People empowered by automation will bring us out of this crisis
An Amazon Fulfillment Center in Washington state. Workers have partnered with machines to move and ... [+]
The COVID-19 pandemic has halted economic activity globally. Factories and warehouses are forced to shut down to protect their workers, while those that are essential struggle with preventing outbreaks. Could a more automated workforce have alleviated the economic damage COVID-19 has caused? The International Federation of Robotics (IFR) reported the cost of robots has decreased and continues to decrease enabling wide adoption. South Korea has seven robots per 100 workers and every third robot installed is in China. A 2019 report by Oxford Economics predicted 12.5 million manufacturing jobs will be automated in China by 2030. In the aftermath of the pandemic, it could be many more.
So what does this mean for workers? Before the crisis hit, fearful reaction and alarmist headline buzz immediately harkened to predictions of massive job loss, disproportionate allocation of prosperity and further political polarization. Now that we are in the midst of massive job loss, that hasn’t been caused by automation, the question is now “How can automation accelerate our recovery and protect us from future pandemics?”
Prior to the COVID-19 outbreak, estimates on the specific impact automation will have on jobs varied drastically: McKinsey projected up to 30% of jobs in the US will be automated by 2030, and “automation and AI will lift productivity and economic growth, but millions of people worldwide may need to switch occupations or upgrade skills.” The World Economic Forum (WEF) estimated the emerging professions resulting from automation could account for 6.1 million jobs globally between 2020 to 2022. We have yet to see how the global pandemic will impact jobs in the long term, but it’s safe to assume that we will see acceleration in automation where it keeps human workers, and consumers, safer.
Prior to the crisis, the WEF reported that automation will generate “vast new opportunities for fulfilling people’s potential and aspirations.” Now there is evidence that automation protects humans. Consider logistics automation: it protects warehousing and delivery workers from being exposed to pathogens. Robots continuously cleaning hospitals avoid imperiling health workers. Digital payments obviate exchanging money, cards, and signatures for those who work in retail.
Automation and jobs are not mutually exclusive. To mitigate uncertainty as we find our way out of this crisis, we must focus on humans achieving their full potential and aspirations. This means founders, investors, industry leaders and public policy-shapers must all emphasize workers and the customers they serve.
Focusing on Three Key Factors: Automation, Education and Prosperity of Human Workers
In 2017, I wrote a post-presidential election piece about how both candidates overlooked automation and education as powerful catalysts behind shaping future jobs. Instead, both Clinton and Trump talked about minimum wage, taxes, and trade agreements. It was a missed opportunity of epic proportions for both sides. Instead, they could have emphasized opportunity for better-paying, higher-quality jobs through a skilled workforce partnered with automation, and allayed the fears of those who are anxious about the future of work.
In this crucial election cycle, we need to select candidates who 1) have a plan for how technology can synergistically enable humans, and 2) emphasize the important role of continuous education.
Things have evolved in the last three years as the reality of automation’s arrival dawned for policymakers. The Trump administration has gone from Treasury Secretary Mnuchin admitting at a 2017 Axios ‘Newshapers’ event that job automation “is not even on our radar” to an about-face with the formation of the National Council for the American Worker in 2018. The council's purpose is to detail a way forward through the Fourth Industrial Revolution. It amplifies the alarm that “our country’s education and job training programs have prepared Americans for the economy of the past. The rapidly changing digital economy requires the United States to view education and training as encompassing more than a single period of time in a traditional classroom.”
In a further evolution of the administration's policy, the March 2019 Economic Report of the President indicated that the impending threat of automation and its impact on jobs had become “high priority” and that “astute policymaking will play an integral role in leveraging technology as an asset for the country, while mitigating potential disruptions.”
In light of the pandemic, we can expect to see supply chains existing closer to home. To achieve the replacement of cheap labor found in foreign markets, automation will be a critical component in this trend.
While Biden supports tax incentives, government grants and technical training programs, Sanders made automation a major point in his speech announcing his candidacy for president the second time; running on a mix of policies like raising the federal minimum wage and federal jobs guarantees. Whether it’s from a new administration or the existing one, we should expect to see massive economic recovery efforts going towards re-training.
The best plan has to be bi-partisan and human-centered. It is one that will need to be rapidly iterative like the technology advancements themselves. Notably, we shouldn’t automate just for the sake of ‘cool’ technology. I agree with MIT Economics Professor Daron Acemoglu’s definition of the ‘right’ technology and ‘so-so’ technology. The right technology creates opportunities for higher quality work versus a zero-sum game of destroying jobs. An example of the right technology has been how typesetters have moved up the value chain with graphic design. So-so technology completely displaces workers and doesn’t offer the end-user a radically improved experience or service.
