Lion of the Blogosphere

Why robots will be expensive

Several commenters have asked the rather dumb question, “Why would robots be unaffordable to anyone if robots are manufacturing other robots? They should be practically free!”

Why does Adobe Photoshop cost $699 when it costs Adobe absolutely nothing for you to download it? Why doe cable TV cost $700 a year when the transmission costs are only a few dollars?

Just because the marginal cost of producing something is very low, or even zero, doesn’t mean that it’s going to be cheap or affordable. There will no doubt be many inputs that are controlled by monopolies or oligopolies who will jack up the prices in order to make profits, and there will be future economists who will explain that it’s necessary in order for the companies to recover their capital investments and and to create incentives for companies to make new capital investments.

Furthermore, unlike the software example, robots are physical objects and there may be scarce resources involved in the manufacture of certain parts. For example, because of peak oil theory, the price of oil will continue to increase, even though oil company labor costs will decrease because of robotic roughnecks. There will no doubt be other natural resources vital for the manufacture of robots that will be in short supply, or controlled by monopolies or cartels.

Written by Lion of the Blogosphere

February 24, 2013 at EDT am

Posted in Economics, Robots

30 Responses

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  1. I know I have posted this before, but the “Four Futures” article by Peter Frase on Jacobin is a really coherent and logical examination of the implications of increased automation. It really should be getting more attention:

    http://jacobinmag.com/2011/12/four-futures/

    Essentially the article is a thought experiment of how the effects of automation unfold differently in a more and a less egalitarian society, and in a society with less resource constraints and more resource constraints.

    If the peak oil hypothesis is correct -I agree that it almost certainly is- whatever else, we are looking at a future with more resource constraints.

    Ed

    February 24, 2013 at EDT am

    • Interesting read. From a game theory perspective, I would argue that each individual’s “dominant strategy” would be to prepare for the author’s option #4. Sort of like an inverted “Pascal’s Wager”, where, rather than clinging to the small probability of an infinite payoff, I plan my strategy around the high probability of a more Hobbesian future world.

      Regarding “peak” resources, I think that the use of robots to mine the oceans at ever greater depths could be a game changer. Even if we have “peaked” in energy creation from current sources, we have left more than 50% of the planet’s available “drilling” locations untouched, since even the deepest of deep-water rigs barely penetrates the ocean’s depths. A few years ago, Credit Suisse was running ads claiming that there was up to $1 trillion in “gold dust” on the ocean floors, for example. Who knows how many untold barrels of oil are in the ground under the deepest parts of the Pacific?

      BS Inc.

      February 24, 2013 at EDT pm

      • I believe there are geological reasons why there isn’t any oil at the bottom of deep ocean (as opposed to relatively shallow waters where offshore drilling takes place), but I could be wrong about that.

        Lion of the Blogosphere

        February 24, 2013 at EDT pm

      • “I believe there are geological reasons why there isn’t any oil at the bottom of deep ocean (as opposed to relatively shallow waters where offshore drilling takes place), but I could be wrong about that.”

        That’s entirely possible and maybe that’s why the ads I saw referred to gold (and, by inference, other metallic commodities), rather than oil. If the part of the earth that we can walk on was originally underwater and only rose above the water due to volcanic activity, everything that we have above ground by way of metals should also exist below the surface.

        Also, there might be some interesting geothermal opportunities underwater.

        Something like this:

        http://thinkgeoenergy.com/archives/7941

        BS Inc.

        February 24, 2013 at EDT pm

  2. Lion, i respectfully say that you are dead wrong here. All manufactured objects have plummetted in price over the past thirty years. Laptops, flat panel televisions, etc. robots willbe made by a large number of manufacturers in china japan korea etc. competition will drive the price down. The robot future will be bountiful, And by the way all cars will be self driving. One hundred years from now people in high iq nations like singapore and denmark will look at our lives as filled with drudgery

    Bob

    February 24, 2013 at EDT am

    • The Europeans make a large number of robots. ABB and KUKA are large manufacturers.

      de Broglie

      February 24, 2013 at EDT pm

  3. Robots will be just as cheap as any other electro-mechanical device. Your scenario makes more sense if someone manages to retroactively patent the idea of robots, or something like that.

    ntk

    February 24, 2013 at EDT am

  4. Hey Lion- You probably know more about software development than robots. So when do you think “robots,” i.e. computers that write their own code, will take over much of software development? It doesn’t seem like much more of a stretch to me to get from robot roughnecks to robot coders. Certainly hum-drum tasks like creating a new report or adding a new field to a form can’t be that far off for computer assistants. I can picture asking Siri to modify some web form and associated database. Probably the majority of coders these days are doing this sort of work, not more intellectually demanding or novel programming.

    steve

    February 24, 2013 at EDT pm

  5. “Why does Adobe Photoshop cost $699 when it costs Adobe absolutely nothing for you to download it? Why doe cable TV cost $700 a year when the transmission costs are only a few dollars?”

    Because people insist on having the Adobe-brand Photoshop robot. There are cheaper brands of robot available, e.g. Gimp, Paint Shop Pro, GraphicConverter.

