Insofar as (at the risk of sounding tautological) transformative technologies are concerned, Neil Postman is surely right. But then, as Roy Amara pointed out, “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” David Oks uses a common myth of technological replacement to illustrate– and more specifically, to observe that there’s a lot more to replacing labor than just automating tasks.
He begins by recounting an interview a few months ago of J. D. Vance by Ross Douthat in which (in response to a question from Douthat about the potential downsides of AI, in particular the prospect of its “obsoleting” human workers) Vance responded sanguinely, arguing that ATM machines didn’t eliminate bank tellers. Indeed, Vance suggested, “we have more bank tellers today than we did when the ATM was created, but they’re doing slightly different work…”
There are two interesting things about what Vance said, both relating to the example that he chose about bank tellers and ATMs.
The first thing is what it tells us about who J. D. Vance is. The bank teller story—how ATMs were predicted to increase bank teller unemployment, but in fact did not—isn’t a story you’ll hear from politicians; in fact, for a long time, Barack Obama would claim, incorrectly, that ATMs had decreased the number of bank tellers, in order to suggest that the elevated unemployment rate during his presidency was due to productivity gains from technology. I’ve never heard a politician cite the bank teller story before: but I have seen the bank teller story cited in a lot of blogs. I’ve seen it cited, for example, by Scott Alexander and Matt Yglesias and Freddie deBoer; and I’ve heard it, upstream of the humble bloggers, from such fine economists as Daron Acemoglu and David Autor. The story of how ATMs didn’t automate bank tellers is, indeed, something of a minor parable of the economics profession…
… But the other thing about the bank teller story that Vance cites is that it’s wrong. We do not, contrary to what Vance claims, have “more bank tellers today than we did when the ATM was created”: we in fact have far fewer. The story he tells Douthat might have been true in 2000 or 2005, but it hasn’t been true for years. Bank teller employment has fallen off a cliff. Here is a graph of bank teller employment since 2000:
So what happened to bank tellers? Autor, Bessen, Vance, and the like are right to point out that ATMs did not reduce bank teller employment. But they miss the second half of the story, which is that another technology did. And that technology was the iPhone. The huge decline in bank teller employment that we’ve seen over the last 15-odd years is mainly a story about iPhones and what they made possible.
But why? Why did the ATM, literally called the automated teller machine, not automate the teller, while an entirely orthogonal technology—the iPhone—actually did?
The answer, I think, is complementarity.
In my last piece, on why I don’t think imminent mass job loss from AI is likely, I talked a lot about complementarity. The core point I made was that labor substitution is about comparative advantage, not absolute advantage: the relevant question for labor impacts is not whether AI can do the tasks that humans can do, but rather whether the aggregate output of humans working with AI is inferior to what AI can produce alone. And I suggested that given the vast number of frictions and bottlenecks that exist in any human domain—domains that are, after all, defined around human labor in all its warts and eccentricities, with workflows designed around humans in mind—we should expect to see a serious gap between the incredible power of the technology and its impacts on economic life.
That gap will probably close faster than previous gaps did: AI is not “like” electricity or the steam engine; an AI system is literally a machine that can think and do things itself. But the gap exists, and will exist even as the technology continues to amaze us with what it can now accomplish.
But by talking about why ATMs didn’t displace bank tellers but iPhones did, I want to highlight an important corollary, which is that the true force of a technology is felt not with the substitution of tasks, but the invention of new paradigms. This is the famous lesson of electricity and productivity growth, which I’ll return to in a future piece. When a technology automates some of what a human does within an existing paradigm, even the vast majority of what a human does within it, it’s quite rare for it to actually get rid of the human, because the definition of the paradigm around human-shaped roles creates all sorts of bottlenecks and frictions that demand human involvement. It’s only when we see the construction of entirely new paradigms that the full power of a technology can be realized. The ATM substituted tasks; but the iPhone made them irrelevant…
[Oks unpacks the stories of the ATM’s and iPhone’s impact on banking, then looks ahead, by anaology, to what might be in store with AI. He concludes…]
… I am not a “denier” on the question of technological job loss; Vance’s blithe optimism is not mine. But I’m skeptical that simply slotting AI into human-shaped jobs will have the results people seem to expect. The history of technology, even exceptionally powerful general-purpose technology, tells us that as long as you are trying to fit capital into labor-shaped holes you will find yourself confronted by endless frictions: just as with electricity, the productivity inherent in any technology is unleashed only when you figure out how to organize work around it, rather than slotting it into what already exists. We are still very much in the regime of slotting it in. And as long as we are in that regime, I expect disappointing productivity gains and relatively little real displacement.
The real productivity gains from AI—and the real threat of labor displacement—will come not from the “drop-in remote worker,” but from something like Dwarkesh Patel’s vision of the fully-automated firm. At some point in the life of every technology, old workflows are replaced by new ones, and we discover the paradigms in which the full productive force of a technology can best be expressed. In the past this has simply been a fact of managerial turnover or depreciation cycles. But with AI it will likely be the sheer power of the technology itself, which really is wholly unlike anything that has come before, and unlike electricity or the steam engine will eventually be able to build the structures that harness its powers by itself.
