The world and its ageing workforce needs Robots

OECD

An OECD report: Policy challenges for the next 50 years indicates: “Over the coming decades labor forces will age substantially.” “Population ageing will result in a decline in the potential labor force… causing a negative labor supply.” They then ominously add:

“An ageing workforce and longer working-lives will mean a longer period where depreciation of skills and technological change risk making human capital obsolete.”

Another report by Moody’s quoted in the Financial Times states:

“The world will have 13 “super-aged” societies by 2020, up from just three today, according to a report that warns of ageing populations becoming a drag on global economic growth.

Most of the countries set to join the “super-aged” club by 2020 are in Europe and include the Netherlands, France, Sweden, Portugal, Slovenia and Croatia. But by 2030 they will be joined by a more diverse group including Hong Kong, Korea, the US, the UK and New Zealand. In the meantime, more than 60 per cent of the countries rated by Moody’s will be “ageing” next year, where 7 per cent of the population is 65 or older.”

A report by CPB Netherlands Bureau for Economic Policy Analysis, Roads to Recovery posits that by 2023 the ageing population will have a negative effect on the economy:

“Potential growth of employment first of all depends on population growth, in particular, the growth of the working-age population. Due to the ageing of the population, this growth has come to a halt.”

Robotics technology has significant potential to impact on the societal challenges concerned with the ageing society. An ageing population will see declining productivity. However as reported by Morgan Stanley in their publication; The Internet of Things is Now:

Widening use of robots may be a welcome solution to one of the consequences of global ageing. Over the next 30 years, the number of people aged 20-64 years will decline in countries such as China, Japan, Germany, and Russia. By increasing the use of technology, companies can optimize productivity, thus helping to offset some of the headwinds of lower labor supply and higher wage inflation that are likely to emerge over the next 20-40 years.

Robots provide a preventative benefit to counterbalance the ageing process. The UK Government recognized the importance of robots to an ageing society in their report, RAS 2020: robotics and autonomous systems:

In the future, we will increasingly use Robots and Autonomous Systems to enhance almost every aspect of our lives. They will be part of our response to national challenges: an ageing population, safer transport, efficient healthcare, productive manufacturing, and secure energy.

Human history has always been characterized by technological advances to help society. Roboticists recognize that robots need to offer gains in productivity and support to justify an investment. The ageing society provides a strong imperative to develop robotic systems.

With an ageing population it may be plausible to think instead of robots replacing jobs; robots will actually mitigate the expected economic strains caused by the demographic changes ahead.

3 solutions to stay afloat when the robots come for your job

On the back of two major speeches and papers by leading economists 3 solutions are outlined to head off the threat of being displaced as a result of advances in robotics and automation.

Larry Summers recently wrote: “Looking to the future, my guess is that the main story connecting capital accumulation and inequality will not be Piketty’s tale of amassing fortunes. It will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead. 

One of Larry Summers Harvard colleagues, the economist Professor Richard Freeman, a leading labor economist who also directs the National Bureau of Economic Research, presented a paper in early May with the title: Who owns the robots rules the world.

Solutions:

  1. Seek opportunities where capital will also provide an income. Citing the fact that CEO’s and executives receive a large portion of payment in equity, Freeman offers the following solution: “There is only one solution to the challenge posed by computerizing skill through machines. That is for you, me, all of us to have a substantial ownership stake in the robot machines that will compete with us for our jobs and be the vehicle for capital’s share of production. We must earn a substantial part of our incomes from capital ownership rather than from working.”
  1. At a recent conference on AI/Robotics and Employability, executives from IBM proposed people need to develop T Shaped Skills – “Occupations that will see an increase in demand are so-called T-shaped (requiring both depth and breadth) with deep expertise and complex communications skills.”
  1. Social Jobs, improving humanity – The so called Not for Profit sector, many corporations and owners of the wealth are increasingly building their philanthropic arms to help diverse sectors of the population – people with skills in these sectors will likely increasingly benefit as more and more wealth streams into this $2.3 trillion sector. (This was also to a large extent the proposed solution of Jeremy Rifkin’s 1995 bestseller The End of Work).

