Lately, I've been reading more about the impact of automation and AI (Artificial Intelligence) and the potential destruction it will have on jobs and the global economy. Elon Musk has been very outspoken on this topic and his comments this past week seem to have set off alarm bells and now some are predicting doomsday scenarios of high unemployment, economic contraction and stock market crashes. Naturally, this sounds scary and while it could happen, history is always a good barometer check.
It is important to remember that innovation and automation are nothing new, it is the pace and level which matters. A good example would be the introduction of self-serve gas pumps. Prior to the 70's, gas station attendants were the norm. Once self-serve pumps caught on, many thousands of jobs were eliminated. This did not take place overnight and gave many time to find a new avenue. Obviously this hurt the attendants but on the flip side many benefited as jobs were created to manufacture, sell and install the self-serve pumps! This in turn led to lower gas prices which put more money in the consumers pocket. At the same time, gas station owners benefited as their overhead decreased which allowed them to expand operations.
While this is only one example, it's an important one as automation helps increase overall standards of living and leads to an increase in productivity which leads to greater prosperity. According to an estimate done by the United Nations, poverty was reduced more in the past 50 years than in the previous 500! The idea of automation/artificial intelligence is to increase efficiency and reduce costs. Think about it, 3-D printers are already starting to help build cars and homes and over time the costs will continue to decline.
Of course this still means there could be a lot of change ahead. Pricewaterhouse Coopers predicts that 38% of American jobs are at risk of automation by the early 2030s. This is alarming and makes one question how the global economy can absorb it. Obviously if we woke up tomorrow and 15 million workers were displaced, that would be terrifying and have devastating consequences. The threat we face in the next ten to twenty years is real, and judging by Mr. Musk's comments, every single job is in jeopardy. I won't go that far but many jobs that we once that would never be replaceable, will be. Most agree that the transportation and fast food industry are likely to be first on the chopping block. Automation doesn't require health insurance, 401(k), bonuses or a job change like humans do, just a tune up every now and again. It is important to remember that innovation will also help create new jobs that did not exist prior, it's not a zero sum game.
Some argue that automation will hurt developed countries (i.e. United States) the most as they they have the highest wage earners who will be the first to be replaced, while lower developed countries suffer less as their wages are already low and many countries won't have the upfront capital needed to invest in automation. The jury is still out but trying to make an investment decision based on this is not wise. There will be governmental regulation and other things to deal with before we truly know how this shakes out.
While it won't be all fun and games, there is a lot to be excited about as we head into the future.