2min chapter

"Hexapodia" Is the Key Insight: by Noah Smith & Brad DeLong cover image

Hexapodia XLIX: We Cannot Tell in Advance Which Technologies Are Labor-Augmenting & Which Are Labor-Replacing

"Hexapodia" Is the Key Insight: by Noah Smith & Brad DeLong

CHAPTER

The Importance of Labor Replacing Innovation

If you're a corporation, the way to make money is to commoditize every other piece of the value chain except the one in which your expertise is. Maybe there's a sense in which a large not for profit industrial research laboratory apparatus is good insurance against companies actually figuring out some way to tweak research and development. So it is labor replacing rather than labor augmenting because labor replacing innovation commoditizes more of theValue Chain then labor augmenting.

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Speaker 2
Another thing, the other possibility is that, you know, if you're a corporation, the way to make money is to commoditize every other piece of the value chain except the one in which your expertise is, you know, that if you're Microsoft, you want everything except the operating machine to be made by 33 different companies all existing and perfectly competitive and there's a lot of money to do with the money. And then you, because there's lock in for the windows operating machine managed to grab all of the money's that if you're Apple computer, you have. And so you're now what $2.8 trillion in terms of your expected discounted value of future cash flows to Apple computer, which is an absurdly large proportion of the value created by this particular value chain, or for devices that cost $1000 when there are quite good substitutes that cost only 100. Maybe there's a sense in which a large not for profit industrial research laboratory apparatus is good insurance against companies actually figuring out some way to tweak research and development. So it is labor replacing rather than labor augmenting because labor replacing innovation commoditizes more of the value chain, then labor augmenting. Anyway,
Speaker 1
maybe.

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