Free Ice Cream

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MMA organised a Discussion on the theme of the book “Free Ice Cream” authored by Mr Ganesh Natarajan on 28 December 2022 at MMA Management Center. Mr R A Nadesan, fulltime director, SRM Group, CA V Pattabhi Ram, author, public speaker and teacher, Ms Malini Saravanan, Head HR (III SBG) Water & Effluent Treatment IC L&T Ltd and Mr Anand Srinivasan, economist, author and value investor, shared their insights in a conversation with the author.

Ganesh Natarajan: FRICE is a fairly unusual concept. Can we make everything free for everyone? The question people ask is, “How is it possible?” Today we have a problem. It is artificial intelligence. It is going to lead to a major job loss event.

When we look at artificial intelligence, what we require is computing capacity. In 2017, the best computer that we had, was as good as the rat’s brain. The human brain is about 100,000 times better than a rat’s brain. Applying Moore’s Law, our computers get better, faster and twice the capacity every two years. By 2050, we will have a computer as good as a human brain. By 2083, we will have a supercomputer that’s 100,000 times better than a human brain. We look at a rat as a pest. We kill them terming it pest control.

A computer needs energy. By 2083, 10 billion people are going to be hanging around consuming energy. If I am that supercomputer, I’m going to look at all the people as an unwanted load on the system, just like we look at rats now. Noah Harare, the author of the book, ‘Sapiens-A Brief History of Humankind’ said that human beings will become useless. People like Bill Gates and Elon Musk say, “Yes, we have a problem on our hands.” The UBI- universal basic income has been floated around for a while. For various reasons, this may not be the best solution.

Machine vs. Machine

Computers have already beaten human beings in Jeopardy, Chess and in GO. GO is a game like checkers. There’s something called the Shannon number, which is the number of possible permutations and combinations. In a game of chess, it’s 35 to the power of 80. So no wonder, chess is pretty hard. In GO, it is 250 to the power of 150. Google, through one of its subsidiaries, built the computer called AlphaGo. They taught the rules, gave it a lot of data input and prepared the computer. It beat Lee Sedol, the champion in GO, which was a major event in that space.

What was interesting was that Google set up the next machine AlphaGo Zero. This machine was given the rules and inputs. It started learning and beat the previous machine AlphaGo in three days. The next version Alpha Zero beat the previous version, by learning in just 36 hours. So now we are talking about the game between computers and the human is out. This is scary stuff. What is AI yesterday becomes a part of normal today.

The Automation Spree

Yesterday, we built a factory and we needed 500 people. Today you build the same factory and you need only 100 people because the cost of sensors has come down. Why would I need a person watching the temperature or pressure, when I can put a sensor and walk away? Tomorrow, it’s going to be 20 people and the day after tomorrow, there are going to be no people. It’s a logical progression. You can’t fight this, you can’t argue with this, this is what’s happening. 80% of the jobs can and will be automated. And we are not talking about factory jobs but of doctors, lawyers and accountants.

In 2050, we are expecting 10 billion people as the world population. If 80% of the jobs will go away, how many billion people will be out of work? It’s not as if the doctor is bad. The doctor knows all the stuff. But the doctor takes an hour to think through the process. He can only think of 20 case studies, the lawyer can only look at 50 or 100 cases but the computer can look at million cases instantaneously.

The other side of the problem is that for most of us, we take up a job to get some income for our survival. They need to put food on the table. If all of us are going to be without a job, what do we need to do? The simple answer would be to decouple job and our survival. There are a couple of ways for this. One, make everything free for everyone. The other option is a UBI. But UBI has got many issues. Simply speaking, it is going to increase inequality severely. You will have 10 multi billionaires globally and 10 billion paupers. Those 10 people will decide what is good for the universe.  

Ideas will matter

Millions of years ago, we were in the hunter-gatherer phase. If you had a spear, you could go and kill some animals and you got your food. Then we started farming. If you had the land, you could grow some crops. Then we had the industrial phase. Warren Buffett is the richest person in the industrial phase. He doesn’t want farmland, he wants stocks. The nature of ownership changes as we go forward. In the post AI society, it will be ideas, because there’ll be a machine to implement the idea. The idea hopefully will come from us.

