The Rise of the Robots

The rise of the robots is another reason to have an asset protection strategy

I had the good fortune to be a kid in the ‘60s and ‘70s, when science fiction retained just enough of the optimism of the ‘50s to be fun, but also began to hint at darker futures. You could watch Star Trek after school for a pick-me-up, and 2001: A Space Odyssey after dinner to bring you back down again.You need an asset protection strategy against the rise of the robots

One of the recurrent themes of the sci-fi of the time was robots. They were usually good (“Danger, Will Robinson!”), but could sometimes be bad (the homicidal HAL 9000). They could be humanoid (Blade Runner) or resemble a home appliance (R2D2).

I can’t recall sci-fi robots ever depriving anyone of a livelihood, however. That possibility only occurred to me once I started studying economics at college.

You wouldn’t think you’d need asset protection from robots, but it’s true: Robots are stealing jobs now and with potentially serious consequences for you … even if you’re at or near retirement.

Robots: Not Just Another Tool

The mainstream economic view of robotics is the same as any process of technology-driven industrial productivity improvement. According to this view, the spread of robotics will be just like the transition from hand-looms to steam-driven textile mills in the 19th century. There will be initial displacement of workers, but the resultant growth of the economy will produce more than enough new jobs, and lower prices to boot.

I don’t buy this sanguine story, for three reasons.

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First, industrial steam-looms (like Henry Ford’s assembly lines) produced consumer goods that were bought by the people who operated them, and by consumers in captive colonial markets like India. There was a good match between the industries adopting new technology and the markets they served — as productivity increased, so did the absolute size of those markets, especially as colonialism brought new ones into being. Today’s robots, on the other hand, are displacing workers who have been producing goods for quantitatively mature markets, like smartphones or hamburgers. I don’t see the total sales of either increasing dramatically over the long term.

Second, I think Karl Marx was right for once when he argued that the universal adoption of labor-saving technology will result in a fall in the rate of return of capital. When one hamburger joint automates, it can undercut its conventional competitors’ prices for a while. But when all hamburger joints are automated, the only way to maintain market share will be to drop the price of a burger, eventually reducing the return of investment in those robots. There may be scope for further productivity enhancement — and robots may become cheaper when made by other robots — but once you’ve gotten rid of human labor, there’s a limit to how much margin you can keep over the long-term.

But above all, automation will displace workers who won’t be able to purchase the resulting goods. Unless capitalists decide to start cutting working hours, hiring more than one employee to share a week’s work, and raising hourly wages — the techno-utopian dream — many people will simply be shut out of the modern economy. The “economic cycle” that links production to consumption will be broken.

That will intensify the first two problems … and cause another: socio-political instability.

Asset Protection: Preparing For a Robotic Future

For many of us, this isn’t an immediate problem. We’re part of the pre-robotic economy, and by the time machines really start having an impact, we’ll be retired.

But that’s precisely the problem.

The U.S. Social Security system, like those in most advanced economies, relies on current worker tax contributions to fund pension obligations toward previous generations. A robotic economy will produce a steep fall in tax collections. In 10 to 15 years, social pension systems will be unworkable, no matter how much you’ve put into them over the years. If you’re counting on Social Security for your retirement, you’re in deep trouble.

If I’m right about the impact of robotics, the future will be far more unequal than the present. Some industries catering to the lucky few will prosper, but the vast majority of today’s firms will simply run out of customers.

That means you won’t be able to rely on conventional retirement investment and asset protection strategies to beat inflation. As in any period of rapid economic change, there will be winners and losers, and anticipating who they will be is crucial.

That’s why I predict that the only people who will prosper in our robotic future are those who eschew conventional public and private pensions — including 401(k)s — and take a more active approach to retirement investing and asset protection. Self-directed IRAs and certain annuities, for example, give you the scope to ride the waves of the future rather than be engulfed by them.

If you haven’t got a retirement and asset protection strategy like that, you’d better start working on it now, before our robot overlords gain the upper hand.

Kind regards,
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Ted Baumann
Offshore and Asset Protection Editor