Author Archives: Skilliard

Tera Online’s Chat Suffers From An HTML Exploit

An exploit has been discovered within the game Tera Online involving the in game chat, allowing users to insert HTML elements into chat that link to resources on external websites.

Screenshot from Gameforge’s forums. user input is not escaped properly, allowing the user to include an img element pointing to an external web address

Basically, the in game chat in Tera uses HTML for markup. The problem is that exploiters have found a way to utilize a type of attack similar to XSS(cross site scripting). XSS can be used to trick the server into referencing to resources on external websites controlled by an attacker, such as an image, when the user’s input is ultimately outputed back to another user(such as when a chat message is loaded, in this case).

This has led to a huge scare in which users have speculated that it could lead to remote code executions on client’s computers, and therefore leading to malware or worse. This is highly unlikely based on my knowledge of web development. Tera uses a software framework known as Scaleform for its user interface. Scaleform uses HTML for markup, including images, as we’ve seen. I researched Scaleform’s HTML implementation and found that the htmlText property that exploiters found a way to modify does not support referencing scripts, and therefore cannot be used to execute remote scripts.

Even if this exploit allowed remote execution of javascript files, it most likely couldn’t do much more except cause extremely annoying inconvenience such as lagging up a users computer while the game stays up, play annoying media, etc, assuming that Scaleform’s implementation of Javascript is secure.

Currently Enmasse Entertainment has been deleting posts on their forums that mention the exploit, out of concern that the spread of information regarding the exploit will increase the prevalence of it. The exploit allegedly affects all versions of Tera in all regions. Gameforge has confirmed the issue, but requested that the OP remove specific details on how the exploit is executed.

According to Gameforge, the European publisher of Tera, they have contacted Bluehole Studios(the developer) regarding the vulnerability.


Edit: After discussing the issue with sources, it has come to my attention that the exploit can be used to reference internal actionscript functions, which may be used to execute existing functions arbitrarily. While these won’t cause damage to a users computer, it can lead to the game having unexpected behavior. Additionally, users have speculated about an underflow error with the libpng library that allows for arbitrary code execution if a modified .png file is loaded, an error that was patched In 2015. It is unknown if Tera uses an unpatched version of this C library or not. While this exploit has not been proven to work in Tera, users are concerned regarding the possibility that it could exist.

Trion Worlds Might be in Dire Financial Condition

Trion Worlds is known for publishing online games such as Archeage, Rift, and Defiance. With a history of layoffs over the past five years, it had been unclear to the public if the layoffs are the result of bad financial conditions, or if the layoffs were just a way to trim operating expenses by eliminating unnecessary positions.

Generally, it is fairly difficult to judge the financial health of a private company, as statistics such as net assets, profits, revenue and other figures are generally not available to the public. However, in a shareholder report released today for Fidelity’s Contrafund, the report listed a holding of convertible bonds in Trion Worlds, Inc.

The interest rate on the bond indicates that the company may be at significant risk of default. Not only is 12% an extremely high interest rate for bonds, but convertible bonds generally have lower rates than regular bonds, as it provides the bondholder the option to exchange the bonds for equity in the company. This makes convertible bonds more attractive to investors, as they have the upside advantage of equity, with the creditor advantage of bonds. The rate is especially high considering the short duration of the bonds.

If a company needs to offer interest of 12% on a convertible bond to lure investors, it is quite likely that the company has a high risk of default. For comparison, Tesla’s newly issued convertible bonds have a coupon rate of 5.3%, even with a B3 credit rating by Moodys, a rating that is considered junk/non-investment grade.

I was unable to dig up information on Trion’s Credit rating. However, for reference, CCC rated bonds and below, which are considered to be “extremely speculative” or worse, currently yield 10.62%. This data is based on the BofA Merrill Lynch US Corporate C Index.

This article should not be taken as financial or investment advice.

Edit: The CEO of Trion Worlds, Scott Hartsman, has responded via Reddit:




The Media’s Hysteria over Cryptocurrency’s Energy Consumption is Based on Misinformation

While it’s true that mining for cryptocurrency consumes significant amounts of power, in many cases the media makes highly inaccurate estimates regarding power consumption. In addition, journalists often lack an understanding of how blockchains or even just electricity works.

