I had an idea about how Generation X can be seen as a market correction of sorts. The thing about market corrections is that the lofty heights that were achieved prior to the correction (baby boomers) generally don’t get reached again for a long time. This is because after correction things are at a new ‘normal’. They have reached a stable equilibrium. If generation X is the market correction then the new normal is that work and life are difficult, and will remain so. This is probably the norm throughout all of history but our scope of perception is based upon recent history and wanting to go back to ‘the good old days’ when in fact they were an aberration in and of themselves. One of the reasons that things will remain more difficult for the average professional is the continued impact of technical disruption. The information age hit with a bang when things like personal computers met with broadband and world wide fiber optic deployments. It continues with current disruptions like smartphones and self driving vehicles. These are still early days for this next iteration of disruptions from what I can tell and It appears I’m not alone in that conclusion.
Technology disruption isn’t good or evil, it just is. Tech based disruption will behave in our economy like it always has. A new technological innovation will come in and generate great productivity. This productivity will destroy many jobs that are now displaced by the technology in question. Over time, the tech will create more jobs than it disrupted. In In some ways this will be good for the individual, in others it’s going to be a nightmare. On the good side productivity goes through the roof, costs on products and services go down so there is more wealth in the economy as a whole. Unfortunately the bad comes from the fact that nobody lives in a vacuum and some sort of action is needed just to exist, that’s why it’s a disruption. Tech forces change if you want it or not. If you were a farmer over the last one hundred years, you either got a nice new tractor (with a loan from the bank) or you eventually had to sell the family farm because Ole’ bessy couldn’t keep up with John Deere. The economics of the business environment demand it. Another example has to do with receptionists. We lost them in my lifetime to automated phone systems.
A more modern take can bee seen when you look at the reality of what self driving trucks is going to do with the chunk of the economy that is engaged in logistics. No trucking company owner in their right mind would pay drivers, a cost center that’s nearly 1/3rd or more of operational expenses, if they could buy an always-on computer to do the job. The computer, or the additional costs of the truck that includes the computer, would pay for itself in months. Even if self driving trucks were only allowed on interstates, millions of jobs are lost, and that goes all the way up the organizational food chain. Less drivers means less infrastructure to support those drivers. Eventually the additional profits means the business gets more automated trucks and the additional vehicles would need humans as part of their support chain, they would just be doing different jobs than driving, probably more sophisticated jobs, which is a net positive for the professional if you can weather that storm.
The point of this commentary is that there are signs that this trend is going to continue in the foreseeable future. I’m seeing a growing cascade of warnings from the people who make it happen mechanically and through financial empowerment. The warnings individually are not specifically concerning by themselves, It’s the frequency and magnitude that matter. I have a few specific examples.
I’ve talked about how it’s scary that Facebook CEO Mark Zuckerberg has made positive comments about the universal basic income, a socialist program designed around making sure that everyone has their basic needs met through a universal government subsidy. My commentary on the subject is that Zuckerberg would like business to continue as usual, and if he has a huge population with their basic needs met there won’t be much in the way of disruption of his business even if there are no jobs for them.
More recently Elon Musk got together with state governors and started talking about artificial intelligence and the need for increased legislation. Chances are if you are reading my works or listening to my podcast, then you are the kind of person who knows who Elon Musk is. If not, he’s seen as a profit of tech. This is the guy who went from creating paypal to Space X and Tesla. He knows technology disruption and he knows how to make it happen. He may be one of the greatest tech visionaries of all time but the jury doesn’t make it’s conclusion until much later in his career. The point is that he’s also, not surprisingly for a serial entrepreneur, known as a bit of a right winger when it comes to government. Yet, he’s out telling some of the highest level elected officials that they need to get in front of automation with their legislation because it’s such a risk to all of humanity. He’s not the only one who thinks that artificial intelligence will fundamentally change the world, the people at PARC, agree with him.
What makes both of these concerning is that they are suggesting very broad and deep solutions to what they perceive as a massive fundamental problem with the world of tomorrow. These are not little guys who think small. The solutions they espousing are not minor tweaks nor are they short-term solutions. In fact, things like legislation or entitlements are the kinds of things that when implemented never go away.
I have three examples of where technology will disrupt in the near future. Two of the examples have to do with Robots. I’m not talking about the cool humanoid robots that we all see in sci-fi films. It’s practical robots which do exactly what robots have always done. They automate the tasks that humans find menial or unpleasant. One good example is robotic food delivery. I delivered Pizza when I was young and then when I was a bit older and needed some extra cash. Dave Ramsey is always talking about delivering pizza as a way to get out of debt. I think that it’s obvious that we are a few short years away from that option being taken off the table for the youth or unskilled worker.
