Today, many people are concerned about the impact of technology on the future of humanity. Some of them are obsessed with scary, emotionless futures, inspired by science fiction books and movies, and especially worried about the development of robotics and artificial intelligence. They are afraid that robots might take their jobs and destroy the economy.
What is getting significantly less attention is the fact that technological advancements make it increasingly cheaper to meet our basic needs. It frees up cash for consumers to buy other things and drives the virtuous cycle of economic growth. Peter Diamandis, the founder of the X Prize Foundation and the co-founder of Singularity University, called this phenomenon “demonetisation of the cost of living”.[i]
Seven categories – transportation, food, healthcare, housing, energy, education, and entertainment – make up the majority of expenditures in basically every country. Though there are some cultural differences – for instance, in China people spend more on clothing than in the U.S. – spending habits around the world are pretty similar. “Technological socialism” is consistently reducing the cost of these seven categories, and since this trend is more than likely to continue, the cost of living could eventually reach zero.
The notion of “demonetisation” refers to the ability of technology to make a product that was previously expensive substantially cheaper, or in some cases even free.
Uber demonetised transportation, AirBnb demonetised hotels, Amazon demonetised bookstores, Skype demonetised phone calls, iTunes demonetised the music industry. Information and research have been demonetised by the Internet, photography has become available to everyone with the camera on the phone. The list is near endless.
Transportation: Uber has demonetised the trillion dollars automotive market. It eliminated the costs related to owning a car, such as insurance, repairs, fuel, and parking. In the future, when cars are fully autonomous, using car as a service would be up to 10 times cheaper compared to owning a car, and even the poorest people on Earth would be able to afford taxi.
Food: The cost of food has decreased thirteen fold over the past century, and the trend will continue.[ii] Also, currently about 70% of food’s retail price comes from transportation, storage and handling, while in the future we’ll learn to produce foods locally through vertical farming, what would significantly cut costs. Additionally, genetic and biological progress would result in an increased yield per unit of land.
Healthcare: Medical know-how is very expensive to acquire for humans: it takes years of studying medicine, and then years of working as a medical practitioner to build up a doctor’s knowledge base. Still, the quality of medical decision-making is highly variable: a junior or less skilled doctor might be worse, leading to a suboptimal outcome for the patient. This dynamics introduces a very high cost into the medical system that has to train generations of doctors just to lose this knowledge when they retire. AI could greatly reduce this cost and improve the quality of healthcare –especially in the situation where medical data is expected to double every 73 days by 2020.[iii]
AI, such as IBM Watson Health, has already proven its ability to diagnose some diseases better than the best human doctors thanks to the huge amount of collected and analysed data. In the future, the best surgeons will also be robots for the same reason. Pharmaceuticals will be discovered more efficiently by AI, and be 3D printed at home based on your needs in that very moment. Under all of these conditions, the cost of healthcare will asymptotically be approaching zero.
Housing: The extremely high housing prices are mostly determined by location: people want to live near the jobs and the entertainment and reduce travel time as much as possible. However, the autonomous cars where you can relax, sleep, watch a movie, or have a meeting, will make the ideas of proximity of your job to your home irrelevant. Also, increasingly more people will work in virtual offices and will no longer need to commute at all. These two factors would make people prefer purchasing houses in lower-density and lower-cost areas. Moreover, 3D printing has proven to dramatically reduce the cost and time of construction. The world’s first 3D-printed houses have been completed in 45 days in Beijing, each at a cost of only $4,800, and in Dubai, it took a total of 17 days to print the office building at a cost of about $140,000.
Energy: Today in the world 1.3 billion people do not have access to electricity, and another one billion people only have access to unreliable energy sources.[iv] However, this situation is changing, and we are now starting to see the benefits of new energy technologies reach the most impoverished people in terms of supplying power and saving money. The local energy units are built with solar panels, batteries, materials and computers that are becoming cheaper while increasing in capacity and sophistication. Solar prices, for example, dropped two hundred times since the 1970s and five times in the last five years to ~$0.03 kWh. The cost will decrease because these technologies use more easily harvested and nearly limitless resources (solar and wind) compared to fossil fuels. M-Kopa, for example, supplies households in Kenya, Tanzania and Uganda with home-based solar systems that are 10% cheaper than energy supplied by both the national grid and kerosene lamps, and the company has plans to reach one million more customers in East Africa by 2017. In Vietnam, villages are hacking together wind power systems to reduce the cost of energy by 30%. Additionally, in the future machines, appliances and devices will use far less energy overall (e.g. energy-efficient self-driving cars and gadgets that share harvested energy from Wi-Fi signals).