“Ethereum could be using more than a country’s worth of electricity” reads a title from  Below is a quote from the article:

“the entire Ethereum network could be consuming as much as 4.2 Terawatt-hours (tWh) — which is only a little bit more than what’s consumed by the Middle Eastern island of Cyprus.”

There are a number of problems with this sentence. First of all, the 4.2 Terawatt-hour figure is meaningless without any time frame as to how often that much energy is consumed. A watt is a unit of power, whereas watt hours are units of energy.

I decided to take a look at their source that they linked for that statistic, only to find that the link was to an article on Bitcoin’s power consumption. I think he meant to link this article instead. It appears they meant 4.2 Terawatt-hours per year. Another quote from the Futurism article:

“All those household computers turned into Ether miners each have blockchain transactions consuming at least, if not more than, 45 kWh of electricity.”

The statistic the author was trying to describe was the average energy consumption per transaction on the Ethereum blockchain. Basically, it takes the estimated daily energy consumption from Ethereum miners, and divides it by the number of transactions that occur per day.

This is a completely misleading way of describing the efficiency of a proof-of-work based blockchain. When people say that miners validate transactions, that’s actually a huge oversimplification and misrepresentation of what actually goes on.

When miners perform calculations to try and find blocks to earn coins, those calculations aren’t actually validating transactions. The calculations that are made by miners, which are known as hashing operations, are much like guess and check math equations, in which there is a very tiny chance of succeeding, and being the first one to find a solution entitles you to create the next block and claim the prize. Miners compete, performing millions of operations per second, in order to try and find the next block.

When the miner creates a block, they can include transactions in the block, and can claim the fees. This is where mining and transactions are connected.  The sole purpose of these calculations, known as “proof of work”, is to decentralize the network, by providing a way of establishing consensus on who has the right to publish the next block. As long as no entity has greater than 50% of the hashing power, there is no need to trust a single entity such as a bank.

Without a blockchain, there would be no consensus or proof on the network that coins are owned and not sent, making the currency worthless.

The reason this is important is because the power consumption is unrelated to how many transactions there are. If Ethereum’s transactions doubled overnight, but the price remained the same, the power consumption would remain the same, and the energy consumption per transaction would decrease, as there’s more transactions on the same amount of power.

The reason power consumption is so high is because block rewards create an incentive to mine. The good news is that Bitcoin’s mining reward gets cut in half 4 years, meaning the incentive to burn electricity to mine will decrease over time.

The amount of power consumed will likely follow market forces. The incentives that encourage supply of miners is the newly minted coins via block rewards, plus any fees from transactions. With too little of an incentive to mine, a proof-of-work blockchain is vulnerable to 51% attacks due to low costs to bruteforce it. With too high of an incentive to mine, a tremendous amount of power is used to compete for new blocks.

So for example, approximately 1800 Bitcoins are created per day from new block creation as of today. At a price of $2,636, that means $4,744,800 worth of Bitcoin is created daily, meaning total investment in mining will likely remain near that amount(this includes hardware costs, not just power). But in 2021 when block rewards are cut to 6.25 BTC, if prices are the same, the incentive to mine is then cut in half, meaning older miners will be taken offline, and mining hardware production/purchases will likely decrease.

The key takeaway is that as usage of cryptocurrency usage grows, and block rewards shrink, energy consumption per transaction will decrease. Right now, cryptocurrency is in it’s experimental stage, and most usage is for speculative means and development. That does not mean the power consumption is currently useless. With each block created, Bitcoin and Ethereum’s blockchains continue to grow larger, making them stronger and more difficult to attack.

There is a compelling argument that proof of work wastes too much power, and luckily, there are alternatives, such as proof of stake and proof of storage, which consume very little. However, it is incredibly misleading to claim that it takes 45 kilowatt hours to verify a single transaction. If cryptocurrencies solve scaling problems that result from lack of high-speed internet infrastructure, and lack of affordable storage for  storing large chains, the transaction capacity of Bitcoin and other digital currencies could increase almost infinitely while having very little impact on total power consumption.

