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.
The world’s $12.5 trillion informal economy covers nearly every corner of the world, seeing the highest concentration in emerging economies.
Yet in absolute terms, China, the U.S. and India are home to the largest black markets—covering everything from street vendors to illegal activities that evade governmental oversight. Overall, this generates lower tax revenue and poorer working conditions given the absence of worker protections, leaving millions exposed to poor working conditions…
… Since 2004, workers employed in China’s informal economy have nearly doubled, reaching approximately 200 million.
Driving this trend are jobs are found in the labor-intensive services sector, such as drivers, nannies, and roadside repairmen. As a result, China’s income tax revenue accounts for about 6% of GDP—far lower than the 24% OECD average.
Ranking in second is the U.S. shadow economy, valued at $1.4 trillion. Overall, states with lower real GDP and higher regulatory burdens tend to have more active underground economies.
Meanwhile, Brazil leads in Latin America, with a shadow economy valued at $448 billion. In Europe, Germany is home to the largest at $308 billion, equal to 6.8% of GDP…
As we contemplate commerce, we might recall that it was on this date in 1988 that three 50 pound snapping turtles were found in a Bronx, New York sewage treatment plant. They had probably been pets that were flushed down the toilet when very small. One might imagine that this story helped spawn the Teenage Mutant Ninja Turtles, but the Ninja Turtles are actually a bit older than that. Comic book artists Kevin Eastman and Peter Laird published the first Ninja Turtles comic in 1984.
Woodcut engraving from the mid-16th century depicting the process of distilling essential oils from plants with a conical condenser
Since ancient times, people have felt that eliminating the foul odors of human bodies and effluvia is an effective– indeed, in some times and cultures, the most effective– way to improve public health.
Consider the sweet, intoxicating smell of a rose: While it might seem superficial, the bloom’s lovely odor is actually an evolutionary tactic meant to ensure the plant’s survival by attracting pollinators from miles away. Since ancient times, the rose’s aroma has also drawn people under its spell, becoming one of the most popular extracts for manufactured fragrances. Although the function of these artificial scents has varied widely—from incense for spiritual ceremonies to perfumes for fighting illness to products for enhancing sex appeal—they’ve all emphasized a connection between good smells and good health, whether in the context of religious salvation or physical hygiene.
Over the last few millennia, as scientific knowledge and social norms have fluctuated, what Westerners considered smelling “good” has changed drastically: In today’s highly deodorized world, where the notion of “chemical sensitivity” justifies bans on fragrance and our tolerance of natural smells is ever diminishing, we assume that to be without smell is to be clean, wholesome, and pure. But throughout the long and pungent history of humanity, smelling healthy has been as delightful as it has disgusting…
* Patrick Süskind, Perfume: The Story of a Murderer [an amazingly good novel]
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As we hold our noses, we might spare a thought for Sir Joseph William Bazalgette; he died on this date in 1891. 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 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 and in beginning the cleansing of the River Thames.
David Hockney has famously pondered perspective in his work; when criticized for a lack of “reality,” he’s observed,
Cubism was an attack on the perspective that had been known and used for 500 years. It was the first big, big change. It confused people: they said, ‘Things don’t look like that!’
The twin brothers Ryan and Trevor Oakes share his adventurousness in seeing in the artwork that they create together.
As children in the back seat, Trevor and Ryan Oakes noticed that when they focused on the horizon, bugs on the windshield seemed to split in two. Twenty-odd years later these identical twins are still investigating the intricacies of visual perception. This show pulls back the curtain on a decade of their optical obsession. To avoid the distortions that occur when the world is traced onto a flat canvas, the twins have built a concave metal easel that allows them to sketch directly onto the inside of a sphere. Rather than using lenses or mirrors to project an image onto canvas, as the Renaissance masters did, the twins have devised an ultra-low-tech method for sketching from life: they cross their eyes until an object floats onto their paper’s edge — and then they trace it. Visitors can marvel at the plaster helmet (dubbed an “optical cockpit” by Lawrence Weschler) where the twins have spent hours with their eyes out of stereo alignment [cross-eyed], reproducing skylines and courtyards into curved paper with a supernatural sense of depth and perspective. During the exhibition, the twins will haul their curved easel outside the museum to trace the Flatiron building with their cross-eyed technique. “Our subject matter is as much an eye looking as the thing being looked at,” said Trevor. Ryan added, “We’re dissecting what it feels like to have two eyes.”
As we focus on the tips of our noses, we might recall that it was on this date in 1880 that the City of Memphis, Tennessee began construction of the first independent municipal sewage system in the U.S. Independent sewer systems had been introduced in 25 years earlier in England; but American engineers at the time, still favored “combined” systems, in which storm water and sewage were handled in the same large pipes. Memphis was the first U.S. municipal system to forgo the benefits of the natural “flushing” provided by rain water, opting for smaller, dedicated pipes.
Memphis suffered through several severe plagues of cholera (1873) and yellow fever (1878 and 1879) — over 10,000 lives were lost. The city recognized the need to get their sanitary sewage away from their water sources (then, primarily small private wells), even though the final decision was erroneously based on the belief that yellow fever was being caused by inadequate sanitation practices. The city and the state legislature tried to raise monies; the efforts gained some of the money they thought would be needed for a new sewer system — but not a lot.
The situation in Memphis aroused the sympathy of the nation and was largely responsible for the creation of the National Board of Health. The Board retained and sent Col. George E. Waring, Jr., [who had gained notoriety draining Central Park] to Memphis. He designed what he thought was a system Memphis could afford, but also one he felt would work: a separate system using 6″ diameter laterals, with sewers with 112-gallon flush-tank mechanisms placed at the upstream terminal end of each of the lateral (collector) sewer runs — to be flushed once every 24 hours. The house connection sewers were 4″ diameter. Both vertical and horizontal changes of alignment were routinely done along the long runs of manhole-less gravity sewer mains. No more than 300 homes were to be connected to each 6″ main. No rain water was to be made tributary to these sewers and the sewer system was to be vented through the soil pipe plumbing system in each house..
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