We had our discussion on Monday about automation. The discussion was prompted by various related material on the web.
First is Andy Haldane, chief economist, Bank of England, speech to the Trade Union Congress, London, titled "Labour's share".
http://www.bankofengland.co.uk/publications/Documents/speeches/2015/speech864.pdf
Very interesting presentation with data and charts dating back three centuries of mechanization in Britain, and trends in productivity and wage increases.
Then there is the video of Clayton Christensen's presentation on disruptive innovation, how the established industries have to keep on innovating as the competitors from the lower levels keep catching up to them.
http://blog.deming.org/2013/06/clayton-christensen-on-innovation-and-macro-economics/
Thirdly, there is the video about robots replacing humans "humans need not apply", less academic and data based, and perhaps more on the alarmist side.
https://www.youtube.com/watch?v=7Pq-S557XQU
The data used in Haldane's speech showed that despite the Luddite's concern about machinery eliminating the cottage industry for cotton spinners and weavers, labor's wage increases have been keeping up with the productivity gains in the last couple of centuries. He acknowledged that there is a lag in the last decade with the hope that the catch up will come.
But will it? The increasing disparity between the top and bottom earners in our society may be an indication that the benefits of automation may no longer be distributed throughout society.
Haldane's speech also talked about the "hollowing out of the middle class", that while some of the workers displaced by machines have trained up for better jobs, others have moved down to lower paid jobs where they are overqualified for. There is significant numbers of workers, though employed, are looking for more hours to work in order to get more income.
On the other hand, automation does more than just replace workers with machines. In my previous life as an engineer doing automation projects for industry, the major financial justification for automation is not so much in labor savings as in better quality product and less production downtime.
Human ingenuity is great but no match for machines when it comes to consistency and repeatability to make a good product once the formulation is known. Machines do the tedium duty while humans now do the setup, tweaking, and troubleshooting.
We all witness the progress of the ATM, or automatic teller machine in the last few decades. Setting aside the debate of whether we want to deal with machines or humans when we go to a bank, there is no doubt that 24 hour access to a bank machine is much more convenient for the bank customer compared to the 3pm closing that banks use to have.
So automation benefits enterprise owners in saving costs and making better products. It also benefits consumer of these products and services in terms of the quality and availability of these items.
Is society as a whole benefiting properly by automation in this way?
Thinking back a few decades ago, when Eastman Kodak came up with the Instamatic camera and film, a manufacturing plant was built in Rochester, New York, to make these items. Residents in that area were employed in good paying jobs to produce these items that consumers want.
Contrast to the present day, when Apple came up with the popular iPhone, iPad devices, they go all over the world to get the best low cost producer to make the products. Workers in California did not get the drag along effect of manufacturing jobs to assemble these devices but the consumer gets a lower cost product.
For someone in the developed world who is not an innovator, machine or robot implementer or serviceman, software developer, should they be content with jobs in the service industries?
Are manufacturing jobs an outdated concept?
There was a time when the majority of our population was in agriculture to feed ourselves. There is now less than 5% of the population in farming compared to over 75% before. We have to conclude that people have moved away from farming as a career and we no longer think that we should get rid of the farm machinery so that we can create more farming jobs.
The Economist Magazine had an article about German manufactures going digital. The first chart here shows the prominence of manufacturing for Germany with the percentage of GDP due to manufacturing only second to China while we see countries such as Britain only have less than 10% of their GDP due to manufacturing.
The other chart shows how the stock market values the digital companies over famous manufacturers like Daimler, Siemens, and BMW. How is it possible that Apple can be valued at ten times or more than each of the German car manufacturers?
We are surely witnessing the move from traditional manufacturing to digital age just like we had the move from agricultural to manufacturing a century ago.
Chris, a web designer and programmer, was in the discussion. His take on automation is more than machines replacing manual labor.
Chris sees automation as the crowd collaboration of ideas. Examples such as Wikipedia, open source software development let computers or servers co-ordinate ideas from various people in a common forum. Without a human coordinator or curator, the group forum grows on its own, free of bias and censorship by some central figure or filter.
There is so much benefit from these collaboration efforts that the old ideas of patents and copy rights, originally conceived to encourage innovation, no longer applies.
Welcome to the new meaning of automation.
