All Rights: NBC
If you are a regular reader, you know that I often write about automation and Robotics. Lately, I have been writing about the coming robot revolution, which is closer than you think. It’s also going to be a lot bigger than you’ve heard. You may have lived through other revolutions in employment, but the robot revolution will be so quick and so wide-spread that it will be, well, revolutionary! Today, we’re going to peel back the many layers of the robot revolution to see how it will add up to a Tsunami of economic change. Let’s dive into the UBER agenda, and see how just one stream in the robot revolution will shape our future!
By now every reader has heard of UBER… the ride-sharing company… even if they haven’t taken a ride with UBER. The UBER agenda is to see that everyone uses UBER, all the time. If you live in a big city, you’ve either used UBER or seen others tapping on their smart phones while they wait for their UBER car. UBER says that they are not a taxi service. Instead, they categorize themselves as a service provider, producing software for taxi and private car companies. However, their drivers… and increasingly the courts… are saying that UBER is a taxi service. Why does this distinction matter? Because if UBER is a taxi service, then the drivers are UBER employees. Their drivers are suing UBER for missing wages and benefits. UBER has realized that the greatest threat to their future profitability is not the growing competition in ride-sharing, it is the economic consequences of being classified as a taxi service.
UBER has been addressing this risk in two ways. First, it is branching out into other transportation roles, delivering packages and cargo as well as moving passengers. Over time, they plan on dominating every profitable function for moving people or things from one place to another. UBER has experimented with hybridized service that blend taxi and messenger services. Sophisticated software can predict traffic, time to complete a passenger ride and other data to efficiently blend passenger rides and package deliveries. If they are very efficient, UBER will deliver industry disrupting efficiencies to car services and package delivery (FedEx, DLS, UPS, etc.). UBER has similar plans for the trucking industry. While UBER tunnels into these industries, it is also focusing on a rapid replacement of human drivers. No human drivers means: lower operating costs, no employees lawsuits, and the ability for their vehicles to wait for a passenger without adding costs. You’ll see how that last item may be the biggest disrupter of all. Let’s break this down, and put some numbers around UBER’s plans.
All Rights: MSNBC
Taxi Drivers: UBER is making big investments in robotics. It has already bought out Carnegie Mellon’s robotics department and is gobbling up other firms with similar capabilities. But UBER doesn’t have to be the first company to develop a fully autonomous car. All it has to do is buy one. All of the major car manufacturers are releasing semi-autonomous driving features. TESLA’s high-end cars now have Auto-Pilot, which is a robot car in all but name. TESLA expects to release their fully autonomous car in 3 years. Between the car industry and UBER’s own customizations, the UBER self-driving car could hit the road in just 3-4 years. Then UBER will begin their big push to replace drivers. Within a few years, they could replace most of the 275,000 taxi and private car drivers in the US. That’s a lot of jobs, but the US has a big economy, and we should be able to easily absorb this change. But what about…
Other Transportation: The same software that can drive a taxi can drive the trucks that deliver cargo around the country. If trucks can be autonomous, so can buses and trains. Recent deadly accidents have been attributed to “human error”, leading to questions about why the government hasn’t mandated automated safety features, or have computers handle driving in accident prone areas. Whether it’s all at once, or in bits and pieces, the 4.5 million jobs in the transportation industry are on the verge of being replaced by autonomous cars, trucks, and trains. Planes aren’t that much farther behind. If these vehicles were autonomous, how would our lives change?
For one thing, all of these vehicles would communicate with each other. Your car would know what other cars are doing before they did it. Cars would act cooperatively. Traffic jams would fade away as software routed traffic around accidents and jams, which acting cooperatively at the site of the jam, allowing it to clear more quickly. Autonomous cars would even let emergency vehicles get to accident sites more quickly. Eventually, cooperative cars would virtually eliminate accidents. That’s a good thing, isn’t it?
Accidents: Cars accidents happen all the time. At least, they do when fallible humans are at the wheel. If fully autonomous cars arrive in 3 years, then they will become popular in the next 5-6 years and may dominate the roads in as little as 8-10 years. Over that time, accidents will drop, as: road rage, drunk driving, distracted driving, and drivers falling asleep at the wheel no longer contribute to traffic accidents.