    In other words, it’s a bad example because it’s a particular type or model of good, as opposed to “robots” in general, which might refer to any type of robot. So your comparison is inappropriately specific. You should compare “robots” in general to “software” in general, and “Photoshop” in particular to a particular model of robot.

    Just because one model of robot can sell for a huge premium doesn’t mean that all brands of robot will sell similarly. There will be price differentiation, just like with every other sort of good.

    The cable TV example suffers from the same problem. If people don’t want to pay for the expensive cable TV robot, they can watch the free broadcast TV robot.

    ntk

    February 24, 2013 at EDT pm

  6. adobe has a monopoly on their products and can get away with it. creative professionals only use the creative suite, costs be damned. robots probably won’t be a monopoly.

    look at 3d printing – sure, it’s just plastic crap – but prices are dropping pretty rapidly and they weren’t that expensive to begin with.

    there are million dollar printers that can print stuff out of steel and copper. think about what those might cost in 10 years, and what the million dollar version in 10 years will do.

    i think atom-scale home-manufacturing will be a bigger impact than robots, because as long as you have inputs, you can make yourself what you want.

    lion of the lionosphere

    February 24, 2013 at EDT pm

    • “i think atom-scale home-manufacturing will be a bigger impact than robots…”

      I doubt this will come to pass.

      de Broglie

      February 24, 2013 at EDT pm

      • Atom-scale home manufacturing is incompatible with the First Law of Thermodynamics. You could easily construct combustible systems with containing enough potential energy that your home power link would not be able to run the machine, even with very small scale products.

        And the Second Law has exponentially harsher disappointment to deliver on that count.

        Owen

        February 24, 2013 at EDT pm

  7. I don’t understand why automation is treated as a factor that will somehow make labor obsolete. Take farming. There was a time when 80% of the population was engaged in farming. Now, barely 1%. According to you guys, the 79% of those farmers and their descendants should’ve either died from starvation or should live in abject poverty.

    None of that happened. Instead, people who used to work on farms found other work.

    The aspect you are not considering is how mechanization changes the marginal productivity of labor. If you have 10 acres of and and 100 people to cultivate by hand, the marginal productivity of labor is probably pretty small, in that you’re barely making a profit. Now, add a tractor to the mix. You can now plow that same 10 acres with only 10 people. The other 90 are let go. What happens to them.

    Well, they find other work. Many of them may end up working for the company that makes the tractor. But here is hat also happens. The higher marginal productivity of labor allows more land to be cultivated. Instead of 10 acres with one tractor and 10 workers, I can now cultivate 100 acres with 100 workers and 10 tractors. Employment expands, with the workforce divided up among the new tractor maker and the additional land falling under cultivation.

    This was the whole process of the industrial revolution, with looms and farms being automated. Automation never created the dystopia you guys claim.

    The key difference, of course, was all this automation took place in a economic environment with little immigration and no outsourcing. A displaced American farmer probably needed to go one county over to work for the tractor maker. He did not face labor barrier mobility, like being unable to move to India.

    The problem today is immigration and offshore-outsourcing creating labor supply shocks that the economy can’t handle.

    I also don’t entirely buy your peak oil theory, since resource prices are politically determined.

    map

    February 24, 2013 at EDT pm

    • Imagine this scenario: I have a few square miles of land. I have a dome over it so that I can control the atmosphere and keep out contaminants. On my land I have some greenhouses and chicken factories that are fully automated. They produce more than enough food for me with no effort on my part. My waste is fed back into the system. I have medical robots to treat my illnesses, robot soldiers to protect me from invaders, repair robots to fix things that break, etc… everything that I need is under my dome. I don’t need anyone or anything to survive. There are a few million of us living like this under domes. We socialize, marry, raise families, etc…. we have a complete society where no human has to work.

      Why exactly should I hire you? You’re just some surface-dwelling scum, not an enlightened dome-dweller. Your labor is worthless to me and my kind. Oh and by the way, our domes cover most of the earth. When we build a new dome you can’t resist us seizing the land because you do not have an army of robotic soldiers. Your kind are getting pushed into smaller and smaller areas. Eventually your kind is exterminated.

      T

      February 24, 2013 at EDT pm

      • T, this kind of generalized automation does not exist and is probably as fanciful as the singularity. What you do illustrate is the peculiar problem of immigration. Replace robots with illegals and you illustrate the problem.

        map

        February 24, 2013 at EDT pm

  8. If a robot manufacturer is making windfall profits, what prevents a new entrant (perhaps Chinese, or another foreign country), from developing robots that work 80% as well and seel them for 50% of the price?

    High profit margins are very rare in manufacturing. They are seen in “emotional value” products like cosmetics, status goods like luxury bags and iPhones (partially), or politically sensitive monopolies like weapons manufacturers. With most other things, you just can’t charge huge markups.

    AsianDude

    February 24, 2013 at EDT pm

    • What prevented Samsung from selling Galaxy Nexus phones that were more capable and cheaper than iPhones last year?

