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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)

6 reads in AI, Robots, Drones and Economics

This is an excellent response to a post by Marc Andreesen – What you left out was the essential question: who owns the robots? (By Alex Payne)

Microsoft Unveils Machine Learning for the Masses (New York Times)

AI’s dueling definition: Why my understanding of AI is different from yours. (O’Reilly Radar)

More Robots won’t mean fewer jobs (Rodney Brooks on Harvard Business Review)

Before you travel to a city why not see how it looks from the air? (Travel By Drone)

Our Work Here is Done: Visions of a Robot Economy (Free eBook by Nesta). Contributors: Ryan Avent, Frances Coppola, Frederick Guy, Nick Hawes, Izabella Kaminska, Tess Reidy, Edward Skidelsky, Noah Smith, E. R. Truitt, Jon Turney, Georgina Voss, Steve Randy Waldman and Alan Winfield.

The economics of Amazon’s delivery drones

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Last December there was a lot of skepticism when Jeff Bezos, CEO and founder of Amazon, announced on the 60 minutes TV program that they were looking into using drones for delivering small packages. Many pundits called it a publicity stunt and nonsense! — timed for the biggest online shopping day of the year .

Bezos on the other hand was bemused and took pains to point out in his 2013 annual letter to shareholders that Amazon are serious about delivery by drones, writing: “The Prime Air team is already flight testing our 5th and 6th generation aerial vehicles, and we are in the design phase on generations 7 and 8.”

On their Prime Air Q and A page Amazon anticipate FAA’s rules for commercial drones will: “be in place as early as sometime in 2015.” And state: “We will be ready at that time.”

To be ready they are assembling a team said to already consist of between 45 to 50 employees and at least 10 additional personnel sought according to job openings on Amazon’s website.

Job postings for the Prime Air team range from a Patent Lawyer, to a Communications Manager, Software Engineers, Machine Learning Engineers, Executive Assistant, Project Coordinator, Research Scientist and Technical Program Manager.

To give you a taste of what the company is aiming for, the Communications Manager post indicates:

We’re looking for a communications leader for Amazon Prime Air, a new delivery system that will get packages into customers’ hands in 30 minutes or less using unmanned aerial vehicles.

So what’s driving Amazon’s Prime Air initiative?

Instant gratification from customers is clearly one element; providing outstanding service is another; as is staying ahead of the curve with innovative delivery and order fulfillment. All highly significant points in their own right to meet Amazon’s goal: “to be Earth’s most customer-centric company.”

Cost of transportation is another. Amazon’s total shipping costs in 2013 were $6.635 billion. They received shipping revenue of $3.097 billion and incurred overall losses of $3.538 billion related to shipping costs.

Amazon shipping costs

Amazon use several services for shipping, UPS, FedEx, US Postal, and others as well as developing their own City Pick Up points, delivery van service and Amazon courier cycles. Shipping is clearly a major cost factor to Amazon and one where they are focused on improving service whilst reducing cost.

Technical difficulties

In addition to the regulatory hurdles that must be overcome there are many technical difficulties.

Amazon is aiming for their drones to deliver shoebox size packages.

They probably do not want video onboard due to the extra weight on the drone and also privacy concerns, so will need another way of identification before customers can accept delivery, e.g. biometric identification or pin code to release the package provided with the consignment email – package drop off will be a challenge.

Wind will be a factor in delivery.

Sense and avoid – very few of the current breed of drones (especially the hobbyist drones) have sense and avoid capabilities and should not be flown where there are people or objects.

Amazon will want their drones to be as safe as regular manned planes. Piloted planes have 9.4 accidents per million flights, in other words statistically very safe.

CyPhy Works is possibly the leader in this drone technology with their tethered drones having already developed high payload, high wind, environmentally sealed systems.

GPS lock is an issue that has caused drones to drop out of the air and piloting inexperience is also a major issue, although one the FAA is looking very closely at and I’m sure Amazon will too – drones should never be operated without formal training and some license arrangements.

Another hurdle will be location for dispatch – most of Amazon’s Fulfillment Centers are outside major cities, although it is probable that the items Amazon will provide via Prime Air will be a vastly reduced inventory and kept at the Amazon Pick Up points or smaller Fulfillment Centers closer to major city centers.

These are just a few of the technical hurdles, not insurmountable and as Amazon state they will be ready when the FAA approve the use of commercial drones.

Will drones be more cost effective?

According to shipping-industry analysts Amazon typically pays between about $2 and $8 to ship each package, with the cheapest option through the Postal Service and the most expensive via UPS or FedEx.

Amazon may be able to get a premium price for the Prime Air delivery service – customers who want their package within 30 minutes may be prepared to pay a premium of say $15 to $20 per delivery. Irrational for a book that costs $18, but as behavioral economics shows humans do not always act rationally.

During a 15 hour window (7am to 10pm) one Prime Air drone could potentially make 30 deliveries (absolute maximum efficiency and at a significant stretch).

