Investment Opportunities

Should Automation Be Feared?

Does automation put people out of work?

Economists, politicians and union leaders have been asking this question for as long as I can remember. And it’s a legitimate concern.

Consider driverless vehicles.

In the last 16 years, since the first DARPA Grand Challenge was held in the Mojave Desert, the race to develop a fully autonomous vehicle has been on.

More than two dozen companies are working on it. The current leader is Alphabet’s Waymo, whose fleet of 600 vehicles has logged in more than 20 million miles. (Waymo stands for “a new way forward in mobility.”) And although we are not there yet, industry experts suggest that the first commercial autonomous vehicle will make its appearance in the next several years.

Considering the advantages (safer, cheaper to operate, etc.), it seems inevitable that driverless cars will replace conventional cars just as conventional cars replaced the horse and buggy.

How will that affect the workforce?
[mw-adbox]

In Ride-Sharing

I’m sure that Uber’s smartest executives are already doing the math on how much money they would save by replacing their 750,000 drivers with driverless vehicles. Add to those the drivers for Lyft, etc., and you’ve got about 1.5 million people out of work.

In Trucking

There are an estimated 1.2 million trucking companies in the U.S. When the trucking industry goes driverless, at least another 3.5 million Americans will be unemployed.

In the Bus Business

There are half a million school buses on the road and another 600,000 commercial buses, which means that 2 million or 3 million bus drivers could lose their jobs.

And that’s not to mention the millions of UPS, FedEx and other delivery service workers who will become obsolete when we have driverless vehicles and automated drop-off facilities.

What will all those people do?

Some Historical Perspective

The average American is not enthusiastic about the increased use of automation by just about every industry you can name. Many fear that it will lead to widespread unemployment and even greater economic inequality.

I have that fear myself. But the facts don’t support it.

When, for example, ATMs were introduced in the mid-1970s, it was thought that the jobs of tens of thousands of bank tellers were on the line.

That wasn’t the case. Since then, in fact, the number of bank tellers in the U.S. has doubled, from about 125,000 to 250,000.

The reason?

The hyperefficiency of the ATMs gave banks more operating profits. And those profits were invested in opening new branches.

Thus, although the number of tellers at each bank did go down by a third, the number of branches increased by almost half.

It gets better.

Because the ATMs handle a majority of routine banking functions, tellers are freed up to do more challenging – and higher-paying – work (such as customer service and loan processing). And that means they make more money.

This is not to say that some jobs aren’t lost through automation.

From 1850 to 1970, the U.S. agricultural sector shrank from 60% of the general workforce to 5%. Today, it’s 1%!

Manufacturing jobs, too, have been on the decline. Partly because some operations were moved overseas, but even more so through automation. In 1960, manufacturing workers represented 26% of the labor force. Today, that number is barely 9%.

But here’s the thing: Except for the Great Depression and the Great Recession, U.S. employment opportunities, in general, did not shrink. On the contrary, they expanded.

One example: In 2012, after putting robots to work in its warehouses, Amazon was accused of being “determined to profit by creating a future where automation replaces good jobs.” But within a year, instead of having fewer employees, Amazon had added nearly 30,000.

Out With the Old…

When I was starting out in business in the late 1970s, every executive I knew had a secretary.

Being a secretary was a decent job for a smart person with a high school education and good typing skills. You could make $14,000 a year with benefits. But it was also mind-numbing. All you did was type, file, answer the phone and book appointments.

Today, thanks in large part to computers and changes in the way businesses are run, secretarial jobs have pretty much disappeared. (My primary client has more than 1,000 employees, and I don’t think there’s a single secretary among them.)

So what are all the people who once might have been secretaries doing? They are event planners, graphic artists, paralegals, personal assistants and freelancers in dozens of fields – jobs that didn’t exist 50 years ago.

In much the same way, that’s what automation is all about.

Yes, automation replaces human labor. But countless studies, both in the U.S. and in Europe, have found that innovations in technology, particularly in automation, have actually created more jobs.

What’s happening, I think, is this: By lowering the cost of the dullest and most tedious forms of human labor, automation generally increases profitability. A general increase in profitability stimulates economic growth. And when the economy grows, new jobs are created in every industry… jobs that are more demanding, more interesting and more financially rewarding than the ones that were lost.


About

Mark Morgan Ford is a lifelong practitioner of writing, teaching, entrepreneurship, martial arts and philanthropy. He has written more than two dozen books on business, entrepreneurship and wealth building (several of which were New York Times and Wall Street Journal bestsellers). As an entrepreneur, he has been involved in dozens of multimillion-dollar businesses, including one whose revenues exceeded $100 million and another that broke the billion-dollar mark. And as a real estate investor, he has been involved in more than a hundred projects and developments, from single-family homes to apartment buildings, office buildings and resort communities. He shares the lessons learned from his decades as an entrepreneur and investor with readers of Manward Digest.

Articles by
Related Articles