Thought Leadership

Dr. Horst Walther
The coming bright dark ages

But you Tiresias, blind old man, perceived the scene, and foretold the rest¹.

An analysis by Dr. Horst Walther

McKinsey, well established Consultancy for those for those who don't shy away from high prices for at times good value, did it again:  Capturing the Zeitgeist in one of their recent surveys about automation. 

1    Lights out on the factory floor

Hello darkness, my old friend - the lights will get out - for good?

Business as usual, better known by those routine-blinded by its acronym BAU, often is characterized by its very purpose to "keep the lights on" - the daily operational business. When the lights go out usually the time of the end has come.

"Are your factories and warehouses operating in the dark? They might be soon." The top-consultants ask their audience rhetorically. You already suspect it: This is about automation, or the upcoming digital transformation, to use the more fashionable term. And of course, in this context, the key and buzz word "disruption" must not be missing, as if it were associated with a positive connotation.

But let's put aside the trenchant irony. Let us close our eyes and imagine how developments may continue and what there will be in for us in the near future.

Will ordinary factory workers soon at their assembly lines be replaced by soulless robots?

2    The robot revolution

An insurgency of subdued robots? No, it's not that kind of fiction - not yet at least. Nevertheless it may be considered as a revolution, taking the first of Webster's definitions, as a sudden, radical, or complete change.

So why, what will likely happen and what exactly is a robot?

Robot - the nearly 100 year old term by the way was coined in K. Capek's play R.U.R 'Rossum's Universal Robots' (1920) and is derived from Czech, robota 'forced labour'.

During the following epoch of belief in progress, the idea of autonomously acting intelligent machines inspired people's imagination. In fiction robots have been capable of independent thought, emotions, even a little cooking and sewing. In practice however the results were initially sobering as scientists found that endowing a mechanical being with even the most basic human functions was and still is a monstrous task.

Although theoretically not impossible, such robotic properties are not required for the more mundane tasks left behind by the segmentation and fragmentation of the work initiated by the 100-year-old scientific management. That movement in the wake of the works of Frederik Winslow Taylor has prepared the factory floor processes well to be performed by still rather dump machines.

In fact, as Gary Hamel states in his landmark book "The Future of Management" that during the century of industrialization we created a work environment in which expected humans to act like machines.

To the extent that machines will be able to take on these simple one-step tasks that we had previously expected people to do, these people could turn to more humane tasks again.

Apparently there is an urgent necessity for that as corporations are desperately striving for innovation requiring the ingredients initiative, creativity and passion, which (still) only humans are capable of.

Therefore, if robots can now solve tricky tasks that even intelligent people often despair of, for example assembling IKEA furniture, then humans will be no longer necessary on the assembly line. At the same time some more human traits are required from us, which some of us might have to re-learn again.

That's true in principle. However the idea, to find its incarnation, needs to undergo some evolutionary steps: The technology must have matured enough to withstand the harsh conditions of a factory floor - as humans can. Then there needs to be a market with some competition, and the robot prices must be such of nature to be able to outcompete us humans on those less inspiring operational tasks.

Well, this is exactly, what the McKinsey survey suggests.

So does this development spell the end of off-shoring? And isn't - for different reasons - globalization on the brink of collapse anyway? Will outplaced manufacturing jobs finally return to their origins?

3    The return of blue-collar jobs - a futile hope

The whole picture, you may have suspected it already, is quite a bit more complex. The job exodus was driven by several factors. One very prominent is the China effect. Bloomberg writes: "Thanks to China's extremely low costs for labour, capital, land and energy, its undervalued exchange rate, and the lure of China's vast domestic market, production shifted to the country en masse in the 2000s; everyone else just couldn't compete."

This China effect kept wages low and considerably put otherwise appropriate automation attempts on hold across entire industry sectors. Estimations go that some 5 million US jobs in manufacturing and related activities this way voluntarily migrated across the Pacific towards China since year 2000.

Now, many of China's cost advantages have disappeared. Also access to those billion Chinese consumers, as Joe Studwells excellent research suggests, looks like a fading dream. Other effects being deferred and superseded for the past 30 to 40 years by the massive impact of a major player re-entering the world stage come into view again.

In his 2015 book Rise of the Robots², Martin Ford cites "Seven Deadly Trends" that began in the 1970s-1980s and by the mid 2010s appeared set to continue:

  1. Stagnation in real wages
  2. Decline in labour's share of national income in many countries (breakdown of Bowley's law), while corporate profits increased
  3. Declining labour force participation
  4. Diminishing job creation, lengthening jobless recoveries, and soaring long-term unemployment
  5. Rising inequality
  6. Declining incomes, and underemployment for recent college graduates
  7. Polarization and part-time jobs (middle-class jobs are disappearing, to be replaced by a small number of high-paying jobs and large number of low-paying jobs)

He sees automation and information technology as the major drivers. He in particular expects new technologies including narrow AI threaten to destroy jobs faster than displaced workers can be retrained for new jobs, before automation takes the new jobs as well. This includes many jobs categories, such as in transportation, which were never threatened by automation before. According to a 2013 study, about 47% of US jobs are susceptible to automation.

There are contradicting analyses around, trying to explain the obvious and making attempts to predict, what is still hidden deep in the fog of uncertainty. But we can safely assume that the wages will stay low, robot prices will continue falling lower, automation will enjoy a major boost.

4 Meanwhile, the rust belt quietly continues to rust.

Will manufacturing jobs suffer the same fate like agricultural jobs?

Yes, but even more than we have seen so far, as agricultural jobs had been just reduced to that core where sensors, autonomy and some reasoning were still essential. Now however we will have the potential to eradicate the remaining jobs there as well - and so we will do in manufacturing.

With no compelling reason to outsource manufacturing to off-shore locations any longer, manufacturing may return nearer to the markets. The manufacturing jobs however will remain vaporized. While the value creation may return to some extent, it is however not quite clear for whom. Maybe it will be the lucky few, who will benefit in a "the winner takes it all" fashion, not being dependent on blue collar workers like in the past.

Then there will be no more exploited and oppressed working class to stand up and fight for its legitimate interests. Then there may only be left the insiders and the excluded. However, the latter then have the disadvantage that they no longer represent a market with purchasing power. That would be a pretty stupid story then, wouldn't it?

Maybe we may join Franz Kafka, who is (a bit abbreviated) quoted with "There is hope, but not for us".

"Hello darkness, my old friend - I've come to talk with you again". Again? Yes, it's not the first time in history that things for some parts of the society look bleak. Not keeping the lights on on the factory floor needs not to spell disaster for those currently working there. However the solution may not just be left to technology, to market forces or short-sighted economical reason.

Sorry for taking the McKinsey article one step further out of their traditional domain. But solutions may again come from a changed societal paradigm, a new consciousness, which expresses itself - well - in a radically changed perception of the necessary political steps to be undertaken.

Anyway we may conclude already now: The future is not for the faint-hearted.

¹modified quote taken from "The Waste Land" by T. S. Eliot

²Ford, Martin (May 5, 2015). Rise of the Robots. Basic Books. pp. 29-30. ISBN 0465059996.