3rd Industrial Revolution

Applebees automates, and brings a new world of jobs one step closer

Summary:  The FM website serves to help readers more clearly see the future (it’s an unplanned emergent role). Today we look at one aspect of America’s future, bring both peril and promise: the next wave of automation. It’s already here, but seen by few. Today is not too soon to consider how this might affect your family.

Seeing the future

Ron Chapple/Getty Images

“Fortune favors the prepared mind.”
— Lecture by Louis Pasteur, 7 December 1854

.

Our experts fret about decreasing fertility, slowing population growth (we need immigrants! otherwise wages will rise and consumption fall!) and aging populations of longer-living retirees (we must slash social security and medicare!).

These are daft recommendations for a nation with real wages stagnant for a generation — taxes on the rich near multi-generational lows — corporate profits at record highs — inequality rising — a health care system grossly less cost-effective than that of any other developed nation’s — and perhaps most important, the next wave of automation already hitting us.

From another perspective, these problems — centered on the Federal government’s debt and liability for retirement care — are operationally easy to fix. Embarrassingly so, like pouring water from a boot with the instructions on the heel. Especially when compared to the problems of our peer nations (e.g., unifying the nations of Europe, or Japan’s government avoiding financial collapse from its mind-blowingly large debt).

Experts label these issues “politically difficult” to avoid asking if we have become too incompetent to govern ourselves.

Meanwhile a far greater challenge has already begun, although still invisible to our experts: the next wave of automation. We can as yet only guess how many jobs this will extinguish, as it does to the service sector what previous waves of automation did to farming and manufacturing. Both skilled and unskilled jobs will go away in unguessably large numbers. Previous posts (see below) discussed some of the first effects. Here’s another…

Applebees Tables Get Tech Treatment

100,000 Applebee’s Tables Get Tech Treatment; DineEquity Announces Rollout of E la Carte Tablets“, Restaurant News, 3 December 2013 — Excerpt:

Today, Applebee’s steps into the future to redefine and enhance the guest experience through the installation of 100,000 E la Carte Presto tablets, powered by Intel, on every table and multiple bar positions at more than 1,800 Applebee’s® restaurants in the United States by the end of next year.

DineEquity, franchisor of Applebee’s and IHOP® restaurants, announced the relationship with an aggressive schedule for 2014 installation throughout the Applebee’s system. The tablets, which enable guests to add to their orders, pay and play games from their seats…

.

How many fewer waiters will we need as these roll out? Eventually having a person take your food order will seem as reasonable as having someone cut your food — or pump your gas.

This wave of automation has just begun eliminating jobs. Parking lot attendants and toll booth operators. Checkout clerks. Now we see the wave coming to waiters. And clerks who prepare, process, and file paper (the savings from digitalization are almost unimaginable). Middle class jobs, too. For example, the university system has begun the slide to a radically different structure (since the finances of the current one is unsustainable) — universities with more tech and fewer teachers.

Millions and millions of jobs will disappear with stunning speed during the next few decades.

Automation need not be feared. Many of the dooms we fear will disappear along with the lost jobs. Automation improves productivity, giving us more national wealth and income. We need only adapt our society to gain its benefits, minimize the trauma of the transition, and share the benefits (which we have failed to do with the gains from the last 30 years). We want to succeed like Britain did in the 1760 – 1840 period, with internal peace and prosperity. We do not want to follow France’s path during that period.

Planning for success require that we reassess America’s strengths and weaknesses. For example, economists see as strengths our relatively high fertility and attractiveness to immigrants. True in the past, but not so as automation begins another cycle of job destruction.

In the 21st century population growth will not be necessary for economic growth.  In this new world Japan might become the nation best prepared for the next wave of automation — as seen in the below graph from “Japan Meanderings”, Christopher Woods, CLSA, 5 December 2013. Falling population for a world with more machines and fewer jobs, leaving a richer people in a greener land.