All Rights: Wikipedia
Today, approximately 1 million car accidents happen every year, involving 4 million people, that results in 35,000 deaths. As you can see from the chart above, basic car safety innovations (seat belts, safety glass, airbags, etc.) have dramatically reduced the number of fatal car accidents. IN the future, there will still be the occasional unavoidable accident, but 99% of today’s deaths and injuries will go away. A 2010 analysis placed the annual cost of traffic accidents to the US economy at $836 billion.
Insurance: If you watch a few auto insurance commercials or read a few ads, you will notice that car insurance is trying to get your premium more closely linked to your individual risk. If you prove you are less of a risk, you get a credit against the cost of insurance. For example, if you don’t have any accidents for a period of time, or if you are high risk because of previous DWI incidents you can install a “breathalizer” device to prevent you from driving while intoxicated. Newer carts have a “black box”, similar to the ones in airplanes, that has GPS tracking, speed, and directional data and can show patterns of erratic behavior (a driver falling asleep at the wheel?). If you don’t drive erratically, don’t speed, don’t drive while drinking, then your insurance costs less. Once there are many autonomous cars on the road, with robot drivers that almost never have a car accident, highly flawed human drivers suddenly become a major liability.
Not on day one of the robot revolution, but at some point, turning off the robot driver and taking the wheel yourself, becomes a staggering liability for your insurance company. And that cost has to be passed on to you! It’s not just that a human cause more accidents, it’s that a robot driver will be so safe that it becomes classified as a safety system (i.e. it saves lives). Consider a courtroom, not too far in the future, where a car owner just wanted to drive his own car for a while, but accidentally kills a child who was crossing the road. That happens all of the time on today’s roads. But if autonomous cars have a much better record of driving, then you are consciously raising your risk of an accident.
This may not just astronomically increase the cost of your insurance, it may void your insurance for as long as the car is being manually driven. Or, humans may drive so poorly (compared to robot cars) that if you turn off the robot, and you kill someone, it becomes murder in the 1st degree. For civil cases where the damage is financial, trying off the robot may be considered reckless behavior, resulting in a much higher award to the injured party. Now, ask yourselves… how long after the 1st fully autonomous car is on the market before the first lawyer uses exactly this argument in court? Then, how long before human drivers are fired because the cost of insurance is prohibitive? Insurance companies will either stop selling to people drive their own car, or they will make it fantastically expensive. Once robot cars are available, older drivers, first-time drivers, those without perfect vision… may all be driven by insurance costs to turn the wheel over to the robots. For some of us, the robot revolution will arrive a bit sooner.
Let’s go just a little farther into the future. If insurance companies get their way, human drivers go away and traffic accidents virtually disappear. For a short time, profits at insurance companies will explode! Massive premiums and no payouts! But then, the cost of insurance will drop down to virtually nothing, and the auto insurance as we know it will disappear. There may still be some theft insurance, but in cities like New York, car theft is down 97%. The days of hot-wiring a car and driving away are gone. A robot that is smart enough to drive your car, can also drive away if someone tries to break in, and notify the police (with photos of the attempted crime and perpetrators). As the auto insurance industry fades away, we will also lose the 227,000 jobs it creates. Eventually, new forms of insurance may replace the old auto insurance, but it’s going to take years for this new market to develop.
Car Repairs: If today’s 1,000,000 car accidents go away, then a lot of garages and repair shops will close. Writers looking for an upside to the robot revolution tell us that by upgrading our educations, we may be able to thrive even after our existing jobs are taken over by robots. This could be a legitimate path for some lawyers, doctors, financial analysts and knowledge workers. It won’t be free. Adding another Masters or Ph.D., and giving up a few years of productive work time, will increase your lifetime debt by at least $1,000,000 to $200,000, depending on the school and the degree. That will get you to the next job, which might not pay any more than your last job. What about the 30% of the adult workforce that never attended college?
IBISworld: Oct. 2015
In order to cross the job gap to the next job that a robot can’t do (yet), lower skilled workers will be faced with a huge educational leap of faith. There are 115,000 gas stations in the US that provide nearly a million jobs. As cars become robotic, many will also become electric. Electric cars have fewer fluids and consumables than internal combustion. Electronic or not, automated cars are likely to be serviced by automated fueling stations. The next job for these displaced workers is unlikely to be in a higher end version of their old job. Adults that may have tried college and not done well, or tried and failed their board exams many years ago, will need a lot of support to make this journey. And when they get that new degree? If workers with Masters and PhDs are scrambling to find their next job, higher up in the educational hierarchy, working who have just earned their 1st college degree may find that the job they trained for has just been taken over by robots.