Techpowerup “Advertorial By AMD” Draws Controversy

Last Wednesday, Techpowerup published what appeared to be a comparison between AMD’s Radeon RX 560 and Nvidia’s GTX 1050. Both are budget graphics cards in a similar price range, and consumers may want to research which choice is better for them. What readers are unlikely to notice is the small “advertorial by AMD” hidden off to the side on the top right. That, combined with the author being named “Advertorial” are the only indications that the content is sponsored on the entire page.

The article reads much like a review from an independent journalist, with no disclaimers within the article itself that it comes from AMD or is sponsored by AMD. In fact, the article was posted directly in the “Reviews” section, a place where users should be able to view an honest opinion rather than a sponsored one. The comparison makes a very strong case for AMD’s RX 560, but does so using misleading representation of data.

Chart from Techpowerup advertorial

The chart included in the article shows the RX 560 performing better on every single game benchmark. The problem is that the chart isn’t even graphically accurate. For example, for Resident Evil, the GTX 1050 scores 63 FPS, but somehow ends up on the left side of the “60 FPS” vertical bar. In addition, the graphs don’t seem to be to scale.

The benchmark results also seem to vary from what has been found by independent reviewers. Throughout my research on the web, it seems that the RX 560 and GTX 1050 trade blows in terms of performance, so it’s very likely AMD cherry picked their benchmarks to best represent their card.

With the rise of ad-blocking software, traditional script-based ads are becoming ineffective, especially when a site relies on catering to tech-savvy individuals that are more likely to run adblockers, leading many news sites to adapt sponsored articles disguised as real content. It is considered important ethics to properly mark sponsored content as sponsored, rather than trying to hide disclaimers off to the side.


Link to advertorial

AMD Vega GPUs Are Now Available For Preorder

AMD’s “Vega” GPU has surfaced, now available for pre-order on Scan UK and Sabre PC. The listings may have been a mistake, as there hasn’t been an announcement from AMD regarding pricing or release dates, or listings on many other major online computer hardware stores.
The cards are not cheap. The air cooled version sells for $1,199, while the liquid cooled variant sells for $1,799. Unlike AMD’s Fury/Fury X, the liquid cooled version does not provide more usable cores than the air cooled version. The two cards have seemingly identical specs, each boasting 16 GB of HBM2 VRAM and 4096 shader cores.

While the GPU is a workstation card, which is intended for professional use for double precision computing, the card is likely the most powerful AMD GPU available for gaming. Featuring an advertised 13.1 TFLOPS of single precision computing power compared to the Fury X’s 8.6 TFLOPS, AMD’s Vega has the potential to be over 50% faster than the Fury X in terms of computing power while containing 4 times the available VRAM. Of course, it’s not certain that this will translate to real world performance, so it’s best to wait for benchmarks before reaching conclusions.

It’s currently unclear if AMD will release a cheaper variant of the workstation card for gaming use. Usually, both AMD and Nvidia release workstation variants of their cards after the consumer version, with the cheaper consumer versions of the cards having throttled double precision capability. With AMD’s Vega, this may be different. Supply of HBM2 memory, a revolutionary new type of high bandwidth & low power consumption memory, is currently limited, and very expensive. Nvidia has not released any consumer-grade GPUs with HBM2, as they’re using their limited supply for their $7,000+ GP100 GPU, which is intended for datacenter use. It’s likely that AMD will follow a similar pattern due to the scarcity and price of HBM2 memory.

At $1,199(or $1,799 if you want a liquid cooled one), AMD’s Vega is likely not a good purchase for gaming purposes, unless you are committed to using AMD(or use Freesync), want the best performance, don’t want to wait, and price is not an issue.

Bitcoin/Cryptocurrency Craze Wipes out AMD GPU Supply

PC gamers may find themselves struggling to find AMD’s RX 570 or RX 580 available anywhere near it’s MSRP. The great surge in demand comes from the recent spike in the price of Bitcoin, which has increased from roughly $500 a year ago to $2193 as of the time of writing. When Bitcoin’s price rises, the USD value of other crypto-currencies such as Litecoin and Ethereum usually rise proportionally to Bitcoin.

