21-11-2015, 11:11 PM
The disruptions reshaping our world
Alan Kohler
[Image: alan_kohler.png]
Editor-at-large
The Australian Business Review
[b]The day after a book called The Rise of the Robots won the Financial Times McKinsey Business Book of the Year award in London this week, a little company called Fastbrick Robotics listed on the ASX and promptly doubled in value.[/b]
It was instant fulfilment. Fastbrick Robotics has invented a bricklaying robot; the book, by Silicon Valley entrepreneur Martin Ford, presents a grim view of a future in which robots permanently replace human jobs.
Replacing brickies with robots is not that surprising when you think about it — after all, laying bricks is a repetitive, robot-like task. Talk to me when you’ve invented a robot builder, then I’ll be impressed (and grateful).
Brickies might not agree, but the corporate videos of Fastbrick Robotics present a bright new world of quick and efficient construction, in which a house can go up in two days.
The Rise of the Robots, on the other hand, foresees a dark dystopian future of fewer jobs, with disruption from machines and algorithms on both manufacturing and professional industries.
According to the reviews (I haven’t read the book yet), Ford essentially argues that the current industrial revolution will not be like the last one, when new jobs were created just as quickly as the old ones were eliminated by technology. He writes: “While human-machine collaboration jobs will certainly exist, they seem likely to be relatively few in number and often short-lived. In a great many cases, they may also be unrewarding and even dehumanising.”
According to Martin Ford, artificial intelligence is already well on its way to making “good jobs” obsolete: many paralegals, journalists, office workers and even computer programmers are poised to be replaced by robots and smart software. As progress continues, blue and white collar jobs alike will evaporate, squeezing working and middle class families ever further.
But Ford does not only talk about job theft by machines. One of his key points is that robots weaken middle-class demand by skewing the gains to a few — worsening inequality.
As labour becomes uneconomic relative to machines, purchasing power falls. For example, the US economy produces a third more today than it did in 1998 with the same sized workforce. What he doesn’t mention is that macro-economic policy is doing the same thing, to some extent driven by digital disruption and robotics.
Just as falling wage growth is reducing middle-class demand, so are super low interest rates. It’s true that disposable incomes of middle-class mortgagees are being boosted by low interest rates, but that is being cancelled by the opposite effect on retirees who live off their savings. To some extent it’s a circular phenomenon: automation and disruption reduce costs and prices, reducing inflation and therefore interest rates.
So monetary policy itself becomes a disrupter. Not only is wages growth the lowest on record and unit labour costs not grown at all for three years, interest rates are the lowest they have ever been. In the US they have been effectively zero for seven years.
As I see it the world has to deal with six great disruptions at once:
Monetary policy
Zero interest rates and quantitative easing are one of great disruptive innovations of our time: negative real interest rates — and in some places even negative nominal interest rates — and central banks simply printing money and buying assets from banks. It’s an experiment that is having a profound effect on the way all markets and economies operate.
Computing power
When Gordon Moore observed in 1965 that the number of transistors on an integrated circuit could double every year (and then revised that to every two years in 1975) it was early days for Moore’s Law. Forty years of that exponential growth in computing power is now affecting every part of life. Moore’s Law is responsible for smartphones, robotics, artificial intelligence, programmatic trading in shares and advertising … the list goes on, and includes all the things that Martin Ford is so worried about.
Cloud computing
In a way this is an extension of Moore’s Law, but turning both data storage and software into a service — operating expenditure rather than capital expenditure — is itself hugely disruptive and deserves its own mention.
Hyper-Connectivity
In an interview this week with Stephen Bartholomeusz and myself for Business Spectator, the CEO of Telstra Andy Penn revealed that the company had achieved a data speed over its mobile network of one gigabit per second in a test environment. Similar download speeds are already being achieved over fixed line. This has meant the internet can be used for broadcasting as well as connecting millions of machines (the “internet of things”) transmitting colossal amounts of data and storing it in the cloud.
Blockchain
This is the technology at the heart of Bitcoin, but its uses go far wider than that. Blockchain is a way of organising and verifying almost any transaction. It is early days, but already clear that this technology will eventually be at heart of a new banking system and a new settlement system.
Trust
In my view this is the most powerful disruptive force of all.
The internet has become a tool for humans to deal directly with each other. And it turns out that in even a world that is also being disrupted by appalling acts of terrorism, there is an overwhelming urge for people to trust each other.
We go and stay in each other’s houses (Airbnb), get in each other’s cars (Uber), buy stuff from each other and pay first (eBay, etc). We tell each other about our lives and ideas (Facebook, Twitter, Instagram, etc) and we’re now lending each other money (Society One, Lending Club, etc).
The willingness of humans to trust each other and, separately, to express themselves to each other, is not a new thing, but the internet has unleashed it and allowed it to be organised.
The social urge in human society has always existed, but has been confined to small communities simply because of the lack of any means to communicate efficiently across large distances.
The combination of connectivity and computing power has literally put that ability into our pockets — it’s with us everywhere we go. It has meant that our inherent urge to trust and communicate can be both fully expressed and organised.
