My 1st Waymo, AI Job Churn, & Germany (Sigh)

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I was out in San Francisco on business two weeks ago and took the opportunity to ride in my first driverless taxi from Waymo. The cars are all over downtown SF. Waymo is also active in Phoenix and Los Angeles. It’ll be coming soon to Atlanta and Austin in a partnership with Uber in 2025.

It was a good ride. In the city center there was a Waymo available within a minute or two but after taking one to Russian Hill it was a longer wait to get back from there and I just opted for the closer Uber.

My biggest take away after my first ride was how quickly I got used to it and then even bored. Within 5 minutes I was scrolling away on my phone.

David Demming is a Harvard Kennedy School economist and specializes in studying labor markets. He’s generally cautious about how quickly things will change because of AI. He cites this chart from a recent paper he authored along with former Treasury Secretary and Harvard President Larry Summers. It attempts to measure labor market churn or how many workers entered and exited each occupation or job category over a decade.

First it’s just cool to see this over time. The 1880s and 1890s were a disruptive time, but the big take away is that the labor market was much more volatile from the 1940s-1970s than it has been in recent decades. The biggest changes then were a move away from farm labor which fell by a full 13 points during this period and a rise in professional and managerial roles.

Everyone says, “things are different these days,” but for the last 40 years they’ve been remarkably the same. But when looking just at more recent data and particularly data since the pandemic, there’s much more evidence that things have begun to shift.

The Demming/Summers paper shows:

• A decline in lower end jobs particularly those in personal services categories like janitors and food prep

• A leveling off in health care positions

• A massive drop in retail jobs

At the high end of the job spectrum, they show an increase in Science, Technology, Engineering, and Math (STEM) jobs. These are particularly concentrated in business.

At the same time, the level of business investment in software and information processing is at a peak of 4% of GDP (see item below. Germany is at less than half that). That’s the highest its been since the dot com bubble and a lot of that is AI related.

In the aggregate, it looks like businesses have been investing in AI related technologies for several years now. These aren’t necessarily generative AI technologies like ChatGPT but predictive AI. Predictive AI is setting prices on Amazon and airlines. It’s serving up your ads on Google and robots have become increasingly important part of many companies’ strategies.

It seems like we are entering another period of high labor market churn. Maybe it’ll be the 1880s all over again. We’ll be tracking the new rules that result.

I give Germany a hard time on this blog but it’s only because I want them to do well. They just can’t get out of their own way. As Rebecca Patterson writes in the News Items newsletter:

EY did a survey of European countries on their experiences with AI. Only 34% of Germany respondents had even experimented with AI.

This is what happens when you have too much austerity. Germany will not run budget deficits to fund investment and its private companies have been buffered by first the Great Financial Crisis then the Euro Crisis then the Pandemic and now the Ukraine War and the associated energy shocks of losing access to cheap Russian gas.

The government won’t cough up any money to make up the difference and German business are getting put through the ringer. Just remember that when deficit scolds tell you how broken US policy is. I’d rather be richer with more debt than poorer without it.

Keep learning,

Alan

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