My friend Ted Bauer recently blogged about this CEOs are “unaware” their employees are often struggling. WTF? How?
The video he included, of Democrat Katie Porter asking JP Morgan’s Jamie Dimon how someone living modestly with an entry level job at his financial empire should survive, is fantastic. Going through the employee’s budget line by line we see she’s at a ~$500/month deficit. Asked about some specific items or for general advice Mr. Dimon seems to be baffled, and needs to think about it and research it more. Not really reassuring for shareholders if the assumption is he’s being honest and not just deflecting.
The assumption after seeing this is, Jamie Dimon is guilty, and CEOs aren’t aware of their own employees, or more likely don’t care, and they should reform or be controlled through wage controls. That does sound nice, to insure that people are paid just a tiny bit more so they’re not making horrible decisions and sunk into poverty. Ah, but alas, that’s not where this will go. If you think government can force everyone to be nice and share their toys I think you may have been napping in a cave for the last several decades, or you’ve been spending your free time watching The Super Bowl and Game of Thrones and not keeping up with current events, economics, history, technology and globalization. Why do I say that?
Human Life is Cheap
My father-in-law once told me “In Asia, human life is cheap.” Aside from the fact that it’s a fact, he’s also Asian and lives in Asia, so let’s not think this is offensive somehow, aside from the reality of it. Thanks to globalization and technology inexpensive humans, not just from Asia, are available to all. Call centers are routinely overseas. There are businesses in Romania where people play video games all day to sell the virtual gold for real money. There are companies in India that will intercept “Are you a robot?” captcha questions and solve them so scripts you run won’t be interrupted. Replacing everyone at a bank office with machines and remote workers would probably not be a great deal of work. We’ll even set up tablets so you can look people in the eye while you’re handling your banking with them, I’m sure vendors are already promising. Why isn’t this being done already? It likely is being done here and there in pieces, but there’s a point at which humans are cheaper than machines. Push that line of how much humans are compensated too far and that won’t be an issue anymore. Remember people protesting about McDonald’s employees not being paid enough? Shortly after that we saw most cashiers disappear and huge touchscreens, reportedly peppered with feces, appear. Which brings us to…
Apps, AI & Robots, Oh My!
I used to go to the bank at least once a week, if not more. I had to deposit checks, move money around and wire money, as I ran a business and tried to keep my personal account from going negative. I think I’ve been inside the bank once in the past year, when I had a check that was too large to deposit through the app I use now for everything. The days of local bank branches every quarter of a mile or so throughout the suburbs are probably a thing of the past already. Aside from serving as ads for the banks, and maybe locations for workers, there’s not a big retail banking purpose to their existence.
Many scoff at AI, thinking it will never be able to replace people in their jobs – it doesn’t work so well, what would be the point, etc. AI, which in this context I’m using for computer systems that don’t manipulate physical objects, but run largely on their own, is already in use writing sports articles and annual reports, doing legal due diligence, doing compensation analysis, bookkeeping, and many other things. AI plus robotics is where things get really interesting, though.
Even more amazing to me are people who talk about when robots will replace workers, or how they won’t be able to, etc. That day has already come and gone, my friend. And the list of jobs that will go away is growing by the day.
I’ll go through the seemingly endless list of robots that are being developed to insure we don’t have to be burdened with boring, repetitive, straining work anymore (or compensation for that matter), but first, listen to this. You’ve surely heard that Amazon is experimenting with drones to deliver, but up to this point you might have imagined their warehouses to be few and far between and filled with employees pushing carts down aisles, filling them from print outs they carry on clip boards. Oh, that would be quite incorrect. First off, Amazon has so many warehouses of various types in so many cities that they don’t bother to name them in any sort of conventional fashion. The building names are like license plates or social security numbers. There are buildings for same day delivery, that seem like the human and cart style I described. There are large item (canoe, big screen TV, etc) warehouses where there are people controlling machines to move items. There are buildings that are walk in refrigerators and freezers. Then there are the buildings where most of what we all order from Amazon all the time come from. The warehouse in question in my metro area, Dallas, is in an industrial park in Coppell, and it’s the largest building I’ve ever seen in my life. It’s a bit over a million square feet, nondescript and windowless. Inside you’ll find 4,000 employees at work at any time (it operates around the clock), 4 miles of conveyor belts, and….40,000 robots. When I heard that number my jaw dropped. I assumed there would be some, but that’s a tremendous number. And are they worth it?
The Amazon warehouse hiring process is about as easy as it gets, and with little hassle you can be working at least 40 hours a week. The compensation isn’t fantastic, but relative to the friction of getting the job, the qualifications, etc, I think it’s a pretty good situation. If you need a job now, want some upward mobility, and want some degree of control over what shifts you’ll work, it seems like a good option. With that endorsement in mind, though, back to the robots. The robots are cheaper than people? People paid ~$15/hr? Maybe, maybe not. They certainly speed things up and reduce error, breakage and injury. They reduce risks that could come from not finding enough human workers, for whatever reason. I’m fairly certain there is a team at Amazon that monitors everything going on in warehouses and figures out more things robots could do to increase that ratio of robot to human.
Amazon is hardly alone, and certainly not unique in seeming to want to replace low paying jobs with robots. Self driving cars and trucks will likely replace truck drivers and likely cab/uber drivers within 10 years, if not sooner. Amazon is again not alone in trying to replace delivery drivers with drones or wheel based robots. Starship Technologies plans on deploying thousands of delivery robots to college campuses after raising $40 million. So much for getting a job delivering pizzas to make a little extra. I have seen articles on robots that can fold clothes, make coffee and pizza, do farm work, replace police officers stopping speeders and issue tickets, vacuum and mop floors, clean gutters, replace manufacturing jobs, etc.
Trickle Down Employment
Ah, but the dawn of our technological Utopia will free people from drudgery and allow people to program and service robots instead of flipping burgers or driving trucks. I’ve actually heard people say this. Assuming that no one will make robots that program and service robots, which seems like a ludicrous assumption, and assuming robots wouldn’t just be discarded, the way TVs and cars and so many other devices full of complex electronics seem to be now when they don’t work properly, is it at all reasonable to expect people to get the education and experience necessary to do this highly complex work – en masse? That seems beyond naive. It’s like a Mad Libs version of trickle down economics, but replacing employment for income. What is far more likely is there will be fewer and fewer jobs. The jobs that will exist will be for the very wealthy and connected who run companies, the very well educated and experienced needed to keep them running, or jobs machines can’t do or that aren’t worth doing. Bleak? Yes. This isn’t meant as a big PR piece for Andrew Yang and Universal Basic Income (UBI), but if you’ve ever read The Expanse series of books I think you probably have a fairly accurate view of what life will be like for the masses living on Basic. Here’s an interesting blog post on The Expanse and UBI. The same dystopian future has been imagined in other forms in many other works of fiction.
The bottom line is, it’s likely that the current system, where people live off of earnings from their labor, will, of necessity, change. Assumptions that CEOs will shift their focus from increasing shareholder value to the well being of the least of their employees are naive. And efforts to force businesses to take better care of their employees will result in jobs disappearing, as the cost of local humans end up being greater than the cost of machines or offshore resources. This isn’t a justification for UBI. It’s not a call for a socialist government. It’s not a warning sign for people everywhere to skill up or be pushed aside. It’s a series of observations that seem fairly obvious, with a future that seems inevitable.