Robot Theory
The battle of robot theory is on. Bank of America paints one picture and
McKinsey another.
Let's investigate both theories.
Automation Will Change Jobs More Than Kill Them
As reported by the New York Times, McKinsey says Automation Will Change Jobs More Than Kill Them
The report, published on Friday and written by two members
of the McKinsey Global Institute, the consulting firm’s research arm, and
another McKinsey employee, adds a twist to the debate over the likely nature
and pace of automation in the workplace.
Today’s automation fears essentially rest on two assumptions. First, the
speed of advances in digital software and hardware is faster than in previous
waves of technological change. And second, clever software and machines are
increasingly able to automate cognitive tasks, not just physical ones.
Artificial intelligence, it seems, poses a new kind of threat to jobs — not
so much replacing muscle but brains.
Looking at the trends in artificial intelligence, Carl Benedikt Frey and
Michael A. Osborne, researchers at Oxford University, estimated
in a paper published two years ago that 47 percent of American jobs were
at risk from automation.
The McKinsey research suggests a different kind of impact, at least over the
next three to five years, which is the time span of its analysis. The
McKinsey study found that less than 5 percent of jobs can be entirely
automated using “currently demonstrated technologies,” which it describes as
technologies that are either in the marketplace or in research labs.
The work ripe for automation is not just routine tasks in lower-paying jobs.
“Most high-wage, high-skill jobs have a significant amount of activity that
can be automated,” said Michael Chui, a principal at the McKinsey Global
Institute, and a co-author of the report.
Jobs where some portion of activities could be automated include physicians,
financial managers and senior corporate executives. At the apex of the
corporate job ladder, chief executives, more than 20 percent of the work
could be automated, McKinsey estimates. The C.E.O. chores that could be
automated with machine-learning software include analyzing reports and data
to make operating decisions, preparing staff assignments and reviewing status
reports.
The McKinsey authors emphasized the potential for automation to enrich
work, liberating people to focus on more creative tasks. Apparently there is
a lot of room for improvement on that front. According to one calculation in
the report, “just 4 percent of the work activities across the U.S. economy
require creativity at median human level of performance.”
McKinsey Report
Inquiring minds may be interested in the actual report. If so please consider
the Four Fundamentals of Workplace Automation in the McKinsey
Quarterly.
Compare and contrast that viewpoint with that of Bank of America.
Robots Will Change World Beyond Recognition Says BoA
The Telegraph comments on the viewpoint of Bank of America in Robots May Shatter the Global Economic Order Within a Decade.
Robots will take over 45pc of all jobs in manufacturing
and shave $9 trillion off labour costs within a decade, leaving great swathes
of the global society on the historical scrap heap.
In a sweeping 300-page report, Bank of America predicts that robots and other
forms of artificial intelligence will transform the world beyond recognition
as soon as 2025, shattering old business models in a whirlwind of “creative
disruption”, with transformation effects ultimately amounting to $30 trillion
or more each year.
“The pace of disruptive technological innovation has gone from linear to
parabolic,” it said. Any country that fails to embrace the robot revolution
will slip rapidly down the rankings of competiveness, and will be left
behind.
Manufacturing wages in China have jumped ninefold since 2000, and the
country’s workforce is shrinking. China is already the world’s biggest buyer
of robots, making up a quarter of the global market.
The costs of robots, "care-bots" for the elderly,
"agribots" to plants seeds or pick fruit, commercial drones and
artificial intelligence have, on average, dropped by 27pc over the past 10
years, and are expected to fall a further 22pc by 2005.
The price of an advance robotic welder fell from $182,000 in 2005 to $133,000
last year, and its sophistication is increasing all the time. The standard
Baxter collaborative "cobot" that works side by side with people on
the factory floor – fixing bolts on a conveyor belt, for example – costs just
$22,000.
We are coming close to the crucial “inflexion point” when it is 15pc cheaper
to use a robot than to employ a human worker.
This threshold has already been crossed in the American, European and
Japanese car industries, where it costs $8 an hour to employ a robot for spot
welding, compared to $25 for a worker. Hence the eerie post-human feel of the
most up-to-date car plants. “We are facing a paradigm shift, which will
change the way we live and work,” said the report's author, Beijia Ma.
The social effect is to squeeze out those at the bottom of the employment
ladder, rendering them almost unemployable without re-education. Bank of
America describes this as the “displacement of human labour”, estimating that
almost half of US jobs could be at risk.
Productivity will soar but wages will not rise at the same pace, if at all.
The owners of capital will take an even bigger slice of global income,
pushing inequality to yet greater extremes. Labour’s share of the pie peaked
at 65pc in 1975 in the rich countries and has already dropped to 58pc.
The workforce will split yet further into the "haves" at the
top of education scale and the "have-nots" with just high school
qualifications, not to mention the 800m illiterates in the world. It is easy
to imagine the explosive political consequences if governments fail to take
action to mitigate the effects, yet this may be almost impossible in a
borderless, globalised world.
Nor are the middle classes invulnerable. Bank of America said
"robo-advisors" using algorithm-based systems will “disrupt” 25m
workers in financial and legal services. The Millennial generation – now
18-34 years old – will be the first to switch en masse to these post-human
services. This rising cohort already holds $7 trillion of liquid assets and
is likely to inherit another $30-$40 trillion from Baby Boom parents.
There is nowhere to go. Labour-saving devices are sweeping everything,
everywhere. A single professor can teach a course to 150,000 students through
digital technology.
We may achieve the dream of prosperity without toil as robots take over, but
find ourselves living in a jobless dystopia.
Deflationary Force
Regardless of which viewpoint you think more likely, it should be perfectly
clear that robots are a huge deflationary force.
The Fed's (central bank's in general), that the global economy needs 2%
inflation is 100% absurd in the face of such forces.
Attempts by the Fed, by unions, by Obama, and by those screaming for a $15
"living wage" are totally counterproductive.
The higher the wage inflation, the greater the incentive to replace workers
with robots.
Mike "Mish" Shedlock
