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May I Take Your Order? May 15, 2017 4:00 PM | Tagged as robotics

WSJ 15 May 2017, “Robots Will Save the Economy” by Bret Swanson and Michael Mandel

The Biz Bucks Guy has always promoted innovation at the expense of protecting of jobs. A vibrant economy will both create and destroy jobs. During the last presidential election, the Obama administration announced a 300,000 job increase one month. That was great. But what most did not understand, the net increase was based on 5.3 million gross increase, netted against a 5.0 million gross decrease. This is typical of any US economy. Capitalism was nicknamed by the late Professor Joseph Shumpter of Harvard “creative destruction.” We should realize every month some new jobs, divisions, companies, products, and services are created and some old ones destroyed. Good liberals want to make sure no one loses their job. That is nice to protect people. But it is unrealistic. Good conservatives want to have freedom. With freedom comes movement in the economy.

In the referenced article, Swanson and Mandel, each from opposite sides of the political spectrum, note that technology advances actually grow the total job market and with higher paying positions. Some people don’t get that, like Bill Gates who argued recently to tax robots because they will destroy jobs. He needs to return and finish his degree at Harvard, and emphasize economics.

Centuries ago in Leicester, England, there was this (most likely apocryphal) bloke named Ned Ludd. As the story goes, Ludd led a group to destroy weaving machines that were putting local weavers out of business. To this day, a Luddite is one who fights against technological advancement. Today some are saying robots and other technology will destroy jobs or at least reduce productivity.

Swanson and Mandel write, “There’s reason to reject both of these dystopian scenarios. Innovation isn’t a zero-sum game. The problem for most workers isn’t too much technology but too little. What America needs is more computers, mobile broadband, cloud services, software tools, sensor networks, 3-D printing, augmented reality, artificial intelligence and, yes, robots.”

They note in their forthcoming book that for digital industries productivity grew 2.7% over the past 15 years. For physical industries, it grew a paltry 0.7%. Furthermore, since the last business cycle peak in December 2007, job growth in digital grew 9.6%, compared to only 5.6% on the physical side. Subtracting healthcare, the growth in physical was only 3%.

Part of the reason is the physical industries don’t add IT investments as much as digital. This is partly due to heavy government regulations. However, when an industry automates, good things usually happen. Take the shale oil and gas boom. This was largely brought on by 3-D modeling of underground formations which enables fracking to be in the right places.

Consider E-commerce in retail and distribution. Jobs have increased by 397,000 since the end of 2007. The bricks and mortar stores have lost only 76,000. That’s another amazing net of 300,000 up.

Even in trucking, robo-drivers which is on the horizon will cause drivers to lose their jobs. But the trucks will run 24-7 with no sleep. Maintenance will increase. Truck maintenance jobs pay substantially better than drivers.

It’s time to drop our Luddite tendencies and embrace the technological future. 

[Although opinion is included, The Biz Bucks Blog is primarily written to former students of Biz Bucks training courses to encourage their daily reading of the three opinion pages of the WSJ. This refreshes principles of Biz Bucks courses and improves business acumen on topics not discussed in Biz Bucks training.]

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