It’s Time to Talk About AI-Enabled Job Destruction

Last week Kevin Roose wrote an interesting piece on Davos and the reticence of most Western CEO’s to talk about their automation efforts and these efforts’ (very much intentional) elimination of human labor. The CEO’s at Davos, noted Roose, got very nervous when asked about AI-driven job destruction, so they prefer to use terms such as “the Fourth Industrial Revolution” or “human-centered-A.I.” to discuss the increasing movement of white-collar jobs to machines.

The reality, however, is that first and foremost most corporate AI/ML efforts are aimed at finding ways to cut process cost significantly and cutting people out of the picture is the easiest way to achieve that goal. “People are looking to achieve very big numbers,” Roose quotes Mohit Joshi (the president of Infosys). “Earlier they had incremental, 5 to 10 percent goals in reducing their work force. Now they’re saying, ‘Why can’t we do it with 1 percent of the people we have?’” Roose also quotes Ben Pring, the director of the Center for the Future of Work at Cognizant: “That’s the great dichotomy. On one hand, they absolutely want to automate as much as they can. On the other hand, they’re facing a backlash in civic society.”

Interestingly, notes Roose, CEOs in Asia don’t seem as worried about social backlash, and we can look to them to get a sense of what Western CEOs may be saying privately:

For an unvarnished view of how some American leaders talk about automation in private, you have to listen to their counterparts in Asia, who often make no attempt to hide their aims. Terry Gou, the chairman of the Taiwanese electronics manufacturer Foxconn, has saidthe company plans to replace 80 percent of its workers with robots in the next five to 10 years. Richard Liu, the founder of the Chinese e-commerce company JD.com, said at a conference last year that “I hope my company would be 100 percent automation someday.”

If 100% automated seems like a fanciful goal, consider the results that a 2017 WEF article found in China:

Changying Precision Technology Company’s factory used to need 650 human workers to produce mobile phones. Now, the factory is run by 60 robot arms that work around the clock across 10 production lines. Only 60 people are still employed by the company — three are assigned to check and monitor the production line, and the others are tasked with monitoring computer control systems. Any remaining work not handled by humans is left in the capable hands of machines.

On a much larger corporate scale, Deloitte’s 2017 Robotic Process Automation (“RPA”) study promises similar outcomes with enough effort and investment. It found that:

  • 53% of respondents have already started their RPA journey.This is expected to increase to 72% in the next two years. If this continues at its current level, RPA will have achieved near-universal adoption within the next five years.
  • The benefits of RPA adoption are significant. Payback was reported at less than 12 months, with an average 20% of full-time equivalent (FTE) capacity provided by robots. RPA continues to meet and exceed expectations across multiple dimensions including: improved compliance (92%), improved quality / accuracy (90%), improved productivity (86%), cost reduction (59%).
  • 78% of those who have already implemented RPA expect to significantly increase investment in RPA over the next three years, yet scaling RPA is clearly proving more difficult than anticipated: only 3% of organizations have scaled their digital workforce.

So, according to Deloitte, the average company was able to use RPA to achieve 20% labor reductions in only 12 monthsWe can easily imagine what those numbers would be after five years of intense RPA initiatives. Indeed, with those kinds of results, it’s no wonder that 78% of Deloitte’s respondents plan to increase their RPA investments.

Now, for those of you unfamiliar with RPA, it’s basically the use of technology, usually a “bot” controlled by business logic, that aims to automate routine business and operational processes. Just as we can visualize a robot welding a car frame together, we can imagine an RPA bot completing a business process such as a credit approval or vendor check or even approving vacation time for an employee. In its most basic sense, RPA allows companies to remove administrative staff and replace them with machines, much as manufacturers once replaced production line workers with robots.

A couple of decades ago, RPA would have been just another management technique, but in the age of drastic economic inequality in which we live CEOs must tread carefully as they bring automation from the shop floor into the office cubicle. For this reason, writes Roose, companies are eager to claim that RPA efforts do not necessarily result in mass layoffs:

One common argument made by executives is that workers whose jobs are eliminated by automation can be “reskilled” to perform other jobs in an organization. They offer examples like Accenture, which claimed in 2017 to have replaced 17,000 back-office processing jobs without layoffs, by training employees to work elsewhere in the company. In a letter to shareholders last year, Jeff Bezos, Amazon’s chief executive, said that more than 16,000 Amazon warehouse workers had received training in high-demand fields like nursing and aircraft mechanics, with the company covering 95 percent of their expenses.

Deloitte, in what is surely one the most optimistic things written about RPA last year, makes a similar case that RPA is actually good news for workers:

[RPA] in turn creates opportunities for the human workforce in the increasingly challenging market for talent. Instead of considering RPA as a pure cost reduction exercise, businesses should be looking for opportunities to invest saved time in more fulfilling jobs and more flexible work arrangements, enhancing their employee experience.

These stories, notes Roose correctly, are rare, and Deloitte’s own data at the start of their report undercuts any optimism. Indeed, reading this comment reminded of a trip I took to India during a major outsourcing effort for a Midwest manufacturing client. I was in a delivery center in Bangalore, and I asked one of the techs what he thought happened to the worker in Ohio whom he had made redundant. The Indian employee replied breezily that he was sure the American worker had a much better job by now, no doubt in the same company or maybe in his own exciting startup. I replied that in all likelihood that American worker was over 40, almost certainly now unemployed and would probably never again in his life earn what he had earned before being outsourced. It was a harsh reply, but it was the truth that those of us on the front lines of globalization saw every day.

Now, a decade later, the same phenomenon returns, only this time there are no human winners and losers. The only winners are the bot makers –– and the shareholders, of course, who are demanding this next industrial evolution from their appointed CEOs. As Roose also notes:

Kai-Fu Lee, the author of “AI Superpowers” and a longtime technology executive, predicts that artificial intelligence will eliminate 40 percent of the world’s jobs within 15 years. In an interview, he said that chief executives were under enormous pressure from shareholders and boards to maximize short-term profits, and that the rapid shift toward automation was the inevitable result. “They always say it’s more than the stock price,” he said. “But in the end, if you screw up, you get fired.”

The only open question, writes Roose in closing, is “how the gains from automation and A.I. are distributed, and whether to give the excess profits they reap as a result to workers or hoard it for themselves and their shareholders.”

So here we are at the start of the next corporate labor battle: between the automators and those being automated, between the survivors of the next industrial revolution and its victims. If past is prologue, the victims are facing longs odds. But who knows, maybe this time things will be different. The Millennial generation, mired in college debt and about to inherit an increasingly dysfunctional set of Western democracies, may yet demand a different outcome. Maybe CEOs will start a dialogue with their boards and shareholders about the social impact of RPA and similar technologies. These dialogues might not change the eventual outcome, but at least an open socio-political discussion about the effects of white-collar automation (something that never happened with blue-collar outsourcing) could result in better social outcomes and smarter deployment of these innovations. After all, as Erik Brynjolfsson, the director of M.I.T.’s Initiative on the Digital Economy, says in the article: “The choice isn’t between automation and non-automation. It’s between whether you use the technology in a way that creates shared prosperity, or more concentration of wealth.”

 

Read this post on LinkedIn.

 

Advertisements
Carlos Alvarenga

Founder and CEO at KatalystNet and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s