Crypto-currencies are an emerging, decentralized, peer to peer currency sent using the internet. Their money supply initially comes from a process known as “mining” in which computing devices such as GPUs perform luck-based operations that are used to claim “block rewards” containing the currency. The primary purpose of cryptocurrencies is to eliminate the need for trust in a central organization such as a bank, although many cryptocurrencies such as Ethereum have adapted additional features such as “smart-contracts”.

While the mining of Bitcoin and Litecoin using GPUs has become obsolete due to specialized devices know as ASICs, Ethereum is currently extremely profitable to mine using GPUs. An Ethereum miner can expect to earn $100-150  per month worth of Ethereum per RX 580 they mine with, based on current exchange rates and a variable called “difficulty”, which makes mining less profitable as more mining power comes online. This current rate of profitability is expected to drop in the future(this is not the first mining craze), so miners are buying as many cards as they can now to take advantage of it while they can.

If the trend continues, the supply of NVIDIA GPUs may be threatened too. The GTX 1070 mines at a rate similar to the RX 580. With prices of RX 580’s surpassing the GTX 1070, miners may choose to purchase NVIDIA GPUs for mining purposes.


The RX 570, with a MSRP of $169, is being sold for over double its intended price

If you’re looking to sell a used AMD GPU such as a RX 470/480 with the intent to upgrade, now may be the best time to sell, while the demand is extremely high. If mining profitability drops to the point of not covering electricity costs(highly probable), there will likely be a mass selloff of AMD cards, thus crashing the price of used AMD GPUs. Such an event may create an opportunity to pick up used AMD GPUs for cheap, but buyers should be cautious, as cards used for mining are under heavy load 24/7.



Take advantage of your GPU and easily set up mining with no text configuration or programmming needed!


Additional information:


Disclosure: Author owns 2 shares of AMD valued at a total of $22 as of date of publication. Author holds less than $5 worth of cryptocurrency(primarily in Bitcoin) as of time of publication.


The Emergence of Free to Play, and Decline of Pay to Play

When the first online games emerged, most were based on a pay-to-play model. Some involved an hourly rate that was charged to play; however, the monthly subscription method of monetization became the most common method. As these games grew in popularity and e-commerce websites such as Ebay and Paypal began to grow, players began buying and selling digital items within games for large sums of money. This quickly exploded into a massive industry in which actual companies began to arise around the sale of virtual items in games. This turned ugly quite rapidly, as the pursuit of profit led these sellers to use automated tools, hacked player accounts, and cheats to earn their items, and bots to spam the in game chat for the purpose of advertising their website, thus ruining the player’s experience.

As these gold sellers began to undermine the enjoy-ability of their games, developers began to push back, prohibiting real money trade(RMT) and the advertising of it in game. The massive growth of these “gold-sellers” were a clear indication of demand to publishers. It was proof that players would in fact pay for fake, digital items with no real world value, a concept that would have seemed completely bizarre 20 years ago.

When the first “free-to-play” games emerged, many of them were known to be extremely “pay-to-win”. Quite often, the best items could only be earned by paying, meaning that the only way to be competitive would be to spend a large amount of money. At first, publishers felt that players would only buy digital items if they were significantly useful, as the idea of fake, virtual items being sold was still seen as bizarre. Over time, developers tested the limits of what players will spend money on, with games starting to shift from “pay-to-win” to “Pay-for-convenience”.

Over time, players began to push back against “pay-to-win” games, and new games began to reflect such changes in consumer interests. “Is it Pay to win?” is usually one of the first questions asked by players looking into a free to play game. What counts as pay-to-win is always a controversial topic, with many players holding different standards regarding what’s fair and what isn’t. Games such as Dota 2 have pushed the limit of free-to-play, with items sold having absolutely no impact on gameplay, and being entirely cosmetic.

Another reason subscription-based games are becoming less common is due to the decline in hosting costs per user. Highly scale-able cloud-based hosting such as Amazon AWS, as well as the massive improvement in server hardware and networking technology since the 90’s has reduced the cost per user connected to a game.

Micro-transactions are a large and growing trend in the video-game industry. It is a trend that has been with with intense criticism from hardcore gamers, but continues to persist because it is more profitable than purely subscription-based games. In fact, even subscription-based games such as World of Warcraft and Final Fantasy XIV have adapted micro-transactions on top of their mandatory subscriptions, simply because they’re so profitable.

