Be Innovative Yet Cautious: Secondary Effects Loom

Autonomous Google Uber Car - Photo from Zack Canter's blog "How Uber’s Autonomous Cars Will Destroy 10 Million Jobs and Reshape the Economy by 2025"

We live in an era when change and innovation are commonplace.  The reality is that today’s computer chip will likely be obsolete tomorrow, or soon thereafter.  The 2010 vehicle models will soon seem like they belong in the last century, and the next-released communication software will make us astonished that we ever lived without it.  The same principle applies for governing policies, public and private initiatives design, and really anything susceptible to growth and change.

Yet, for all the technology we rave about, policies we praise or growth we welcome, innovation and change also have dark sides that are seldom discussed.  Fortunately, even in the presence of an overwhelming and loud majority, there are usually a few brave souls willing to point to the negative and voice a dissenting opinion (at least in a free country).

What are the secondary effects of our actions and our developments that are presumably meant for good?  And are those secondary effects always good themselves?

We are privileged to live in a place where such criticism is welcomed; yet, we all too often drown out opposing views with cheers and jeers and fail to learn the true logic of the other side. Maybe, just maybe, we would change our opinion, or even consider a slight alteration in our existing plans if we knew about these secondary effects.  Even if we don’t change our plans or opinions, and no one is suggesting you should, it is always beneficial to be educated and understand other perspectives.

To be clear, I am not suggesting we change the trajectory of innovation and change, but rather, I am suggesting we take a critical look at our strategy moving forward and consider the secondary effects.  If done effectively, we could still make progress, adjusting if necessary, and then continue to move forward in a way that is more responsible.

For example:  I’m a passionate user of the transportation-hailing company, Uber.  The Chairwoman and CEO of the NYC Taxi and Limousine Commission, Meera Joshi, also sees the value of Uber.  “There is definitely a large hail market,” she said in an interview with CNBC. “Uber is an addition to the for-hire industry, and clearly a welcome addition because they’re extremely popular and their customer service is well-regarded.”  She continued, saying that “The city is better off,” referring to the business model employed by Uber and its peers. “It’s provided a level of competition that I think will increase service for the entire city.”[1]  This is positive because even the taxi lobby, Uber’s obvious competitor, says competition is good and that there is a place for Uber in the market place.  This also might seem surprising, because the biggest anti-Uber sentiments come from taxi lobbies in various cities and government officials with support from said lobbies.

Yet, one cannot argue that the start-up valued at $40 billion isn’t making waves.  According to Uber CEO Travis Kalanick, in a Business Insider article published in early 2015, “the taxi market in San Francisco is about $140 million per year.  Uber’s revenues in San Francisco, meanwhile, are running at $500 million per year.  That’s more than three times the size of the taxi market.  And Uber’s revenues in San Francisco are still growing at about 200% per year.”  In the same article, Kalanick dropped some other startling statistics about Uber: “Uber’s rides in San Francisco are growing 3X per year.  Uber’s rides in New York are growing 4X per year. Uber’s rides in London are growing 5X to 6X per year.”[2]

With that kind of growth, and that kind of unprecedented competition for a seemingly monopolized market, there are going to be waves.  Are traditional cab drivers going to keep their jobs?  If not, where will they be displaced to, and will they remain unemployed?

Another example of unprecedented growth is in the software technology and computers industry.  We have more computing power in our pockets today than in the first computers had that spanned an entire room.  Privacy is always a hot issue, so should these regular leaps in technology be reason for concern?  The American Civil Liberties Union (ACLU) explained that “Technological innovation has outpaced our privacy protections. As a result, our digital footprint can be tracked by the government and corporations in ways that were once unthinkable.”[3]  Yet, unfortunately, the digital footprint created as a consequence of technological advances is not only susceptible to scrutiny by governments and corporations, but also terrorist groups, criminals, and hackers. U.S. Supreme Court Chief Justice, John Roberts, understood this inherent need to protect certain truths we think important in the wake of such technological advances. He stated in the landmark case Riley v. California (2014) that “The fact that technology now allows an individual to carry such information in his hand does not make the information any less worthy of the protection for which the Founders fought.”

However, there are technologies used by people around the world that some would argue are the foundation for the next technological revolution – automation.  So, is there a concern for automated robotic technology – Google’s self-driving car, for instance?  Uber has stated that its goal is to replace all drivers with driverless vehicles, and this relates to the first issue in regard to secondary effects. If Uber achieves this goal, what happens to the millions of jobs it claims to have created?  These are questions that I do not have the answer to, nor am I suggesting we must find an answer right now, but they should be asked and discussed.  These economic questions, though, are less significant in the larger scheme – at least according to some of our world’s brightest scientists and businesspeople.

