The WelderDestiny Compass

Limit Of Automation - Issue #065

Wednesday, April 25, 2018 / Perth Australia / By Niekie Jooste

In this edition of "The WelderDestiny Compass":

• Robot Productivity Mystery 
• Economic Money Flows
• People Don't Disappear
• Way Forward
  

Robot Productivity Mystery

A recent article on the Bloomberg website references the work of a Swedish researcher into robot productivity. He found that the number of robots in the USA has kept increasing at a health pace, but labour productivity has been largely stagnant, or even declining, since 1995.

If you are interested, you can read that story on the Bloomberg website by following this link...

Given that robots are generally introduced because they are considered to be cost competitive, when compared to human labour, this result seems counter intuitive.

Seeing as our beat here at The WelderDestiny Compass is to try to unravel how the world of jobs will be impacted by increasing automation, this result gives us pause for thought. Surely, if we can get to the bottom of what is going on here, we could get another piece of the puzzle to help us predict how the future of jobs will unfold.

Today we try to make sense of these robot productivity findings, and try to piece it into our economic model that we have developed so far.

If you would like to add your ideas to this week’s discussion, then please send me an e-mail with your ideas, (Send your e-mails to: compass@welderdestiny.com) or complete the comment form on the page below.

Now let's get stuck into this week’s topics...

Economic Money Flows

We have covered economic fundaments within many of our e-zine issues. In issue 5 we looked at money flows within economies. I believe that if we look at money flows, we may be getting the picture of what is going on here. Click here to read that discussion again...  

Within the context of money flows and where money eventually ends up, we can see that by replacing humans with robots, less money is paid into the labour market by these businesses. This means that less money is "recycled" back into the bottom of the economic pyramid.

Another issue that needs to be kept in mind is that while labour costs may be saved by the business using robots, the initial cost of robots lead to capital costs. In other words, it adds debt to the economy, because most capital investment in business starts off as debt. Debt needs to be serviced with interest payments, so it adds a drag on efficiency measures.

The companies that introduce robots may be optimising their businesses, but from a broader economic perspective this is a "sub optimisation". The people are not "replaced" within the economy by robots. Instead, the labourers are just "displaced".

So, let us think about the displaced workers.

People Don't Disappear

So far, most robots have been used in factory type production environments. This is typified by the automobile assembly lines. We know that all the major automobile assembly lines are heavily automated by the use of robots. In fact, those plants that have not automated, have been doomed to closure. They could not compete.

The problem is that the people replaced by robots still need to have an income. If they do not have an income, they cannot be economically active, so they cannot spend money into an economy to purchase those widgets made by the robots.

So, where do they go? Many of the displaced factory workers end up in lower paying services jobs, or enter part time jobs. The nett effect is that their purchasing power goes down.

While the factories may be able to produce cheaper products, they will only be able to experience this as increased profits if the market can maintain the same buying power. If it is true that much of their customers' purchasing power is reduced by the automation, then they have not made much progress.

Another issue to keep in mind is that if people are not employed 100% of their time, then they have more time to do their own work rather than paying somebody else to do it. If I have only 3 days a week of employment, then I am probably going to cancel my garden service and just do my own gardening.

Given that the internet has the information to help me perform just about any activity, there is not much that I am reliant on from outside service providers.

Another way of saying this is that most measures of labour productivity depends as much on consumer side behaviour, as they depend on supply side behaviour.

Way Forward

In issues 4 and 5 of The WelderDestiny Compass, we tried to decide if the future of mankind was an economy that would be utopian or dystopian. In issue 6 we concluded that it would be neither. We concluded that it would be nichetopian.

I believe that the results of this labour productivity study is a confirmation of the conclusion regarding the nichetopian future of jobs. Because companies will always try to optimise their costs while minimising their risks, the present move towards outsourcing of labour and services will continue. The "displaced" labour will have no option but to establish themselves as the suppliers of that labour and services.

The upside is that the reduction of the cost of artificial intelligence, (AI) and the enabling infrastructure being created by distributed ledger technology, (blockchain) will result in solopreneurs that will boost their own productivity through the use of AI and decentralized data sharing platforms.

This is a tad scary, because it means that nobody will be able to stop improving themselves and their understanding of new technologies and systems. Whoever remains in the same place, will be roadkill on the highway of technological progress.

What excites me is that the technologies and systems that could actually free us from a dystopian future is being developed around us as we speak. All that remains is for us to embrace them...

Yours in welding

Niekie Jooste

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