Industry 4.0 is inevitable. How can you prepare for a future of automation?
How Will Industry 4.0 Affect The Economy?
Industry 4.0 has already impacted the economy; it’s just not as noticeable because you don’t see robots roaming the streets. Software is embedded into everyday life and starting to reduce the number of jobs. For example, Intuit’s TurboTax software replaces your neighborhood accountant. A start-up has developed a software to automate accounting processes for small- and medium-sized businesses. While the number of new technology jobs has increased, it’s not high enough to offset the job losses. For example, in the past 10 years in the United States, 80 percent of manufacturing jobs were lost because of automation, and only 20 percent were lost to offshoring.
Historically, companies didn’t want to spend the upfront costs of the robots and automation machinery. Now that’s starting to change because the equipment prices are decreasing.
In order to stay competitive, manufacturers are compelled to produce quickly, flexibly and cost-effectively under a shorter product cycle. Big Data Analytics and 3-D printing will greatly reduce lead times; the use of drones will increase delivery efficiency.
When deflation sets in, automation will be highly sought after, causing a boom of technological unemployment. Technological unemployment is the loss of jobs caused by technological displacement of workers — machines and software programs replace people in job functions.
How Will Industry 4.0 Impact the Financial Markets?
Overall there will be less human intervention in the financial markets. All major banks and proprietary trading firms use algorithms for a majority of their trades. In 2014, 75 percent of all trades used automated trading systems. As mentioned earlier, the financial services industry is continuing to automate jobs from bank tellers to risk managers.
Also the loan industry will be automated. Now, you can get a 360° view of a car, be notified of any defects with high resolution photos, obtain financing and have the car delivered to your front door. Also you can return the car within seven days in the event of buyer’s remorse.
Virtu, a Quant firm, had only one losing day in six years. The financial services industry is looking for employees who can code, develop algorithms, test the algorithms and deploy to expedite the “Auto Bank.” Despite the push for automation, there are small niches in the market that a person can still make a reasonable living if he or she finds an area not traded by others aka “making a market.”
What is the Next Step for the Labor Markets?
The commodification of labor has already begun and is touted as the “gig economy.” There is software that tracks employees’ every single movement on their computer to ensure they are “productive.” The software is embedded into the operating system to know all your keystrokes and what activities you have done. In addition, every 10 minutes, a photo is taken of you, and if you don’t look up at the camera every 10 minutes. you will not be paid. If you need to think about a problem for 20 minutes and do some whiteboarding, you don’t get paid for that time. If you need to use the toilet, you have an option to turn off the tracker, but again you won’t be paid for the time you are away.
Increasingly, companies are using tracking software as a transition platform before the freelancer positions are automated. In short, everyone around the world will be competing for “gigs” and continue to drive down wages and standards of living in countries where the purchasing power parity is lower.
How can I prepare for such a Future?
Automation of many jobs may seem distant; however, the technology already exists to reduce the number of jobs at all skill levels. Since wages have risen significantly, even Chinese manufacturers are turning to automation. There is discussion of introducing a monthly stipend for citizens who are technologically unemployed.
The concept of the Universal Basic Income (UTI) has been introduced on a trial basis in Canada; Oakland, California; and the Netherlands as a tool that can help people transition into a society of fewer available jobs due to automation. Right now in Finland, there is a trial of 2,000-3,000 citizens already on unemployment that will receive a monthly UTI stipend of €560. On June 5, Switzerland voted against introducing the UTI, but a majority of Swiss voters think there will be a revote for the referendum.
Continuous learning is required to make a solid business or career in the 21st century. Staying current is necessary in order to stay ahead of the trend to reduce your probability of being automated.
Joseph Jones spent over 10 years in industry, where he was responsible variously for corporate strategy, econometric forecasting, financial analysis, and project management. He is experienced in risk management, macroeconomic advisory roles and business operations. In addition, Joseph is monitoring more than 20 economic bubbles that are brewing right now.
As the co-founder of MacroView Research, Joseph understands the dynamic markets must be met with dynamic analysis and rigorous processing. MacroView strives to understand what’s happening in markets and how it can impact investors. You can follow him on Twitter at @EconomicHedge and @Macro_View.
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