Digital technologies at the foundation of these new systems will form a smart energy infrastructure called the Internet of Energy – a dynamic network connecting energy sources to the Internet. The Internet of Energy will allow users to share or sell energy across devices. And with more complex software and AI, we will be able to further micro-manage small bits of energy and optimise energy needs. Advances in new materials may one day allow near-lossless energy transmission via a superconductive grid that, for example, may make it as easy for a slum in Vietnam to sell or share excess energy. The Internet of Energy will drive the cost of energy down, because it is software-based system capable of scaling without growing costs.
Education: Most information you’d learn in school or university is today available online, for free. Coursera, Khan Academy, and University of the People offer thousands of high-quality lectures with professors from the world top universities online, available to anyone with an Internet connection and sufficient level of English. In the future, AI could become the best professor in world, because it will know more about the abilities, needs and desires of a student than any human being, even the most experienced one. Consequently, family income will no longer be a factor that determines the future career of a person.
Entertainment: Spotify, YouTube, Netflix, and the iPhone App Store have demonetised video and gaming that previously required investment to equipment and services. E-books are exponentially cheaper than paper-based books, and even libraries now lend books in kindle and eReader formats.
Most things we used to spend a lot of money on are continuously demonetizing, thus bringing us closer to a post-scarcity world. Multiple apps tap into sharing economy and eliminate money from the equation, while some of them help you literally save money. This seems to solve, at least to some extent, the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.
The strangest part of the story is the transfer of expectations: when we have access to all of these things for free on our smartphones, we don’t value them. We simply expect them.
The future of work in the context of demonitisation
If most products and services are getting cheaper and eventually could become free, how could this dynamic influence the future of work?
In the situation where the need to work is eliminated, at least in the traditional sense, and most professions that require manual labour no longer exist, the issue of wealth distribution might emerge. Unfortunately, the benefits of technology are unlikely to accrue equally to everyone in the world where half of wealth is in hands of 1% of population and wealth inequality continues to increase.[v] The fact that so many resources are retained but not used prevents the elimination of scarcity and the need to work.
Additionally, working is engraved in human nature; it is associated to achievement and dreams. People who had to quit their job often feel like they lost sense of purpose in life, and those who could afford not to work usually continue to do so. Thereby, it’s hard to imagine the world where most people don’t work – by force of circumstances or voluntarily.
The evolution of the cost of living in the US
In order to have a realistic perspective on the evolution of the cost of living, we must rely on facts. According to the Bureau of Labour Statistics, in the U.S., over the last decade, the costs have soared for education, childcare and healthcare, and plummeted for TVs, computers, phones, and toys.[vi] These data make it feel like the least important things in life are getting cheaper while the most important things continue to increase in cost. As a result, the insights bring forth an important discussion regarding the true meaning of poverty and richness.
For the items necessary to help individuals climb out of poverty, prices have been rising – things like university education, which correlates with better employment and earnings; family health, which is a strong factor of a household’s material well-being; affordable daycare that results in higher chances for working parents to develop their careers. The challenges of poverty create a vicious cycle that is difficult to break. One possible explanation of this evolution of the cost of living is related to offshoring or the domestic replaceability of U.S. labour with foreign workers. The graph 1 shows that prices have been falling in the categories that don’t require the use of American labour, such as electronics, clothing, and toys, and have been increasing mostly in labour-intensive, non-tradable categories.
Some of the trends demonstrate the gap between the idea of demonetisation and quantified reality, but it is important to understand the reasons behind this variance. Education can be considered demonetised only when and if a sufficient number of employers do not differentiate between traditional universities and online courses. The era of AI and 3D printing in healthcare and construction is yet to come. Regarding the cost of food, which has been rather flat in the past few years in the US, the biggest drop has occurred in developing regions and it is more observable during a time period longer than 10 years. For other categories, the numbers confirm the trend of demonetisation.
Costs for Americans, 2004-2014
Critical perspective on the concept of demonetisation
One concern related to the concept of demonetisation is the power of corporations in the modern world. Large companies may influence the policy directions of government and manipulate the desires and behaviours of people through advertising and marketing campaigns. This status quo is rather stable, and despite the demonetisation of many aspects of life, these powerful economic actors may to some extent hinder the movement that is disadvantageous for them, for example, by focusing more on branding and perceived value of products and services they sell.
Hidden costs and unintentional impacts are also a part of the story. Though hundreds of millions of people have emerged from poverty, much of that came at the cost to the future – environmental, health, or financial. For instance, the lower cost of some kinds of food comes at the cost of health and hence results in higher healthcare costs or poor quality of life.
Finally, most of the services that demonetize the economy are now available via smartphone with Internet connection. However, both smartphone and connection are anything but free. Therefore, some might argue that using the term “demonetisation” exaggerates the reality, and “democratization” would sound more correct. Indeed, many things that used to be the prerogative of certain affluent individuals – from taxi services to high-quality education– have become available to masses.
Image via Flickr