Robotics are also moving up the labor market. You can see this with robots that do 3D printing. What started as students building chess pieces that looked like star wars characters is now turning into automation and AI that can create fully livable homes. So 3D printing is awesome, right? That means lots of really inexpensive and highly customized houses. It’ll take a generation or two, but I suspect the replacement for the mobile home industry is here, and eventually even scale to homes upmarket. Is this a big deal? Well labor for building a home averages between 66 and 80% of costs with materials at 33 up to 66% of some home building jobs. These numbers are based upon a quick look at some forum discussions about pricing construction jobs. Labor, like you see in trucking, is most of the cost. Lower labor costs equal lower prices, which should mean lower housing costs and better housing, but it also means less construction jobs and the ones that do remain require a higher technical competency level.
Let’s make automation personal. I have an 8 year old son who fell behind in his reading. This wasn’t because of some innate inability to decode letters into words. It had to do with a personality that was more interested in the squirrel (both literal and abstract) outside the school window than what the teacher was saying to the class at large. All my son needed was a significant dash of one on one time, simply because he needs someone to drag him back to something that engages him. We had a family friend, who is a trained educator, tutor him one on one. She’s close enough to him to read his emotions, modify her interactions with him and ultimately deal with his discipline issues. Today we have smart learning systems that modify their pace of the exercises to align with the pace of the students abilities to learn. Now, imagine a system that can also read his emotional state and engage with him based upon his moment to moment distractions. When the computer reads his face and he starts getting distracted, it’s easy to see where a game would pop up on the screen to re-engage him in the exercise. No human teacher needed, at least not one on one. In this case we are well into the world of the professional.
There are many other huge areas of automation with disruption and job loss that we can discuss including the economic atomic bomb of medical disruption (which could be a series of articles unto themselves) but they are a bit further off. These examples are further to the right on the hype cycle. I’m just not sure of their exact placement but I think they are closer to the slope of enlightenment than the trough of disillusionment. I could go on and on with examples. That’s part of what’s so scary about all of this, both the short and longer term disruptions by automation are seemly endless. What does this mean? It means automation everywhere and in everything that’s related to work. That’s probably why the tech leaders of today are arguing for somewhat permanent solutions for the huge problems of tomorrow. The automation that tech is generating will continue to create a long tail, some say never ending, of challenges for the workforce.
My writing generally focuses on the professional class, not the “They took ‘er jobs” crowd that’d populates food delivery and general construction labor positions. The challenge is a one two punch. The less the working class crowd is employed, the less professionals are needed to support their efforts. There will be less HR, less insurance people, less operations managers, etc. Additional professional job shrinkage will come from the growth of artificial intelligence and algorithmic management. Again, my conclusions are not just my own thoughts and observations. The conversation about this problem is happening among world leaders and multi-national CEO’s of traditional non tech businesses. Yes, there will be jobs created to facilitate automation, but they require tremendous retraining and won’t be at the volume to make up for the losses.
Let’s put understandable numbers on this. I can think of several small advanced manufacturing companies that have three HR reps to manage the plant of 150 workers. Assuming their business doesn’t grow and they adopt automation they may only need 100 workers for the same productivity after the robots are installed. Now we are down to a need of two HR managers. Add in AI based HR interactions through some sort of multi-linguistic cloud portal, and now the plant only needs one HR manager and they can pay them less because the computer does everything. Even if the plant hires someone to manage the automation systems, the net result is still at least one professional class job loss. I think this will be more of a typical scenario than it is a prediction of ultimate economic collapse for the professional class.
I don’t think automation will destroy the world nor will it create the nirvana of a world where everyone has everything they need and can indulge in pursuits driven by their passions. I do agree with the great business minds of our time that automation and artificial intelligence is coming in ways that will have much greater impact than it has in the past. I also think that this means that our new normal continues. There is no great increase in the fortunes of the american worker on the horizon and the squeeze on the professional class will get tighter. It doesn’t matter who you elect to what office. Basic economics is immutable. Trends are trends because they don’t change on a dime. Both tech disruption and the economics behind it are reinforcing the these trends.
What does this mean for Professionals, especially the working professional individual contributor? It’s simply one more thing we have to plan for. If you are in human resources, maybe look at companies that are at the forefront of human resource automation. If you are in engineering, learn the more advanced and growing automation tools for design: i’m looking at you Hololens. There is an old comment I remember from when Dan Marino was quarterback of the Miami Dolphins which is the last time I cared about sports. I remember some pundit critiquing Marino saying offense puts points on the board but defense wins games. Career planning is the same. History has shown that when automation happens not only are jobs lost but overall wages get lowered. The only people who can keep their wages at a certain level or above are the ones prepared for the automation assault. Automation will make wages go down, but if your the person enabling or facilitating automation, your wages may not go down, or maybe even go up a little. When you factor in inflation, then you will hopefully hit equilibrium. In today’s market staying where you are at is winning. I think it’s important to win this one the first time you play because this is one computer game that doesn’t have a restart option.
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-Mike.
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