5 Weekend Reads: Robots – you don’t want one to fall on you

Humanoid robots are nowhere close to having the “brain” and motor control of a human

VIDEO: The smartest people in the world have spent millions on developing high-tech robots. But even though technology has come a long way, and will advance further still through the DARPA Robotics Challenge, humanoid robots are nowhere close to having the “brain” and motor control of a human. Why is that? MIT+k12 Videos takes a look behind the motor control processes in the human brain, and explains how cutting-edge research like that taking place at the MIT School of Engineering and CSAIL – MIT is trying to implement it in robots. Helios, MIT’s Atlas robot for the DARPA challenge plays a starring role. (MITK12 videos)

Microbots, Robot Swarms, And Other News From The Future

Many experts believe that we are nearing a tipping point where robots will emerge from industrial settings and soon enter our homes, workplaces, and public spaces. With that will come questions such as if and when robots will steal our jobs, surpass us in intelligence, or pose a threat to our privacy and security. (Interview with Sabine Hauert and Hallie Siegel of Robohub)

Building Robot Companions for Children

Some day, robot “personal trainers” will teach kids to speak, read, exercise and eat their vegetables, say Yale researchers. A $10 million federal grant is funding the five-year project. “The need for this technology is driven by critical societal problems that require sustained, personalized support that supplements the efforts of educators, parents, and clinicians.” (The Washington Free Beacon)

Robots need to be able to effectively sense and navigate whatever might be thrown at it

“Robots need to get less expensive, lighter (you don’t want a robot that weighs 300 lbs to fall on you), and softer in case they make unintended contact. But even if you gave me one of those tomorrow, we would still have to do research on how to make it do useful tasks.” (Robotics Industries Association) Hat tip: Andre Montaud.

The technology and jobs debate – we can learn a lot from the 1960’s

Economists, struggling to disentangle the effects of technology, trade, and other forces, don’t have a certain answer to the question of whether this time is different. David Autor, an MIT economist who is one of the leading researchers in the field, argues that trade (imports from China and elsewhere) has increased unemployment, while technology has reshaped the job market into something like an hourglass form, with more jobs in fields such as finance and food service and fewer in between. (Wilson Quarterly)

Investments in robots and drones on the up – creating new jobs

Working together

In 1850 the French economist Frederic Bastiat published an essay titled: That Which is Seen, and That Which is Not Seen. The essay is most famous for introducing the concept of ‘opportunity cost,’ the limits, alternatives and choices – to obtain more of one thing, we give-up the opportunity of getting the next ‘best thing,’ or because we “can’t have it all,” we must decide what we will have and what we must forgo. That sacrifice is the opportunity cost of the choice.

Many argue that opportunity cost is applied in business, once the cost of marginal labor rises too high, it makes more sense to replace minimum wage jobs with robots or other automated technology – leading to increased production and profits.

Of course this is not a new phenomenon. In his 1850 essay, Bastiat wrote:

“A curse on machines! Every year, their increasing power devotes millions of workmen to pauperism, by depriving them of work, and therefore of wages and bread. A curse on machines!

This is the cry which is raised by vulgar prejudice, and echoed in the journals… machinery must injure labour. This is not the case.”

It is a cry echoed in media today, just as it was 164 years ago – 164 years during which humans have seen the greatest advancement of technological progress, resulting in more luxury goods, improved health, longer life expectancy, better housing, and sanitary, clean water, electricity, instant communication around the globe via the Internet for free, mobile phones, planes and automobiles, heart transplants, and so on. Ninety nine percent of the poorest people in the ‘developed world’ have amenities that the wealthiest people of Bastiat ‘s time could not imagine.

Machinery does reduce some labor, but as Bastiat points out new labor from new industries is quickly created. The very industry, robotics, that is said to be eliminating jobs is in fact creating hundreds of thousands of jobs.

