Why the surreptitious rise of automation and robotics may be the end of work (as we know it)
Humans have an odd fascination with imagining dystopian futures in which runaway technological progress, once our saving grace, inevitably becomes our downfall. Look no further than the success of recent TV shows like “Westworld” and “Black Mirror” for evidence that something in us is drawn to the man-vs.-machine archetype. This phenomenon has even hit the news cycle in recent years, as sensationalized headlines promise a world in which advanced automation and robotics completely eliminate the need for both skilled and unskilled human labor. Even the late physicist Stephen Hawking — a man whose theories are foundational to modern physics and helped predict the existence of black holes — gave a dire warning before his death that artificial intelligence could replace humans altogether. Hawking helped predict one kind of singularity; could he be right about another?
While an impending robot apocalypse makes for great headlines, we here at Silicon Valley Bank have an inside look at the companies, entrepreneurs and investors that are driving these transformational technologies forward, and we think our future is brighter than the headlines would have you believe.
History repeats, and so does hysteria
Discourse around the societal consequences of innovation is not a new phenomenon; killer robots are just a recent iteration of an age-old notion. In fact, the debate around technological unemployment dates back to the time of Aristotle, and evidence suggests that its effects can be seen at least as far back as the invention of the wheel circa 3,500 B.C. And yet despite centuries of quibbling about the societal destruction caused by highly disruptive technologies — such as the wheelbarrow, the pointy stick and fire — today most of us still have jobs that give us purpose and meaning, albeit in safer environments and with more-rewarding outcomes than occupations of generations past.
Despite recurring fears surrounding automation and technology, the evidence consistently shows that long-term structural unemployment due to the introduction of new technology is offset by various “compensation effects” — in other words, the creation of previously unforeseen industries and jobs as a result of new technology. But that’s not all: As new technology increases overall productivity, it broadly reduces economic costs across the board and increases our standard of living.
For a bit more evidence, take a look at the above graph showing labor productivity as measured by real output per hour. Although it’s true that the labor productivity growth rate has been sluggish in recent years, productivity itself has still been steadily increasing over the past 60 years and beyond due almost exclusively to technological progress. If technology eliminates jobs, we would expect to see a consistent increase in unemployment over this same time period, as ever more efficient machines render us humans increasingly useless. But, alas, this is not the case.
Instead, the natural rate of unemployment arising from all sources except fluctuations in aggregate demand has seen steep declines, particularly in the dot-com era, and currently rests at its lowest point on record. In other words, this unemployment is strictly a result of supply side factors only, not monetary or fiscal policy. Sorry, quantitative easing isn’t the culprit here!
Will automation and robotics really be a catalyst for pervasive job loss, or will it rev up sluggish labor productivity growth, creating new and unforeseen opportunities? The fervent vision of killer robots supplanting humankind may be just that — a vision, albeit one that continues to fade as our future takes shape.
But this time is different … right?
Let there be no doubt: We are on the brink of a historic technological shift, with some of the greatest economic and societal impacts yet to be seen. According to a widely cited McKinsey report, as many as 800 million jobs worldwide could be automated to some degree by 2030. Further research from an Oxford University study indicates that nearly 47 percent of jobs in the U.S. are “at risk” of being automated in the next 20 years.
So we’re all doomed, right? Not so fast. Even the oft-cited McKinsey and Oxford studies that sparked global debate also noted that automation and robotics are not going to replace jobs per se but rather tasks. Furthermore, the Oxford study assessed only the capabilities of automation, ignoring the compensation effects of this new technology and saying nothing about the actual extent or pace of automation or the overall effect on employment. No wonder this fact doesn’t make headlines; it doesn’t induce as much outrage and fear.
Add to that the fact that robots and automation are fundamentally misunderstood, and the picture shifts even more. Contrary to popular belief, automation and robotics are not designed to replace you. In fact, robots are specifically designed to work with and for humans — that’s why we build them! My colleague and fellow tech banker, Austin Badger wrote an excellent piece on the expanding trend of “co-bots,” or collaborative robotics, highlighting the fact that the most innovative robotics companies are building robots designed to work with humans, not in place of them. It’s no accident that Amazon, well-known for its wide use of robotics and automation, also employs more than a half million people — that’s more than Microsoft, Google, Apple, Intel, Cisco, Tencent, Alibaba and Facebook combined!
Also, automation and robotics are not even capable of replacing you. Many cross-functional tasks are still far out of reach of automation’s capabilities — and they will be out of reach for the foreseeable future. It is true that the developments in automation and robotics we are seeing today are focused on increasing process efficiency and reducing manufacturing costs, but as a result they will also enable us to do more of what we humans have a competitive advantage in: empathy, communication and creativity.
Some say this automation and robotics revolution is different because of the staggering pace of change. But while the pace of change is quick, it’s still not as rapid as we have seen in the past. Take a look at these photos of Manhattan’s Fifth Avenue, taken only 13 years apart.
While one of them has only a single car, the other has only a single horse. We’ve seen transformational technology take hold at breakneck speed before, yet we still seem to forget that we’ve adapted just as quickly as we’ve adopted.
Automation and robotics are here, and it’s awesome
Proponents of the “robo-pocalypse” often like to quote the headline-grabbing statistics mentioned earlier, but they often fail to realize that while the technology is continuously improving and inevitably changing the way we work, automation and robotics are already here — and it’s not as scary as you might think. In fact, it’s downright awesome.
Picture, for a moment, the local trash collector who picks up your garbage: Long gone are the days when he actually picks up garbage. Why would he? Instead, a robotic arm on the truck does the task for him, making his job far easier, safer and more efficient. And this is all occurring while your dishwasher is running, along with your coffeemaker and Roomba — all of which are forms of automation that you’re not only not scared of but which you thoroughly enjoy because they make your daily life better. This is a simple example, but it highlights a very important point: Automation and robotics are all around us today — in the factory and the warehouse, the office and the home; we just don’t seem to notice anymore.
In some sectors, robotics and automation are becoming absolutely necessary. At SVB, we even see cases where companies simply cannot find enough people to fill a certain job, thus creating market demand for a technical solution. Agriculture, where farmers struggle to find enough human labor, is a perfect example. In this case, automation is not “stealing” jobs; it’s filling a gap in the labor market, and it’s been doing so for decades, with very few American citizens up in arms about the loss of jobs picking strawberries.
In fact, this phenomenon is not limited to agriculture. When you look at the innovation that’s occurring in Silicon Valley today, entrepreneurs are just doing what they have always done: identifying a problem or pain point and designing a solution to take to market. Robotics companies Creator and Bossa Nova are perfect examples of this. In both cases, they’re improving pain points in the production process that the market didn’t even fully appreciate until they developed a solution. Today, they’re building robotics and automation technology that drastically reduces costs and gives us humans the ability to focus on what we do best.
That’s right: Robots aren’t here to steal your job; they’re here to make your job more interesting and to give you more time to focus on higher-value work that requires empathy, emotion and creativity — the very qualities that make us human. So, yes, robotics and automation may mean the end of work as we know it, but that’s a future I think we can all look forward to.