Less Work, More Wealth

Here’s a question. Just how rich are we going to be?

Thanks to wafer scale computing—already being boosted by graphene’s near superconducting properties, with much more to come—we stand on the threshold of an increase in local computing power—a thousand-fold or more—that will make the feats of the past 50 years, climaxed by giant giga-kludge data centers, look quaint.

According to official numbers, current computational power already supports a $100 trillion global economy. That’s measured, however, by gross domestic product (GDP), an almost meaningless statistic. Time prices—which transcend inflation—say the world’s wealth is growing by 4% a year, leaving GDP in the dust. Yet even that figure may be a gross underestimate.

The world’s worriers say Artificial Intelligence (AI) may impoverish those who lose their jobs to it. Yet what little data we have suggests just the opposite. The jobs will remain as hours of work plummet, while new opportunities proliferate.

Management moans and groans that “working hard at home” is a poor cover for hardly working. That is likely at least partly true: almost certainly most work-at-homers put in fewer hours than when they had to go to the office. Many may already be working less than four days a week. Many devote their freed hours learning new skills and disciplines. Yet corporate earnings continue to rise relentlessly at a compound annual growth rate (CAGR) of more than 5% over the past decade. One reason surely is that AI-boosted productivity is closing the gap.

The 40-hour work week seemed a miracle of modernity; how far are we from 20?

Brilliant as Pooley and Tupy’s time prices are, they are based on blue-collar hourly wages which capture a shrinking portion of the economy. Knowledge workers are almost certainly gaining wealth as their productivity rises and their mandatory work hours fall amid lives largely devoted to new entrepreneurial and educational pursuits.

Nor do time prices fully capture the reduced physical exertion or risk of injury for blue-collar workers, though both are partly captured in rising productivity and wages.

For investors, one obvious conclusion is that current share prices are anything but frothy. Mr. Market will never be cured of his bi-polar problems and future volatility is assured. But over time, share prices follow earnings, and earnings follow productivity, and everything is pointing up.