Assume the drones are fully in service for 360 days per year, this will be the equivalent of 10,800 deliveries per drone.

The drones will require 2 full time pilots. With drone pilot wages ranging between US$13 to US$23 per hour, plus fulfillment center costs, insurances, drone fees and service, the Prime Air Team overheads and development – the annual fees per Prime Air drone service – annual cost per drone could be a minimum of between US$105,000 to $186,000 per year.

Those numbers divided by the maximum number of deliveries per drone indicate that the Prime Air service could cost Amazon between $9.75 and $17.44 per delivery, which is okay if Amazon get a premium rate for 30 minutes delivery.

Amazon will want to get maximum number of deliveries and efficiencies out of the drone capabilities, whilst reducing the costs as close to $2 per delivery as possible and maximizing the revenue by providing the wow factor to customers. They will also be aiming to reduce the US$ 8.829 billion in cumulative shipping losses in the last three years.

At some stage don’t be surprised if Amazon seeks to move into the logistics business. The robots that they are deploying in their fulfillment centers and now with Prime Air Drones, Amazon are clearly building a high quality, high capability logistics service – and ultimately that is good news for consumers.

Photos: Amazon 2013 Annual Report and Amazon Prime Air Q&A

As Helen Greiner, CEO and founder of CyPhy Works says: “The shortest path between two points is as the drone flies.”

Updated: There is an interesting take on this article edited by Business Insider — The 4 reasons Amazon is dead serious about its Drone delivery service.

Robots may take your job but it could lead to a more humane society

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Many in the Artificial Intelligence and robotics professions clearly state that their work is toward what has come to be called “weak A.I.” — which is focused more on building tools for helping humans in their work rather than on replacing them. This is clearly the claim of robot manufacturers such as Rethink Robotics and Universal Robots. However weak A.I., or its associated technology, machine learning is becoming an integral component of automation – and it is this automation, something that previously may have been called Business Process Automation, that may explain the high rate of joblessness in many advanced countries some four years into the recovery from recession.

Yet, it is not inconceivable that in the near future current advances in robotics and automation technology will have a bigger impact on employment from the cashless supermarket checkout to security guards; we will have robot roofers’ helpers and A.I. receptionists, robots are increasingly used on farms for milking cows, picking peppers and drones for crop spraying. Advanced algorithms are ‘improving’ financial trading and providing more and more predictive analysis. Insurance and travel tickets are ordered via online automated systems and banks are reducing headcount (and physical sizes) of branches as online banking and ATM’s become pervasive – all created by automated technology. The list of jobs that soon could be, or already can be performed, by robotic and automated technologies is vast, but if you read on I will show how this is likely to greatly benefit humanity.

One of the key questions being asked by senior economists and others: “Is the threat of automation and robotics on employment the most pressing social issue?” This is not new — In his book published in 1995 The End of Work, Jeremy Rifkin examined the technological innovations and market-directed forces that were “moving us to the edge of a near workerless world.

Redefining opportunities and responsibilities for millions of people in a society absent of mass formal employment is likely to be the single most pressing social issue of the coming century. (Introduction page XV)

More recently, the economist Larry Summers who is President Emeritus and Professor at Harvard University, said that the big concern in the economy and split between capital and inequality will be the “devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks.” Adding that all sectors of the workplace are at risk of the advances in “artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead.”

Despite many highlighting the gloom few have spoken of the benefits and offered up good solutions, until now.

Who owns the robots?

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.

Freeman is also convinced that robots will displace many from the workplace, offering up the advances in technology from IBM’s Watson preparing recipes (Chef’s beware), to the improvements of robots as anesthetists. He warns:

Behind the headlines are advances in artificial intelligence that create machines that are far better substitutes for human intelligence than seemed possible just a few years ago

Robots can increasingly substitute for workers, even highly skilled professionals.

The main message of Professor Freeman is that ‘workers (you and me) need to ensure that they have some other income from capital and not just income from work. To own equity stakes, in companies that will thrive, so as to receive dividends and increased wealth, to own the land or properties to receive rent:

As companies substitute machines and computers for human activity, workers need to own part of the capital stock that substitutes for them to benefit from these new “robot” technologies. Workers could own shares of the firm, hold stock options, or be paid in part from the profits. Without ownership stakes, workers will become serfs working on behalf of the robots’ overlords. Governments could tax the wealthy capital owners and redistribute income to workers, but that is not the direction societies are moving in. Workers need to own capital rather than rely on government income redistribution policies.

He points to the fact that Chief Executive Officers (CEO’s) and other executives are paid stock options, restricted stock grants, and bonuses tied to capital income:

It is telling that the persons with the greatest power in corporations prefer to be paid as owners rather than as wage and salary workers.