The subscription-based model has been attempted countless times over the past 5 years, and has seldom been met with success. Almost every recent title launched as a subscription-based game has been converted into a free-to-play or buy-to-play game with micro-transactions. To name a few:

  • Star Wars: The Old Republic(subscription->free-to-play)
  • Elder Scrolls Online(subscription->buy-to-play)
  • Tera(subscription->free-to-play)
  • Wildstar(subscription->free-to-play)
  • Archeage(was initially subscription based in Korea, launched in US/EUas free-to-play)
  • Blade and Soul(started out as subscription based in Korea, launched in US/EU as free-to-play)

Despite nearly every game that launches as a subscription-based title dying within a year, developers are still insistent on launching games as subscription-only titles. This may stem from the fact that the designers/developers are often gamers themselves, and prefer to launch games without micro-transactions out of principle.

With every new game being launched as a pay to play, monthly subscription based title, every company feels as if their game is the exception. They feel as though their game is so revolutionary and exciting that players will continue to pay a subscription and won’t get bored, so they can get away with charging a subscription. The latest of this trend is Ashes of Creation, which recently launched a Kickstarter indicating that the game will require a monthly subscription.

Another theory is that many games launching as subscription-based games are intended to convert to free-to-play at a later date. The idea is that the game will make the majority of it’s revenue early on when there is significant hype, through sales of “Founder’s packs”, copies of the game itself, and the first few months of subscriptions. When the game begins to lose players, temporary sales of the game itself can stimulate further sales. When the game really starts to feel dead and sales aren’t attracting many new players, the game can transition to free-to-play, and the game will experience a new surge of players once again, with revenue from previous sales secured, with older players simply receiving compensation for their purchase of the now-free game in the form of digital items that cost no money to produce.


The subscription model fails to compete with free to play and buy to play games, for many reasons:

1. Online games, like social networks, rely on the network effect.

People don’t want to play a game with an inactive community. Online games rely on the existence of many players for the purpose of creating in game experiences.

Players generally want to play a game that they can play with their friends. Convincing your friend to try out a free game is easy, but convincing your friend to spend $60 followed by $15 a month is not. When groups of friends are looking for a game to play, they’re more likely to settle on a free-to-play game, in order to ensure everyone in the group can play it.

If a player doesn’t spend any money, they’re still valuable to the company that publishes the game. That’s because they may attract friends that will pay, or create solid experiences for other players that do pay.

2. Micro-transactions expand expand earnings potential per user.

With a purely subscription-driven model, the most money you can make per user is the cost of the game, plus the cost of a subscription. What you charge for a subscription must be equal for everyone. If you charge too much, you lose subscribers. If you charge too little, you miss out on potential revenue from consumers willing to pay more.

3. Subscriptions deter casual players/busy individuals.

While most hardcore players often prefer purely subscription-based games for the principle of fairness, they are often a minority in terms of players. When Wildstar launched with a subscription-based revenue model and challenging content that was specifically geared towards hardcore players, the game performed poorly in terms of player retention due to the game not appealing to a wide demographic. Shortly after launch, the developers rushed to produce easier content and make endgame content more accessible, but it was too late, players already had bad impressions.

Casual players are less likely to want to pay a subscription for a single game. If they only have time to play a few hours per week, they will feel as though they aren’t getting their money’s worth on their subscription.

4. There’s too much competition from free games.

One of the best thing about free to play or buy to play games is that there’s an abundance of games you can play as little or as much as you like. With a game you’re subscribed to, you likely feel obligated to play it more than other games, thus making it a game you need to stick with rather than having the freedom to play it in short bursts whenever you feel like it.


Design Transformation

The massive growth of free to play games has certainly transformed the industry. While it does make online games more accessible and affordable, it also can have negative impact on the ways games are designed. Free-to-play games are often designed around microtransactions rather than what’s fun. For example, in order to create a “pay for convenience” model, designers will implement inconvenient aspects of gameplay that make the game frustrating, such as repetitive gameplay that can be skipped or sped up by paying.