In resource allocation, agrarian economy was feudalism, industrial economy was capitalism or communism—both two sides of the same coin. The only difference is in resource allocation. In capitalism, they say it’s up to the individual. In communism, it’s up to the central planning. As we are going into a new era of artificial intelligence, it’s time for us to have a new economic model -free ice cream economy.

Malini Saravanan: Will AI make us all irrelevant? We don’t have to get scared because it is not going to happen tomorrow or next year. It’s going to happen only in a phased manner, so we can be much more prepared, we can foresee it and plan for it. Despite artificial intelligence coming in, human beings play a significant role, because they are the ones who can be more creative and innovative. Tomorrow, we may have robots working along with human beings. Machines will not have fatigue and will work round the clock. People in the new age must have multi-dimensional and multi-functional knowledge, to stay competitive.

R A Nadesan: AI can probably do fuzzy logic, like in our washing machines, AC and TV. They can do predictions and extrapolations. A combination of fuzzy logic, deep learning, machine learning and sensors and various other things form the robots. Robots can do jobs that human beings cannot do, like working in dangerous terrains- for example, jungles and mines. There are also humanoids like Sofia. Basically, the understanding is that you need human intelligence to feed artificial intelligence. I do not think that 80% of the people are going to be unemployed. If you apply the Pareto principle, 20% of the people who are going to do the job can probably get that 80% result. The other 80% who are otherwise doing repetitive works can do more creative things. The routine elements can be done by the robots.

CA V Pattabhi Ram: AI is definitely a challenge. At the same time, we must also recognize that down the years—from 70s and 80s, people have been talking about how technology will take over our lives. When computerization first came, people said accountants would go away. Accountants did not go anywhere. Only accountants who did not embrace technology disappeared.

To give a more current example, a lot of audits that happened today have been done in a better way, thanks to AI. We need to look at AI as a tool that helps us. I do a lot of writing. The Grammarly software does a remarkable job in cleaning up the spelling, checking the tense and suggesting modifications. Even in a creative space, AI can do many things. We thought that technology will face a challenge in creative areas. Today, many new jobs have come up. 15 years ago, we never thought there would be a Swiggy or Uber drivers. So new jobs will come up. We need to embrace AI to make our lives far simpler.

Mr Anand Srinivasan: There are two distinct sciences in our life. One, we have physical sciences. We also have what is called Social Science like Philosophy and Economics. This book on the Frice concept talks about Natural Science. The end point of Natural Science is Heisenberg’s uncertainty principle which states that it is impossible to measure or calculate exactly, both the position and the momentum of an object. That’s where social science begins.

We don’t play by rules

AI as of today has limitations. Yes, if the rules are known to you, then you can program a computer to do anything. But in most situations in life, you do not know the rules or people don’t play by the rules. That is 95% of the situation. AI will be effective when people play by the rules.

Let me take an example of a recent cricket test match played between India and Bangladesh in Mirpur, Bangladesh. I was listening to ‘Ashwin Speak.’ In the subcontinent, you cannot play a spinning ball on the fifth day pitch. The skill is to pick which ball will turn and which will go through straight. Most players don’t go after the ball that turns and jumps. Most of the wickets go to the balls that go straight. Ashwin made an important point as a bowler, which no batsman could do. The balls used in the test match were not the original kookaburra balls. So he believed that after 35 overs, the ball would do nothing. He tried telling it to others in the team management but nobody took him seriously. If you have just gone by AI, Bangladesh should have won the match, with the quality of bowlers they had. But Ashwin knew that the ball would do nothing after 35 overs and that he could play it either on front foot or back foot. The fact was that India won and Ashwin played a key role in it. AI can help in a T20 Test match but life is not T20. It is all about playing Test cricket. We have to play for 80 years.

But I agree that 70% of us or even higher are in trouble because our attention span has come down. We cannot watch anything for more than five minutes anymore, especially the younger ones. If you lose attention span, you lose the ability to gain knowledge. If you don’t study for knowledge and just study to pass the exams, then AI will surely kill you. But if you are going to accumulate knowledge by reading at least 50 pages a day, you have nothing to worry about AI. 