      It was an injunction from the US Circuit Court of Appeals promoting Apple’s monopoly rights over a mountain of nonsense frivolous patents.

      Filing a pile of frivolous patents over robots isn’t going to take any special creative imagination.

      Owen

      February 24, 2013 at EDT pm

      • But ultimately what happened? Samsung was set back, but its sales are roaring and APL stock has fallen quite a bit from its peak. Those things slow down, but ultimately cannot, prevent competition.

        Apple is able to charge so much partly because its i devices are “cool” (confer status). Robots, with the exception of personal services robots, will be commodity goods. They will be evaluated solely on performance and not on intangible factors.

        AsianDude

        February 25, 2013 at EDT am

  9. I plan to run for office on the “a robot in every house, spread the robot-produced wealth around” platform. All the human voters will want robots and the wealth / goods / services produced by robots. Who will vote against this except for a few robot-owning plutocrats? The army of robot slaves, of course, doesn’t vote and doesn’t care who it works for anyway.

    Tarl

    February 24, 2013 at EDT pm

  10. re: “because of peak oil theory” LoB

    No such thing as oil is abiotic. Read The DEEP HOT BIOSPHERE and HYDRITIC EARTH.

    Dan Kurt

    Dan Kurt

    February 25, 2013 at EDT am

    • This “abiotic” oil is some Christian Right thing, because it doesn’t challenge the idea that the Earth was created exactly 5000 and something years ago.

      Lion of the Blogosphere

      February 25, 2013 at EDT am

      • Ha. The theory was originally proposed by SOVIET geologists in the 1950s.

        Tarl

        February 25, 2013 at EDT am

      • re: “This “abiotic” oil is some Christian Right thing” LoB

        Not even close. Thomas Gold (DEEP HOT BIOSPHERE) late Middle European Jew. Vladimir Larin (HYDRIDIC EARTH) was a Soviet geologist. Read this article: http://eearthk.com/Articles03.html or
        by a Cal Tech educated (1940s) Canadian Geologist.

        Dan Kurt

        Dan Kurt

        February 25, 2013 at EDT am

      • I think Mendeleev proposed the idea. Russians have a sort of nationalist claim to the theory.

        de Broglie

        February 25, 2013 at EDT pm

  11. Please change HYDRITIC to HYDRIDIC.

    Dan Kurt

    Dan Kurt

    February 25, 2013 at EDT am

  12. Cheap fossil fuels has allowed things to be manufactured and shipped cheaply. Once the well runs dry, everything will become more expensive.

    bobo

    February 25, 2013 at EDT am

  13. Adobe has to charge so much for Photoshop because I can get Photoshop for free. Only businesses with large targets on their back have to pay that. Cable TV I assume the infrastructure costs some money to maintain, but of course it’s a monopoly enforced by society so it’s probably more expensive than it’s true cost.

    What about the price of processors, milk, meat, any utilitarian goods that are close to their market rate?

    Software right now is screwed up by archaic patent laws, hopefully that will change. Software needs to be treated like novels or music. At any rate the software laws haven’t turned software into brutal monopolies and they won’t for robots either. Utilities are special circumstances, there’s no legitimate reason that robots would be treated like utility companies.

    They will probably be treated more like cell phones where competition is not as high as it could be but still pretty good. Mainly this is because it’s difficult for people to get used to different formats, like with computers, it’s kind of winner take all. The most popular platform gets the most applications, so it becomes more popular, so it gets more applications etc. until you have Microsoft. But in cell phones and PCs you still see hope for the little guy. There are cheap cell phones, and they get better every generation just staying behind the big players. There is open source software that is often only a little worse (and sometimes better) than the big monopoly software, GIMP vs Photoshop, Open Office vs Microsoft Office. So there is no reason for so much pessimism concerning the robot future.

    Maybe there will have to be more government distribution, or maybe something else will solve the problem. Maybe one of these future robot trillionaires or the government will start a welfare for sterilization program and everything will be solved. We all know poor people couldn’t resist lifetime welfare.

    XVO

    February 25, 2013 at EDT am

  14. ‘bots WILL BE expensive
    Because of that Great American Freedom
    To pursue that Great American Dream
    of gouging customers with a
    110% base mark-up.

    Firepower

    February 25, 2013 at EDT pm

  15. “Peak oil” is a survivalist bogeyman … a stupid phantasm. There are many alternatives to current U.S. energy production and these will come to be used as petroleum prices rise, making the necessary political changes inevitable. France generates 75% of its electricity via nuclear reactors and electric cars are being developed. Petroleum usable in IC engines can be produced using air and electricity. Do panicking leftists need calmer heads to draw them a picture?

    http://en.m.wikipedia.org/wiki/Nuclear_power_in_France

    http://www.telegraph.co.uk/earth/energy/fuel/9619269/British-engineers-produce-amazing-petrol-from-air-technology.html

    There are free operating systems (Android, Ubuntu, etc.) and 3-D printer developers offer many free templates. Robots will be cheaper than dirt, just like Korean Android phones.

    runindogs

    February 26, 2013 at EDT am


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