According to the European Union Commission, by 2020, service robotics could reach a market volume of more than 60 billion euros per year, and are forecasting 240,000 new jobs in the EU alone, backed by an investment of Euro 2.8 billion during this period.

The International Federation of Robotics has reported that Robotics will be a major driver for global job creation creating more than one million jobs by 2016.

Many of these new jobs will come from investments into the Robotics sector which is currently experiencing a major boost.

Startup Robotic companies like Jibo blasted through their crowd funding campaign raising $1,270,193 in a matter of days against a goal of $100,000. Much of the investment will allow Jibo to recruit new staff as the company delivers its artificially intelligent robot helper.

Another robotics startup, Airware the drone manufacturer raised an additional $25 million series B round on top of the $12.2 million it raised in it’s A series round. The company said it had raised the new funding: “to build out its staff.”

The South Korean government is mooted to invest $2.5 billion US dollars by the end of 2018 in joint projects with robotics companies, creating more jobs and targeting more than $6 billion US dollars in annual sales.

Investors are flocking to stock listed robotic companies in the US and also in China, whose manufacturing sector has a healthy appetite for all things robotic.

Japan is building a huge drone fleet. The country will invest ¥3 billion (approximately $372 million) in the coming decade to drastically expand its military unmanned aerial vehicle (UAV) program.

An estimated $6.4 billion is currently being spent each year on developing drone technology around the world, according to a report published earlier this month by the Teal Group Corp.

Whilst jobs will disappear, there are literally hundreds of companies and governments investing tens of billions of dollars in drones and robotics and in doing so creating a significant number of new jobs.

The current generation of engineers and roboticists are making science fiction stories of magical realism come true and creating millions of jobs in the process. As Bastiat put it: “to curse machines is to curse the human mind.”

Lloyds of London report – how self driving cars will affect the insurance industry

Red flag act

When the first steam powered cars (or locomotives as they were then called) first took to the roads in the early 1860’s it was feared that engines and their trailers might endanger the safety of the public, cause fatal accidents, block narrow lanes, and disturb the locals by operating at night. Many complained the cars were scaring the horses meanwhile the farmers were shooting the cars!

To allay the concerns, restrictions and speed limits were imposed by the Locomotive Act of 1865 (more popularly known as the “Red Flag Act“) which required all road locomotives, which included automobiles, to travel at a maximum of 4 mph (6.4 km/h) in the country and 2 mph (3.2 km/h) in the city – as well as requiring a man carrying a red flag or lantern to walk in front of road vehicles. The Act also included such matters as “Damage caused by locomotives to bridges to be made good by the vehicle owners.” However it was soon discovered that the steam carriages’ brakes and their wide tyres caused less damage to the roads than horse-drawn carriages because of the absence of horses’ hooves striking the road and wheels which did not lock and drag as they did on horse drawn carriages.

In the latter part of the 1800’s the British Motor Syndicate began a public relations campaign to lobby for the repeal of the Locomotive Act, which was declared the main obstacle to wider adoption of the car in Britain. The Act of 1865 was repealed in 1896.

Almost 120 years later we stand at the precipice of a new dawn in the age of the automobile – self-driving cars. Everything, from how we move goods to how we move ourselves around, is ripe for change.

Self-driving cars will require legislators to make new amendments to the current Highways Acts in place. There is already considerable debate surrounding the legal issues of driverless cars, the ethical concerns and questions over the liability of who to sue when a driverless car is involved in an accident.

Nevertheless the case for self-driving cars is considerable, the death toll (from motor accidents) is increasing worldwide with 1.3 million fatalities and 50 million injuries every year globally and around 93% of these accidents are caused by human error, and cost a staggering US$ 871 billion in the United States alone, according to the National Transportation Safety Board (NTSB) – self-driving cars will dramatically reduce accidents significantly. Autonomous cars will also reduce the burden on law enforcement, may also make streets safer and less congested, and allow those with disability greater movement – leading to a cleaner environment and improved quality of life.