With regard to technological advances occurring at an unprecedented rate, Stephen Hawking explained in The Independent in 2014 that “success in creating AI [Artificial Intelligence] would be the biggest event in human history.”   He continued in a 2014 BBC interview explaining, “Unfortunately, it might also be the last, unless we learn how to avoid the risks. In the near term, world militaries are considering autonomous-weapon systems that can choose and eliminate targets.  Humans, limited by slow biological evolution, couldn’t compete and would be superseded by AI.”

A graduate of The Wharton School and CEO of Tesla and SpaceX, Elon Musk said in a 2014 address to MIT that AI is “our greatest existential threat.”  He said, “I’m increasingly inclined to think that there should be some regulatory oversight, maybe at the national and international level, just to make sure that we don’t do something very foolish.”

Technology has undoubtedly saved lives, and it should continue to be developed and be applied in innovative and fresh ways, but done so responsibly and at least considering the secondary effects.

What if we move away from a technology focus?  Does innovation and change in the policy sector still have as much of an impact, for better or worse?  Minimum wage is certainly an issue that multiple parties rally behind, albeit on opposing sides, and yet, the minimum wage supporters seem to be winning a slow battle – cent by cent.  Whether they are actually winning is still up for question, and this is where the second-order effects are critical.

Seattle recently instituted a $15/hour minimum wage.  Awesome – more money going into the middle and working classes that worked hard for that wage.  Certainly no one is arguing that our nation’s minimum wage workers did not earn their salary.  However, the unplanned results of forcing a company to pay workers a higher minimum wage are concerning.  A 2012 CATO Institute report said the following are likely side-effects of raising the minimum wage:  “Increasing the likelihood and duration of unemployment for low-wage workers, particularly during economic downturns; Encouraging employers to cut worker training; Increasing job turnover; Discouraging part-time work and reducing school attendance; Driving workers into uncovered jobs, thus reducing wages in those sectors; Encouraging employers to cut back on fringe benefits; Encouraging employers to install laborsaving devices; Increasing inflationary pressure; Increasing teenage crime rates as a result of higher unemployment; and Encouraging employers to hire illegal aliens.”[4]

How is Seattle’s minimum wage working out?  In a 2015 Tim Worstall report on Forbes, he cites that “as the implementation date for Seattle’s strict $15 per hour minimum wage law approaches, the city is experiencing a rising trend in restaurant closures. The tough new law goes into effect April 1st. The closings have occurred across the city, from Grub in the upscale Queen Anne Hill neighborhood, to Little Uncle in gritty Pioneer Square, to the Boat Street Cafe on Western Avenue near the waterfront.  The shut-downs have idled dozens of low-wage workers, the very people advocates say the wage law is supposed to help. Instead of delivering the promised “living wage” of $15 an hour, economic realities created by the new law have dropped the hourly wage for these workers to zero.”[5]

Of course, this is not to deter anyone from innovating, changing, growing and helping our society move forward.  On the contrary – I believe the evidence shows that change and innovation needs to happen.  Innovation and disruption constantly improves our lives – maybe even saves them – and helps secure future ones as well.  At the same time, the secondary effects of all of our decisions should be discussed and analyzed more.  We looked at a lot of the negative consequences because they illustrate more dramatically the need to think about these effects, but there are positive outcomes as well. As long as the potential downsides are thought about and made evident, perhaps investments, time, and focus could be allocated more efficiently, and we could actually innovate more rapidly.  While it may be easier to dismiss the secondary effects, they often have as big of an impact on us as the very things that set them into motion.

 

[1] http://www.cnbc.com/2015/03/03/is-uber-crushing-the-taxi-industry.html

[2] http://www.businessinsider.com/uber-revenue-san-francisco-2015-1

[3] https://www.aclu.org/issues/privacy-technology

[4] http://object.cato.org/sites/cato.org/files/pubs/pdf/PA701.pdf

[5] http://www.forbes.com/sites/timworstall/2015/03/16/we-are-seeing-the-effects-of-seattles-15-an-hour-minimum-wage/

[6] (photo) http://zackkanter.com/2015/01/23/how-ubers-autonomous-cars-will-destroy-10-million-jobs-by-2025/

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