Japan's demographics

Christopher Woods, CLSA, 5 December 2013

(3) For More Information about the robot revolution

(a) Dynamics of the robot revolution

  1. The coming big increase in structural unemployment, August 2010
  2. The coming Robotic Nation, 28 August 2010
  3. The coming of the robots, reshaping our society in ways difficult to foresee,
    22 September 2010
  4. Economists grapple with the first stage of the robot revolution, September 2012
  5. The coming big inequality. Was Marx just early?, 27 November 2012

(b) First signs of the robot revolution appear

  1. The Robot Revolution arrives & the world changes, Apr 2012
  2. In Friday’s job report you’ll see early signs of the robot revolution!, 5 December 2012
  3. Krugman discovers the Robot Revolution!, 9 December 2012
  4. How do we respond to the Robot Revolution?, 11 December 2012
  5. 2012: the year people began to realize the robots are coming, 3 January 2013
  6. Journalists reporting the end of journalism as a profession, 19 March 2013
  7. The next step of computer evolution: becoming bloggers, 20 March 2013
  8. Two proposals for dealing with the robot revolution (the next wave of automation), 20 August 2013

.

.

Advertisements

12 replies »

  1. Sir, I do agree that technology and automation is destroying jobs that require skill and talent on a massive scale but there is also a countervailing tend, towards jobs that contribute nothing to society or the economy, or as we in Australia call “bullshit jobs”.

    For example, in the higher educational system, technology is being used to reduce the number of teaching positions, at the same time increasing the number of administrators, to what and why I am not too sure. The same also occurs in the complex US health care system (which is by design), where there are more managers than doctors and nurses.

    The same can be said in may organizations through out the west, ranging from finance, military, security services to politics. So I wonder if these jobs, which are political in nature and also insulated from changes in technology( thus insulated from social and economic reality) is one of forces that is contributing to the political crisis in the United States and the West.

    Like

    • Winston,

      I too see the rise of admin overhead, in its bewildering array of forms. However, I do not believe these result from technology. Increased bureaucracy is an age-old problem in sclerotic organizations, going back at least to Rome.

      The cause of this lost dynamism is a mystery to me. I agree it is a serious problem.

      Like

    • The cause of this lost dynamism is a mystery to me.

      Dynamism existed when state was dirigist and pushing for worthy goals; win WWII, go to the moon, war on powerty, civil rights…
      Neoliberalism propaganda that state should not interupt private sector is succeding.

      Like

    • Jordan,

      “Dynamism existed when state was dirigist and pushing for worthy goals; win WWII, go to the moon, war on powerty, civil rights”

      The US had a dynamic society in the 19th and early 20th centuries, when we had a small laissez-faire government.

      Like

    • Yes, US had boom and bust period in 19th and early 20th centuries. And also a lot of new land to spread around and new oil resources. Giving new lands to railroad barons for almost free was a dirigist government.
      It might not be very big government but only if you count in amounts of money that they did not charge it to railroad and oil magnates for lands. But in amounts of land it owned before giving it away…. OPS. Very very BIG government.

      What it has now? IT technology? but it has to have a way to spread benefits of it as you said.
      And that comes only by dirigist government.

      Like

    • Jordan,

      “Giving new lands to railroad barons for almost free was a dirigist government.”

      They were given land (and government bonds) in exchange for building railroads that we not economically viable at that time. That is not “for almost free”.

      Dirigisme was originally coined to describe the policies of post-WW2 France. It is quite mad to so describe late 19th C America. States have been building transportation infrastructure back to Rome, for reasons obvious to most of us (if not Jordan). That doesn’t make them dirigist.

      Almost everything you post is wrong. You are totally resistant to facts — so posting replies are a waste of time. No more. Additional comments are blocked.

      Like

  2. Japan’s government avoiding financial collapse from its mind-blowingly large debt).

    For how long have people been saying that same prophecy? 10, 15, 20 years?

    Like

    • Jordan,

      You are, of course, confused. How long people have been predicting something is only relevant if you know what they are predicting. In this case, that means at what date they are predicting Japan’s government debt will cause severe problems.

      Since their net govt debt is far lower than their gross debt, and almost entirely held by its citizens, forecasts have mostly been for severe trouble in the future.

      After a quarter-century of economic stagnation, supported by massive fiscal deficits and zero-interest rate, that future might be coming into view. Given their great social cohesion, specific forecasts are, however, few.

