Posts tagged ‘robots’
The Fallacy Behind Populism and Automation Fears
The rise of global populism and anti-immigration sentiments, coupled with the perpetual rising trend of automation and robotics has stoked the fear fires of job security. Many stories perpetuate erroneous stereotypes and falsehoods. The news reports and blog articles come in various flavors, but in a nutshell the stories state the U.S. is hemorrhaging jobs due to the thieves of illegal immigration and heartless robotics. The job displacement theory is built upon the idea that these two sources of labor (immigrants & robots) are cheaper and more productive than traditional blue collar and white collar American workers.
Although these logical beliefs make for great soundbites, and may sell subscriptions and advertising, unfortunately the substance behind the assertions holds little water. Let’s take a look at the facts. In the most recent April jobs report, nonfarm payrolls employment increased by 211,000 jobs, according to the U.S. Bureau of Labor Statistics. Since early 2009 the unemployment rate has plummeted from 10.0% down to a historically low level of 4.4%. Over the similar timeframe, the economy has added over 15,000,000 new jobs. Does this sound like an environment in which immigrants and robots are killing all American jobs?
Sounds like a bunch of phoney-baloney, if you ask me. Just look at the employed person chart below, which shows a rising employment trend over the last seven decades, with the exception of some brief recessionary periods.
As I point out in a previous article (see Rise of the Robots), from the beginning of the United States, the share of the largest segment of the economy (agriculture) dropped by more than 98%, yet the standard of living and output in the agriculture sector have still exploded. There may not have been robots two and a half centuries ago, but technology and automation were alive and well, just as they are today. Although there were no self-driving cars, no internet, no biotech drugs, and no mobile phones, there were technological advances like the cotton gin, plow, scythe, chemical fertilizers, tractors, combine harvesters, and genetically engineered seeds over time.
Source: Carpe Diem
And while there most certainly were farmers who regrettably were displaced by these technologies, there were massive new industries fostered by the industrial revolution, which redeployed labor to new burgeoning industries like manufacturing, aerospace, transportation, semiconductors, medicine, and many more.
While it may be difficult to fathom what industries will replace the workers displaced by self-service kiosks at restaurants, airports, and retail stores, famed economist Milton Friedman summed it up best when he stated:
“Human wants & needs are infinite, and so there will always be new industries, there will always be new professions.”
As globalization and technology continue permeating through society, it is true, the importance of education becomes more critical. Billions of people around the globe in developing markets, along with automation technology, will be stealing lower-paying American jobs that require repetitive processes. Educating our workforce up the value-add food chain is imperative.
The bottom-line is that integration of technology and automation will improve the standard of living for the masses. Sure, immigration will displace some workers, but if legislative policy can be designed to cherry-pick (attract) the cream of the skilled foreign crop (and retrain displaced workers), skilled immigrants will keep on innovating and creating higher valued jobs. Just consider a recent study that shows 51% of U.S. billion-dollar startups were founded by immigrants.
The populist drum may continue to pound against immigration, and horror stories of job-stealing robots may abound, however the truth cannot be erased. Over the long-run, the fallacies behind populism and automation will be uncovered. The benefits and truths surrounding highly skilled immigrants and robots will be realized, as these dynamics dramatically improve the standard of living and productivity of our great economy.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct position in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.
2012 Investing Caffeine Greatest Hits
Source: Photobucket
Between Felix Baumgartner flying through space at the speed of sound and the masses flapping their arms Gangnam style, we all still managed to survive the Mayan apocalyptic end to the world. Investing Caffeine also survived and managed to grow it’s viewership by about +50% from last year.
Thank you to all the readers who inspire me to spew out my random but impassioned thoughts on a somewhat regular basis. Investing Caffeine and Sidoxia Capital Management wish you a healthy, happy, and prosperous New Year in 2013!
Here are some of the most popular Investing Caffeine postings over the year:
Explaining how billions of dollars in stock selling can lead to doubling in stock prices.
2) Uncertainty: Love It or Hate It?
Source: Photobucket
Good investors love ambiguity.
3) USA Inc.: Buy, Hold or Sell?
What would you do if our country was a stock?
4) Fiscal Cliff: Will a 1937 Repeat = 2013 Dead Meat?
Source: StockCharts.com
Determining whether history will repeat itself after the presidential elections.
5) Robotic Chain Saw Replaces Paul Bunyan
How robots are changing the face of the global job market.
6) Floating Hedge Fund on Ice Thawing Out
Lessons learned from Iceland four years after Lehman Brothers.
7) Sidoxia’s Investor Hall of Fame
Continue reading at IC & perhaps you too can become a member?!
8) Broken Record Repeats Itself
It appears that the cycle from previous years is happening again.