Malini Saravanan: AI can provide meaningful data analysis and predictive analysis. But human beings are required to look at those predictive analysis. We need humans to understand human emotions and human behavior and in a given business scenario, to provide right decision making.

Ganesh Natarajan: If all people are not going to lose jobs and if they’re going get new jobs, that’s great. But as a species, if this is going to lead to our extinction, then we need to be prepared. So as a minimum, we need to have a plan B. Now, let’s move on some basics.

Why do things cost money?

If I am going to start a bakery to make bread, I need flour, a baker and an oven. I need energy—gas or electricity. So I need to pay for the raw materials, labour, machinery and energy. These are my input costs. As a business owner, I want to make a profit. If my bread costs me Rs 40, I will sell it for Rs 50. If I am a not-for-profit organization, I can sell the bread for 40 rupees.

If I focus on reducing my cost further, then I can make it cheaper. When I totally eliminate the cost and do not have a profit, I can sell the bread for free. How do we make it happen? Let’s look at the energy cost. If we have a solar panel or a wind farm which is fully automated and has zero maintenance, then the cost of energy is zero. There is, of course, the capital cost—which is the cost of the machinery.   

Automation will happen and there is no turning back. Newer factories will have less and less labour and they will progressively be totally automated and it will be a major job loss event. The next cost aspect is the raw material. Now this gets interesting. If you want to make a shirt, cloth is the raw material. If you want to make cloth, cotton is the raw material. A hammer requires steel, which comes from the iron ore. All of these are classified as primary raw materials. They either come from a farm or a mine. If you start at the primary raw material and make that free and progressively move up the chain with free energy and total automation all along the process, most costs are eliminated. The last one—which is the machinery—is the most interesting case.

How are the machines made? To make a fridge, you need steel, some moulded plastic, polyurethane foam for insulation and a compressor which is mostly steel, copper and various other metals. We need machines to make machines. Think of a 3D printer. Let us borrow a 3D printer, give it the necessary raw materials and make another 3D printer out of it. You can return the first 3D printer. So you borrowed the first one, replicated it and gave the first machine back.

Let’s get more granular. To make ice cream, I require a factory, milk, cream and sugar as raw materials. I need a dairy processing facility to make cream and sugar mill for sugar. As we go up, sugar cane is required as raw material. To make sugar cane, we need energy, water, fertilizer and equipment. We need factories to make all of those things. What is interesting is that once you have the infrastructure to grow sugar cane, you also have the infrastructure to grow rice, wheat, grass for cows or any farm material produce. So when you solve one problem, you solve multiple problems.

Free energy, free machines and free factories

Just like the 3D printer making multiple 3D printers, let us assume that we make one factory out of another factory and return the first factory. The remaining factory is our own factory. We start making solar panels or wind farms and start generating electricity. We start using that electricity in our own factory and use the excess energy to repay our debts. The electricity becomes free for us. The next step is we start making mining machines that are fully automated and use our own energy to operate. So we got free energy and we got a free mining machine, which is fully automated. We eliminated the energy costs, labour costs and the machine cost, at this point, for mining operation.

We’re going to do the same thing for a smelter. A smelter is a place where the ore gets melted and we extract the metal. We have our own metal. We start using our own metal for any further development and any excess metal that we produce, we use to repay our debt. Extrapolating this concept, we have our own oil rigs, petrochemical complexes, which will take petroleum and convert it into plastic beads. It’s all free. Going forward, this factory can produce whatever we want for free. So what do we do? We build a pumping station. Maybe we build a desalination plant to get the necessary water for the sugarcane farm. We build a factory to make fertilizers and we use those fertilizers for our sugarcane. We make a factory which produces automated farm equipment which is powered by the energy that we produce. And that takes care of all the farming needs. In the same process, we take care of the cows as well.

In the next step, we build a sugar mill and dairy processing facility. We have milk, cream, sugar and then the ice cream factory. We got free ice cream for all. You take the same process and apply it for any material things you want to be made. We have addressed the two core sources. One is the farm and the other is the mine. We started from there and automated that part of the process. Progressively we moved into the economy. Whatever you want, yes, it can be made absolutely free.

