Misunderstanding the Economics of Robotics

Robots are only cost-effective in the narrow niches of commoditized tasks.
To reach a more realistic understanding of the economics of robots, let’s return to author Peter Drucker’s maxim: enterprises don’t have profits, enterprises only have expenses. In other words, from the outside, it looks as if businesses generate profits as a matter of course. In the view of Universal Basic Income (UBI) advocates, substituting robots for human labor will not only free virtually all humans from working, it will also generate endless wealth because the robots will be doing almost all of the work. Enterprises don’t have profits, enterprises only have expenses captures the core dynamic of all enterprises: the only reliable characteristic of enterprises, whether they are owned by the state, the workers or private investors, is that they have expenses. Profits–needed to reinvest in the enterprise and build capital–can only be reaped if revenues exceed the costs of production, general overhead and debt service. Robots are complex machines that require substantial quantities of energy and resources to produce, program and maintain. As a result, they will never be super-cheap to manufacture, own or maintain.

This post was published at Charles Hugh Smith on THURSDAY, DECEMBER 07, 2017.