I don’t think we’ve really yet learned what those new structures will look like. But, at the limit, I don’t quite know why humans have to be involved in those: though I suspect that by the time we’re dealing with the fully-automated organizations of the future, our current set of concerns will have been largely outmoded by new and quite foreign ones, as has always been the case with human progress.
But, however optimistic I might be about the human future, I don’t think it’s worth leaning on the history of past technologies for comfort. The ATM parable is a comforting narrative; and in times of uncertainty and fear we search naturally for solace and comfort wherever it may come. But even when it comes to bank tellers, it’s only the first half of the story…
As to whether the wisdom of Amara and Oks is widely-shared, consider this from Crunchbase:
Crunchbase data shows global venture investment totaled $189 billion in February — the largest startup funding month on record — although 83% of capital raised went to just three companies. They include OpenAI, which raised $110 billion, also in the largest round ever raised by a private, venture-backed company.
The record month for venture funding took place against the backdrop of a trillion-dollar stock market drop as AI compute and tooling unsettled leading public software companies. [See also here.]
All told, venture investment was up close to 780% year over year from the $21.5 billion raised by startups in February 2025.
OpenAI was not the only company to raise tens of billions of dollars last month. Its closest rival, Anthropic, raised $30 billion, marking the third-largest venture round on record.
Waymo, Alphabet‘s self-driving division, raised $16 billion. Together, those three rounds totaled $156 billion, representing 83% of the global venture capital raised in February.
A further four companies each raised $1 billion or more last month: Tokyo-based semiconductor manufacturer Rapidus; London-based self-driving platform Wayve; San Francisco-based AI for robotics World Labs; and Sunnyvale, California-based AI semiconductor company Cerebras Systems.
These massive rounds were led by strategic corporate investors, a host of private equity and alternative investors, as well as a few multistage venture investors and a government agency…
As we contemplate change, we might send sanitary, odor-free birthday greetings to Sir Joseph William Bazalgette; he was born on this date in 1819. A civil engineer, he became chief engineer of London’s Metropolitan Board of Works, in which role his major achievement was a response to the “Great Stink of 1858,” in July and August of 1858, during which very hot weather exacerbated the smell of untreated human waste and industrial effluent. Bazalgette oversaw the creation of a sewer network for central London which addressed the problem– and was instrumental in relieving the city from cholera epidemics, in beginning the cleansing of the River Thames, and in creating (a crucial part of) the infrastructure that underlay its extraordinary growth over the next century.
ATM’s have been around in the U.S. since 1969; there were, as of 2018, 470,135 of them in operation, from which $5.1 Billion was withdrawn. The market for the machines and the technology that connects them was $20 Billion in 2020, projected to grow to $30 Billion in 2028. They were originally– and are still primarily used for cash disbursement; but over the years they’ve added a number of other functions: account deposits, bill payment, even lottery and movie ticket purchase– there are over 10 Billion ATM transactions in the U.S. alone. As cash plays a less central role in transactions, the the number of machines and transactions has slightly declined. Still they are a major factor in today’s financial infrastructure– and that few of us really understand. Patrick McKenzie is here to help– and to remind us that their history has lessons that are broader…
The first automated teller machines, which debuted in the late 1960s, were, as the name suggests, strictly cost-saving devices for bank branches. Branches exist as sales offices but have incidental cash-management functions. The denser depositors are around a branch, the more transactions happen during peak windows like e.g. the morning commute and lunchtime. The more transactions you need to support in a window, the more tellers you need to employ. Tellers are both surprisingly inexpensive relative to the degree of trust placed in them but surprisingly costly relative to occupations like e.g. cashiers which look outwardly similar. Banks have long wanted to control the costs of the teller base.
The original thesis behind the ATM was that you could move the most routine teller transactions, like cash withdrawals and balance inquiries, to a machine, and then reserve the teller for higher-complexity routine transactions like cashing checks. The machines gradually gained more features as they achieved ubiquity.
Interestingly, teller employment is actually up substantially since the introduction of ATMs. Secular demand for retail banking grew with the economy and the larger number of branches has compensated for reduced numbers of tellers per branch. See Bessen 2016…
ATMs are a fascinating example of a pattern we see a lot in finance: an internal operations improvement which was built into a business which eventually begat an infrastructure layer that may be a much bigger business. And for all their ubiquity, almost no one, even people professionally involved in finance, understand how they work…
As we insert our cards, we might send carefully-denominated birthday greetings to Kaushik Basu; he was born on this date in 1952. An economist, he served as Chief Economist of the World Bank from 2012 to 2016. Having taught at MIT, Harvard University, the Institute for Advanced Study at Princeton, and the London School of Economics, he is currently a professor at Cornell. From 2009 to 2012, during the United Progressive Alliance‘s second term, Basu served as the Chief Economic Adviser to the Government of India. His recent work has been on collective moral responsibilities and the role that individuals play in fulfilling them. In 2021, he was awarded the Alexander von Humboldt Foundation Research Award.