Self-Driving Cars — Not if, but when

Lloyds reportAs well as the technical obstacles that are quickly being eliminated by manufacturers of self-driving cars, there are a few potential barriers that will delay the deployment or growth of self-driving cars, just as the ‘Red-Flag Act’ did in the 19th Century.

One such obstacle is Insurance Liability.

Lloyd’s of London, the insurance underwriter, has recently produced a report about how autonomous car technology will affect the insurance industry.

According to the report, insurance companies will have to create new methodologies on how they measure risk and charge motor insurance premiums:

There could be “significant changes in motor insurance: if accidents reduce in frequency, claims will also decrease, leading to lower premiums and, in turn, tighter profit margins for insurers.”

The report also highlights declining car ownership as potentially reducing the total number of insurance premiums:

Car ownership could decline in favor of a renting model and taxi companies could become owners of rentable car fleets, leading to company-wide policies.

With respect to insurance concerns Lloyds emphasized the problems with transferring risk from the driver to the machine:

With less reliance on a human driver’s input, however, increased risk would be associated with the car technology itself. Computers can do many things that a human driver cannot: they can see in fog and the dark, and are not susceptible to fatigue or distraction. However, they can also fail, and systems are only as good as their designers and programmers. With an increased complexity of hardware and software used in cars, there will also be more that can go wrong.

A new form of driving tests and licensing will be required:

By gradually transferring responsibility from the driver to the car, there is a risk that a driver could misjudge the responsibility they currently have… To mitigate this risk it is important that drivers are well-educated about the limitations of autonomous functions, and how they can retake control of the car when it is necessary.

When we rely on the car we may ‘switch-off’ and not be attentive to what is happening in the surrounding environment when it seems that their input is not needed.

If drivers are expected by law to supervise an autonomously operating car, they may find it difficult to remain focused on this task if they feel able to trust the car.

However the report does acknowledge the higher safety standards of autonomous vehicles:

The advent of autonomous cars could revolutionize the world of motor insurance. Autonomous cars could potentially lead to a substantial reduction in motor insurance claims.

Some might argue that if cars really do become crashless, there may not even be a need for motor insurance.

In many ways driverless cars may make assessments easier because it would be possible to see data such as what speeds the vehicles were travelling at.

An accident caused by autonomous technology, would need software and hardware analysis expertise in order to understand how and why it occurred. As sensors and computers become more commonplace in cars, and some driving responsibility is devolved to the car, an increase in telematics-based policies could be an option. Premiums could be better matched to exposure rather than based on proxies, and in the event of accidents, the car’s ‘blackbox’ could be examined. Whereas at present insurers using telematics devices incur the cost of their fitting, in the future the data may already be collected, making telematics a more viable option.

Whilst some analysts indicate self-driving cars will be on our roads in greater numbers with 3 to 7 years, it may be some time before the new technology earns the public’s trust. Lloyds also commissioned a Google Consumer Survey according to the survey, which was taken by 2,016 people in the UK, 50.4% male, 49.6% female.

People are uncomfortable placing their trust in a computer and they like the process of driving too much to give it up.

Automated driving will become progressively more standard in the near future, but it will require the development of high standard autonomous navigation systems and adequate safety standards, along with the implementation of new legal and licensing procedures. With a shift towards autonomous technology and away from human operators, the landscape of insurance, especially motor insurance, may change dramatically.

