
is our endless inventiveness
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and bottomless desires
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means that we never get enough,
never get enough.
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There's always new work to do.
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Adjusting to the rapid pace
of technological change
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creates real challenges,
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seen most clearly
in our polarized labor market
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and the threat that it poses
to economic mobility.
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Rising to this challenge is not automatic.
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It's not costless.
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It's not easy.
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But it is feasible.
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And here is some encouraging news.
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Because of our amazing productivity,
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we're rich.
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Of course we can afford to invest
in ourselves and in our children
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as America did a hundred years ago
with the high school movement.
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Arguably, we can't afford not to.
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Now, you may be thinking,
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Professor Autor has told us
a heartwarming tale
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about the distant past,
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the recent past,
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maybe the present,
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but probably not the future,
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because everybody knows
that this time is different.
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Right? Is this time different?
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Of course this time is different.
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Every time is different.
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On numerous occasions
in the last 200 years,
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scholars and activists
have raised the alarm
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that we are running out of work
and making ourselves obsolete:
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for example, the Luddites
in the early 1800s;
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U.S. Secretary of Labor James Davis
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in the mid-1920s;
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Nobel Prize-winning economist
Wassily Leontief in 1982;
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and of course, many scholars,
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pundits, technologists,
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and media figures today.
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These predictions strike me as arrogant.
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These self-proclaimed oracles
are in effect saying,
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if I can't think of what people
will do for work in the future,
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then you, me, and our kids
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aren't going to think of it either.
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I don't have the guts
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to take that bet against human ingenuity.
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Look, I can't tell you what people
are going to do for work
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a hundred years from now.
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But the future doesn't hinge
on my imagination.
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If I were a farmer in Iowa
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in the year 1900,
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and an economist from the 21st century
teleported down to my field
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and said, "Hey, guess what, Farmer Autor,
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in the next hundred years,
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agricultural employment is going to fall
from 40 percent of all jobs
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to two percent
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purely due to rising productivity.
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What do you think the other
38 percent of workers are going to do?"
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I would not have said, "Oh, we got this.
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We'll do app development,
radiological medicine,
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yoga instruction, ??."
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(Laughter)
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I wouldn't have had a clue.
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But I hope I would have had
the wisdom to say,
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"Wow, a 95 percent reduction
in farm employment
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with no shortage of food.
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That's an amazing amount of progress.
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I hope that humanity
finds something remarkable to do
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with all of that prosperity."
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And by in large, I would say that it has.
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Thank you very much.
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(Applause)