I, Not Robot: Why The Rise Of SkyNet Leads To Automatic Unemployment For The People

Tyler Durden's picture




 

With so much hollow and pointless discussion over the past week, month and year over such fundamentally trivial things as who will inject more money faster, who will be bailed out first, who will go back to their own currency before everyone else, it is easy to forget that reality actually matters. And the reality is not who has their CTRL-P macro stuck, but what does the future of the world truly hold when one sidesteps such idiotic flights of fancy that debt may be cured with more debt. In order to completely change the topic from what has become trivial and generic - i.e., the various encroaching forms of central planning: Fed, SCOTUS, G-8 through G-20; European Finance Ministers, and now, with the ESM passing German parliament, the German Constitutional Court, we focus on something few have discussed, yet all have a morbid fascination with: Robots... And China. And why the combination of the two just may be the most dangerous thing for China's several hundred million strong migrant labor force, which, on the margin may just be the deciding factor defining the engine of global growth for the next decade. Oh, and did we mention global structural unemployment which will only get worse as increasing automation leaves more and more millions collecting their 99 weeks of extended unemployment benefits.

And since we have written far too much this week, we will let the charts do most of the talking.

Machinations and autobots, and unmet Chinese markets:

Robots and unemployment: correlation or causation?

Finally, here is why China better have learned all the tricks of the labor market manipulation trade from the BLS. It will need it.

Those who are lazy and/or have been replaced by a robot lately, can stop reading here.

For everyone else, here are some parting thoughts from Goldman's Hugo Scott-Gall

Who does automation benefit more? Low-cost producers in Asia or high-value manufacturers in the developed world? In the near term, it’s likely that we’ll see an accelerated adoption of automation in Asia, and in China in particular, as companies there face rising wages, increasing competition and slowing global demand and pricing pressure that necessitates higher efficiency. And to add to it, financing such capital investment is perhaps most convenient (and quickest) in a place like China in the current environment. Wrapping up that argument is the economy’s conscious effort to industrialize and move up the manufacturing value chain. When higher levels of automation materialize, it should lead to a pick up in productivity (off a low base – China has c.90 robots per 10,000 workers compared to more than 300 in Japan). But will it provide a sustainable advantage?

 

Transforming a factory teeming with people to an automated assembly line of complex machinery is easier said than done. It not only requires highly skilled talent and experience to manage the process (tough to acquire even through global recruitment), but also a much deeper shift in the way the manufacturing process is planned and executed. We think the advantage here lies with the West, together with Japan and South Korea, which is why they should be able to maintain their lead on higher-value exports (which includes robotics), for most of the coming decade. Does this mean manufacturing facilities will move back to the West? Taking cheap labour out of the equation, manufacturing facilities must stay close to end consumers (which is Asia for some sectors like autos, smartphones etc.), having balanced out the transportation costs and IP risks with associated infrastructure costs.

 

Companies that incorporate automation in their manufacturing process should see the labour intensity of their operations fall at the expense of capital intensity, though this may not be a 1:1 match and the payback could take time – lower asset turn versus higher EBITDA margin. Also, setting up industrial robots (with average life-spans of 12-15 years, but no pension costs!) requires management to have longer-term visibility and sound forecasting skills. Automation should also reduce working capital as production lead times fall, thanks to scheduling flexibility (i.e., if inventories have been built, or demand is weakening, it’s easier to run the machines for fewer hours or even shut them temporarily, at the expense of lower capacity utilization, than to reduce the number of employees – the cash cost of production falls and this advantage should be weighed against debt servicing if any). In essence, automation most likely works for a company with a healthy balance sheet, good demand visibility and superior industry positioning.

 

Automate and eliminate

 

Finally, we address the potential impact of automation on human capital. It’s easy to be wholly negative in the current environment and conclude automation would drive structural unemployment, leading to lower disposable incomes and weaker consumption. And this would not be completely wrong – we think the sticky unemployment we are seeing in the US and in Europe has a lot to with jobs permanently eliminated by technology. The average duration of unemployment in the US has never been as high as in this downturn, and this follows the relentless export of jobs to lower-cost countries over the past decade or so, making it particularly painful (and for a period slowing down the penetration of automation). And, ceteris paribus, you could envision a world dominated by a machine-to-machine economy, where most things are done by intelligent technology, leaving only highly skilled people with the lion’s share of the limited jobs. This would lead to further income inequality. Would estimates of global population growth remain the same if we did not need 10 bn people, and if we didn’t have the means to feed them? And could automation then be seen as a driver of globalisation that through its success provokes de-globalisation?

