A tea field outside of Đà Lạt, Vietnam

Today I spent the day outside of Đà Lạt, Vietnam on a tea farm doing a matcha workshop. We made matcha the old way with a hand cranked mill after heating tea leaves we picked over a wok. The place is called CẦU ĐẤT BEAN if you are curious. It took hours and I don’t think we ended up with even 50 grams of matcha each by the end of it.

A hand crank mill for making Matcha powder

As I cranked the wheel I was thinking a lot about physical human labor. After I finished the process, we strained the powder and brewed tea. I sat and watched workers out in the field pick tea leaves. A dozen men and women stuffed leaves into sacks in the late morning sun.

There is no shortage of labor in Vietnam. Often you walk into a restaurant and there will be 3 guests and 5 staff visible.

Vietnam is young and rapidly developing. The economy has been growing at 7-8% for years recently and is showing no signs of slowing down.

The stage: Demographics in Vietnam Vs. Japan

“Demographics Is Destiny” is a common refrain in economics and geopolitics. I have been thinking about this a lot while traveling in Vietnam the past few weeks.

Compare Vietnam to Japan. Japan has seen negative population growth recently and flat GDP growth (and even negative in some recent quarters).

Vietnam’s population is growing in excess of a million a year and Japan’s is declining nearly a million a year. They are similar sizes (Japan is a bit larger).

As with many Asian countries Japan and Vietnam are both essentially ethnostates with little immigration, they offer a much better comparison as opposed to western countries with extremely high rates of immigration.

Automation and the Return of Developed Economies

What if I told you everything you read in the economist the past 10 years about the “global south” and developing economies vs developed was going to be flipped on it’s head?

Picture this:

1. White collar work becomes heavily automated by AI.
2. Robotics is the next target and incredible advances are made.
3. Humanoid robots start to be mass-produced on the order of millions or tens of millions per year.
4. Now even manual labor is extremely easy to automate without specialized machinery.

Now ask yourself, in this scenario, is a large population of laborers beneficial or even desirable?

What if everything flips?

Suddenly Japan is growing at 5% a year because you can automate everything and produce the most amazing things from factories that are now suddenly economic to operate.

Suddenly Vietnam has slowed to growing 1% a year because despite the cheap labor, the infrastructure, logistics and resources are not as readily available and labor is essentially free in developed economies now.

There is no labor cost arbitrage left.

Developing economies with low intellectual capital and low infrastructure intensity are now left with nothing going for them and a huge unemployed population. It’s lucky that you cannot farm tea or coffee in most of the developed economies because agricultural products are one of the only things each local climate in the global south has a real enduring advantage in.

Everything is upside down.

What do we do with all the human labor?

If we really do get mass produced humanoid robots that you can teach to any task for $20k a piece by 2030 everything you thought you knew will be wrong. All of your models will be broken.

Suddenly you don’t want excess people in your country.

In fact, you wish you probably had as few people as possible.

Picture this: it’s 2030 and the west realizes it made a huge mistake accepting droves of immigrants into their countries who are rapidly becoming unemployed and unhappy.

Ballooning social safety net payments with increasing unemployment deteriorating the tax base blow out the fiscal situation of western governments.

The native born population is increasingly being squeezed. Unemployment is ticking up as each week goes by. Everyone is agitating for UBI payments but there is no money unless you tax the AI companies. The political situation is volatile.

Developing economies stop growing.

Imagine developing countries: factories shutting down en-masse because you can simply produce things locally cheaper with no logistic issues, no customs, no tariffs, and as long as you can get humanoid robots and raw materials you absolutely don’t want to deal with production 10,000 miles away from your customers.

Developing countries are now facing an employment crisis. And they lack the infrastructure, electricity and technology companies at home to produce the same fountains of innovation and tech based productivity meanwhile many factories are re-shoring.

Without adapting rapidly to technological advancements, developing economies risk stagnation and social unrest. Their traditional advantages—low-cost labor and production—may become irrelevant.

The escape valve?

The entire world is a powder keg.

And yet we have AGI, and super intelligence. Wonderful inventions are being created, and discoveries are being made at a breathtaking pace.

There are two options to redirect humanity out of this trap:

1. Heavily manage the world economies with UBI payments.
2. Send people toward a new frontier and let them escape.

What is that frontier?

It’s likely space in some form or another. Whether it’s a moon colony or asteroid mining or a Mars colony or all of the above this is likely where things will end up going if we want to maintain our purpose as a species.

If rapid automation of physical labor becomes a reality under a fast-takeoff scenario, humanity must either commit to large-scale economic restructuring through UBI or embrace bold new frontiers—like space exploration—to provide renewed purpose and direction.