      The earliest forecast of severe and perhaps intractable problems for Japan was in The Enigma of Japanese Power, published in 1989. The author’s analysis and forecast was spot on, but did not tell us how the story ends.

      For good looks at Japan’s debt see:

      http://fatasmihov.blogspot.com/2010/03/gross-debt-net-debt-and-future-debt.html

      http://www.brookings.edu/~/media/research/files/articles/2010/11/01%20government%20debt%20prasad/debtchart5.pdf

      Like

    • Jordan,

      “For how long have people been saying that same prophecy? 10, 15, 20 years?”

      Where do you get your information, so that you say such weird stuff?

      Japan’s net govt debt/GDP only pasted the 100% level — roughly that of Italy’s — around 2009. That is when credit rating agencies start to get nervous.

      Like

  3. This is chickenfeed. The real money comes through automated fraud: “How to commit fraud and get away with it: A Guide for CEOs, Ashwin Parameswaran, Macroresilience, 4 December 2013 — A strategy to maximise bonuses and avoid personal culpability:

    1. Don’t commit the fraud yourself.
    2. Minimise information received about the actions of your employees.
    3. Control employees through automated, algorithmic systems based on plausible metrics like Value at Risk.
    4. Pay high bonuses to employees linked to “stretch” revenue/profit targets.
    5. Fire employees when targets are not met.”

    As explained in detail:

    “But wait – all hope is not lost yet. There is one way by which you as a CEO can not only argue that adequate controls and supervision were in place and at the same time make it easier for your employees to commit fraud. Simply perform the monitoring and control function through an automated system and restrict your role to signing off on the risk metrics that are the output of this automated system.”

    At the risk of causing FM to hyperventilate, Value at Risk, while not strictly speaking Black Scholes, is nevertheless – so to speak – first cousin of Black Scholes. “Black Scholes and the normal distribution”, By Cathy O’Neil (a data scientist), Naked Capitalism, 14 March 2013

    So FM will go ballistic. And this is good. Because the more people go ballistic, the more disruption. And the more disruption, the less efficient algorithms are. And the less efficient algorithms are, the greater the need Applebees, like Hooters, will have for real live human waiters. ( or waitresses as the case may be. )

    Like

    • Duncan,

      This is fun, but all wrong.

      (1) Accounting Fraud

      It’s ancient, and has absolutely nothing to do with Black-Scholes. For serious information about see the Wikipedia entry on Forensic Accouting. For a introduction to the subject for a general audience (well-written, entertaining) I recommend Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports by Howard Schilit and Jeremy Perler.

      (2) The real game

      In the larger context of the US economy, it is fools stealing pocket change. The big money comes from senior managers gaming the system to get a large share of their companies’ profits (or cash flow, for non-profits) — even up to 10% (i.e., the shareholders are tithing to the senior managers). Doing so requires two things:

      (a) Packing the Board of Directors with supporters. The best guide to this I’ve seen is Barbarians at the Gate: The Fall of RJR Nabisco by (see Wikipedia) by Bryan Burrough and John Helyar (1989), the chapter describing how F. Ross Johnson (the CEO of RJR Nabisco) did it.

      (b) Building a layered pile of compensation packages: cash, stock options, stock grants, non-cash benefits, retirement plans, and a golden parachute. Tend it like a garden.

      For advanced students, a well-placed leveraged buy-out of the company — followed by selling it or IPO — can, when timed well, generate a fortune beyond the ambitions of kings.

      It helps to be a sociopath. But that’s an easy to meet requirement, since our selection system for corporate leaders advances tall men with regular features and strong sociopathic traits.

      All of these things have been amply documented. But Americans remain disengaged and uninterested. So the parade goes on.

      (3) “At the risk of causing FM to hyperventilate, Value at Risk, while not strictly speaking Black Scholes, is nevertheless – so to speak – first cousin of Black Scholes”

      I’ve given up. Fighting ignorance is like fighting the tide. Your introducing Black-Scholes into totally unrelated matters is sad, but beyond my ability to help.

      Like

Leave a comment & share your thoughts...

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 )

Twitter picture

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

Facebook photo

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

Google+ photo

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

Connecting to %s