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Welcome to Disrupting Japan, straight talk from Japan’s most innovative founders and VCs.
This is our 250th episode, and I wanted to give you something special; something I have been thinking about more and more as my career in startups and venture capital has developed.
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Today we are going to talk about a group of people who are perhaps the most reviled and maligned by technologists and innovators worldwide. People who stand in opposition to everything innovators hold dear. Today we are going to talk about the Luddites — those individuals who through a combination of ignorance and shortsightedness opposed technology and change.
But that’s not really true. The Luddites were not who you think they were. In fact, almost everything you have ever been told about them is wrong.
In truth, the Luddites were not really opposed to new technology. Not even when it threatened their livelihoods.
There is growing concern today about AI taking our jobs, but if AI had emerged 220 years ago, the Luddites would have embraced it. Far more important, they would have held a much better understanding of the true dangers posed by today's new business models than do most of the AI advocates or critics talking about it today.
Although the Luddites are accused of opposing the very technology that resulted in the incredible progress and the rise of living standards that we have experienced over the past 200 years, that’s simply not the case.
In fact, as you’ll see, although the higher living standards and shared prosperity enabled by the technology of the industrial revolution are undeniable, we actually have the Luddites, and not the technology, to thank for that.
The Luddite in the Mirror
So who exactly were the Luddites?
You have probably heard that they were cloth workers in late 18th century England who, early in the industrial revolution, saw their livelihoods threatened by the new textile factories, and they tried to shut down those factories by destroying automated looms and other textile equipment.
That much is completely true. The important question, however, and the one with a wildly misunderstood answer is “Why?” “Why were the Luddites breaking machines and shutting down textile factories?”
The mythology is that Luddites rejected the new technology because they benefited from the old system. Rather than embrace technology which would lift millions out of poverty, lengthen lifespans, and lead to greater shared prosperity, the Luddites selfishly wanted the world to stay as it was. They were backward-looking rubes who simply could not see the bigger picture.
And that, all of that, every single word of that, is simply wrong. If anything, the Luddites were alarmed because they saw the big picture far too clearly.
So let’s take a quick step back into the world of the Luddites and see just how much like us they really were. And also see that although the technologies are completely different, how the new business models of the industrial age changed society in very much the same ways as the new business models of our emerging AI age.
As the industrial revolution was gaining momentum in the closing decades of the 1700s, textiles were one of England’s most important and profitable exports, and they were manufactured using what was called the “domestic system.”
Textile workers worked with their own machines in their own workshops. Some of the more enterprising had multiple machines and employed others. The work was distributed, done mostly at home, and the finished product delivered to merchants. This system is where the English term “cottage industry”comes from.
By and large, these clothworkers did not have leisurely or even particularly comfortable lives, but it was a better living than agricultural work and much better than most of the newly emerging factory jobs. What these clothworkers did have, however, and what they were very afraid of losing, was a degree of economic freedom.
The freedom to negotiate fair prices with their customers and, based on those negotiations, the freedom to decide what and how much they would produce.
These proto-Luddites had no problems with machinery or technology. They used and maintained machinery. They experimented with and developed technology. What they objected to was not the new technology, but the new business models.
To understand the Luddite’s position here, we need to understand that new technology was not the only thing powering England’s industrial expansion. These new factories were also powered by some of the most horrific forms of child labor imaginable.
Children as young as six were forced to work 14 to 16-hour shifts crawling under machinery to recover scraps of cloth and reaching into running machines to untangle threads and remove debris. Some business owners even made deals with the government to take orphans off public hands and put them to work in their factories.
And to be absolutely clear, these children were not paid. They were given enough food to keep them alive and only allowed to sleep a few hours a day. When children tried to escape, they were brought back in chains. These children would either die in one of the frequent industrial accidents or they would literally be worked to death.
Working conditions could have easily been made safer, but pausing or turning off the machines would lower profits. The whole point of this innovative new business model was that it produced textiles continuously, 24/7.
Things like idling machines or buying safety equipment would cut directly into shareholder value. Since there were always more bodies to feed the machines, it would have been unfair to the shareholders not to leverage that resource.
No one knows how many children died in those factories. Neither the politicians nor the business owners benefited from that kind of record keeping. Slaughtering children has always been bad optics.
Today we usually try to gloss over this behavior with the rejoinder that “attitudes and values were different back then”, but that’s not really the case. Even by the standards of the day, these new business practices were appalling. Many religious, social, and political groups were outraged and worked to force business owners to respect social norms and basic human decency.
Many business owners did, of course, but they were quickly outcompeted and bankrupted by the business owners who chose not to. Working children to death was just so damn profitable. William Blake famously referred to these factories as the “Dark Satanic Mills”.
Our proto-Luddites were not simply worried that their way of life was changing, but that it was changing into something horrible.
The Broken Legal Shield
It’s also important to understand that these business owners were actually breaking the law. Not just social norms, but the actual law. Labor protections in that era were not exactly robust, but some basic rules did exist.
When challenged on their illegal labor practices, the new business owners responded in exactly the same way today’s new business owners do. They claimed that since no one imagined this new technology when those labor laws were created, they clearly did not apply to them. Forcing them to abide by the law would only slow progress. And just like today’s business owners, they had legions of supportive journalists and caravans of lobbying money to amplify that message.
It’s quite impressive how effective and unchanged this strategy has remained. Over the past decade, Uber and other gig-economy companies executed this playbook exactly. They claimed that since their new technology did not exist when the relevant labor and licensing laws were passed, those laws should not apply to their new business model. They argued that if they were forced to pay minimum wage or comply with licensing and insurance laws, their business model would collapse and that would slow the march of progress for everyone.
Interestingly, that playbook worked well in the US, but not everywhere. There are many markets where Uber is required to follow local labor and licensing laws. And you know what? Uber does fine in those markets. They are a little less profitable, of course, but they do fine. Their business model never required them to ignore labor and licensing laws, it is simply more profitable if they can do so.
For over 200 years, business owners have used this slight of hand to sidestep both criticism and regulation. They simply assert that any criticism of their business practices is actually hostility towards and fear of progress and technology.
Right now, this “old laws don’t apply to new technology” grift is being used by AI companies to deflect copyright concerns.
I’m not talking about using copyrighted works to train AI. Admittedly, that’s a grey area. Rather, I‘m talking about the simple fact that I can pay OpenAI $20, and with a bit of prompting, it will sell me all kinds of copyright-infringing images and whole passages lifted from books and screenplays.
That is straight, blackletter-law copyright infringement for profit. It makes no difference what the user does with the image they paid OpenAI to generate. OpenAI is violating the law when they sell it without permission. It’s a commercial transaction.
The AI companies usually imply that the customer is at fault for requesting the images. But again, No! The law is clear. Asking a company to create a work that could infringe on someone's copyright is not illegal. However, creating and selling that work without securing the necessary rights? That’s illegal.
My point here is not that AI companies should be shut down for copyright infringement. I don’t think they should be. The point is that we need to stop falling for this 220-year-old slight of hand where the existence of a new technology is used as an excuse to violate any laws or social norms that might reduce profitability.
I’m not anti-technology. I’m just anti-bullshit.
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