Just as players have demanded that games avoid being pay-to-win, they should also demand that games avoid being designed around micro-transactions rather than what’s fun. The most successful method of achieving a profitable free to play game without impacting gameplay experience has been charging for cosmetic items, and for large expansion packs/”DLC”

Bill Introduced In Illinois to Protect Online Privacy, But Threatens Small Business

The Right to Know act has been making progress in Illinois. If passed, the bill would require operators of websites or online services to notify users that reside in Illinois of any information sharing practices they partake in. The bill also requires that these sites provide a either a toll-free telephone number or email address where users can request such information, and the operator must provide a response within 30 days. The penalty for failing to adhere to this regulation would be the greater of either $10 (per individual affected) or “Actual damages”,  injunctive relief, and reasonable attorney fees.

The classification of “personal information” within the bill is quite broad. Essentially any user-generated content would be classified as personal information, and thus leave the operator liable for maintaining records of how user information is transmitted. One of the categories of personal information is “Content, including text, photographs, audio or video recordings, or other material generated by the customer”.

In other words, something as simple as allowing a user to leave a comment on an article on your personal blog could be considered transmission of personal information, and thus leave you liable to respond to user requests for who has accessed your information.
While the bill will protect the privacy of internet users by ensuring that they are aware of how various sites use their information, it may impose a significant cost on small businesses. Small businesses across the country would need to hire an expert to create a privacy policy that accurately describes their information gathering and usage if they wish to do business in Illinois. This can be difficult for some types of businesses. For example, consider an online store that uses a third party for shipping and billing, or often delivers straight through the manufacturer. The owner of the store would need to carefully track all instances where shipping information and billing information is transmitted, and then create a database that can be queried when the user requests how their data was used.

Should this law pass in its current state, small businesses with a limited tech background will likely have to hire a legal/technical consulting team to comply with the regulations imposed. Ideally, the wording of the law would be changed in a way that the company only has to disclose in what ways consumer information may be disclosed or used, rather than the ways it actually is. That way, companies do not need to spend millions of dollars implementing and maintaining a database of how user information is transmitted, but consumers are still informed of which ways their data may be used or shared.

The bill does provide a few cases where information can be disclosed to a third party without requiring notifying the user or maintaining a record. These cases are either when information is disclosed for security or fraud prevention purposes, or if there is a contract with the third party that requires that the shared data only be used to perform the services requested, such as billing,  filling orders, etc. While this does make the law easier for large corporations with legal teams to comply with, smaller business simply don’t have the resources to draft a contract with each service provider that ensures that personal information is used only as needed, in order to comply with the rules set within the bill.

A recent amendment to the bill stated that an operator would not be required to respond to a request from the same customer more than once in a 12 month period. This may be because of concerns regarding the cost of meeting the law’s requirements. However, because the bill says it requires operators to provide such information, but doesn’t say anything about answering questions(which would require human interaction), the process of sharing information via email or telephone on request could be easily automated at little to no cost. The largest cost associated with the regulations imposed in this bill would be the cost of implementing a system of tracking the ways that user information is transmitted, and creating/maintaining contracts with service providers to ensure that data is only used as needed to provide the service.

While the bill does provide privacy protections for internet users, changes in the legislation are needed to ensure that the bill does not create a situation in which small businesses cannot afford to meet regulatory standards. The bill is still quite new and off to a good start, so improvements will likely be made over time.
The bill is sponsored by Michael E. Hastings.

You can see actions taken on the bill and it’s details here

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Razer Server Outage Locks Users Out of Their Own Device Functionality

Users of Razer Peripherals such as mice and keyboards are reporting the error “System Error 3803” when attempting to login into Synapse, the app used to access custom keybinding settings. As a result of the server outage, users are stuck using default keybinds- macros, custom DPI settings, and custom keybinds are inaccessible during the outage.

Cloud-based applications are a rapidly growing trend. For Razer peripherals, cloud-based configurations enable users to access their keybindings across different devices. However, this functionality is not without it’s faults. Razer’s software currently lacks the ability to cache settings locally, causing issues such as this one when outages occur. Ideally, Razer would at least enable local caching of user settings, as it would really only take a few megabytes of data to store.

While cloud-based applications are quite valuable to producers of consumer hardware and software for data gathering purposes, they pose a serious threat when they begin to hinder the user experience. This outage has left users very upset, with many threatening never to purchase a Razer device again.