Doctors & Lawyers: No accidents means no injuries and no lawsuits. It’s hard to estimate how many jobs are generated by the 1,000,000 car accidents and 4,000,000 people who are involved in auto accidents. Many fender-benders cause no physical injury, but do require time off from work to deal with car repairs and traffic infractions. When the injuries are greater, there can be months away from work to recuperate. How many temporary workers replace these individuals? Think of the time, billable time, that is spent with doctors and medical professionals to treat injuries. And to develop documentation for a lawsuit. Ah yes! The lawyers. In additional to real injuries, there is $5 to $8 billion in fraudulent car accident and injury lawsuits every year. Even people that walk away from an accident with seemingly no injuries may have medical problems later in life.
Autonomous cars will wipe out a whole practice area for lawyers. That’s especially troubling because the legal profession has already been rocked by new forms of automation and by software “Bots”. Big corporations are demanding that law firms reduce their costs. The latest technology, a cousin to the self-learning autonomous car software, allows computers to look at lawyer created documents and produce the same work… contracts, document reviews, government forms, etc. In the medical field, however, we have the opposite problems. America has a shortage of doctors, nurses, and medical professionals. Once medical personnel are freed from dealing with car accident victims, will they help solve the problems in America’s health care system, or will they be attracted by lucrative niche areas, like plastic surgery?
Car Industry: Car manufacturing and car dealerships jointly provide over 2.7 million jobs. The average American family owns 1.9 cars. If the UBER agenda is achieved, all that changes. A typical family needs more than one car because: both parents may work and not have access to mass transit, the second car may be used by teen aged children, a stay at home parent needs to drive to activities for the children, etc. Now ask yourself, “What is the level of utilization for the second car?” Is it actively driven (don’t count parking and waiting times) for an hour a day? Maybe two hours. So, in a 24 hour day, the car is more than 90% unutilized? Most families would be better off financially if they kept just one car and then ordered an UBER car for other tasks. If you’re running around a city to shop, you would save a huge amount of time finding parking spots. You just leave one UBER car, do your errands and then have another UBER car pick you up.
In an UBER world, there could be a temporary surge in car purchases as the world transitions to autonomous cars. Eventually the “forward facing driver” could be replaced by having all seats fact inward, so that passengers can interact with each other. We’ve already added stereo, DVD, LDC screens and WiFi to cars, why not put a table in the middle of the space and make it a living room. Or work-office on the road? When the “driver” no longer needs to face forward the entire car layout could, and will, be radically redesigned. We will not just replace cars as they age out, many American’s will “upgrade” their cars as new features are introduced. Think about how iPhone users stand in line every time a new phone is released (did I mention that Apple may be building an autonomous car?). After this surge in employment, we face a permanent decline in auto industry employment as families supplement their main car with an UBER contract for the rest of their car needs. Farther into the future, even a main car may seem like a waste of money, especially in cities where owning a car often means owning a garage space that costs as much as an apartment.
Of course, none of this is especially new for America’s car industry. The auto industry has been automating and downsizing for years. The auto industry practically invented outsourcing and Detroit… the long-time home of car manufacturing… has become a bankrupt city with a fraction of its old population. Old skilled positions, such as painters and welders, have been gone for decades. UBER will accelerate the trend in new and unexpected ways as they reduce the number of cars owned by the average American family one, or none. That will eliminate at least half of the traditional manufacturing and distributorship jobs. Let’s call it a conservative 1.5 million jobs.
Summary: Between lost jobs in the car and transportation industry, a permanent shrinking of Auto insurance and the elimination of car accidents (and related legal and medical work), 5 to 8 million jobs will permanently go away. And it could all happen in just 5 to 10 years. And that’s just the 1st round of changes. Make no mistake about it, the robot revolution will be one of the most important economic disruptors of the 21st century. New industries will eventually rise, but there may be a gap of years or decades between the fall of the old economy and the rise of the new economy. Will more education help us during this transition? Possibly, but this solution will not come cheaply. It means more years in school and probably another hundred thousand dollars in lost revenue and additional tuition costs. And for the individuals today without any college degrees, it’s going to be very difficult to transition to their next job when robots eliminate their current job.
That doesn’t mean that it’s all gloom and doom for employees. In fact, this economic transition is going to create a new industry… the creative economy! What is it and how does it work? We’ll take a deep dive into the new growth industry of the 21st century when we take another look at the coming robotic revolution! But that’s my Niccolls’ worth for today!
Niccolls AND Dimes 