 

In mankind, we trust

 

But we take a more positive view than the bleak dystopian one outlined above. The global workforce has been able to adapt to the advent of machines since the industrial revolution, and the subsequent evolution in the types of jobs that a typical economy has to offer. When more and more women entered the workforce in the 1960s and 1970s, particularly after automation in the home, the developed countries could handle the boost that gave to their workforce, since they were transitioning from a physical, manufacturing-based economy to a services-based one. We could see something similar happen with automation too. Twenty years from now, it’s more likely that there will be different sorts of jobs to fill in the gap that technology is creating now. But this will not happen without short-term dislocations, as the current workforce needs to be better trained, not for a particular type of job, but to be nimble enough to evolve along with the changing needs of the world. This will take time, perhaps even a generation, and until then automation could continue to hurt the labour market.

 

To conclude we think automation is spawned from innovation and technological advancement. Things that the West and the developed world have been very good at. Automation can bring with it a productivity surge for industries that employ it, and those that could potentially employ it. Initially automation is an attractive way of reducing labour costs and the risks associated with labour. However, increasingly it is a more meaningful driver of product quality and process, and therefore an important part of competitive advantage. We expect automation penetration to increase and can see winners in both providers (Andritz, Spectris, ABB, Dassault) and users like (Sirona, Sonova, Nissan, Rio Tinto and Apple).

Well, there's the forced utopian view. And then there is the one which those who are unemployed for years and years will have no choice but to adopt, if for no other reason than to create a cognitive dissonance barrier that preservers the last shreds of one's dignity: namely that it is all the robots fault that structural unemployment is now worse than it has ever been.

And there is nothing some central banks' printers can do about that.

Maybe the Terminator movie was right all along...

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Fri, 06/29/2012 - 18:08 | 2574848 ACP
ACP's picture

"I" want a handout.

...in exchange for my vote, BITCHEZ!

Fri, 06/29/2012 - 18:16 | 2574860 mikla
mikla's picture

Sadly, that's a rational response, as that's the only way to get ahead.

The implications are massive, and counter-intuitive:

  • When you cannot "diversify" your investments, it makes no sense to diversify.
  • When you can make more money speculating on public largesse, it makes no sense to invest.
  • When the ROI on purchasing politicians is outstanding, it makes no sense to build an economy.
Fri, 06/29/2012 - 18:17 | 2574868 battle axe
battle axe's picture

But the real story is Tom Cruise and Katy Holmes are getting divorced..../sarc

 

Fri, 06/29/2012 - 18:35 | 2574913 Winston Churchill
Winston Churchill's picture

Which thingamejigs do robots buy ?

Fri, 06/29/2012 - 18:54 | 2574942 The Disappointed
The Disappointed's picture

The Tin Woodsman still needed someone to lube him up after the rain fell.
If Dorothy had refused to use the 'oil can' on him, she could have taken the axe and his job.

Fri, 06/29/2012 - 19:54 | 2575068 Tinky
Tinky's picture

Speaking of the Tin Woodsman...

http://mtanga.com/Larson9.jpg

Fri, 06/29/2012 - 20:13 | 2575093 AldousHuxley
AldousHuxley's picture

Japanese elites saw robots as the solution to declining birth rate.

 

robotics should be America's future......only way to compete with BILLION Chinese slaves is to have one middle class American oversee 100 robots that work 24/7.

 

Thus, Rockefellers are funding human depopulation. Elites no longer need Americans. Elites will no longer need Chinese.

 

Wait until you have robots making robots.

 

Terminator was a great movie.

Fri, 06/29/2012 - 20:50 | 2575150 BKbroiler
BKbroiler's picture

Man, this why I read ZH.  Articles like these are published light years before an honest discussion about it opens anywhere else.  Good work Tylers.

Fri, 06/29/2012 - 20:56 | 2575166 Big Corked Boots
Big Corked Boots's picture

The whole future is turning into a Philip K. Dick story.

http://en.wikipedia.org/wiki/Autofac

 

Fri, 06/29/2012 - 21:42 | 2575226 Yes_Questions
Yes_Questions's picture

 

 

Yes it is.