The outage has been resolved according to Razer. If you find yourself encountering this issue again(such as if another outage occurs), Reddit user “VossVossVossVoss” has shared a workaround .

Read more on the /r/Razer subreddit

Why Bill Gates is Wrong About Robot Taxation

In an interview with Quartz editor-in-chief Kevin Delaney, Bill Gates said that as robots are used to do work that used to be performed by humans, that robots should pay a tax:

“Right now, if a human worker does, you know, $50,000 worth of work in a factory, that income is taxed. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

Bill gates goes on to express concern that as automation from robots replace jobs, that income taxes will be lost, resulting in the government being unable to fund important causes such as education and helping out the elderly.

The first thing to understand is that taxes are still being paid on the value the robot creates. If a company develops a robot that cuts labor costs by 10%, the money will end up in one of three places:

  • In the consumers pocket, due to a reduction in prices providing them with more money leftover, of which they either save/invest and pay taxes on interest, or spend, triggering taxable events elsewhere.
  • As bonuses for employees that have not yet had their jobs automated, who pay income taxes.
  • As an increase in net profit for the company, that ends up going to shareholders of company, who pay taxes on their investment income

Even if the company keeps its profits overseas to avoid taxation, their growth still triggers taxable events. First off all, value of shares in the corporation will likely increase, causing sellers to incur a capital gain that they must pay taxes on. In addition, if the company chooses to pay dividends to its shareholders, the investors must pay income taxes on the dividends received.

Due to the progressive nature of our federal tax system, profit generated through robotics will generally be taxed at a higher rate than personal income from a factory worker making $40,000-$50,000.

Some may argue that the wealthy don’t pay as much in taxes as working people. This is only true if you ignore several indirect taxes on investors:

  • The 39.6% federal corporate tax rate. In order to pay dividends, companies must bring profits overseas, which then get taxed. These taxes reduce the dividends corporations can pay out, thus being an indirect tax on shareholders. So while the investor may only pay a 20-23.8% federal tax rate on qualified dividends, they’re only taxed at a lower rate because the corporation already paid taxes on it which are passed onto the investor in the form of smaller returns.
  • The tax of inflation. The dollar loses a substantial percentage of its value every year due to the federal reserve increasing the money supply. Investors cannot deduct inflation against their capital gains, so their real effective gain in wealth is substantially less than what it is taxed as. In addition, CPI can be a misleading measure of inflation, because increases in productivity act as market forces against increasing prices.

An analysis by FactSet found that between 2010 and 2014, companies in the S&P 500 paid an effective average tax on profits of approximately 28.5%, which is substantially higher than the effective income tax rate of most working-class citizens. Investors also pay taxes on their income, on top of corporate taxes, effectively making it double taxation.

An important thing to understand is that automation and the use of technology to improve productivity has been going on for hundreds of years. It used to be that the majority of the population was employed in agriculture. This is no longer the case, as most of the population has been able to specialize, and provide products and services that were not available back then.

Human desire is limitless. As robots improve productivity and replace jobs, the economy will expand and create other jobs elsewhere, and the workers at these jobs will also pay income taxes. This has happened for the past 100 years as automation has put people out of work, and will continue to happen as industries such as transportation adapt autonomous technologies.

Yes, the factory that lays off 1000 factory line workers won’t hire 1000 programmers, machine operators, engineers, etc. But the reduction in prices and increased profits will cause the profits to flow elsewhere, increasing quantity demanded in other sectors. So as one industry shrinks employment due to automation, other industries will experience growth due to capital being freed up, and create jobs to fulfill a surge in demand.

One of the largest examples of this has been the recent boom of the food service industry.

In 2015, restaurant sales exceed grocery store sales for the first time ever. Costs of material goods have been declining(relative to inflation) for decades due to both globalization and automation enabling cheap production overseas. Cheaper product have left consumers with more to spend on other services, such as dining out. While it’s true that many of these jobs pay quite poorly, recent expansion in the economy has created competition among employers, and wages have begun to rise. Ideally, improved access to education  through affordable online learning programs would reduce the surplus of unskilled labor, resulting in improved wage growth due to competition.

