Wednesday, February 08, 2017 / Perth Australia / By Niekie Jooste
In this edition of "The WelderDestiny Compass":
In our quest to determine if our future will be utopian or dystopian, we have spent quite some time considering how the economy works. This week we close off this discussion by looking at the role of debt in the economy.
At that point, I believe that we will have all the ammunition we need to tackle this question with logic, having at least a reasonable probability of getting the right answer to the question. The answer does however lead us to a third, new, possibility. The answer is neither utopia or dystopia, but “Nichetopia”.
After discussing what Nichetopia is, we explore how the Welder will fit into this brave new world.
If you would like to add your ideas to this week’s discussion, then please send me an e-mail with your ideas, (Send your e-mails to: email@example.com) or complete the comment form on the page below.
You may want to read the input of Martin, one of our readers. His take on how engineering jobs are changing due to the introduction of automation, is also interesting. Click here to read Martin's input.
Now let's get stuck into this week’s topics...
The other major factor to consider when talking about money, is debt. As we have previously discussed, when banks issue debt, they are in effect making money from thin air. The more debt, the more money there is in the economy.
The interest rate is the cost of debt. As the interest rate goes down, asset values increase. These asset values are used as collateral for further debt, therefore this is a self-feeding mechanism.
The problem is that this can happen in reverse when asset values fall due to economic shocks. This leads to credit crises. Due to the very high levels of debt currently, and the history of reserve banks printing money to support the banks during these crises, it is only a matter of time before confidence in the paper money system is lost. Exactly how much time, is anybody's guess. I am surprised that it has not already happened.
I believe that the way in which government will try to restore confidence in the system is to introduce gold backed electronic currencies.
If future currencies are to be gold backed, it will obviously result in a big upheaval in the gold market, and could conceivably destroy a lot of “paper wealth” in the process. This will not be a big problem if you are keeping your wealth in hard investment assets, rather than paper assets, just like the wealthy do!
In the interest of brevity, I have not gone into details regarding the economic principles discussed, but if you are interested in a more detailed description, please click here…
We have discussed how the broader economy works in allowing most of us to survive, while allowing some people to gain very high levels of wealth. We have seen that this is based largely on human behaviour and human nature. Based on this, it appears that neither utopia or dystopia is a stable system.
A utopian system assumes that there will be some subset of society that uses their capital and efforts to serve the wider society, while this wider society has no obligation to add any value. This is clearly expecting too much of this “wealthy subset” and would go totally against how society and economics has operated for thousands of years.
A dystopian system where the lower classes are no more than slaves to the wealthy, will also not be sustainable for any extended period of time. Revolution will ensure that this situation changes. People of wealth and power will obviously use their sphere of influence for their own gain, but if they overreach too far, they may have to face the figurative or literal guillotine.
The most likely situation is that there will be a gradual levelling out of wealth gaps between nations as developing nations joint the “club” of developed nations. Much as Japan, South Korea and Singapore have. In addition, the developed nations will need to “pay” for their excessive debt levels. This will not be a nice smooth journey, as there will certainly be many economic crises and hardship along the way.
What this means is that the idea that there will be any kind of “free ride” created by automation is simply wrong. For decades, we have been hearing how automation is going to lead to a greater standard of living for everyone while we will have to work fewer hours. After all, the machines will be doing our work for us, so there will be nothing left for us to do, right?
If that is the case, then why has the real (after inflation) income remained largely unchanged within the USA since the 1970’s, while the average number of hours worked have increased? Why is it now necessary for most families to have two bread winners rather than just a single bread winner to make ends meet? This all happened during a time when automation was already making a significant impact on society.
Clearly the phenomenon of machines replacing humans, does not result in humans having to work less. They just need to do different types of work. They also need more money to afford the “assets” such as a home and enough savings to cater for retirement, because greater wealth creation results in higher asset inflation. (If you want to explore this conclusion in greater detail, please go back to the last two editions of The Welder Destiny Compass to see my reasoning.)
Be under no illusion. You will need to make this new era work for you. If you just wait around for circumstances to overtake you, you are liable to find yourself on the wrong side of the breadline.
So, if it is not utopia or dystopia, then what? I call it Nichetopia. This is where we will all have to find our own “niche” in the world, and in the solopreneur economy. How good you are at finding and developing your niche, is going to determine your socio-economic standing in society.
Instead of having large engineering corporations that employ huge numbers of people shuffling papers, operating manual systems or welding, the engineering corporation of the future will be fluid in nature.
It will have systems that have standardised interfaces, so that it can interface with suppliers, contractors and customers’ systems on the fly. Automated planning systems will decide how much of what kind of service is needed for the next “production planning cycle.” The automated systems will then find the most suitable suppliers and niche solopreneurs to provide the required services as required.
We have previously discussed how Artificial Intelligence (AI) will be central in how this all plays out. As Welders, we cannot possibly do everything ourselves, but with the aid of our own personal AI’s, that can interface with every other AI as needed, the details will be dealt with behind the scenes.
Clearly, the more we can offer in terms of niche areas where we can be effective within the welding game, the more work will flow our way. The more self-contained our service offering becomes, the better our chances of getting the work.
Where we now have a welding supervisor to tell us what to do, in the future our AI will provide us with that information, as obtained from the central planning system of the engineering corporation. Where we had an army of quality control (QC) people to monitor and test and record and file, our AI’s will collate the evidence on the fly and provide the necessary QC output with minimal intervention from ourselves.
Information such as welding amps, voltages, heat inputs, cooling rates, maximum inter-pass temperatures etc. will all be collected by connected sensors and shared via the “Internet of Things” to be stored in “the cloud” for subsequent retrieval should there be any need for the information. (e.g. when something goes bang or collapses!)
Obviously, this level of automated interfaces will not happen overnight, but we need to appreciate that we have already entered the change process. During this change process, we need to be able to keep up with technology and developments. We need to understand the fundamentals that underpin the science of welding, because we will need to know when the machines are making a bugger-up, and they most certainly will! No change happens without pain or mishaps.
But the most important factor is to develop the skill, which IS THE ART OF WELDING. When all is said, and done, that artful skill will be the differentiating factor that will gain you, the Welder, the juiciest work at the best remuneration.
Does this picture scare you, or excite you? Do you hope to ride out your days before the change hits like a storm at sea, or do you want to start preparing your boat to be the most seaworthy possible?
Yours in welding
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