Picture source: 1st picture – Red Flag Act and 2nd picture Lloyds Report

5 Reads: Drones, Robots, jobs and the economy

Drones the wall street journalDrone Dogfight: Big Defense Firms vs. Techies – The users and makers of smaller drones are focusing their frustration with the FAA onto larger drone makers, who aren’t in such a hurry for rules. (The Wall Street Journal)

Humans 1, Machines 7 — It is easy to underestimate how quickly robotics is improving. (The Economist)

The computerisation of European jobs — Who will win and who will lose from the impact of new technology onto old areas of employment? H/T Robert Went (Link to article Bruegel)

The Rise of the Robots — What impact will automation – the so-called “rise of the robots” – have on wages and employment over the coming decades? (Project Syndicate)

Even greater workplace disruption lies ahead. Labor markets may once again be entering a new era of technological turbulence and widening wage inequality. (Project Syndicate)

Me, Myself and Robots

Robot builderIn his book The Moral Consequences of Economic Growth, Benjamin M. Friedman posits that steady economic growth: “fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy.” Friedman’s hypothesis is defended with an impressive range of evidence from disciplines including economic and political history and other relevant sources. He also highlights our understanding of the relationship between economic growth and our willingness to cooperate by drawing on literature in psychology and especially behavioral economics and he emphasizes that economic growth transforms society into a “cooperative venture for mutual advantage.”

But when economic growth stagnates society has less tolerance and social unrest coupled with people less willing to cooperate and more focused on satisfying their own basic needs – a me, myself and I world. Some authors have predicted we are already in a Great Stagnation, others indicate that economic growth, in ‘advanced economies’ will continue at a nominal rate of growth of circa 1 to 2 per cent for many years, possibly decades.

The big question is – are we likely to see the growth rates of the 20th and early 21st century again?  Even though much of it was built on a house of debt!

The economic boom after the Second World War was predominately built on two sectors: housing and automobiles – which collectively accounted for 40 percent of the high growth rates. In more recent years we can see the same sectors responsible for the high growth rates in emerging markets such as Dubai, Abu-Dhabi and other Emirates and in Europe countries such as Poland which emerged from Communism some 25 years ago, a housing boom and flourishing car market quickly followed. The same is happening today in China.

Flourishing housing and automobile markets have many spin-offs: fuel, highways, transportation, associated household equipment, mechanical parts, banking, finance, etc. As history shows, housing and automobile markets do slow and the consequences are now being felt across the developed world.

Without such markets how will we get the levels of employment near to 95 or 100 percent?

The facts are; new flat screen TV’s, smartphones, tablet computers, laptops, mobile Apps, etc. will not generate anywhere near the level of economic activity that is required to grow the economy and put people back to work.

Historically, technological innovation has provided the momentum for long-term economic expansion. The area with the greatest potential for technological innovation today is advanced Robotics and the associated technology of Artificial Intelligence. But let’s not kid ourselves, there is no point in developing these technologies unless they serve a significant purpose – and the overall purpose for robots and A.I., especially within the workplace, is greater efficiencies and reduced costs. Much of these reduced costs will, in the long run, come from reduced headcount – people.

I am a strong proponent of the advances in robotics. Our lives can be greatly enhanced by exoskeletons, driverless cars, artificial assistants and so on. In the short term these sectors will create more jobs, but over the next two decades the full economic benefits of investing in robots will mean one thing – less people working.

Government investment in infrastructures, green energy and other advanced technologies will of course help spur the economy. But these will have to be paid for from somewhere and with Government debts at record levels few countries can sustain the levels of investment required to make meaningful long-term investments.

This is where I believe a new welfare state is increasingly becoming one of the only sensible options. Many are calling for a ‘living wage’ or Basic income Guarantee. Seattle in the United States and Switzerland, where approximately 45% supported such a motion in a recent referendum, could prove to be very informative test cases. The former US Secretary of Labor Robert Reich has said:

We’ve got to seriously think about how we widen the circle of prosperity, how we get shared prosperity. Otherwise, who’s going to be the customer? And a minimal guarantee with regard to income, it seems to me as almost inevitable in terms the direction that the structural changes of our economy are taking us in.

With excessive household debt, low savings, wage stagnation, almost 2 in 5 on the poverty line in advanced economies it will take something of the order of a basic income guarantee to spur economic growth or we can be sure to witness Gartner’s prediction of mass social unrest in the coming decade.

Let’s also not forget – robot’s are now good at building structures and 3D printers are capable of building houses!