This is an edited version of the speech given by Austan D. Goolsbee, Robert P. Gwinn Professor of Economics, at Chicago Booth’s Convocation ceremony on June 14.
The central question of economics is: Compared to what?
Nowhere was that more true than in that Washington, DC’s funniest celebrity contest you mentioned. It’s true that I won. And the runner-up was the antitax crusader Grover Norquist. Seriously.
My title today is: “Are we doomed?” So compared to what, we should ask, are we doomed? I’d say compared to 1999 or 2000, the last time I spoke at a graduation at the business school. The stock market was soaring. The booming internet was all over the news and on every graduates’ mind. I gave a speech about the internet economy. Six months later, it was dead.
Four years previous to that, I was teaching microeconomics. I gave a lecture about Bill Vickrey, economic expert on auctions. About eight days later, he won the Nobel Prize. My class was thrilled. “You predicted the Nobel Prize!” Two days later, he was dead.
Today, the stock market is again booming; Silicon Valley is, again, on everyone’s mind; and a Booth faculty member has won the Nobel Prize in Economics. So, when I ask, ‘Are we doomed?’ if you are graduating or your name is Eugene F. Fama, then you’d darn well pay attention. So, for real, are we doomed?
What is the case for doom and gloom? Well, we have massive debt; we had the worst recession of our lifetimes; there are no jobs. We’ve inherited a condition that’s now being called “the new normal,” which is something like my grandma’s old, “You’ll get nothing and like it.”
And now we come to find out that technology is replacing all of us, that there isn’t a single job in America or maybe even around the world that cannot be replaced by a computer. We have seen lawyerless wills, driverless cars, jobless manufacturing. They are even manufacturing a toilet seat in Japan that raises itself and lowers itself as you walk in.
What is left for us to do? I gave a talk in Kalgoorlie, Australia. It’s 400 miles east of Perth and the home of the largest open-pit gold mine in the world, known as the “Super Pit.” That’s the main tourist attraction there. And in the bottom of the super pit, there are giant trucks that have no drivers. They zoom back and forth with loads of rock that they dump in vats of arsenic, which pulls the gold out.
The trucks move a quarter of an inch to the right each hour so that they don’t wear a groove into the dirt. And I said, “But I don’t understand who drives the truck. Nobody works here?”
“No,” they said, “There’s five guys driving the trucks, and for them it’s like a video game. And, actually, they’re in Perth. They’re not even here.”
So are we doomed? Are we on path to be mine-workers in Kalgoorlie, Australia, in which technology fills everything that we do? If there are no barriers to entry and if technology will replace us all, what will happen to us?
Well, the first thing I’ll remind you is this has happened before in the world. If you had asked people in 1910, “What will be the phone-company job market of 2014 if 330 million phone lines exist, that people are carrying phones in their pocket and calling each other?” They would have said, “Well, in the job market of 2014, every man, woman, and child must be a telephone-operator pulling out cords and plugging them in. They can’t possibly exist. How could there be 330 million phone lines?”
Other than that one woman whose voice is Siri, and on American Airlines’ and the University of Chicago’s information line—except for that one telephone operator job, that occupation ceased to exist. But the unemployment rate didn’t go to 100%, even in the telecom sector. In fact, we created more than 75 million net jobs and the population more than doubled, and we’re still doing OK.
The key thing is there isn’t a fixed number of jobs.
The progress of technology, yes, has disruptive potential, but it has also enabled far higher incomes and far higher productivity than anything we could have dreamed of before.
Once Merton Miller—who passed away but was one of our other Nobel laureates—and I were talking about computers, and I asked him, “What was it like?” He got to the university in 1961. I said, “When you were there and they had all the punch cards, and you wanted to run your programs, you had do everything in those cards, so if one thing went wrong, cards flew everywhere,” and he told me, “Aw, you could tell if it was working. You put your ear to the thing. And if it went ‘jounka-jounka-jounka-jounka-jounka,’ then it was working. But if it went ‘bleurr,’ then you knew it was doomed.”
So I said, “What did you think when you were running that? I mean, what an unbelievable pain in the rear that must have been.”
He said, “I remember very well what we thought. With the cards, we thought, ‘This is INCREDIBLE. Look at all we have to do is punch these cards, and the thing will do all the calculations for us.’ We were the opposite of upset.”
And that will be in 20 years the same thing we say about phones and about everything. I don’t know if you’ve seen the little video of kids introduced to the Apple II Plus, a version of the original PC. The kids look at it, and they’re like, “Where’s the mouse?” There is no mouse. Some of the kids type on the thing “internet,” it just says “error.” They’re like, “What is this?”
They say they can’t turn it on. They can’t figure out what to do. Each of them says, “This is terrible. This is the worst.” One kid says, “Well, even this is better than Flappy Bird.”
If you look at the progress of computers, of video games, of technology in any field, you see dramatic improvement. Even with driverless cars, if they replace every taxi-driver or commuter in America, eventually our incomes will be higher because we had more productivity growth than if they hadn’t.
What we’ve seen is that at the individual level, at the city level, at the national level, those with more skills and more education have done better. Coming from Booth, you’re not doomed; you’re going the right way, you’re aiming the right way of history—that is with skills, a commitment to entrepreneurship and innovation. All the things that you studied are what is in most demand and has been in the most demand for the last several decades and will be in the decades to come.
It’s not that we taught you to think—you already knew how to think. It’s that we made you think. We made you do the work that’s needed to be done to fill yourself with content so that you are not doomed as you go out in the world.
Now, they told me I had to give you some advice. The first thing I’d written down here was, be yourself. But for some of you, that’s the worst possible advice I could give.
So I will say this: first, at least have some passing familiarity with economics. Even if it’s just adding “compared to what?” after anything other people say. Fine. Because wherever you go, you’re now a Booth graduate, so they’re going to assume you know what you’re talking about. If you don’t, you will look like an idiot.
Second, take a risk. It could be small; it could be big. In my own life in 1990, I was a student. Poland had just gotten rid of communism, and I went to work for an economics professor in Poland. We went to Germany. The Berlin Wall had just fallen. I took a chisel, knocked a chunk out of the Berlin Wall. It’s still in the basement of my house. I found out the wall was fortified with asbestos so I somewhat regret that now.
Third, go to your reunions, if only because the people who go to the reunions are people who think they’re successful. If you don’t go to the reunions, they’re going to say, “Oh, that guy, he’s probably a failure or committed a crime or something. Why isn’t he at the reunions?”
In the election campaign and in government I got to know Warren Buffett a little bit. He used to quiz us about what the Dow was at in 1900.
It turns out 1900 was Booth’s first graduating year. The business school began in 1898.
Imagine the commencement: it’s June of 1900 and the Dow is around 50.
Take your pessimistic list of everything that is to go wrong in the world from graduation day, 1900, to graduation day, 2014. You’ve got world wars, flu pandemics, bank runs, Justin Bieber, and every other catastrophic thing that has happened. Ask the class of 1900, “What do you think the Dow is going to be in 2014?” They would say, “Maybe 60. Though with all of that stuff and how bad Justin Bieber’s Believe was, heck maybe 40.”
Well, the Dow is almost 17,000. Why? Because the innovative capacity of people is unbounded, and nothing has changed in the past five years to alter that fact.
I’m left with the description of another of our Nobel laureates at Booth, the great economist George Stigler. Stigler passed away just before I joined the faculty in the mid ’90s. He could be a crusty old guy. His friends described him as the kind of person who woke up each morning, looked in the mirror, and graded himself a D . . . and then smiled because he gave everyone else in the world an F.
As bad as things seem in the economy, believe me. It could be a whole lot worse.