Implementing a Robot Tax Isn’t Easy

The most difficult aspect of implementing a robot tax is finding a way to fairly and accurately classify what is and isn’t a robot. When you think of a robot, you might think of a human-shaped hunk of metal that performs the same labor that humans do. But the reality is that automation comes in many different forms, some involving mechanical devices, some involving sensors and image processing, and some existing purely on a computer, performing digital actions.

Here are many examples of the use of technology to reduce the amount of workers needed to produce a given level of output:

  • A calculator performing basic calculations for engineers, saving them time to work on more importing things.
  • A computer program that takes input and organizes data, reducing the amount of administrative staff needed.
  • A electrical circular saw, reducing the amount of time it takes for a human to cut wood, reducing the amount of workers needed
  • A machine that performs the work of 5 people, but requires a supervisor to oversee its operation.
  • A device that automatically performs welds in a pattern, replacing the work of welders.(but requires someone to design and maintain the machine)
  • An automated chat program on a website that answers 50% of users’ questions, reducing customer support staffing requirements by 50%.
  • Trucks that drive themselves, but require workers to monitor their travel and perform repairs.
  • Online learning software that reduces the amount of work required by the instructor, enabling them to teach more classes or increase class sizes, and therefore reducing the amount of instructors needed.


Which ones would you consider to be a robot, eligible to be taxed? All of them perform work that was once done by humans. All of them potentially reduce the amount of staff needed to produce a given product or service, and thus could be labeled “job killers”.

If a robot tax was to implemented, it would most likely be a bureaucratic mess, filled with loopholes, special interest lobbying, and wasteful spending by companies intended to avoid paying taxes.

For example, suppose the law says that a technology is a robot subject to taxation if it is a mechanical device containing sensors and a computer unit used to determine output, that does not require a human operator.

Suppose there is a robot that completely assembles a car through image processing. Engineers could easily create a loophole by adding a meaningless part to the device that must human can control manually, that simply involves walking down a line and pressing buttons that wave a “tail” on the back of the machine back and forth. The machine now has a human operator. One completely unproductive job might be created for the purpose of dodging Millions of dollars worth of taxes, something that does not benefit society at all.

To prevent nonsense such as this, there would have to be a bureaucracy that investigates factories to ensure their technology doesn’t fit their definition of robots, which of course would open up the door to bribery, lobbyists, and corruption, all while costing a ton of money to administer.

There’s Better Ways to Fund Progressive Goals

Utilizing public policy to punish companies that use robots will have negative effects on everyone. Corporations will find a way to legally dodge the robot tax while the government spends a ton of money trying to enforce it. Even if the government does manage to successfully enforce the tax, the tax will end up passed onto consumers in the form of higher prices. When you impose costs on business for the use of productivity-increasing technology, you’re actively increasing costs of production, which requires businesses to raise prices to break even- corporations will not sell at a loss unless sale of the product/service builds market share or increases sales of other products/services they sell.

Instead of creating bureaucracies that evaluate the usage of robots and calculate taxes owed, it would be ideal to make taxes purely results-based.

Taxes on profit are generally passed onto investors. Companies are already seeking the highest profits possible, so they can’t simply pass on the cost of higher profit taxes to consumers in the form of higher prices(if higher prices increased revenue, they would’ve done it already). Employees will only see the profit taxes passed onto them if they receive some sort of profit sharing.

It is true that high corporate taxes reduces investment, and thus can reduce job creation, and therefore hurting workers, but at least the taxes aren’t passed onto consumers or workers directly. The U.S already has one of the highest corporate taxes in the world, so raising it further would be an unintelligent move that would reduce investment in the US, and encourage investment overseas where corporate taxes are cheaper.

It is important to understand that the economy is not a fixed pie. Increases in productivity are a good thing for everyone, and government efforts to prevent or penalize the use of technology to improve production will only make everyone poorer.

The best way to ensure the needs of the working class are met is to simply let the market to continue operating as is, but reform it in areas in where excessive regulations provide companies with monopolies, causing higher prices due to limited competition(such as pharmaceuticals and Internet Service Providers). Jobs will continue to be created in new and existing fields as capital is freed up, Robotics will decrease the cost of many government services over time enabling the government to provide more for less, and overall cost of living will continue to decline in cost as production of necessities becomes cheaper.