The Developing World Will Offer Better Quality of Life than the US and Europe

The half life of a skill is 10 years and rapidly falling. AI is here. Government policies of low interest rates, threats of tariffs and burying our heads in the sand are incentivizing automation and job destruction as fast as possible. That’s the story in the developed world.

What about the developing world? In places like Latin America, most industries are unchanged. Amazon hasn’t disrupted most markets, and big, old, incumbents are still in control. Retailers see little need to compete. Banks have little online competition. Most large companies are way behind US companies in efficiency and implementation of AI/Automation technology. Business owners don’t feel threatened from competitors, so they see little need to innovate.

Many publicly traded companies’ inventory control system is still minimum wage workers taking notes on a clipboard and then calling in the numbers from the warehouse. Some companies are becoming more efficient because of the commodity bust of 2014-2016, but most are way behind. Things are changing in the developing world, but not nearly at the pace of the US. Because the pace of change is slower, it will be better to live in developing world than in the US or Europe for a higher percentage of the population.

The US is already experiencing serious shocks to the system from technology. It started in the 70s/80s, was exacerbated by the 2008 financial crisis and led to Donald Trump’s election. Today’s parents are the first generation that believes their kids will live worse than they did. The American dream is breaking down and people are losing hope. We’re seeing an angry populist reaction in the developed world.

At the same time, most Latin American countries have grown and stabilized. Most people are optimistic even in places like Brazil and Argentina where scandal and commodity busts have ravaged the economy. People are still better off than they were a generation ago. And most think they’ll keep making progress.

Developing countries like Chile, Colombia and Uruguay, that have stable governments, lower costs of living, and a much slower pace of change, will be better places to live than the developed world for a higher percentage of their population. Incomes will still be much lower in the developing world in absolute terms, but with lower costs of living, consumer goods prices coming down, access to less usurious banking, and potentially most importantly, people still believing that life will get better, a higher percentage of people may live better lives.

Unlike other times in history, it will actually be an advantage to develop more slowly and  to be behind in absolute terms. As the US and Europe experience the shocks and turmoil that goes along with extreme change, places like Latin America can watch the carnage from afar and figure out what works and what doesn’t.

Developing economies can look at the different paths that US and Europeans try and then pick the best ones.  These countries can adopt the best practices and throw out the worst, while hopefully avoiding populist backlashes and future social upheaval than we’ve seen so far and will see more of in the future. They can avoid massive, quick disruption and move at a more “human friendly” pace. Maybe change happens over the next 15-25 years rather than the next 7-10.

Why is change slower in Latin America?

It’s not lack of resources. It’s a combination of a conservative culture, lower wages, low competition and lack of experience with new technology. All of these factors retard the pace of change and may make stable Latin American countries nicer places to live than the US for a comparatively higher percentage of their population.

Additionally, there are cultural factors outside of pace of change that will make Latin American countries better places to live. People gauge happiness based on relative place in society, not absolute. People are happier winning $10k in a lottery than making $100k in the same lottery and then losing half. People in the developed world feel like they were promised $100k, but lost half:

The percentage of 30 year olds earning more than their parents have fallen from 90% to 50% over the past half century. This decline has occurred throughout the parental income distribution, for children from both low and high income families.

People in the developing world feel like their parents earned $2k and now make $10k. Things are getting better, not worse.

Latin Americans are used to large wealth disparities, the US is not. People in the US are pissed because they remember a time when disparities weren’t this high. Many Latin Americans are resigned to big wealth disparities and they see them staying the same or getting better. In US, it’s getting worse, with no signs of getting better.

In the US/Europe people feel like Charlie Brown. They’ve been told that if only they vote a certain way, or save, or work hard etc, they’ll have a better life. And each time they do, they get Lucy’d and the football gets pulled away. And life gets harder.

Is it better to feel like a you’re falling behind, no matter how hard you work, with little chance of advancing? Or better to live on less money, “worse”, in Latin America once one’s basic needs and a bit more are met? We can see what a first version of the US might look like as technology automates more jobs and exacerbates the difference between the rich and the poor. Just look at San Francisco. And compare it to Medellin.

More developed world citizens are moving to up and coming places, looking for lower cost of living, better quality of life and an escape from the transition. The transition is just getting started, but it will be mainstream for those who can and are interested in trying out living abroad in the next five years. And it may be a necessity in ten.

Photo Credit: Thomas Hawk