He does not believe it is far fetched that robots and associated technologies will increasingly take more of the jobs, dismissing the hype claim and indicating this is a reality. He encourages people to own the robots, or at least have their capital in someway invested so that it provides an income, failing to do so will leave those with no ‘robot ownership’ behind:

The “who-owns-the-robots-rules-the-world” thesis is simple: Regardless of whether technological advance is labor-saving or capital-saving, skill-biased or not, and regardless of the speed with which robots or other machines approach or exceed human skill sets, the key to the effect of the new technologies on the well-being of people around the world is who owns the technologies.

Is it any wonder so many tech companies have good stock options? Tech employees see first hand the impact on jobs as their solutions are rolled out. Freeman emphasizes the need for all employees to be stock-owners in their companies (or maybe have John Lewis style partnerships?).

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. Unless workers earn income from capital as well as from labor, the trend toward a more unequal income distribution is likely to continue, and the world will increasingly turn into a new form of economic feudalism. We have to widen the ownership of business capital if we hope to prevent such a polarization of our economies.

Freeman is right, the factor that potentially has the greatest economic benefit in dealing with robotization and the falling share of labor income is employee ownership, as we help build the business we work for — the more skin (equity) we have in the game the better.

A new paradigm

My own thoughts are that we are at the cusp, or in fact quite advanced, in a techno-economic paradigm, which is breaking the organizational habits in technology, the economy, management and social institutions.

In addition to Freeman’s call for us to seek to ‘own the robots,’ I also see a great positive, and as I have written before: I believe the attempt to better the world for all humanity is hidden somewhere within the automated robotic economy.

The robot overlords will need to ensure there is still a flow of finance to people or the goods they make with their automated machines will have no buyers. Organizations (and indeed individuals) that increasingly see vast profits from the machine economy are creating more and more jobs in the Not For Profit sector. Bill Gates has possibly created thousands of jobs as he uses his wealth for humanitarian and educational purposes. Other tech beneficiaries, and billionaires are putting their money to work in ways that help others — and creating jobs in the process.

It is said the Not For Profit (NFP) sector worldwide already surpasses US$ 2 trillion. This will grow considerably and I believe it will become a major sector of job growth. Already we see this playing out as NFP’s such as Google.org seeks to solve humanities problems and bring together brain and brawn, creating jobs and giving hope to many.

Whilst technology will be a big factor in tearing jobs apart, the wealth stream created by the robot owners will likely also put society back together, and in so doing help build a better, stronger, more resilient and altruistic society.

Picture credit Google.org

5 Monday reads in Robotics, Artificial Intelligence and Economics 

Ben Goertzel believes we are just years away from having a robot read the news (South China Morning Post)

Artificial intelligence techniques such as natural-language processing and computer vision will someday revolutionize our world – at least they will help advertisers sell us more: (Gigaom)

The ultra lethal drones of the future and some we have now: (New York Post)

Rodney Brooks cuts through the hype, what robots can and can’t do – people and robots working together; but don’t underestimate the robots: (Wired – Video)

Frances Coppola discusses the “Wastefullnes of automation:” If a small number of people own machines, how will capitalism survive? (Pieria)

Botsourcing – Robots Are Starting to Make Offshoring Less Attractive

My latest Harvard Business Review article is now live.

The hype around robots taking jobs is reaching a crescendo, in response to an insightful new book The Second Machine Age by Erik Brynjolfsson and Andrew McAfee, as well as an Oxford Martin School study: The Future of Employment: How susceptible are jobs to computerization? The former states that digital technology and robotics are advancing at such a pace that: “Professions of all kinds — from lawyers to truck drivers — will be forever upended. Companies will be forced to transform or die.”

For managers, the trend toward botsourcing will require a shift in thinking. Rather than moving operations to wherever work costs the least, think about which pieces can be automated, and how best to combine human and robotic expertise.

Read the full article at Harvard Business Review…

Robots App Brings World of Robotics to iPad

robots-app-screenshot-2-2048×1536A cool new iPad app provides a fascinating tour of robotics. Created by IEEE Spectrum the app lets users explore 126 robots (I’m told it will soon have 158) from 19 countries, with 360-degree views, interactive animations, technical specs, and hundreds of photos, videos, and articles.

Among the  robots included in the App are Honda’s Asimo, NASA’s Curiosity Mars rover, and Google’s self-driving car. I really enjoyed watching Nao perform tai chi.

There are also androids, drones, exoskeletons, quadrupeds, and snake robots. The app offers countless hours of exploration and entertainment to anyone interested in learning about robotics. There is also in-depth, technical data about each robot, and some basic information on how robots work and some good advice on how to get started in robotics.

Rodney Brooks, Dean Kamen, and other leading roboticists provide insights about their creations — and even some career advice — in exclusive audio interviews. The app also features a detailed glossary of robotics terms, the app designers version of the timeline of robots and artificial intelligence, and a section where users can choose which robot wins in a “face-off match.”

It’s pretty cool and fun, whilst offering good information on the progressive field of robotics.

Download the Robot App for iPad here…