Venture investors must seek the “right” technology, which yields higher-wage, rewarding work and higher-quality, cheaper, more sustainable products and services. The key is to focus on how we can best adapt and who can lead public policy in that direction.
Most well-known automation technologies never replaced humans; instead they took over tedious, dangerous and onerous tasks. In 1885 William Burroughs, for instance, didn’t wipe out accountants’ jobs with his calculating machine. The new inventions eliminated the long hours of tedious addition. He innovated the machine because he was tired of the long hours it took to do his job. The resulting machine and commercial entity based on this innovation is the DNA of Unisys, the multi-billion dollar IT company.
The most important lesson from the past and to avoid repeating as we recover from this crisis is that the most recent technical advances haven’t resulted in a shared prosperity. MIT reports that technology has led to more productivity over the last 40 years, but has failed to translate into shared prosperity for workers. From 1973 to 2016, labor productivity rose by 75%, but workers' compensation only rose by 12% and the stagnant earnings hit people of color particularly hard. We are at a unique point in history to course correct for more shared prosperity.
To be successful we all need to get comfortable with the notion that we will all be lifelong learners and will need to be open to ongoing skill sharpening or even entirely re-skilling as we progress. I have had to re-skill in the past and will likely need to again, as will you.
So our challenge when turning to the future of work is to champion the notion that ongoing learning will need to be at the heart of a job shift that distributes prosperity more evenly through society. Happily, this is where the two ends of the political spectrum currently agree.
In light of all these macro issues, founders have a big opportunity to advance automation at this time of crisis towards advancing human prosperity. And smart investors should seek to partner with those founders acting on this opportunity. Here are four lessons for those aspiring founders building great robotics startups:
Articulate a vision for a future where humans are empowered by machines
Great startups uncover a unique, non-consensus market opportunity, and invent a powerful tool that will endow them with a dominant position in that market. We seek founding teams that can articulate a vision to attract the dollars and talent to build the tools to execute on this opportunity. These people are the kernel of fantastic teams. Those teams will build upon those tools to build amazing companies.
Fantastic founders will articulate a hypothesis around how they can build a massive business that solves a big problem with the secret they have uncovered, or tool they plan to build. They will broadcast that hypothesis to attract the amazing talent. They will construct a plan for reducing that hypothesis into an exciting business. They will raise the capital required to build that business, and lead the people who will be held accountable towards devising and executing that plan.
Acquire a deep understanding of how your automation product is impacting the metrics your customer’s business, and how much they will pay for those improved metrics
Great founders gain a deep understanding of their customers’ current circumstances to benefit them with automation, rather than just push fancy robots. They build a team with deep relationships into the customer community. This creates almost-instant credibility for teams and the product, to attract other big customers, as well.
Hire talented teams that speak to customers in their own language, instilling confidence that their robot will deliver on their promises
Some of the best innovations come from outside the sector where they will be put to use. One example is Aeva, founded by an extraordinary team out of Apple, who discovered that sensors used to characterize electronics can help robots “see” in a way cameras, radar, and lidar could not.
The most effective startups “speak the language” while drawing tech from a completely different field. These high quality interactions bypass the many years it would have taken for these “outsiders” to build credibility in a new industry.
Help shape policy to promote continuous education programs
The WEF report says that “collaboration between the public and private sectors can advance an entirely different agenda—one in which people’s futures as well as global economic prospects are enhanced by mobilizing worldwide mass action on better education, jobs and skills.”
Regulation plays a key role here, as do industry leaders. They can ensure their trade associations are paying attention to public policy so that it ensures automation is concurrent with re-training our workforce.
Prior to the economic crisis, we were beginning to see a collective realization that a company’s workforce is its primary source of value creation. We saw shifts happening in how firms account for their human capital investments with an, an ISO certification for human capital and the Security Exchange Commission’s Investor Advisory Committee recommending increasing reporting requirements for companies that are making workforce investments. A Harvard Law School Forum on Corporate Governance report found that many firms are at nascent stages of voluntarily reporting their governance and management of human capital. Soon, we expect agreed-upon KPIs, one of which will be investment in education and re-training.
We rely on amazing talent led by fantastic founding teams to better position our workforce and our nation in the global economy. They are building companies in response to the opportunities this crisis presents. We expect that many once-in-generation companies to emerge, and we are actively seeking to partner with them.