Fri, 06/29/2012 - 21:57 | 2575253 Shocker
Shocker's picture

There is plenty of reasons for the current unemployment problem.

Policies, regulations, a little bit of everthing.

http://www.dailyjobcuts.com

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Fri, 06/29/2012 - 22:22 | 2575283 Yes_Questions
Yes_Questions's picture

 

 

I'm sure there are plenty of reasons.

But there is only one cause.

 

Sat, 06/30/2012 - 04:36 | 2575533 Barefooted_Tramp
Barefooted_Tramp's picture

Machines are the big taboo of  technocracy. They HAVE to be go(o)d.

So better find some fake causes for the disastrous effects of machines.

Sat, 06/30/2012 - 11:52 | 2577036 Yes_Questions
Yes_Questions's picture

 

 

Yeah.

Everyone seems to agree that automation benifits capital through reduced payroll, but there is no apparent agreement on what to do about the idle human talent that results from it.  

Machines deployed to reduce/eliminate wages and idle workers with no money to consume goods dependent on automation.

 

Can there be peak automation?

 

 

 

 

Sat, 06/30/2012 - 08:20 | 2576185 Bobbyrib
Bobbyrib's picture

Policies and regulations? Only with small businesses. The multi-nationals are exporting jobs and importing cheaper labor through the visa programs. The middle class wealth started to flee the country when the jobs (whether blue or white collar) started to flee the country. The credit bubble only made the economic problems of the middle class worse. You can put in "pro-growth policies and remove regulations all you would like, it still won't get you down to the point of 4-5% unemployment anytime soon. Maybe it will help by up to .5%. This country has been gutted by the oligarchs and opportunity has gone out the window.

What I am thinking of doing is going to a country with low taxes to try to live off the land. I want to try to be able to sell to the massive amount of slave laborers throughout the world. This country is trying to go back to the policies of the 19th century and I don't want to be here when the oligarchs succeed.

 

Sat, 06/30/2012 - 11:20 | 2576900 Yes_Questions
Yes_Questions's picture

 

 

You see it.

Its the "reasons" that cloud thinking on the why.

The cause is profit and its blind loyalists are ushering in collapse. 

Sat, 06/30/2012 - 02:09 | 2575487 BBullionaire
BBullionaire's picture

@Bkbroiler.  Not entirely true. Charles Hugh Smith explored these issues several years ago in both blog posts articles and his book survival+ released in 2009 which had a chapter called' the end of paying work.' If i remember rightly his solution was to have multiple income streams by learning a host of new skills.

Fri, 06/29/2012 - 20:54 | 2575161 spinone
spinone's picture

a car is made with less than 24 hours of human labor.  the rest is automation

and robots do make robots:

 

http://www.youtube.com/watch?feature=player_embedded&v=-SREct28lJM

Fri, 06/29/2012 - 23:07 | 2575326 A Nanny Moose
A Nanny Moose's picture

Someone has to build the networks for those robots to communicate. Someone has to secure those networks so the robots don't get Stuxnetted.

Sat, 06/30/2012 - 04:59 | 2575542 Barefooted_Tramp
Barefooted_Tramp's picture

Someone has to build the networks for those robots to communicate.

Right, but usually only slaves have to do things. Humans therefore are merely servants of the machines.

Someone has to secure those networks so the robots don't get Stuxnetted.

Really? Must be a heck of job to secure all those networks. Something like playing bodyguard for the smooth functioning of the machines. Something to be proud of...

Sat, 06/30/2012 - 10:07 | 2576463 BigJim
BigJim's picture

I am genuinely surprised to see so many of my fellow ZHers - most of whom have a much sounder grasp of economics than the average person - falling for what is just is essentially updated Luddism.

Ludd, if you remember, objected not to new technology per se, but to new technology putting the weavers out of a job.

You're all falling for the lump of labour fallacy. It's existed throughout modern history; farm machines would ruin everyone because they'd make farm labour redundant (remember when 90+% of people lived rurally?); cars would raise unemployment because everyone working with horses would no longer be needed, etc, etc. Remember back in 1945 Eleanor Rossevelt, bless her ignorant Statist heart, said: “We have reached a point today where labour-saving devices are good only when they do not throw the worker out of his job.”