9) The European Dog Ate My Homework
Explaining the tight correlation of European & U.S. markets, and what to do about it.
10) Cash Security Blanket Turns into Tourniquet
Stock market returns are beginning to make change perceptions about holding cash.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), but at the time of publishing SCM had no direct positions in any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
Robotic Chain Saw Replaces Paul Bunyan
The world is rapidly changing and so is the profile of jobs. Technology is advancing at an accelerating pace, and this is having enormous impacts on the look, feel, and shape of global workforce dynamics. If lumberjack Paul Bunyan and his blue ox Babe were alive today, the giant would not be chopping down trees with a plain old steel axe, but more likely Mr. Bunyan would be using a 20 inch, 8 horse-power chain saw with side-mounted tensioner purchased from ChainSawsDirect.com.
But productivity in logging is not the only industry in which output has dramatically increased over the last generation. A recent New York Times article published by John Markoff explores how robots and automation are displacing humans across many different companies and industries around the world.
In China, manufacturers have exploited the value of cheap labor in the name of low-priced exports, but with millions of workers now moving to job-filled cities, workers are now demanding higher wages and better working conditions. Besides rising wages, higher transportation costs have eaten away labor expense advantages too. One way of getting around the issues of labor costs, labor relations, and transportations costs is to integrate robots into your workplace. A robot won’t ask for a raise; it always shows up on time; you don’t have to pay for its healthcare; it can work 24/7/365 days per year; it doesn’t belong to a union; dependable quality consistency is a given; it produces products near your customers; and it won’t sue you for discrimination or sexual harassment. The initial costs of a robot may be costlier than hiring a human being by a factor of five times an annual salary, but that hasn’t stopped companies everywhere from integrating robots into their operations.
The Orange Box on Wheels
One incredible example of robot usage (not covered by Markoff) is epitomized through Amazon.com Inc.’s (AMZN) $750 million acquisition of Kiva Systems Inc. last year. In some cases, Kiva uses hundreds of autonomous mobile robots in a warehouse to create a freeway-like effect of ecommerce fulfillment that can increase worker productivity four-fold. Amazon is a true believer of the technology as evidenced by the use of Kiva robots in two of its major websites, shoe-retailer Zappos.com and baby-products site Diapers.com, but Kiva’s robots have also been used by other major retailers including Crate & Barrel, Staples Inc (SPLS), and Gap Inc (GPS). The orange square robots on wheels, which can cost in the range of $2 – $20 million per system, travel around a warehouse tracking the desired items and bring them back to a warehouse worker, ready to then be packed and shipped to a customer. Larger warehouses can use up to 1,000 of the Kiva robots. To see how this organized chaos works, check out the video below to see the swarm of orange machines dancing around the warehouse floor.
The Next Chapter
The auto and electronics industry have historically been the heaviest users of robots and automation, but those dynamics are changing. Healthcare, food, aviation, and other general industries are jumping on the bandwagon. And these trends are not just happening in developed markets, but rather emerging markets are leading the charge – even if penetration rates are lower there than in the richer countries. The robotic usage growth is rapid in emerging markets, but the penetration of robotic density per 10,000 workers in China, Brazil and India is less than 10% of that in Japan and Germany (< 20% penetration of the U.S.), according to IFR World Robotics. As a matter of fact, IFR is forecasting that China will be the top robot market by 2014.
What does this mean for jobs? Not great news if you are a low-skilled worker. Take Foxconn, the company that manufactures and assembles those nifty Apple iPhones (AAPL) that are selling by the millions and generating billions in profits. The harsh working conditions in these so-called massive sweatshops have resulted in suicides and high profile worker backlashes. Related to these issues, Foxconn dealt with at least 17 suicides over a five year period. What is Foxconn’s response? Well, besides attempting to respond to worker grievances, Foxconn chairman Terry Gou announced plans to produce 1 million robots in three years , which will replace about 500,000 jobs….ouch!
As the New York Times points out, the “Rise of Machines” is not about to result in Terminator-like robots taking over the world anytime soon:
“Even though blue-collar jobs will be lost, more efficient manufacturing will create skilled jobs in designing, operating and servicing the assembly lines, as well as significant numbers of other kinds of jobs in the communities where factories are.”
Many companies see this trend accelerating and are investing aggressively to profit from the robotic automation and productivity benefits. In today’s day and age, Paul Bunyan would have surely taken advantage of these trends, just as I plan to through Sidoxia Capital Management’s opportunistic investments in the robotic sector.
Wade W. Slome, CFA, CFP®
Plan. Invest. Prosper.
DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs), AMZN, and AAPL, but at the time of publishing SCM had no direct positions in Foxconn/Hon Hai, Crate & Barrel, SPLS, GPS, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.
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