In the current economic model, if you borrow something from the bank, you got to return it. If I go and borrow your machine, I got to return it. Strictly speaking, you don’t have to return it, if everything is free for everyone. How it will all work is the price contract. Whatever you’re getting for free, pro rata, you need to give out for free.

Lifelong learning 

The final point in the supply chain is the end user. You get everything for free, only if you continue to engage in education, social, community or volunteering activities. It’s a social contract. The last thing we want to do is have the whole population sitting in front of TV and not being productive. We will just decay. We don’t need anything else to die as a species. We need some motivation, so we need to do something.

My pet aspect out of all these is education. Why should we stop education when we are 20 or 21? We did that because of the Industrial Revolution. We studied for a while and then we were thrown inside the factory. We needed people. In this new free price economy, you can go back to college and do one subject every semester till you’re 80. Innovation requires three things. One plus one makes three. That’s innovation. If you know something about biology and something of physics, then you can make up a third subject, which could be biophysics. You need to know about multiple things and bring them together to bring new solutions and new ideas. That’s not going to happen if you don’t educate yourself. Human needs are never ending. We will always be creative, wanting new and different things. 50 years back, nobody thought of an iPhone. Today, none can live without a smartphone.  

CA V Pattabhi Ram: First of all, I don’t buy the idea that everything is going to be free. It will not happen. There’ll be serious problems about motivation. If everybody is going to have everything, we have the antithesis of market economy. We have to be careful about that. Also, if you offer something for free, its value comes down.

 R A Nadesan: According to Maslow’s hierarchy of needs, if your basic needs are met, then there’ll be a lot of other benefits to the society. For example, there won’t be theft. People might shift their concentration to more creative things. But such a society is not possible and everything cannot be made free. If you give me free ice cream, I won’t take it. I’ll be suspicious of that.

Anand Srinivasan: A society without motivation will not survive. Parsis are the first community that is going to vanish. They are less than one lakh persons today. They are one of the most successful and richest communities in the world. They have more than a lakh of flats empty in Bombay, which can be occupied only by Parsis for free. There are no takers, simply because there are not so many Parsis anymore. The next big society that is going to vanish is Japan. It’s a very sad thing. The collapse of Japan is an economic collapse and a social collapse, in spite of it being a society where most of things have come free. Japan is past the stage of being able to revive itself only because, from their great 1989 crisis onwards, the real wages in Japan have been continuously going down. Even today, there is not enough inflation in Japan. They printed and gave money free. Japan has had negative interest rates for 40 years now -from 1980 to 2020.

There are two major flaws, according to me in this argument of free economy. One is deeply philosophical and which is a root of Eastern philosophy. It is the difference between Buddha and Shankara, two ancient philosophers. The philosophy of Buddha is you can eliminate desire. Ashoka embraced it and it went to Sri Lanka and everywhere else but it died in India, because Shankara argued 400 to 500 years down the line, that if you eliminate desire, there is no way the human race will survive. That is exactly what happened to the Parsis and to the Japanese. The third country where this trend is now very clear, is Germany. It is now clearly accepted that in 10 years, there’ll be less Germans than what they were in 1950. So this free argument doesn’t cut ice.

Money is the labour exchange

The second is a misunderstanding of what money is. Money is not something that government creates. Government has no money. It just prints what you believe is money. Every year, in the budget, the government tries to balance what they have and what they don’t have. Money is nothing but a storehouse of labour. What you’re exchanging between two people as money is basically labour exchange. The reason why barter system failed is because people who had something that was in demand did not want to exchange it for something that was in excess. Therefore, to balance it out, money was invented. The original money was in all forms. During World War II, even cigarette was considered money. The Indian rupee has value only in India because people believe it and will accept it for exchange.

For the population to remain stable, the world needs to have a fertility of 2.1. In Tamil Nadu, it is coming down, like Western democracies. When you start thinking of children as liabilities instead of assets, the human race itself will vanish. The society’s greatest danger is not going to come from artificial intelligence. It is coming right now in front of us, simply because we don’t want to have enough kids.