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Are You Scared of Automation?

Automation saves human effort. It makes our lives better.

Yup - we all know that. The process has been on for the last 300 years.

Automation also leads to job loss.

Yeah... but new and more enriching jobs also get created. This compensates for job losses. This process has been on for the last 300 years.

The big question is… “Is it going to be different this time?” In the past, automation has saved human labor - physical labor and routine tasks. It relieved us of drudgery. It allowed us to focus on things that we as humans do best: Creative thinking and social interaction.

Now, computer programs are increasingly becoming better at tasks that were once thought to be the exclusive purview of humans. The segment where we have an advantage over computer programs is shrinking at a scary rate.

Nah ... the computer is still no match for humans. Computers of today can probably simulate the brains of an ant. But they have a long, long way to go before they can catch up with the human brain.

If you look at the tasks computers can do well, the list is amazing.

In February 2015, Gartner made an interesting prediction: That by 2017, a significant disruptive digital business will be launched that was conceived by a computer algorithm.

OK... OK... granted that computers are getting better at doing what we humans do. But throughout the history of industrialization, we have seen that when one type of job disappears through automation, different and more rewarding jobs get created. So why should we worry?

Though the jury is still out, the evidence suggests that the net job loss due to automation is real. Here are three articles that outline the evidence.

Hmm... If net job loss is real, then what happens to our society with so many unemployed individuals?

In my mind, there is no doubt that our society must undergo a massive transition to adjust to the new reality. We have to challenge some of the beliefs that we today take to be sacrosanct.

Here are four questions to think about in the context of large-scale job loss due to automation:

  1. Can price always be determined by “Demand and Supply”? Automation can ensure that supply will always exceed demand, and marginal cost (the incremental cost of producing one more item) is close to zero. In such a scenario, market dynamics change.
  2. Can “Pursuit of continuous Productivity Improvement” through automation remain a goal forever? All our basic needs can be fulfilled without human intervention. If people don't work then how will they earn? Can they get what they need without earning?
  3. Is there a limit to the “growth in demand”? We take it for granted that the world economy will keep growing forever. Growth can happen when every person consumes more and the number of consumers grows. There is a limit to both. It may take 50 to 100 years to reach that point. But what happens next?
  4. Should "Return on Investment" guide all our investment decisions? One of the fundamental principles of a market economy is that investment flows to the area where there is maximum return. But what happens when supply exceeds demand, and there are no growth prospects? What would you invest in?

Will this happen tomorrow? Maybe not... but there is no doubt that we are moving in this direction. If fundamental economic principles become invalid, there will a fundamental change.

I just hope that this change happens gradually... smoothly... peacefully.

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