Beoz

A driver is a specialized skill. One that we have to learn, and learn again if you are to drive a vehicle of a certain type. No need to be good in school for one of those certificates.

And trucks and cars are one of the best forms of automation. Look at the jobs created around vehicles. Look at the losses - the horse.

Beoz

Lose 10 million jobs, create 1 million new jobs, no one has money and automation relies on money, no automation

An outcome that is impossible.

Shard

Company A can decimate its costs through automation; company B believes all customers need money to buy product so doesn't automate. Company A undercuts Company B which goes out of business and lays off its staff. It's a race to the bottom, I'm afraid. Unless, governments legislate against it (unlikely). More probable outcome is that, in time, governments will tax highly productive and profitable corporates and distribute this to individuals who have little or no work.

GarryP

Worse. Unemployment rate rises, so less customers and less sales. Therefore Company A automates more of it's operations, getting rid of extra staff. Company B has to rapidly follow, least it go out of business. Rinse and repeat with Company C,D,E,F,G,H,I etc. all around the world so large numbers of people hit unemployment in one go. Thus even less customers and so on in a spiral down. At the same time tax take drops, so government investment (if there is any, let's be generous and assume a Labor government) drops and there is less support of any kind for those out of work. So Gov A tries to tax Companies A thru Z more money, but since the white collar jobs are now automated, Companies A thru Z move offshore to the low tax regimes of Gov B, taking the automated jobs with them. Only Gov A can't do anything about it, since if the cohort of Companies A thru Z decided to stop providing services, Country A collapses overnight. A real denial of service attack.

Oligarchs A thru Z make sure they put a lot of space between themselves and the rioting herds, having converted zeros in bank accounts into real assets ahead of the collapse they themselves were going to cause.

Country A votes in a dictator who expands the security services (automated of course) and clamps down to try and attract Oligarchs A thru Z to their 'safe' country.

And I didn't even touch on their being no new jobs because there's no mass market new job classes (starting new businesses are automated first) and no role for at least half the population anyway, with the other half being frightened silly that if the don't work 80 hour weeks for $40k, they too will be on the scrapheap.

Shard

Crikey, Gary, have you considered becoming a novelist and penning a new novel titled "2084".

I don't think it will come to this kind of rapid automated singularity. Certainly governments the world over are under-assessing the risk and scale of automation, and it will probably take a decade of large scale structural unemployment for the public (and therefore governments) to consider the kind of fiscal and welfare reform that will be required to rectify growing poverty. Ironically, mad man Trump is somewhat on to this, at least from the perspective of the industrial decline due to off-shoring, not that his solutions will be economically viable in the longer term. You do make a valid point about oligarchs though, and there again Trump is travelling down that path.

I think one of the other interesting aspects of automation (technological advancement more generally) is that the real cost of everything, manufactured goods and services will start to become minimal. We've spoken about automated vehicles subscription business model, what if governments paid for the subscription? Electronic goods could be processed and recycled so cheaply that they could be provided or sold for a fraction of what they cost now. Ditto clothes. In such a scenario not only do jobs decreases, but the need for income decreases. Probably about 30 years out from this kind of economy.

Beoz

Why would company A do that? Shareholders don't give much of a hoot about cost cutting, unless the profits of company A are shrinking.

Shareholders want growth. Not decline. People are cheap.

Like always, for shareholders, it's a race to the top.

I do hope you aren't investing your retirement in a race to the bottom.

GarryP

Thing is, the difference in cost structure forces a fast pace of change.

Any example where manpower is a significant cost element, let's say 30% of the cost base, is somewhere where the first adopter can undercut the minimum cost price of the competition. Basically wherever the human cost is bigger than the margin. Say we were looking at, house insurance. If company A can make the price 70% of the price of company B, then they win the business. Therefore Company B loses income, with high existing fixed costs, and either downsizes fast, or switches to automation fast. Or it dies and Company A takes all. You hit millions of job losses fast, and from the stats, anything above about 12-13% in unemployment starts making the country unstable. Australia currently has 5.6% unemployment, and with ~13m potential workers we are looking at about 1m additional job losses before the wheels come off.

In short, I doubt it will take a decade - it's inherently unstable.

What has been going round my mind recently is are there actually any new jobs to come along at all? I keep running around the thing, trying to see where new jobs will come from, but whenever I look at an area I see how the lack of money in the economy is going to lead to job losses, not gains. Try it for yourself. Pick an industry, assume 15% unemployment and see if you can see any net gain in jobs in any area taking into account automation. Even security doesn't add up.

To make this stable, or at least controllable, you'd need a negative feedback loop, but even there being less money around creates a positive, rather than negative loop - the first mover to automation wins.

Beoz

LOL

The dictator part was the best.

