Sunday, February 12, 2017

The technology tsunami: "Why Those jobs aren't coming back"

Let me remind us of a prophetic remark from then Apple exec Steve Jobs to President Obama. The NY Times carried the story in January 2012, How the U.S. Lost Out on iPhone Work, and it was picked up and featured by Politico, Obama sparred with Steve Jobs over outsourcing

When Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steven P. Jobs of Apple spoke, President Obama interrupted with an inquiry of his own: what would it take to make iPhones in the United States?

Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Mr. Obama asked.

Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

Fast forward to today’s post by AZBlueMeanie at Blog for Arizona, The technology tsunami is replacing ‘good paying jobs’ that are not coming back. It’s a must read for futuristic thinkers. Here are excerpts to stimulate your reading of it.

AZBlueMeanie quotes from Ed Hess, professor of business administration at the Darden School of Business at University of Virginia:

What [President Trump] hasn’t yet addressed — but should — is the looming technology tsunami that will hit the U.S. job market over the next five to 15 years and likely destroy tens of millions of jobs due to automation by artificial intelligence, 3-D manufacturing, advanced robotics and driverless vehicles — among other emerging technologies. The best research to date indicates that 47 percent of all U.S. jobs are likely to be replaced by technology over the next 10 to 15 years, more than 80 million in all, according to the Bank of England.

Think back to the human misery in this country during the financial recession when unemployment hit 10 percent. Triple that. Or even quintuple it. We as a society and as individuals are not ready for anything like that. This upheaval has the potential of being as disruptive for us now as the Industrial Revolution was for our ancestors.

The Blue Meanie quotes Peter Cappelli, a management professor at the University of Pennsylvania’s Wharton School who “explains the financial incentives in tax laws and accounting norms that make it easier to invest in robots and equipment than in better managers and training for workers.

So why aren’t we seeing more of a focus on upgrading management and employee skills rather than replacing workers with machines?

For-profit businesses, especially public companies that have extensive reporting requirements for investors, hate fixed costs or those that can’t be adjusted down if business falls. That’s a reason we typically hear for why CFO’s in particular hate adding workers, because they represent fixed costs.

Robots and technology are massively bigger fixed costs than workers. We can’t layoff robots or reduce their hours if business goes down as we can with employees. You might think that would scare investors and businesses away from that approach. What we can do with robots and tech under contemporary accounting rules and can’t do with investments in employees or management is amortize investments in robots and depreciate them over time, spreading the costs out. There are also a range of special tax breaks for investments in capital that aren’t there for management and employee spending. Tax laws and accounting principles do not recognize training and management interventions as investments even though they surely are by any other definition.

Another way in which accounting stacks the deck against investments in human capital and management systems has to do with how those investments are reported, or not reported. An investor looking at any company can tell pretty quickly how much it has invested in capital improvements because the figure is right there on the balance sheet along with related investments like leased capital and even fuzzy assets like “good will.” Those investments are seen as a good thing for the business and are counted as “assets” held against “liabilities.”

But if I wanted to see investments in training and in management, where would I find those? You can’t.

They are lumped in with “general and administrative expenses,” typically described as “overhead” costs. These are liabilities on balance sheets, and investors like to see them as low as possible. Businesses that spend a lot on training and management improvements can look to investors like they are blowing money on office furniture. So we have the irony that business is rewarded for investments in capital that raise productivity by eliminating jobs but punished for investments in people and management that raise productivity and save jobs.

Steve Jobs, the visionary who created a technological culture of iEverything, was indeed prophetic when he said “Those jobs aren’t coming back.” We need now as a nation stop looking back and to prepare for the “technology tsunami” soon to sweep away many of our jobs in the not so distant future.

No comments:

Post a Comment