Free O-ring Automation - 2025 Update

We study automation when tasks are quality complements rather than separable. Production requires numerous tasks whose qualities multiply as in an O-ring technology. A worker allocates a fixed endowment of time across the tasks performed; machines can replace tasks with given quality, and time is allocated across the remaining manual tasks. This “focus” mechanism generates three results. First, task-by-task substitution logic is incomplete because automating one task changes the return to automating others. Second, automation decisions are discrete and can require bundled adoption even when automation quality improves smoothly. Third, labour income can rise under partial automation because automation scales the value of remaining bottleneck tasks. These results imply that widely-used exposure indices, which aggregate task-level automation risk using linear formulas, will overstate displacement when tasks are complements. The relevant object is not average task exposure but the structure of bottlenecks and how automation reshapes worker time around them.

We thank Refine.ink, ChatGPT 5.2 Pro, and Claude Opus 4.5 for research assistance. Funding from the SSHRC is gratefully acknowledged. Responsibility for all errors remains our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

Joshua Gans has drawn on the findings of his research for both compensated speaking engagements and consulting engagements. He has written the books Prediction Machines, Power & Prediction, and Innovation + Equality on the economics of AI for which he receives royalties. He is also chief economist of the Creative Destruction Lab, a University of Toronto-based program that helps seed stage companies, from which he receives compensation. He conducts consulting on anti-trust and intellectual property matters with an association with Keystone Strategy and his ownership of Core Economic Research Ltd. He also has equity and advisory relationships with a number of startup firms. Joshua is also a co-founder of All Day TA.

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