Look around you; there's no end of things that need to be done. The reason they're not done is because, presently, they're not economically viable to do. When more human labour is freed up from tedious tasks like planting and harvesting crops, and digging with shovels, and bolting cars together, the price of consumer goods and services drop meaning we can afford more stuff, and meanwhile hire people to do stuff that 100 years ago only the truly wealthy would have dreamed of doing (getting medical treatment, going to a gig instead of staying at home scrubbing collars, going on holidays, etc).

The reason we have clean sheets is because we're not having to dig tubers out of the ground. Wealth isn't work; you're confusing product for process. Wealth is stuff; it's better for everyone if a car is produced for $5000 by a robot than for $25000 by hand.

How many cars do you think there'd be if all we had were hand-builts like Bentleys?

Stop repeating this nonsense.

Sat, 06/30/2012 - 11:21 | 2576904 Ying-Yang
Ying-Yang's picture

And service jobs enhance our culture over manufacturing jobs.. (sarcasm)
Manufacturing is vital to growth in technologies. Globalism is good for stockholders and management. It would be better if we practiced more nationalism. Produce and manufacture goods locally to put locals back to work.
Don't build Bentleys... build cars that can be fixed where pride of craftmenship is superior to higher margins for corporate cartels. You should worry how well your neighbors are doing. You should care if they have jobs and can contribute locally. They live where you live.
Should you wish to reverse the economic trend make do by buying local and when more people do... watch pride return.
Globalism can be defeated by caring about neighbors buying local and not worshipping the "stuff" we can afford.

Sat, 06/30/2012 - 16:31 | 2577549 BigJim
BigJim's picture

Glaobalism's great. It means a Chinaman can buy my products and services, and I can buy his.

Nationalism? I'm guessing that here, you're advocating protectionism... ever heard of Smoot-Hawley? That worked well, didn't it? Another country that practiced wide-spread protectionism is India. Hmmm.

Feel free to hand-build your own car. I personally would rather buy a mass produced Toyota, mainly because I can afford it. I doubt your hand-built vehicle will be anywhere as cheap, or reliable... unless, of course, you use mass-produced parts to build it with.

The reason we can't afford to buy anything manufactured here isn't because of globalism. It's because our government has loaded us down with shedloads of burdensome regulation and legislation. That, and we have had a property bubble, which also raises the amount we need to be paid just to cover our costs. Oh, and a parasitic financial sector, whereby we essentially pay rent for our very currency. And a shedload of debt.

Incidentally, if you're so keen on protectionism, why stop at the nation-state level? Why not only buy goods from people in your own state? County? Or even neighbourhood?

Why stop there? Why not just restrict your purchases to your immediate family?

PS - it's yin yang, by the way.

Sat, 06/30/2012 - 18:36 | 2577682 Ying-Yang
Ying-Yang's picture

No it is my handle... dumbass
It is spelling bait for shitheads and you took the bait.

"Globalism is great" says it all. Have a nice life.

Sat, 06/30/2012 - 23:28 | 2577992 Iwanttoknow
Iwanttoknow's picture

Ying-Yang,Since globalism is great,let's ship him to sub-sahran africa.

Sun, 07/01/2012 - 15:41 | 2578393 BigJim
BigJim's picture

Globalism means different things to different people, but in the context of this debate we're using it to mean free-market transactions beyond nation-state borders.

It's good to see you advocating coercive measures in response to people calling for voluntary transactions - shows where your heart truly is.

Incidentally, why not ship me off to Sweden? I have far more transaction with their citizens than Africa's.... but I suppose, like people advocating socialism, you'd only use examples that don't disprove your thesis.

Sun, 07/01/2012 - 10:11 | 2578391 BigJim
BigJim's picture

Hmmm, I see... so... you don't know how to spell your own handle, and that makes me the dumbass?

I can see now why you won't engage in actual debate.

Fri, 06/29/2012 - 23:25 | 2575350 cranky-old-geezer
cranky-old-geezer's picture

 

 

The squid never showed similar concern when tens of thousands of American manufacturing jobs were being sent to China. 

They're worried now about a few robots taking some of those jobs?

I get annoyed at all the China bashing here.  I think it's jealousy.  They're the rising economic power in the world, we're sinking economically, and people just can't accept that.