Keep it simple. No money no automation.

Beoz

Example?

A bar man needs to pull 2 points an hour to cover their costs.

GarryP

OK, not that it makes much sense, but let's take your barman example.

Staff costs for the average pub amount to 20.2% of turnover. Trading profit is 19.5%, then minus rent/mortgages, etc. (these are real figures BTW).

So, suppose there were some way in which all the staff could be automated, and thus that 20.2% could be done away with. Pub A could cut prices to below the minimum cost level of Pub B who continued with existing staffing. What does Pub B do? Assuming customers are price sensitive (and in a recession they might well be), they will lose sales and those fixed costs will hammer them. So either Pub B goes out of business, or it also cuts it's staff like Pub A.

Now pubs, as a service sector offering, have other factors, but the general point holds. If the staff costs are bigger than the profit margin, then cutting them allows you to remove competitors who don't - since to match your prices they have to go below cost.

And the even bigger point is that staff costs take up a significant part of the operating costs in many sectors. So if automation can be done in these sectors, it will be. On the other hand, something like an airline spends only a few percent on pilots, hosties, etc. - so there is much less incentive to automate totally.

Beoz

It makes perfect sense. If we can't automate the pulling of a pint in 2018 then we have problems (of course there are so many reasons for not automating the pulling of a pint - we might be moving on to that in a bit)

So in broad terms (yes pubs have cleaners, cooks, etc) if the 20.2% is indeed correct, and a bar man or woman gets paid $17.29 per hour, and a pint is roughly half that price, to cover the costs of a bar man or woman, they need to pull 2 pints.

At 20% cost then then the average bar man is pulling 10 pints an hour. Bringing in about $85 per hour - that is absolutely rubbish pulling

A smart business would not be looking to save $17.29 per hour. That's peanuts and when you are only making $85 off the person an hour, who gives a fling.

A smart business would be looking to use the $17.29 per hour and convert the pint pulling into 30 or 40 an hour. 40 pints - that's $340. Tripling or quadrupling the income.

You have got to stop focussing on costs - businesses only care about costs when they are in trouble. You need to focus on the profit - businesses (especially smart businesses) want to know how they can increase profit.

Cost cutting is finite - Growth is Infinite.

Hope this helps

GarryP

Economists don't half talk some cr*p.

In your fairyland, for growth to be infinite everyone would basically have to live in the pub, drinking all the time.

The point is, this, like most markets, is saturated. Growth is hard to achieve, usually only by pushing someone else out. And one of the main ways of doing that is to undercut them on prices, so they go to the wall. Which is why they concentrate so hard on cost control.

Beoz

That's why they are economists - theorists - and not business owners making squllions.

That would be the ultimate goal, but lets take baby steps.

1. Extract money out of mums and dads by providing children play areas. Mums and dads like drinking too but generally can't because of the kids. Widen the cross section of society in which you can extract money.
2. Have sexy bar staff. Every man (and some women) love looking at the cleavage of a low cut top. Most woman (and some men) like a tall dark and handsome uni student making a cocktail. Keep them returning to the bar to empty their wallets.
3. Provide an atmospheric and visually appealing environment where people will want to return - recurring revenue
4. Have plenty of staff. No one wants to come to a place where they are waiting for drinks. And on top of that, while they are waiting for drinks, their money remains in their pocket and not in the tils.

Growth is easy to achieve if you have a point of difference, and in most markets that point of difference is both product and people. Costs is very much a distant secondary. Pretty much why you don't see a heaving Weatherspoons.

Beoz

See. It's never about costs. It's all about increasing production.

Garry, do you seriously think Rio give 2 hoots about the salary of a couple of train drivers who are transporting a $200 million load of iron ore? Or cost $940USD Million to implement?

There's more blokes in the remote train driving office tha there are on trains. See automation creates jobs.

However we do agree on one thing. Australia lacks people with STEM skills.

https://www.smh.com.au/business/companies/rio-tinto-sees-google-and-apple-as-competitors-for-its-future-workforce-20180713-p4zr9o.html

People are cheap. It's all about productivity.

https://www.watoday.com.au/national/western-australia/rio-tinto-a-step-closer-to-automating-pilbara-train-fleet-20180518-p4zg5j.html?_ga=2.41640034.1385187623.1531443573-1439881051.1531281598

Shard

The pub example is not a good one because, yes the bar staff are part of the "experience" and therefore unlikely to be automated. Incidentally Beoz, you haven't taken into account the cost of drinks in your break even analysis, it's probably the case that they need to pull several pints to cover their hourly wage.

As to cost cutting, every successful company on the planet focuses on this. It's bizarre to assert that the focus only need be on sales, which are in themselves meaningless without profits. Companies that ignore costs will in time be out competed and fail.