- THE AUSTRALIAN
- NOVEMBER 21, 2015 12:00AM
Alan Kohler
[Image: alan_kohler.png]
Editor-at-large
The Australian Business Review
[b]The day after a book called The Rise of the Robots won the Financial Times McKinsey Business Book of the Year award in London this week, a little company called Fastbrick Robotics listed on the ASX and promptly doubled in value.[/b]
It was instant fulfilment. Fastbrick Robotics has invented a bricklaying robot; the book, by Silicon Valley entrepreneur Martin Ford, presents a grim view of a future in which robots permanently replace human jobs.
Replacing brickies with robots is not that surprising when you think about it — after all, laying bricks is a repetitive, robot-like task. Talk to me when you’ve invented a robot builder, then I’ll be impressed (and grateful).
Brickies might not agree, but the corporate videos of Fastbrick Robotics present a bright new world of quick and efficient construction, in which a house can go up in two days.
The Rise of the Robots, on the other hand, foresees a dark dystopian future of fewer jobs, with disruption from machines and algorithms on both manufacturing and professional industries.
According to the reviews (I haven’t read the book yet), Ford essentially argues that the current industrial revolution will not be like the last one, when new jobs were created just as quickly as the old ones were eliminated by technology. He writes: “While human-machine collaboration jobs will certainly exist, they seem likely to be relatively few in number and often short-lived. In a great many cases, they may also be unrewarding and even dehumanising.”
According to Martin Ford, artificial intelligence is already well on its way to making “good jobs” obsolete: many paralegals, journalists, office workers and even computer programmers are poised to be replaced by robots and smart software. As progress continues, blue and white collar jobs alike will evaporate, squeezing working and middle class families ever further.
But Ford does not only talk about job theft by machines. One of his key points is that robots weaken middle-class demand by skewing the gains to a few — worsening inequality.
As labour becomes uneconomic relative to machines, purchasing power falls. For example, the US economy produces a third more today than it did in 1998 with the same sized workforce. What he doesn’t mention is that macro-economic policy is doing the same thing, to some extent driven by digital disruption and robotics.
Just as falling wage growth is reducing middle-class demand, so are super low interest rates. It’s true that disposable incomes of middle-class mortgagees are being boosted by low interest rates, but that is being cancelled by the opposite effect on retirees who live off their savings. To some extent it’s a circular phenomenon: automation and disruption reduce costs and prices, reducing inflation and therefore interest rates.
So monetary policy itself becomes a disrupter. Not only is wages growth the lowest on record and unit labour costs not grown at all for three years, interest rates are the lowest they have ever been. In the US they have been effectively zero for seven years.
As I see it the world has to deal with six great disruptions at once:
Monetary policy
Zero interest rates and quantitative easing are one of great disruptive innovations of our time: negative real interest rates — and in some places even negative nominal interest rates — and central banks simply printing money and buying assets from banks. It’s an experiment that is having a profound effect on the way all markets and economies operate.
Computing power
When Gordon Moore observed in 1965 that the number of transistors on an integrated circuit could double every year (and then revised that to every two years in 1975) it was early days for Moore’s Law. Forty years of that exponential growth in computing power is now affecting every part of life. Moore’s Law is responsible for smartphones, robotics, artificial intelligence, programmatic trading in shares and advertising … the list goes on, and includes all the things that Martin Ford is so worried about.
Cloud computing
In a way this is an extension of Moore’s Law, but turning both data storage and software into a service — operating expenditure rather than capital expenditure — is itself hugely disruptive and deserves its own mention.
Hyper-Connectivity
In an interview this week with Stephen Bartholomeusz and myself for Business Spectator, the CEO of Telstra Andy Penn revealed that the company had achieved a data speed over its mobile network of one gigabit per second in a test environment. Similar download speeds are already being achieved over fixed line. This has meant the internet can be used for broadcasting as well as connecting millions of machines (the “internet of things”) transmitting colossal amounts of data and storing it in the cloud.
Blockchain
This is the technology at the heart of Bitcoin, but its uses go far wider than that. Blockchain is a way of organising and verifying almost any transaction. It is early days, but already clear that this technology will eventually be at heart of a new banking system and a new settlement system.
Trust
In my view this is the most powerful disruptive force of all.
The internet has become a tool for humans to deal directly with each other. And it turns out that in even a world that is also being disrupted by appalling acts of terrorism, there is an overwhelming urge for people to trust each other.
We go and stay in each other’s houses (Airbnb), get in each other’s cars (Uber), buy stuff from each other and pay first (eBay, etc). We tell each other about our lives and ideas (Facebook, Twitter, Instagram, etc) and we’re now lending each other money (Society One, Lending Club, etc).
The willingness of humans to trust each other and, separately, to express themselves to each other, is not a new thing, but the internet has unleashed it and allowed it to be organised.
The social urge in human society has always existed, but has been confined to small communities simply because of the lack of any means to communicate efficiently across large distances.
The combination of connectivity and computing power has literally put that ability into our pockets — it’s with us everywhere we go. It has meant that our inherent urge to trust and communicate can be both fully expressed and organised.