Tough shit, it's reality.  And we helped create that reality.

Sat, 06/30/2012 - 04:54 | 2575539 Colonel
Colonel's picture

Damn that bitch's voice is annoying.

Fri, 06/29/2012 - 21:24 | 2575204 Michael
Michael's picture

Sarah Palin just called Nancy Pelosi a "Dingbat".

Fri, 06/29/2012 - 21:47 | 2575241 Yes_Questions
Yes_Questions's picture

 

 

of milfs and avatars..

Sat, 06/30/2012 - 16:03 | 2577527 roadhazard
roadhazard's picture

Pot meet kettle.

Fri, 06/29/2012 - 22:30 | 2575287 post turtle saver
post turtle saver's picture

Electricity and other consumables (hydraulic fluid & lubrication), parts, and maintenance contracts. All of which currently require capital, materials, labor to produce.

Sat, 06/30/2012 - 04:42 | 2575535 FearedDevil
FearedDevil's picture

oil... :)

Fri, 06/29/2012 - 19:24 | 2575005 Raynja
Raynja's picture

if only tom could fuck like a robot, katy would have stuck around ...

Fri, 06/29/2012 - 20:15 | 2575095 AldousHuxley
AldousHuxley's picture

feminists gained power over men when they discovered dildos.

Fri, 06/29/2012 - 20:28 | 2575114 francis_sawyer
francis_sawyer's picture

So ~ Max Fisher, among other things, gets credit for 'girl power'?... Who knew?

Fri, 06/29/2012 - 21:58 | 2575254 geoffb
geoffb's picture

I'd bet that Tom can fuck like a robot as long as its another dude.

Fri, 06/29/2012 - 23:36 | 2575361 baby_BLYTHE
baby_BLYTHE's picture

Size matters. Tom is under 5" 7'.

Sat, 06/30/2012 - 01:12 | 2575458 Vic Vinegar
Vic Vinegar's picture

Holy cow b_B that's witty.  

Sat, 06/30/2012 - 09:06 | 2576347 BlankfeinDiamond
BlankfeinDiamond's picture

Five inches, seven feet?

Sat, 06/30/2012 - 00:23 | 2575408 Divine Wind
Divine Wind's picture

 

 

Regardless of the logic, opportunity awaits the prepared mind.

LEARN MANDARIN. Make your kids learn MANDARIN like you would make them learn piano. Beat it into them if you must.

I had the good fortune of living in Taipei and Hong Kong for a number of years and as a result, the benefit of that full immersion thang.

Long-haired dictionaries were quite useful, but by no means mission critical.

LEARN MANDARIN. You will be doing yourself and kids a huge service.

It is called ADAPTING to those things over which you have no control.

The world is changing. Adapt.

 

Here are FREE language courses developed by the U.S. Gov years ago for 40+ spoken languages.

http://fsi-language-courses.org/Content.php?page=Chinese

 

Sat, 06/30/2012 - 04:14 | 2575528 BigDuke6
BigDuke6's picture

I know u mean well but you'll do better to pump buying guns and mining your fortified enclave around here these days

Sat, 06/30/2012 - 10:59 | 2576766 The Big Ching-aso
The Big Ching-aso's picture

 

 

Oh yeah right learn Mandarin.  What about China first learns English?  The inane BS is relentless.

Sat, 06/30/2012 - 02:35 | 2575499 A Nanny Moose
A Nanny Moose's picture

Free Shyt 2012!

Bytchez!!!

Sat, 06/30/2012 - 07:54 | 2576088 Ol Man
Ol Man's picture

I am a robot technician... luckily the things still break down...

;)

Fri, 06/29/2012 - 18:13 | 2574849 MillionDollarBogus_
MillionDollarBogus_'s picture

And then there is robo-trading...the ultimate evil...

Speaking of robo-trading, where is our old friend RoboTrader....????

I may have to copy their identity and torture em a bit..........  

Fri, 06/29/2012 - 20:21 | 2575106 AldousHuxley
AldousHuxley's picture

robots crash....

 

 

Fri, 06/29/2012 - 20:54 | 2575163 BKbroiler
BKbroiler's picture

If you're gonna jack an avatar from a regular, at least mimick or mock their style effectively.  Copying identity is the easy part, but wit is the realm of the gifted few. MDB fo eva

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