Robots, creative destruction of jobs, and the private investing imperative

The Share Centre has been polling customers. The findings reflect the view held by most economists – the robot revolution will create more jobs than it destroys. Sorry, but unless we go for radical thinking, this view is wrong. You might ask what has that got to do with investing? Well, quite a lot actually, and I’ll explain why at the end.

Article updated: 9 August 2018 9:00am Author: Michael Baxter

The most popular argument made to ‘prove’ that automation creates more jobs than it destroys goes like this: back in the 1970s, when the ATM was launched, people feared the loss of bank teller (cashier) jobs, but in fact, the greater efficiency the ATM introduced, meant banks could afford more branches and bank teller jobs actually increased. Ergo, we have nothing to fear from automation.

It would be great if I could stop, right there, or simply say: ‘nothing to worry about.’ ‘The End’.
It is just that, I don’t know whether you have noticed, but forward wind the clock to 2018, and bank branches are closing in droves. And if we do move towards a cashless society, how many bank tellers do you think we will have then? I’ll give you a clue. The appropriate number is round and fat and has a hole in the middle.

The ‘don’t need to worry about jobs’ argument, the one that cites ATMs and bank teller jobs is no longer relevant.

Don’t get me wrong, I am no Luddite - I am not anti the machine, I just believe that we need to think about how we can better turn automation to our advantage - because there is no guarantee this will happen.

The Share Centre poll

In a recent poll on Twitter, The Share Centre stated: “Research has shown nearly a quarter of UK workers are worried about robots taking their jobs. As more and more businesses turn to automation to cut costs and improve accuracy, our question today is, are you worried about a robot someday taking your job?” 446 votes were cast, 31 per cent said they were worried, 69 per cent said they weren’t worried.

Depends

I think some should be worried, but it depends. If you are over a certain age, and retirement beckons, then fear not. Robots are not going to destroy jobs next Tuesday.
But if you are under 50, or over 50 but don’t plan to retire for a long time, you need to do some thinking.

Lesson of history

The greatest period of innovation we know of occurred between 1850 and 1914. Also known as the age of symmetry, it began with an explosion, namely the invention of dynamite. The telephone and photographic film followed soon afterwards. The 1880s saw the first electricity-generating plants, electric motors, steam turbines, the gramophone, cars, aluminium production, air-filled rubber tyres, and pre-stressed concrete. The early 1900s saw the first “airplanes, tractors, radio signals and plastics, neon lights and assembly line production,” or so said Vaclav Smil in his book ‘Creating the Twentieth Century’.

So, what happened after this wondrous period of innovation? Answer: we had a world war, an economic depression and another world war. It was not until the 1950s and 1960s that we had the economic growth that one would expect following a period of such innovation. The lesson of this is that innovation does not automatically lead to economic growth. Instead, it can create monopolies, inequality, and social unrest, leading to political extremism. That is what happened the last time around, anyway.

It took the appalling experiences of the first half of the 20th Century to create the social and economic policies and the international framework to enable us to realise the potential from that previous period of innovation.

The fourth industrial revolution, now underway, will surpass the age of symmetry in the pace and extremity of innovation.

But, this time around, instead of learning the lessons of that period, we risk repeating the errors.

What to do

Sure, there will be lots of new jobs created by new technologies. Many will require skill sets that don’t currently exist.

In the labour market of the 2020s and 2030s, jobs involving empathy and working closely with people, such as nursing, social work, and teaching should survive - although even teaching faces threats and government policy has the effect of sucking empathy out of social working. In other sectors, only people who are willing to re-train over and over again will thrive.

We will also see the rise of capital - ownership of capital will be far more lucrative than working.

That is why investing is not merely important, building for yourself a portfolio of investments in diversified sectors, will become essential to everyone that does not want to be left by the wayside.


These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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