In 1943, as American businesses tried to guess whether wartime relief from the Depression would translate into postwar prosperity, the Tension Envelope Corporation printed this chart for customers. The infographic folded into a pamphlet and could be displayed on the wall when opened. (The online archive of the Federal Reserve, FRASER, has digitized a PDF of the pamphlet, which you can view here.)
The infographic and the explanatory text below it tap data from several sources, including U.S. Treasury reports, the Department of Labor’s Bureau of Labor Statistics, the Survey of Current Business, and the Committee for Economic Development, a nonprofit founded in 1942 to help American business plan for the postwar future. Excerpted text from a Committee for Economic Development publication, “Business Planning Now for V Day,” can be found in the lower left-hand corner of the chart.
In an explanatory section on the federal debt—represented on the chart as a red line that climbs steeply upward beginning in 1941—the chart’s authors articulate a strong stance on what could be an alarming indicator: “The necessary cost of this war is not important. Victory is worth the price. Whatever the cost to the future citizens is, they will get their money’s worth in benefits derived.”…
As we reach for the Dramamine, we might recall that it was on this date in 1969 that Chemical Bank installed the first ATM in the U.S. at its branch in Rockville Centre, New York. In fact, as noted here before, the ATM was imagined (and an early version patented) in 1960 by Luther George Simjian; but a six-month trial of the stand-alone device in 1961 was a failure. A British version (developed by the banknote company Delarue and deployed by Barclays) debuted in 1967, but required the use of pre-acquired “cheques” for withdrawal. The Chemical ATM was the first of the breed that is now common: networked machines that communicate with the bank (and its account information) in real time.
“What do we do to things we don’t need/want/like?” Amy Erickson asks on her blog, Oh, Bite It!. “We fry it … that’s what!” In this case, the creator of deep-fried Pumpkin Spice Lattes and, for rougher days, deep-fried tequila shots has put Brach’s famous candy corn inside Pillsbury dough rounds and subjected the whole package to a bath of hot oil. The finished product is dusted with powered sugar, zeppole-style, and allegedly yields “doughy pillows” that are “just a shadow of that seasonal, sad, tooth-buster of a treat.”
In a world in which somebody has already fried every bagged item that comes in a snack size — M&Ms, Tootsie Rolls, Twizzlers — no one can really blame Erickson for daring to dream, but the ultimate end-of-October Frankenfood made Rusty Foster’s Today in Tabs (“Two words: DEEP FRIED CORN CANDY”), and now that’s basically what the internet is doing, pretty unanimously and in repulsion:
As we heat up the oil, we might send fertile birthday greetings to Luther George Simjian; he was born on this date in 1905. The son of Armenian parents in Turkey, Simjian escaped the genocide and made his way to the U.S., where he worked initially as a lab photographer at Yale Medical School– and began his career as a inventor, creating a projector for microscope images among many other devices.
In 1934 Simjian moved to New York City, where he invented a self-posing portrait camera, with which the photographed person could see and optimize their own image in a mirror before the photo was actually taken. In order to manufacture and distribute the camera, which became a success for use in department stores, he founded the company Photoreflex. Years later, after selling the invention and the trade name, the company was renamed Reflectone, after another of Simjian’s inventions, a kind of cosmetic chair with movable mirrors, via which one could see one’s own body from all perspectives.
In 1939 Simjian had the idea to build the Bankmatic Automated Teller Machine, probably his most famous invention. Despite skepticism from banks, he registered 20 patents for it and developed a number of features and principles that can still be found in today’s ATMs– including their name. He finally persuaded the City Bank of New York (today Citibank) to run a 6-month trial. The trial was discontinued — surprisingly not due to technical inefficiencies, but to lack of demand. “It seems the only people using the machines were a small number of prostitutes and gamblers who didn’t want to deal with tellers face to face,”Simjian wrote. Hence Simjian missed out on not only the commercial success, but also the fame associated with inventing the ATM. (This credit is often attributed to John Shepherd-Barron, who invented the first true electronic ATM, and Donald Wetzel, who directed a 5 million US-$ project to build upon Shepherd-Barron’s invention in the late 1960s.)
Simjian achieved real commercial success during World War II with another invention, his Optical Range Estimation Trainer, a kind of simple flight simulator, made from mirrors, light sources and miniature airplanes, used to train US military pilots in estimating the speed and distance of airplanes; Simjian sold over 2000 of these devices. Today’s successor of Reflectone (after a number of mergers and acquisitions), CAE, is still selling flight simulation and control technology.
Simjian founded several other companies in the following years and invented a number of very different devices and technologies,including a teleprompter, medical ultrasound devices, a remote-controlled postage meter, a golf simulator, and a meat tenderizer. He never stopped inventing in his laboratories in Fort Lauderdale. At the age of 92, he got his last patent on a process for improving the sound of wood for musical instruments– seven months before his death in 1997.
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