Tech & Science

To Fix the Economy, We Need More Bump and Grind

09_02_Friction_02
09/02/16
In the Magazine
Bookstores are a bastion for what businesses call friction-- all of the 'unnecessary' steps between profits and growth, with such things as the cost of printing books and running a store with such blue-collar jobs as factory working, delivery drivers, sales people and road crews to play pavement on the street to the store. Matthew Horwood/Getty

An enormous selling point of cloud software, artificial intelligence, the Internet of Things and other new technology is that it removes “friction” from business. But as it turns out, much like with sex, the economy isn’t that great if you take away all the friction.

This is why the best news out of our house of horrors presidential campaign might be that both candidates pledged to pump hundreds of billions of dollars into infrastructure projects. A good way to add friction to our hyper-fast software-driven economy would be to invest in painfully slow, physical, local, wasteful infrastructure, like a nice bridge or sewer. “If some parts of our society are going to speed up,” tech philosopher Stewart Brand wrote in The Clock of the Long Now, “then other parts are going to have to slow way down, just to keep balance.”

Eliminating Friction Benefits the 1 Percent

Businesses loathe friction, a catchall term for anything that gets in the way of speed and profits. Something as simple as a credit card swipe can be considered friction, which is why companies like Pymnts.com pitch a way to pay with your phone to “enable faster, frictionless consumer checkout.” IBM and Cisco advertise that they can analyze data collected at every step of a product’s journey to decrease friction in the supply chain. Trucking physical products around is considered friction. Onstage at a recent conference for corporate chief information officers, Steve Rosenbush, editor of the Wall Street Journal’s CIO Journal, noted, “The perfect CIO is enabling the perfectly frictionless business.” To sum up, businesspeople want friction like they want head lice.

So businesses invest in technology that promises to work like Astroglide. Of course, businesspeople have been making those kinds of investments since Eli Whitney sliced the time and number of workers needed to process cotton. (Less friction, a booming economy in the American South.) But today’s technology is automating away friction so fast that society is reeling.

Why? Friction creates middle-class jobs, and cutting it out means automating or completely bypassing those jobs. Books provide a simple example of how today’s technology nukes friction-generating jobs. Physical books generate a lot of friction between publisher and reader—think of the portion of a book’s price that goes to employees at printers, truck companies, warehouses and book retailers. An e-book erases much of that. A book zips from Amazon’s data center to your iPad. The technology brings benefits to the publisher as costs fall, and it makes books cheaper and easier for consumers to get. But it kills all those jobs in the middle.

Imagine the much greater carnage when AI technology starts to automate truck driving, America’s most common job. Or when blockchain, the technology behind bitcoin, makes accountants obsolete. Eliminating friction means that more of the money in the economy bypasses the middle class and goes right to the ownership class, making the rich richer. That’s how we’ve ended up with stalled middle-class incomes, slow growth, a widening wealth gap and the anti-establishment anger expressed by supporters of Donald Trump and Bernie Sanders.

Nobody is going to halt advances in technology. Nothing is going to short-circuit businesses from automating away friction as fast as they can. So how do we get Brand’s friction balance?

Friction Means Jobs

For the first time since the Reagan administration, there seems to be a consensus that adding friction is the government’s job. Both presidential candidates in the 2016 race are going all-in on infrastructure promises, which is a remarkable turnaround. Jacob Leibenluft, a Hillary Clinton adviser, notes that as a share of the overall economy, infrastructure investment is half of what it was 35 years ago.

Surveys show the public wants this investment. A recent Brookings Institution report concludes that government infrastructure spending is the cure for recent economic woes. “The need to invest in U.S. infrastructure has never been clearer…both to drive long-lasting growth and to expand economic opportunity across the entire workforce,” the report says.

Infrastructure projects can add friction to the economy as software automates it out elsewhere. Building a highway or school is stubbornly local, so cloud-based software from Silicon Valley can’t replace workers in Kansas or Maine. Critics often say that when the government builds anything, the work is plagued by inefficiency and bloated costs. In this software-eats-everything era, that should be part of the point. The inefficiency is friction, and the friction means jobs.

The latest proposals for infrastructure spending would add 2.5 million jobs by 2025, the American Society of Civil Engineers says, and infrastructure projects employ people who haven’t graduated from Harvard Business School and don’t know the Python programming language from a snake but still want satisfying work. We never so badly needed shitty government management.

Added friction further juices local economies because the newly employed can then hire plumbers to fix their bathtubs or buy burgers at nearby restaurants. All of that puts money in the hands of more people who will spend it, instead of adding another billion to Mark Zuckerberg’s savings account. A good dose of friction should do a lot to defuse the anger and resentment aimed at the richest one-percenters.

That’s the short-term benefit. The big payoff from improving transportation and cities and water and schools and broadband will come in the future. Economist Lester Thurow, who died earlier this year, put it this way: “The proper role of government in a capitalist society is to represent the interest of the future to the present.” Better infrastructure will create a more efficient and effective country down the line.

Adding friction seems politically savvier than a proposal put forth by some Silicon Valley leaders to counter tech’s impact by giving people a “guaranteed basic income.” That idea assumes software is going to eradicate most of the friction in the economy—in other words, software will kill most middle-class jobs. To fend off a revolt, government would set up a way to pay everyone enough so people wouldn’t have to work. Apparently, the one-percenters would make everything, and the rest of us would take our economic opium and spend our time painting or making our own cheese. But that doesn’t sit well with the American ideal of working hard to get ahead.

Adding friction by building infrastructure sounds more promising. It would pay people to do real jobs, and the result would be roads and buildings and systems of great value to future generations.

That way, everyone can feel satiated, then roll over and immediately fall asleep.