When someone says robots, most of us conjure up an image of a human-like machine doing human-like things. Robots aren’t really like that at all. This morning I took note of two robots in the office building where I work.
The first robot has replaced the three people who previously managed the parking lot. It doesn’t get sick, take vacation days or retire. Our receptionist interacts with it online to pay our clients’ parking charges. It never argues and doesn’t take cash. The second robot has replaced a bank teller. It similarly doesn’t present the same issues that human employees do, works 24 hours a, day 7 days a week, and is willing to stand outside in the cold.
The government of Ontario recently increased the minimum wage by 21%. It may be just a coincidence that the owner of this building decided at just that time to replace the parking lot staff with a robot, but I doubt it. The math is pretty simple to work out. The robot requires capital to buy and install. Right now, capital is cheap and creditworthy companies can borrow money for less than 4% per year. If the cost of the capital over, say, a ten year period is less than the cost of paying humans, then any sensible business will replace the humans.
As the cost of a human worker rises (wages, benefits and non-monetary issues) more and more businesses will make this calculation for more and more jobs. For a recent example, visit your nearest McDonalds. There you will find (or will soon find) a robot that will take your order, prepare your invoice and give you a number that will be called when your food is ready. There goes another big whack of customer service jobs.
On a more systemic level, online shopping is really just a giant robot that replaces sales clerks. More knowledgeable, faster and with a perfect grasp of inventory and prices, the online robot guides us through the sales process quickly and painlessly. In fact, even men enjoy shopping on line (so I’m told). The number of retail jobs lost in the United States in 2017 is estimated to be at least 70,000, as over 6,700 stores closed. While that sounds like a lot of jobs (and it is, more than the total employment in the US primary steel industry), it may only be the start of the technological tide threatening to wash away retail jobs. Amazon has rolled out a Whole Foods store in Seattle that employs no cashiers at all. Robots record all items a customer puts into a basket, itemizes them and bills the customer through a cellphone connection.
In England in the early 1800’s, one of the country’s most important industries, weaving, was rapidly changing from a home-based artisanal craft to an industrial enterprise, using steam-powered frames. Ned Ludd and a group of anti-industrialists, who came to be known as Luddites, responded by invading factories and breaking the frames. The revolt did not last long. The robotic weavers won. Luddite-like revolutions against industrialization have occurred many times in many countries. In the end, consumer demand for cheaper and more readily available goods have always won out over the demands of labour.
As artificial intelligence (AI) and high speed internet connections become more widespread, more and more jobs will be threatened by robots. Truck and taxi drivers look to be on the chopping block next. As AI becomes cheaper and more reliable, the threat will move up the wage chain, eventually threatening doctors (AI is already a better diagnostician), lawyers (AI reads better and remembers better), and financial professionals like me (feel free to check out the many robot advisors).
As investors we are highly aware of the momentum building in this area, and we are increasingly alert to the possibilities presented by companies seeking to supplant traditional jobs. We notice that the same cannot be said of many governments which believe that the jobs of the past can somehow be conjured back to life through Presidential or Prime-Ministerial command.
Is work obsolete? Are humans out-moded and ready for replacement? We would say no, or at least, not yet. Many jobs require hard to quantify and encode skills and characteristics. Empathy, intuition, the ability to read body language and subtle changes in speech, the capacity to care about others – these things are hard to teach to robots. It is possible to be a doctor or a lawyer or a financial advisor without these personal qualities, but not a very good one. In fact, as we confront a more depersonalized and technological world, the ability to connect with our flesh and blood fellow beings may become more rather than less valuable. Technology may end up making work less mechanical and more human.
March 13, 2018